November 17, 2023 • 48 mins
In this episode, we are joined by James Thompson, a managing partner at Equity Value Advisors, and a veteran Amazon strategist who has helped brands sell billions on Amazon, co-authored two Amazon books, co-founded one of the most important conferences for Amazon Sellers, The PROSPER Show, and serve as a CSOat Buy Box Experts. Having spent two decades navigating the Amazon ecosystem, James is here to share the secrets of how brands can truly succeed on this ever-evolving platform. The conversation promises to deliver powerful insights, practical tips, and a whole new perspective on Amazon.
The podcast begins with a discussion on the game-changing power of Amazon's advertising platform and the wealth of data-driven insights it provides. The conversation explores how unknown brands are shaking up the established order thanks to Amazon's pivot towards manufacturer-created products. The importance of utilizing customer reviews for product visibility is also emphasized, and the complexities of managing a brand's Amazon presence are discussed. Additionally, the critical topic of channel conflicts is unpacked, and the necessity of maintaining a consistent brand story across all platforms is highlighted.
The conversation then moves on to the art of managing relationships with Amazon. The big-picture questions are tackled, such as balancing online and offline worlds and the intricacies of optimizing multiple channel strategies. The chat also shares how Amazon can be harnessed to keep an eye on competitors and adjust strategies for different marketplaces. Finally, the discussion wraps up with an inspiring exploration of how a humble corner store can leverage Amazon's direct-to-consumer opportunities to transform its business.
For more information about James Tomson, please visit https://www.linkedin.com/in/jblthomson/
Want to chat with us about this podcast? Send us a text message here
The Planet Amazon podcast, brought to you by Phelps United, addresses all things Amazon and other eCommerce marketplaces. In each episode, we talk with Brands, Agencies, and Sellers about Amazon news, new features, policies, brand policies, logistics, marketing, issues, and challenges, among other topics.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome to the Planet Amazon podcast with Adam
Schaefer, where we explore theworld of Amazon and other
e-commerce marketplaces.
Join us as we delve into thelatest strategies and tactics
for successful selling on theworld's largest online
marketplace.
Speaker 2 (00:17):
Hello, I'm Adam Schaefer and welcome to Planet
Amazon, where we talk about allthings Amazon.
Today we have an awesome guest,somebody that has really helped
us out on and understanding theAmazon platform and strategies.
I'm pleased to have JamesThompson with us.
James, if I get this wrong,you've been around so many
(00:41):
different places, but I believeyou're currently managing
partner at Equity Value Advisors, so I have that right.
You're a board member, investorand advisor to many global
commerce companies.
I've looked and you have quitea portfolio.
You've been in and around theAmazon ecosystem for over 16
years.
I think you can correct methere.
(01:03):
You were also at the verybeginning of the Amazon 3P
marketplace model.
I think you were part of theteam that actually developed
that marketplace model andlaunched it on Amazon.
You could correct me when I'mwrong with this awesome
introduction.
You're the co-founder of theProsper Show, which has become a
(01:25):
staple in the industry, whereAmazon sellers, brands and
service providers go every yearto talk about and get educated
on and share their stories onAmazon.
That's an awesome, awesome showthat everybody definitely goes
to.
I met James.
He was the chief strategyofficer, I think was your title
(01:47):
there, but you were a founder atBybox Experts, which was an
agency, quite a large one.
It helped brands develop theirstrategies and grow and navigate
Amazon, something that ourcompany always wanted to aspire
to doing.
We had this buy and sell model,but we're also kind of an
agency.
(02:08):
James has written a few booksthat I've read.
I have to say they're staples.
They're things that you, ifyou're going to be in the Amazon
business, if you're thinkingabout being in the Amazon
business, you should read them.
They're not long reads butthey're really, really helpful.
One is called the AmazonMarketplace Dilemma, which I'll
(02:28):
show.
One is called Controlling yourBrand and the Age of Amazon.
Really, I learned a heck of alot from these books.
They're fast reads but reallyreally full of great information
.
With that long introduction,james, thank you and welcome to
the show.
Speaker 3 (02:47):
Thank you for having me, Adam.
It's great to be back together.
Speaker 2 (02:50):
Yes, and so I wasn't really trying to plug the books,
but I read them.
The first thing that Irecognized was the importance of
explaining to brands andworking with brands and trying
to get them to understand.
Whether you want to be onAmazon or not, you've got to
have an Amazon strategy.
(03:11):
Maybe you could expand on thata bit.
Speaker 3 (03:16):
We can talk about different ways to sell on Amazon
, but even before you decidewhether you want to sell on
Amazon, it's important tounderstand that Amazon is this
massive channel hundreds ofmillions of customers just here
in the United States that willeither buy products on Amazon or
at least go and do theirresearch looking up products on
Amazon.
The question you have as abrand executive is what do I
(03:39):
want to do to leverage whatAmazon has to offer?
Most people typically think ofAmazon as a place where you go
to sell products.
Okay, we can talk more aboutdifferent ways to sell, but
Amazon's also becoming a veryeffective place to go and
advertise.
Today, companies may bespending money on social media.
They may be even doing print orTV or radio advertising.
(04:02):
Well, some of the stuff thatAmazon's doing today on its
advertising platform are moreadvanced when it comes to
targeting customers than any ofthese other types of advertising
that we've talked about.
I see a world where Amazonprobably in the next five to
seven years, they're going tostart to replace a lot of the
big TV ad dollars.
They're going to start toreplace a lot of the radio and
(04:24):
the print ad dollars and havethem now move to an Amazon
platform or platform that Amazonhelps to control, allowing
brands to do hyper-targetedadvertising.
This question of do I sell onAmazon?
Do I advertise on Amazon?
And then, thirdly, to whatextent do I use Amazon as a data
source to understand more aboutmy products, my competitors'
(04:46):
products, my category ofproducts?
You have this extraordinaryamount of data that's sitting
publicly available for anyone tolook at to understand what are
customers liking, what are theynot liking about different types
of products.
As you get into actuallyselling on Amazon, there's
additional information you canget about.
What does my customer look like?
I've worked long before myAmazon days.
(05:08):
I worked for managementconsulting firms where big
Fortune 500 brands were spendingmillions of dollars doing focus
groups, millions of dollarsgoing out and asking people what
do you think about this?
What do you think about that?
When I look at the kind of datathat's available on Amazon, it
certainly doesn't fully replacethe kinds of data you can get
from market research, butthere's an awful lot of
(05:28):
information you can very, veryquickly glean from tens of
thousands of product reviewsthat you and your competitors
are already collecting on Amazonand use that information to
figure out are there productgaps?
Is my product not necessarilyproperly designed for customer
needs?
Is my product falling behind ondifferent types of
functionality relative to whatcustomers are looking for?
Speaker 2 (05:50):
What's interesting, it used to be a black box and
now Amazon's been opening it upa bit for sure every year,
slowly, slowly yeah.
Speaker 3 (05:58):
So, again, even if you are a company that has spent
a lot of money on marketresearch for, say, there's so
much valuable information that'spublicly available on Amazon,
if you know where to go and ifyou know how to use it as well
as how not to use it.
So, as a brand executive, it'svery difficult to ignore Amazon
(06:18):
and say we don't want to sellthere.
Well, fine, if you don't wantto sell there, there's reasons
you may choose not to sell there.
But what are you doing toadvertise?
What are you doing to use itfor data collection?
Maybe you don't sell, maybe youdon't advertise, but any Joe
Blow can go on the website andstart collecting information
about what types of customerpreferences there are about
different items.
(06:38):
What are customers liking andnot liking about products that
are in your category?
Well, that's really usefulinformation and it's real time.
You can find out in the last 30days, where has customer
sentiment been around?
The types of products that Isell, extremely useful and so
hard to say.
Amazon is something I don't wantto have anything to do with.
I would look at it differently,which is in what way are you
(07:01):
going to leverage Amazon to helpdrive your business, and
whether it's the selling, theadvertising, the data collection
or some combination of allthree of those.
You've got to have an Amazonchannel strategy.
I also want to add that brandswill say, well, I sell on my own
direct to consumer site or Isell on some other marketplace.
They say, great, that's good.
(07:22):
You should do that.
If that works for you, that'sgreat.
But keep in mind that there aremore customers shopping on
Amazoncom in the United Statestoday than any other e-commerce
channel, and so to what extentare you leveraging all that
information or all thosecustomers or all the inventory
of advertising that's availableto you?
Start with an Amazon channelstrategy.
(07:42):
If you get your Amazon channelstrategy in good place, then
you'll be better prepared toroll out additional marketplaces
or you'll be better preparedfor thinking about how does my
DTC business complement orpotentially compete with
marketplace businesses?
That, I might add.
Speaker 2 (07:59):
Yeah, the other thing that I found is and Shopify has
been a great platform andAmazon friend or foe with
everybody, right, but there'sdefinitely a benefit to having
your own DTC and you say, well,I own the customers there and
I'll have to pay the fee, butAmazon is now providing
discounts for advertising offAmazon.
(08:20):
On Amazon, there doesn't haveto be catalog parity anymore
unless you tell me I'm wrong onthat and you don't have to have
your full assortment on Amazon.
So it's not a bad way to getnew customers and then, if they
like the brand, they're going tocome and visit your website.
So I do think it works.
And Amazon also is helping withlogistics for Shopify customers
(08:45):
.
So it's pretty interesting days.
But it's funny.
We talk to brands all the timeand there's some brands and
there are B2B brands in so manycases and they say we don't sell
on Amazon, you know that's notfor us.
Blah, blah, blah.
And then we choose them.
They're already there and theyjust have zero control over
what's going on there.
I mean, you've seen thatno-transcript.
Speaker 3 (09:07):
If your brand is at all popular, that's your first
mistake.
The reality is, if somebody islooking for your product,
someone else is going to figureout how to make that product
available to them.
Very few brands have such tightcontrol on their distribution.
The product doesn't leak onto amassive channel like Amazon.
If it does leak onto a channellike Amazon, then somebody else
(09:29):
is creating brand content andputting it out there and saying
this is the way we're going torepresent your brand.
Well, I've had more than my fairshare of experience working
with crazy unauthorizedresellers who are running around
just doing deals, resellingwhatever they can get their
hands on, and that's okay.
But those types of resellersrarely invest as much time on
(09:53):
building high-quality brandcontent that aligns with all the
millions of dollars that abrand may have spent in building
and communicating its brandover the years to consumers.
So, at an absolute minimum,when we talk about Amazon
channel strategy, I don't careif you as a brand decide you are
not going to sell a singledollar on Amazon.
At a minimum, recognize thatsomeone else is going to try to
(10:14):
sell your products on Amazon.
So why don't you go in as abrand and at least control the
content.
Make sure that what customerssee is consistent with what they
see everywhere else.
That's what a brand is, isconsistent delivery of promises.
If you're not properly managingthe content that's on Amazon
and somebody else is puttingrandom content out there, then
(10:34):
you're going to create customerconfusion, as much as you like
to say, well, but that's not mycontent, those are not even my
units of inventory.
From a customer's perspective,they don't know any difference.
Speaker 2 (10:44):
I don't know my family.
Speaker 3 (10:45):
They don't care.
They just want to see that ifI'm buying my Levi's jeans in
this store or I'm buying myLevi's jeans online, it's all
the same stuff, it's all thesame sizing charts, it's all the
same messages around how thiswill make me feel or what
functionality I'm going to getout of the products.
I don't want to see somethingthat's so wildly out of line
with everything else that thebrand is actively managing.
(11:06):
So you've got to create a highquality customer experience,
even if you're not going to bethe seller of record a massive
metal like Amazon.
Speaker 2 (11:14):
I always say at least , at least get brand registry
and let's get some real goodcontent for your brand and your
products out there.
Build a brand store, havesomething, even if you don't
care about it, a lots of peopleare going to see it because it's
a popular platform.
And then it also blocks not aperfect block, but it does block
some of these rogue guys fromcreating rogue content and so I
(11:37):
mean, at least do that for sure.
Speaker 3 (11:40):
But one of the other things, adam, that catches me
off guard.
Whenever I hear a brandexecutive tell me this, they'll
say well, we don't have to worryabout all those other types of
companies on Amazon because wedon't see them in our brick and
mortar channels.
They're not competitors to us.
Okay, so you sell in a physicalretail channel.
There might be two or threeother competitors whose products
(12:00):
are on the shelf next to yours.
If that's the world that yousee as your competitive set, and
everything else outside of thatis irrelevant.
Well, talk about a wake-up call.
You go on Amazon.
You start searching for some ofthe generic product terms that
are used for finding yourproducts.
Chances are a bunch of brands.
You've never heard of brandsthat only exist on Amazon.
(12:20):
Brands that often are doing asignificant market share on
Amazon are actually the onesthat are winning the sale.
They're winning organic searchon Amazon, and so I don't really
care.
If you have 40% market share inphysical retail, chances are
you don't have anything close to40% online or specifically on
Amazon, because the platform hasbeen built to enable random
(12:44):
entrepreneurs to say I'm goingto build a brand, I'm going to
slap a brand name on, I'm goingto buy some UPCs.
I'm going to start competingand grabbing pie from some of
the bigger brand names thateveryone else has heard of in
physical retail.
Those very brands are notactively playing and not
actively managing an Amazonchannel strategy.
Thank you very much, butthere's customers looking for
those types of products.
We're going to sell them, ourversion, our brand, of those
(13:07):
items, and we thank these bigbrands for staying away.
Speaker 2 (13:11):
Yeah, no.
And what's interesting is thatthose unknown brands a lot of
them are offshore, some of themaren't they'll buy the brand
names when they're advertisingso we sell again.
These are kind of interestinglyodd products but they're B2B
receipt printers that people useat point of sale and there's
some big names in that business.
You'll pretty common names.
(13:32):
I'm going to say we don'tnecessarily work with them all
but Epson Star, my Chronix,hewlett Packard.
But when you go to look, if youpunch in Epson receipt printer
on Amazon, there'll be seven or10 brands you've never heard of
that sell more receipt printersthan you would imagine.
Like, I'm sure those brandswant those sales but they're
(13:53):
playing off the big brands andthey're marketing their own
brands and they're killing it,or I think they're killing it.
Speaker 3 (13:59):
In about 2014, 2015,.
Amazon recognized that they hadalready talked to every major
brand there is to talk to andsaid come and sell on Amazon.
And some of those brands saidyes, some of them said no, some
of them said don't ever call meagain.
And then Amazon said well, weneed to continue to grow
selection, and one of the bestways to grow selection, amazon
(14:20):
decided, was to go overseas andto start recruiting
manufacturers companies thatwere making these products for
the big US brands that we've allheard of.
But talk to the manufacturersand say listen, why don't you
build your own brand?
We'll help you build the brand.
We'll help you develop it.
We'll even help you sell it andfulfill it and store it and do
all that kind of stuff.
We'll even help you bring itinto the United States through
(14:42):
customs and get it directly intoour warehouses.
All you need to do is make theproduct different enough from
whatever else you're making forsome other brand and let's
create a brand name for you andlet's start selling it on Amazon
.
And so now you have literallytens of thousands of Asian
manufacturers who a few yearsago knew nothing about selling
(15:02):
direct to consumer, who now havefairly decent size direct to
consumer businesses on Amazon,selling brands that they now own
, and these products are quiteoften of high enough quality
that they compete with thenational brands, because it's
the same manufacturers who makethe national brands today who
(15:23):
are now also selling their ownbrands, and so you don't
typically have the same qualityproblems that you might have had
six, seven, eight years agowhen some of these manufacturers
were getting started with theirown brands.
You've got very high qualitybrands.
They're just brand names thatmost of us have never heard of.
And that brings me to anotherinteresting issue.
If you think about Amazon,about 70% of all product search
(15:43):
on Amazon today is unbranded.
People don't go on saying showme NFS and printer.
They go on saying show me areceipt, printer, boom, here's a
bunch of brands you've neverheard of and, by the way, a lot
of those brands are going to ownthe first page of product
search.
Well, brands live or die basedon whether they can show up on
the first page of organic search.
And you may be a big nationalbrand that has major market
(16:06):
share and physical retailchannels, but on Amazon, if
you're not even on page one, alot of consumers will never go
looking for you because there'slots of other choices from
brands, albeit brands they maynot have heard of, but brands
that are playing the Amazon gamewell enough to build up a lot
of product reviews.
They've got decent, qualitycontent.
Maybe they're spending money onPPC in order to also do well
(16:30):
with paid search results, andthese are the brands that are
winning sales.
And so this whole issue of well, I've spent so much money
building up my brand.
My customers are loyal to mybrand.
Well, let me show you Amazon.
One of the first things you'llnotice on Amazon is that brand
loyalty really isn't the mainplay here.
The main play is that theAmazon channel is what customers
(16:51):
are loyal to.
Amazon doesn't care what brandyou buy once you come to Amazon.
What they care about is do theyhave enough of the national
brands and enough other choicesthat when you come onto Amazon
and look for something, there'llbe enough choices, enough of
them that are high quality.
Looking that you'll say youknow what I'm going to buy this
product I'm not the product thatI thought I was going to buy
when I came looking, but I foundsomething that's good enough to
(17:13):
meet my needs.
Let's move forward.
Speaker 2 (17:15):
Well, and what's shocking is I mean you mentioned
reviews and how important theyare.
I mean some of these brands.
So we go back to the originalpart of what we're talking and
like these larger brands becausethey're not managing their
brand and they're not managingtheir content and they're not
managing their customerexperience at all.
Somebody might have posted theproduct on Amazon, maybe bought
(17:37):
it from overseas and brought itin, so it's from outside the
territory, maybe it's got adifferent cable and somebody's
not happy and they leave a badreview.
So now you're a well-knownbrand with a bad review and
maybe you have one star or twostars.
And then there's a companythat's actively trying to manage
and get great reviews and havegreat product and they have
(18:00):
thousands of great reviews andyou have a one or two star in
the brand.
I mean, my God, people aregoing to say I really don't want
that brand.
I want this brand, even if Idid come looking for it.
I want to try this.
It's amazing.
Speaker 3 (18:13):
So it's important to understand as a brand that when
you look at all those productreviews, everything gets
squished together.
On a product review, I'mtalking, a customer does or
doesn't like the delivery of theproduct, does or doesn't like
the packaging, does or doesn'tlike whether the product looks
new, or maybe it's in usecondition, or it actually has
(18:35):
something to do with the actualproduct itself when they open it
up and start using it.
And so all that noise that canhappen from other sellers
selling a brand, other sellerscreating content, other sellers
doing fulfillment of thoseorders all that can be
additional noise that ends uphurting your brand.
And so the day that the brandsays you know what, we really
should be actively managing ourAmazon channel presence.
(18:56):
They may already be starting ina whole, because there's a
bunch of one and two starreviews on their listings
brought on by poor performancefrom random sellers who were
representing the brand in thepast.
That's all the kind of noisethat brands should work really
hard to avoid getting themselvesinto in the first place and
instead say let's accept thefact that there's hundreds of
(19:18):
millions of customers on Amazon.
We now need to ask the questionwhat's the best way for us to
have our products represented,whether it's us, whether it's an
authorized third party reseller, whether we want a wholesale
products to Amazon.
I mean there's lots of ways todo that.
But at least they're activelysaying we're going to use this
channel not just to sellproducts, but we're going to use
it to protect our brand.
(19:38):
And we've got to do it becausethe reality is we made the
mistake of building a popularbrand.
Speaker 2 (19:45):
Yeah, and you know one thing, one bit of advice
that we try to give these brandsthat are thinking about selling
on Amazon maybe they're sellingon Amazon and they're having
issues controlling maybe thesellers selling at a minimum
advertised price, maybe sellingUS product and not foreign
(20:07):
product, and so we say you kindof have to have a strategy
around that too.
And I know you live throughthis a lot where you're working
with brands and they absolutelya thousand percent agree with
what you're saying, but theyjust don't want to do it.
They're scared.
I mean it's like they got toput their big boy pants on and
have a real strategy for that,because they're going to get
clobbered out there if theydon't.
(20:28):
And we see that all the time.
Speaker 3 (20:29):
Yeah, you know this may be amusing for your audience
, but many years ago I was anunauthorized seller of watches.
I could get my hands on allsorts of stuff and make a few
bucks and learn how the Amazonchannel worked, learn how seller
central worked, learn howventure central worked.
You know it was easy to getproducts because brands in that
particular category of watchesyou know a lot of them are not
(20:52):
paying attention to the Amazonchannel or they choose to ignore
the fact that, yes, productsare being re-imported from
elsewhere, or you know theversion, a European version is
being sold as the US versionhere in the United States.
At the end of the day, that'sall destruction of your brand,
and if you, the brand, arechoosing to pretend that that's
not an issue, then you've got abig problem.
(21:13):
But here's the scary thing Alot of brands, when you actually
start looking at why is thishappening, it starts first and
foremost with you've got salesincentives in place within your
organization that are notactually aligned with protecting
the brand.
Their incentives are all aboutlet's sell as many units of
product as we can, and of coursewe'll assume that you know
(21:35):
everybody's going to playappropriately and stay in their
own lanes.
Well, that's not how it works,and you know I wrote a whole
book on.
You know product diversion andall the exciting things you can
do there as a brand, all thescary things you have to manage
away, but a lot of it comes downto what is best for the
salespeople within a brand isoften not what's best for the
brand, and so you've got thissituation where the sales team
(21:59):
does great, they get their bigbonuses and the brand gets
pimped out to everybody andanybody who wants to offer up
money for a PO.
Well, that's not really a goodlong-term strategy for building
a successful brand.
And so this is where we startto get into figuring out who's
evolved to account for the factthat the world today has highly
(22:23):
fluid, highly transparente-commerce channels that are
disrupting the way that brandsdo distribution in all of the
channels that they normallymanage.
And so you've got to bethinking.
As a brand executive, I can'tjust continue to sell to my
favorite retailers, my favoritedistributors, and assume that
they're actually all doingwhat's best for my brand.
(22:43):
You know they're doing what'sbest for themselves, and what's
best for themselves often may beselling the product off to
other people who then, in turnsell it on Amazon.
And if they sell it on Amazonand the brand's not paying
attention to content or topricing, you know you can end up
in a situation where randomcompanies you've never heard of
have constant supply of yourproducts that they sell at
(23:06):
undercut prices, creatingchannel conflict where your
physical retail partners arecomplaining saying why is the
product always cheaper on Amazon?
This conversation I'm havingwith you right now.
I was having it 10 years ago.
It's the same conversationbecause a lot of brands still
are saying you know what?
I'm going to let the next roundof executives handle this
(23:27):
problem because you know I'mclose to retirement being a
brand executive and I don'treally want to have to deal with
that because it's complicatedand, quite frankly, you know we
may suffer loss sales for ashort term period of time, while
we tightened up control.
Well, guess what if you don'ttighten things up?
Someone else is going to managewhat your brand looks like.
Someone else is going to managewhat customers think about your
(23:49):
brand.
Someone else is going to decidewhat the selling price of your
products are, either online oroffline.
Someone else is going to decidewhere your brand is relative to
other brands that are sellingin the same category.
That's an awful lot of givingup control to random people who
you may never even meet or maynot ever be able to identify.
This all comes back to this ideaof you've got to say okay,
(24:12):
whether we've got a problem ornot.
Today we need to recognize theAmazon channel is here to stay.
We need to proactively manageit in whatever way that means,
whether it's controlling content, whether it's also becoming a
seller of record or decidingsomeone else will represent us.
But you can't pretend that acouple of hundred million
customers a month shopping on achannel that's not important in
(24:36):
some manner to your overallbusiness, even if Amazon
represents 5 percent of yourtotal sales, the conflict and
the noise that that channel cancreate for the other 95 percent
of your channels is absolutelydeafening.
Again, we could talk about thatall day long, but it's one of
those things where brands needto recognize that they need to
(24:57):
be proactive on Amazon.
They may need to invest in anumber of things they've never
had to invest in things likeonline content channel control,
saying no to certain types ofpartners in the past who have
been good trade partners butmight, in fact, be selling
products out the back door toall the wrong companies, who
then, in turn, sell the productson Amazon.
Speaker 2 (25:19):
I mean, just recently we met with a brand that we're
working with and they're like,we keep on getting these phone
calls from our biggest retailersscreaming at us and we got to
get those guys off Amazon.
Help us get those guys off.
Okay, we'll try to understandthe policies, but first of
foremost, who are these guys?
We say this company is reallythis company and this company is
(25:40):
really.
Yeah, really, we know thoseguys.
Those are our best dealers.
They're your best dealers.
What do you think they're doingwith your product?
Oh, no, no, no.
They have a value added channel.
They're selling directly toconsumers and to resellers and
they're out there somewhere, butthey're not selling them.
No, no, no.
They're selling.
(26:01):
All their sales are coming fromAmazon.
Don't you understand?
They're not doing.
There's no value add for you.
They're just taking it,lowering the price on Amazon and
causing you problems.
They're like oh my, we caneasily call them up and tell
them to stop doing that.
Maybe you should, or maybe youshould really have a policy so
they have to follow your policy.
You can't go up.
But they were like shocked.
That can't be.
Speaker 3 (26:22):
Not them I've had clients who have said well, we
don't want to say no to some ofour favorite distributors
because they're our golfingbuddies.
We've been golfing with themforever, we like them, we know
their families.
Okay, but what does that haveto do with the fact that their
incentives are different thanyour incentives?
At the end of the day, ifyou're trying to build a robust,
consistent brand acrosschannels with consistent pricing
(26:45):
, consistent messaging, you needto have companies that are also
willing to buy into that storyand are willing to commit that.
That's what they're going to dofor you.
I don't have a problem ifsomebody wants to be an
unauthorized seller, butrecognize that they don't
necessarily help you as a brandto create the consistent
messaging, the consistentpricing that you're looking for
(27:05):
in your overall business.
Maybe you're a brand that sayswe don't really care what price
our products are sold and letcustomers figure out the
cheapest channel where they wantto buy products.
Okay, that's fine.
Just recognize that othercompanies who do clean up the
channel and make consistentcontent for both their online
and offline channels, they'regoing to have a much better and
(27:27):
much easier way of telling thatstory over and over to customers
and repeat customers, simplybecause they're properly
managing their brand.
Then you get into some of thesemajor multinational brands
where every single country hasits own sales team.
Every single country has itsown sales goals.
Speaker 2 (27:46):
All kind of make their numbers right.
Speaker 3 (27:48):
Yeah, and everyone of them might have an online
business and an offline business.
Well, guess what?
If you're really good atsourcing product from different
trade zones around the world,you don't really care where it's
coming from and whose numbersit hits within the brands.
You just care can you get theproduct consistently and be able
to make a few bucks selling iton Amazon.
So, as a brand executive,you've got to recognize that
(28:12):
there are very clever people onthe other side of the table who
are looking for ways to makemoney with your product.
And your product is just a skew, it's just a widget.
It's a widget where, if theyknow how to play the Amazon game
better than you do, they'regoing to make a bunch of money.
And when the time comes thatyou, as a brand, decide to shape
up and start to tighten updistribution, tighten up content
(28:32):
, those entrepreneurs will moveon to some other brand that
hasn't got its act together orhasn't got its eyes open to
what's going on with thesemassive online channels.
Speaker 2 (28:43):
Okay, I mean absolutely 100% agree with you
and we see it every day.
One thing we've been seeinglately, and it's because Amazon
I think you used and youprobably know much better, but
Amazon was looking at the brandand the profitability of a brand
and they were focused on growth.
But now it seems they're muchmore focused on profitability
(29:04):
and they've been really reallyputting the screws to their 1P
partners, their vendor partners,trying to get more and more
advertising dollars, more andmore margin from them, more and
more funds, and so what we'vebeen seeing, and what I've been
reading also, is that about 75%of 1Ps are now hybrid in some
way.
They're selling to Amazon andthey're selling either through
(29:27):
3Ps or they're creating theirown 3P, and you've lived through
this one.
What's your thoughts on that?
But it definitely seems to bethe trend.
Speaker 3 (29:38):
So I can't comment on whether 75% makes sense that
there are a lot of 1P brandsthat would prefer not to be 1P
because they see how they canmake more money being a third
party seller.
They also see that some of themargins that Amazon's coming
after on the 1P side make itunsustainable for them to
(29:59):
continue to wholesale to Amazon.
That being said, amazon doeshave a manufacturer policy in
place specifically to ensurethat Amazon gets first crack at
being able to wholesale productsfrom brands.
And so if a brand is already 1Pand they're thinking about
moving to 3P, unless they'rekicked out of 1P by Amazon
because Amazon says you knowwhat?
(30:19):
We can't make any money sellingthis, and we really don't.
You're too insignificant to theoverall category, we're not
going to bother with you.
In most cases, if a brand saysI'm going to go 3P, they better
not be telling their vendormanager, because the vendor
manager is going to instantlysay heck, heck, no, you're not
going to do that.
And, by the way, if you startdoing that, amazon has a bunch
of systems in place to go outand detect whether a third party
(30:43):
account is tied to a 1P account, meaning, do they have similar
shipping addresses, similar taxIDs, credit card, bank accounts,
whatever, and so I have workedwith many 1P brands that have
decided to go 3P but done it insuch a way that it's resulted in
their 3P account being shutdown but also the vendor manager
(31:04):
getting understandably tickedoff.
Now I'm not a lawyer, I'm notgoing to get into the arguments
around whether this is fair ornot.
It's kind of irrelevant.
It's Amazon's marketplaces anduntil somebody chooses to
challenge this in a court of law, amazon continues to tell which
brands you know, to tell bigbrands whether they're allowed
to sell 1P or sell 3P.
(31:25):
If you're invited to sell 1P, alot of brands say, great,
another wholesale channel for us.
But it's not just anotherwholesale channel.
It's a wholesale channel wherethe rules are a little bit
different than selling to atraditional retailer who has
certain types of economics inplace.
Amazon's looking to find ways tocontinue to drive costs down
(31:46):
and, like many retailers,amazon's not going to respect a
map policy in many cases.
But Amazon also has the addedadvantage that they have huge
numbers of servers that activelygo out and scrape tens of
thousands of websites every hourto look for cheaper prices.
And so if you're a brand thatsays you know what.
We're going to authorize ourNorthern Florida division to
(32:10):
sell this product this weekendat 20% off.
Well, amazon's going to findthat right away.
And if they're wholesalingproducts from you at 1P, it's
often the case that Amazon willimmediately match that lower
price that they found in someregional sale and that now
becomes the national price onAmazon.
But furthermore, if you as abrand are doing that kind of
(32:32):
stuff enough, where you'recreating lower prices outside of
Amazon, amazon, as I say, willmatch that price and they'll
often there's a point where theywill send you a bill for all
the loss of margin that theyhave now had to incur, and so
Amazon will always get its moneyback in one way or the other.
And so you've got to askyourself, as a brand, what do I
(32:54):
need to do to make sure that Idon't upset Amazon so much that
I lose my ability to sell onAmazon or, worse yet, I upset
all of my physical retailersthat may account for a much
larger market share?
It's this really challengingbalancing act, because, at the
end of the day, amazon doesn'tcare if you don't make margin.
That's your problem, that's notAmazon's problem, that's your
(33:15):
problem.
And yet Amazon is sophisticatedenough to be able to go out and
find the cheapest prices thatare out there and decide whether
they're going to match to thoseprices, and often they will
match to those prices.
And now you've got this.
As I mentioned earlier, you'vegot this big problem where that
now becomes the Amazon price,which is highly visible to
anybody who goes on to Amazon tosee what the price is.
Speaker 2 (33:37):
And so Amazon wants and if Amazon has some margin
guarantee with them.
Like you were saying, theycould try and claw it back.
So there were some bad playersout there lowering the price.
So you know Again, I see, I seehybrid is important.
I definitely think there'sdefinitely a way to do it.
Definitely not flounder and ifon their front of them, but
(33:58):
using trusted third partiesdefinitely helps for sure,
because it's another third partyselling the products.
I, you know, I definitely thinkthere's some insulation, but
what?
What they've been complainingabout also is that they get
these random vendor managers orbrand managers Whatever you want
to call them category managersat Amazon and they're just
(34:18):
basically reading off the script.
There's no Negotiation, there'sno discussion, it's black or
white and it's been struggling astruggle for them.
Speaker 3 (34:29):
So it is true that the 1p Process has become much
more automated, but it's alsotrue that most brands Don't do a
particularly good job duringtheir annual vendor negotiations
with Amazon.
They don't show up with theright data to push back on
Amazon and say, well, we'reactually in a position that we
can make you more money if youpush these products, or we're
(34:51):
gonna launch new selection thatwe believe is going to be really
important to Amazon customers.
Instead, the brands to say,okay, okay, you know, we'll give
you an extra 2% this year.
Okay, you know the this processof letting Amazon essentially
dictate the annual pricingadjustment.
That's not a good model, butit's it's.
If you, as a brand, letyourself be dictated by Amazon,
(35:15):
it's further reinforcement thatyou don't know how to play the
Amazon game.
The Amazon game says bring thedata, show me the data.
And while you may have given upa few points to Amazon in years
past, it doesn't mean that yourproduct mix going forward is
going to remain the same.
Maybe you need a new vendorcode for New types of selection
you're creating, maybe you'recreating a new brand that has
(35:36):
different physical shippingdynamics, that that create
different cost structures.
And you've got it.
You've got to be sayingyourself what is it that I am
doing with my selection, with myproduct availability, with
catalog selection, with newselection, with different types
of promotional dollars, withdifferent types of ad dollars?
But what, what is the packageI'm putting together for Amazon
(35:57):
to make them want to do businesswith me?
It's, in some ways, it's notthat wildly different than what
a brand does to break into aphysical retailer for the first
time.
Help me, as the you know thetarget vendor manager.
What?
Why should I give you shelfspace?
Well, with Amazon, it's much thesame thing.
I.
You want to sell one P, you.
You're getting lots of volume,you're in a good place, but
(36:19):
you've got to make it worthAmazon's while.
Well, at the same time, you'vegot to make sure that you're
actually making money doing this, and so you've got to show up
with the right data to be ableto push back on Amazon While the
automated process or what?
While the selling process isbecoming more automated with one
P, if you don't have data thatyou can introduce to the
conversation, then yeah, like,like any channel, you'll get
(36:41):
steamrolled.
Amazon's really good atsteamrolling if you don't have
the data.
But, but again, other retailers, it's the same thing.
You know everyone's going toask and ask for more and more
and more.
And if you don't have Data tosay actually the story is not
quite what you think it is andlet me show you my side of the
story, my data that then thesituation won't be particularly
good.
So, as frustrated as brands canget with being a one P vendor,
(37:05):
sometimes they need to lookthemselves in the mirror and ask
the question what can I bedoing differently to manage my
relationship with Amazon, evenif I stay one P?
What?
What do I do so that I can getsome of what I want out of this
relationship Versus just, youknow, a bunch of low margin
volume?
Speaker 2 (37:23):
So so you've been at Amazon, you've been on both
sides of the table, you've beenat an agency helping brands and
now you're doing something Kindof completely different, like
like so, so just to get caughtup on your life.
Man, like what, what are you upto these days?
I?
Speaker 3 (37:41):
Don't.
I don't work with brands doingthis.
That the very tactical stuffthat I used to do, you know,
when I was at my agency, we werehelping brands with day-to-day
activities loading content, youknow, deciding whether to
approve purchase orders,figuring out what to send into
FBA if they were a third-partyseller, filing tickets.
I don't do that kind of workanymore.
I help brands and, moreimportantly, the investors of
(38:01):
brands think about what it isthat they need to do in order to
be able to succeed in a worldwhere there's online channels
and offline channels.
So I'm helping with like bigmacro questions and they're not
even necessarily Amazonquestions that they're.
They're these big questionsaround how do you as a, how do
you evolve as a brand In orderto be able to adapt to a world
(38:25):
that has big e-commerce channelsand some of this fluidity
fluidity of data or publicpublic so much public data
that's now available that youknow in the past, when you were
just selling to retailers, youcould hide your terms for one
retailer and hide your terms foranother.
Well, I may not be hiding theterms that I'm selling or
wholesaling products to Amazon,but a lot of people can back
(38:48):
enough things out to kind of geta good sense as to where you
are as a brand and what you'relikely doing in order to enable
Amazon to be able to sell yourproducts.
So some of those higher levelquestions are big questions that
I help, especially investors,with, and I've had some private
equity companies come to me andsay we own a brand, we want to
shorten the amount of time thatwe have to own it In order to
see the kind of growth that wewant, so that we can then
(39:10):
eventually exit.
Well, that's, that's aboutunderstanding of all the
channels you sell in.
Where are the levers that youcan actually apply in order to
drive profitable Margin anddifferent channels, and do that
in a way where you're not justlooking at one channel,
disregarding the fact that theproduct also is being sold in
other channels and product leaksacross channels.
Looking at that holisticdistribution model, holistic
(39:33):
control and pricing and allthese types of decisions that
have to be made for one channelthat now have to be made across
all these channels.
So it's a little bit of a youknow, different type of world
that I live in now that I didwhen I was on the agency side,
but it still comes down to abasic understanding that
Amazon's here to stay.
It's very powerful.
(39:53):
It's got huge amounts of datasome of the data it has unique
access to but your brand islikely going to have to have an
Amazon channel strategy toEither sell products, the to
either sell products toadvertise products and find new
customers, or to manage content,or even just to collect data on
(40:16):
some of your competitors.
If all you do is a brand is goon Amazon regularly and say, who
are all these new hotshotcompanies that I've never seen
before that are selling my typesof products on Amazon, you're
gonna discover some of thosevery companies that are likely
one day gonna come and stealshare from you in physical
retail when they go to physicalretailers and say listen, we're
(40:36):
the number one, number two bestselling brand on Amazon.
We do this many sales, we'vegot this many product reviews.
We've built such an efficientbusiness that we can afford
these types of margins.
Get reinvested back into thechannel.
It's only a matter of timebefore some of these
well-established brands inphysical retail find out that
they're no longer being welcomedin physical retail because
(40:58):
there's better brands thatphysical retailers will pursue.
Speaker 2 (41:03):
So random marketplace question.
Obviously, amazon in the US isthe biggest right, but if you
were a brand and you're sellingon Amazon, would you sell on
Walmart or would you reallyfocus on Amazon and get great at
that before you start trying toplay on different marketplaces?
Speaker 3 (41:24):
I think you need a mature Amazon channel strategy
first, and what does thatencompass?
On a very tactical level,you've built the right online
content.
You've got the right images andvideo and A plus detailed page
and you've indexed everythingproperly.
You've got the right keywords,that basically you know where
your products fit in in theAmazon catalog so customers can
(41:44):
find them as often as possibleand are more likely to be able
to convert into sales.
You get that built out with theright kind of content and the
right kind of expertise.
All of that information you canuse in other channels.
It turns out a lot of onlinemarketplaces not necessarily
here in the US, but a lot of theforeign marketplaces are built
(42:05):
off of an Amazon-like catalogprocess, an Amazon-like search
process, and so if you know howto play the Amazon game, it's
like playing a board game that'sbased on other board games.
Learn how to play the Amazongame first and you'll be better
equipped for being able to learnthese other channels.
I have seen brands do well withAmazon and then they go on to
(42:26):
Walmartcom, and certainly duringCOVID, a lot of brands were
looking for opportunities togrow everywhere they possibly
could and a lot of them were alittle bit surprised that when
they went on to Walmartcom theyweren't seeing the kinds of
sales they expected, in partbecause the brands that were
winning on Walmartcom weretypically brands that were
(42:46):
available for in-store pickup,which is to say they were brands
that were on the physicalshelves.
So they were 1p in Walmart andbrands were trying to sell them
3p on Walmartcom, and it didn'twork very well because customers
took the ones that wereavailable in-store.
Walmart's made some importantimprovements with their
fulfillment capability sincethen, and so there are FBA-like
(43:08):
options available for sellersthat sell on Walmartcom.
The traffic's definitely not aslarge as it is on Amazoncom.
Walmart's looking to addresssome of that gap, but I don't
anticipate anytime soon thatWalmartcom is going to be
head-to-head in terms of thevolume opportunities.
Yes, there are going to be lotsof exceptions where you may
have a very specific productthat speaks to the Walmartcom
(43:31):
customer and you've done somegood things attracting customers
in that channel.
But, all things being equal, ageneric brand start with your
Amazon channel strategy.
In time you may diversify intosome other channels.
I would rather you build out aDTC business first before you
build out some of these othermarketplace channels, especially
(43:51):
if you're looking at somedayselling your business.
Speaker 2 (43:54):
Right.
Speaker 3 (43:55):
Investors like to see that you're building customer
data of your own, and you can'tdo that by having a bunch of
marketplace channels.
You're going to have to do thatby building a DTC business.
Your ability to doexperimentation on a DTC site is
certainly stronger than itwould be in most marketplaces.
If you're a very large brandthat has decided to go 1P on
(44:16):
Amazon, building that DTCbusiness is absolutely
fundamental, because it'sprobably the only place you get
to have direct interaction withconsumers and you want to be
able to learn how to be a B2Ccompany.
If you've been a B2B brandforever and now you're selling
on Amazon through 1P, you'restill a B2B business, but
(44:40):
there's all these companies thatare learning to be really good
B2C companies, collecting dataon consumers, figuring out where
the product gaps are, figuringout how to improve on your
products.
You, as a brand, need to startusing that data and not relying
exclusively on your retailers todo that kind of work, because
your retailers don't do marketresearch like that.
You, as the brand, need to dothat in order to capitalize and
(45:01):
continue to be a leader.
Speaker 2 (45:04):
James some really really good stuff today, and so
I'm not going to ask you topredict how the holiday season
is going to be, because I don'twant to date the podcast too
much, but I'm hoping that salespick up.
We definitely saw a slowdown.
You mentioned COVID and it wasjust like the most horrible
event ever, but it was a greatevent for online sellers.
(45:25):
So we've all kind of comethrough that.
We're now trying to all growagain.
Are you seeing the marketplacesgrowing again, or you think
it's going to be flat?
I'm not going to hold you to it, but what do you think is going
to happen?
Speaker 3 (45:40):
here we're seeing mid-teens percentage growth.
But a lot of the companies thatI work with they're coming to me
because they need a lot of helpand it turns out a lot of help
to get onto Amazon and to getset up properly and to get the
right stuff in place.
(46:00):
You can still see somesignificant growth, much larger
than 12% 15% a year.
If you're starting from a pointof, basically, you've dug
yourself a hole by not beingattentive to what's happening on
Amazon.
So we may be working withslightly different types of
brands, but the companies I'mworking with, they either have
(46:21):
dug themselves a hole andrealized they need to fix it, or
they've got investors behindthem who say how do we run
faster and grab share fromothers?
What do we need to do to grabshare more effectively?
So on either one of thosefronts, many of the companies
I'm working with are stillgrowing 20% 30% a year Because
they're doing a better job ofpaying attention to the metrics
that matter on Amazon, but alsothe competitor data that they
(46:44):
can leverage to figure out whatdo they need to do to position
themselves better Againstcustomer demand.
Speaker 2 (46:49):
That's motivating.
That makes me feel better, Good.
Well, James, any final wordsfor the audience and really
thank you so much forparticipating today.
Speaker 3 (46:57):
Amazon's a hard place to sell.
But if you spend the time andyou continue to invest and you
remain nimble and you recognizethat none of us have figured it
all out because Amazon keepsevolving, but if you invest
enough time every week in yourbusiness, you play by the rules.
There's a lot of opportunity tomake good money on Amazon.
At the same time, it doesn'tmatter how big the opportunity
(47:20):
is on Amazon If your product'snot very good fundamentally.
Once a customer tries it, theydiscover this is garbage.
I don't want this.
You've got to go to market witha decent enough product that
customers say this is great.
I had one colleague who reallyimpressed with the way he thinks
about Amazon.
Every time you place an orderwith your manufacturer for
(47:41):
product, ask yourself thequestion there are two or three
things I could do to make myproduct just a little bit better
.
Maybe the packaging getsimproved a little bit.
Maybe the internal parts getimproved a little bit.
Maybe the messaging I put onthe product detail page gets
updated slightly in order toreduce confusion that might
exist with customers.
Think about, every month or so,what can you do to make your
(48:02):
overall business that muchbetter?
Because the reality is you gotall these private label brands
on Amazon doing exactly the samething.
By the way, they're alsopinpointing inefficiencies in
your brand and saying we canactually make a much better
version of that moustrap.
This is no longer grandpa'scorner store.
Speaker 2 (48:24):
This is a very very impressive, it's a real deal.
James, thanks so much.
I really really appreciate it.
I'm sure everybody got a lotout of this today.
Thank you.
Speaker 3 (48:33):
Thank you for having me, adam, it's been my pleasure.
Speaker 1 (48:36):
Thank you for watching another episode of the
Planet Amazon podcast, where wetalk all things Amazon.
Welcome to the Planet Amazon podcast with Adam
Schaefer, where we explore theworld of Amazon and other
e-commerce marketplaces.
Join us as we delve into thelatest strategies and tactics
for successful selling on theworld's largest online
marketplace.
Speaker 2 (00:17):
Hello, I'm Adam Schaefer and welcome to Planet
Amazon, where we talk about allthings Amazon.
Today we have an awesome guest,somebody that has really helped
us out on and understanding theAmazon platform and strategies.
I'm pleased to have JamesThompson with us.
James, if I get this wrong,you've been around so many
(00:41):
different places, but I believeyou're currently managing
partner at Equity Value Advisors, so I have that right.
You're a board member, investorand advisor to many global
commerce companies.
I've looked and you have quitea portfolio.
You've been in and around theAmazon ecosystem for over 16
years.
I think you can correct methere.
(01:03):
You were also at the verybeginning of the Amazon 3P
marketplace model.
I think you were part of theteam that actually developed
that marketplace model andlaunched it on Amazon.
You could correct me when I'mwrong with this awesome
introduction.
You're the co-founder of theProsper Show, which has become a
(01:25):
staple in the industry, whereAmazon sellers, brands and
service providers go every yearto talk about and get educated
on and share their stories onAmazon.
That's an awesome, awesome showthat everybody definitely goes
to.
I met James.
He was the chief strategyofficer, I think was your title
(01:47):
there, but you were a founder atBybox Experts, which was an
agency, quite a large one.
It helped brands develop theirstrategies and grow and navigate
Amazon, something that ourcompany always wanted to aspire
to doing.
We had this buy and sell model,but we're also kind of an
agency.
(02:08):
James has written a few booksthat I've read.
I have to say they're staples.
They're things that you, ifyou're going to be in the Amazon
business, if you're thinkingabout being in the Amazon
business, you should read them.
They're not long reads butthey're really, really helpful.
One is called the AmazonMarketplace Dilemma, which I'll
(02:28):
show.
One is called Controlling yourBrand and the Age of Amazon.
Really, I learned a heck of alot from these books.
They're fast reads but reallyreally full of great information
.
With that long introduction,james, thank you and welcome to
the show.
Speaker 3 (02:47):
Thank you for having me, Adam.
It's great to be back together.
Speaker 2 (02:50):
Yes, and so I wasn't really trying to plug the books,
but I read them.
The first thing that Irecognized was the importance of
explaining to brands andworking with brands and trying
to get them to understand.
Whether you want to be onAmazon or not, you've got to
have an Amazon strategy.
(03:11):
Maybe you could expand on thata bit.
Speaker 3 (03:16):
We can talk about different ways to sell on Amazon
, but even before you decidewhether you want to sell on
Amazon, it's important tounderstand that Amazon is this
massive channel hundreds ofmillions of customers just here
in the United States that willeither buy products on Amazon or
at least go and do theirresearch looking up products on
Amazon.
The question you have as abrand executive is what do I
(03:39):
want to do to leverage whatAmazon has to offer?
Most people typically think ofAmazon as a place where you go
to sell products.
Okay, we can talk more aboutdifferent ways to sell, but
Amazon's also becoming a veryeffective place to go and
advertise.
Today, companies may bespending money on social media.
They may be even doing print orTV or radio advertising.
(04:02):
Well, some of the stuff thatAmazon's doing today on its
advertising platform are moreadvanced when it comes to
targeting customers than any ofthese other types of advertising
that we've talked about.
I see a world where Amazonprobably in the next five to
seven years, they're going tostart to replace a lot of the
big TV ad dollars.
They're going to start toreplace a lot of the radio and
(04:24):
the print ad dollars and havethem now move to an Amazon
platform or platform that Amazonhelps to control, allowing
brands to do hyper-targetedadvertising.
This question of do I sell onAmazon?
Do I advertise on Amazon?
And then, thirdly, to whatextent do I use Amazon as a data
source to understand more aboutmy products, my competitors'
(04:46):
products, my category ofproducts?
You have this extraordinaryamount of data that's sitting
publicly available for anyone tolook at to understand what are
customers liking, what are theynot liking about different types
of products.
As you get into actuallyselling on Amazon, there's
additional information you canget about.
What does my customer look like?
I've worked long before myAmazon days.
(05:08):
I worked for managementconsulting firms where big
Fortune 500 brands were spendingmillions of dollars doing focus
groups, millions of dollarsgoing out and asking people what
do you think about this?
What do you think about that?
When I look at the kind of datathat's available on Amazon, it
certainly doesn't fully replacethe kinds of data you can get
from market research, butthere's an awful lot of
(05:28):
information you can very, veryquickly glean from tens of
thousands of product reviewsthat you and your competitors
are already collecting on Amazonand use that information to
figure out are there productgaps?
Is my product not necessarilyproperly designed for customer
needs?
Is my product falling behind ondifferent types of
functionality relative to whatcustomers are looking for?
Speaker 2 (05:50):
What's interesting, it used to be a black box and
now Amazon's been opening it upa bit for sure every year,
slowly, slowly yeah.
Speaker 3 (05:58):
So, again, even if you are a company that has spent
a lot of money on marketresearch for, say, there's so
much valuable information that'spublicly available on Amazon,
if you know where to go and ifyou know how to use it as well
as how not to use it.
So, as a brand executive, it'svery difficult to ignore Amazon
(06:18):
and say we don't want to sellthere.
Well, fine, if you don't wantto sell there, there's reasons
you may choose not to sell there.
But what are you doing toadvertise?
What are you doing to use itfor data collection?
Maybe you don't sell, maybe youdon't advertise, but any Joe
Blow can go on the website andstart collecting information
about what types of customerpreferences there are about
different items.
(06:38):
What are customers liking andnot liking about products that
are in your category?
Well, that's really usefulinformation and it's real time.
You can find out in the last 30days, where has customer
sentiment been around?
The types of products that Isell, extremely useful and so
hard to say.
Amazon is something I don't wantto have anything to do with.
I would look at it differently,which is in what way are you
(07:01):
going to leverage Amazon to helpdrive your business, and
whether it's the selling, theadvertising, the data collection
or some combination of allthree of those.
You've got to have an Amazonchannel strategy.
I also want to add that brandswill say, well, I sell on my own
direct to consumer site or Isell on some other marketplace.
They say, great, that's good.
(07:22):
You should do that.
If that works for you, that'sgreat.
But keep in mind that there aremore customers shopping on
Amazoncom in the United Statestoday than any other e-commerce
channel, and so to what extentare you leveraging all that
information or all thosecustomers or all the inventory
of advertising that's availableto you?
Start with an Amazon channelstrategy.
(07:42):
If you get your Amazon channelstrategy in good place, then
you'll be better prepared toroll out additional marketplaces
or you'll be better preparedfor thinking about how does my
DTC business complement orpotentially compete with
marketplace businesses?
That, I might add.
Speaker 2 (07:59):
Yeah, the other thing that I found is and Shopify has
been a great platform andAmazon friend or foe with
everybody, right, but there'sdefinitely a benefit to having
your own DTC and you say, well,I own the customers there and
I'll have to pay the fee, butAmazon is now providing
discounts for advertising offAmazon.
(08:20):
On Amazon, there doesn't haveto be catalog parity anymore
unless you tell me I'm wrong onthat and you don't have to have
your full assortment on Amazon.
So it's not a bad way to getnew customers and then, if they
like the brand, they're going tocome and visit your website.
So I do think it works.
And Amazon also is helping withlogistics for Shopify customers
(08:45):
.
So it's pretty interesting days.
But it's funny.
We talk to brands all the timeand there's some brands and
there are B2B brands in so manycases and they say we don't sell
on Amazon, you know that's notfor us.
Blah, blah, blah.
And then we choose them.
They're already there and theyjust have zero control over
what's going on there.
I mean, you've seen thatno-transcript.
Speaker 3 (09:07):
If your brand is at all popular, that's your first
mistake.
The reality is, if somebody islooking for your product,
someone else is going to figureout how to make that product
available to them.
Very few brands have such tightcontrol on their distribution.
The product doesn't leak onto amassive channel like Amazon.
If it does leak onto a channellike Amazon, then somebody else
(09:29):
is creating brand content andputting it out there and saying
this is the way we're going torepresent your brand.
Well, I've had more than my fairshare of experience working
with crazy unauthorizedresellers who are running around
just doing deals, resellingwhatever they can get their
hands on, and that's okay.
But those types of resellersrarely invest as much time on
(09:53):
building high-quality brandcontent that aligns with all the
millions of dollars that abrand may have spent in building
and communicating its brandover the years to consumers.
So, at an absolute minimum,when we talk about Amazon
channel strategy, I don't careif you as a brand decide you are
not going to sell a singledollar on Amazon.
At a minimum, recognize thatsomeone else is going to try to
(10:14):
sell your products on Amazon.
So why don't you go in as abrand and at least control the
content.
Make sure that what customerssee is consistent with what they
see everywhere else.
That's what a brand is, isconsistent delivery of promises.
If you're not properly managingthe content that's on Amazon
and somebody else is puttingrandom content out there, then
(10:34):
you're going to create customerconfusion, as much as you like
to say, well, but that's not mycontent, those are not even my
units of inventory.
From a customer's perspective,they don't know any difference.
Speaker 2 (10:44):
I don't know my family.
Speaker 3 (10:45):
They don't care.
They just want to see that ifI'm buying my Levi's jeans in
this store or I'm buying myLevi's jeans online, it's all
the same stuff, it's all thesame sizing charts, it's all the
same messages around how thiswill make me feel or what
functionality I'm going to getout of the products.
I don't want to see somethingthat's so wildly out of line
with everything else that thebrand is actively managing.
(11:06):
So you've got to create a highquality customer experience,
even if you're not going to bethe seller of record a massive
metal like Amazon.
Speaker 2 (11:14):
I always say at least , at least get brand registry
and let's get some real goodcontent for your brand and your
products out there.
Build a brand store, havesomething, even if you don't
care about it, a lots of peopleare going to see it because it's
a popular platform.
And then it also blocks not aperfect block, but it does block
some of these rogue guys fromcreating rogue content and so I
(11:37):
mean, at least do that for sure.
Speaker 3 (11:40):
But one of the other things, adam, that catches me
off guard.
Whenever I hear a brandexecutive tell me this, they'll
say well, we don't have to worryabout all those other types of
companies on Amazon because wedon't see them in our brick and
mortar channels.
They're not competitors to us.
Okay, so you sell in a physicalretail channel.
There might be two or threeother competitors whose products
(12:00):
are on the shelf next to yours.
If that's the world that yousee as your competitive set, and
everything else outside of thatis irrelevant.
Well, talk about a wake-up call.
You go on Amazon.
You start searching for some ofthe generic product terms that
are used for finding yourproducts.
Chances are a bunch of brands.
You've never heard of brandsthat only exist on Amazon.
(12:20):
Brands that often are doing asignificant market share on
Amazon are actually the onesthat are winning the sale.
They're winning organic searchon Amazon, and so I don't really
care.
If you have 40% market share inphysical retail, chances are
you don't have anything close to40% online or specifically on
Amazon, because the platform hasbeen built to enable random
(12:44):
entrepreneurs to say I'm goingto build a brand, I'm going to
slap a brand name on, I'm goingto buy some UPCs.
I'm going to start competingand grabbing pie from some of
the bigger brand names thateveryone else has heard of in
physical retail.
Those very brands are notactively playing and not
actively managing an Amazonchannel strategy.
Thank you very much, butthere's customers looking for
those types of products.
We're going to sell them, ourversion, our brand, of those
(13:07):
items, and we thank these bigbrands for staying away.
Speaker 2 (13:11):
Yeah, no.
And what's interesting is thatthose unknown brands a lot of
them are offshore, some of themaren't they'll buy the brand
names when they're advertisingso we sell again.
These are kind of interestinglyodd products but they're B2B
receipt printers that people useat point of sale and there's
some big names in that business.
You'll pretty common names.
(13:32):
I'm going to say we don'tnecessarily work with them all
but Epson Star, my Chronix,hewlett Packard.
But when you go to look, if youpunch in Epson receipt printer
on Amazon, there'll be seven or10 brands you've never heard of
that sell more receipt printersthan you would imagine.
Like, I'm sure those brandswant those sales but they're
(13:53):
playing off the big brands andthey're marketing their own
brands and they're killing it,or I think they're killing it.
Speaker 3 (13:59):
In about 2014, 2015,.
Amazon recognized that they hadalready talked to every major
brand there is to talk to andsaid come and sell on Amazon.
And some of those brands saidyes, some of them said no, some
of them said don't ever call meagain.
And then Amazon said well, weneed to continue to grow
selection, and one of the bestways to grow selection, amazon
(14:20):
decided, was to go overseas andto start recruiting
manufacturers companies thatwere making these products for
the big US brands that we've allheard of.
But talk to the manufacturersand say listen, why don't you
build your own brand?
We'll help you build the brand.
We'll help you develop it.
We'll even help you sell it andfulfill it and store it and do
all that kind of stuff.
We'll even help you bring itinto the United States through
(14:42):
customs and get it directly intoour warehouses.
All you need to do is make theproduct different enough from
whatever else you're making forsome other brand and let's
create a brand name for you andlet's start selling it on Amazon
.
And so now you have literallytens of thousands of Asian
manufacturers who a few yearsago knew nothing about selling
(15:02):
direct to consumer, who now havefairly decent size direct to
consumer businesses on Amazon,selling brands that they now own
, and these products are quiteoften of high enough quality
that they compete with thenational brands, because it's
the same manufacturers who makethe national brands today who
(15:23):
are now also selling their ownbrands, and so you don't
typically have the same qualityproblems that you might have had
six, seven, eight years agowhen some of these manufacturers
were getting started with theirown brands.
You've got very high qualitybrands.
They're just brand names thatmost of us have never heard of.
And that brings me to anotherinteresting issue.
If you think about Amazon,about 70% of all product search
(15:43):
on Amazon today is unbranded.
People don't go on saying showme NFS and printer.
They go on saying show me areceipt, printer, boom, here's a
bunch of brands you've neverheard of and, by the way, a lot
of those brands are going to ownthe first page of product
search.
Well, brands live or die basedon whether they can show up on
the first page of organic search.
And you may be a big nationalbrand that has major market
(16:06):
share and physical retailchannels, but on Amazon, if
you're not even on page one, alot of consumers will never go
looking for you because there'slots of other choices from
brands, albeit brands they maynot have heard of, but brands
that are playing the Amazon gamewell enough to build up a lot
of product reviews.
They've got decent, qualitycontent.
Maybe they're spending money onPPC in order to also do well
(16:30):
with paid search results, andthese are the brands that are
winning sales.
And so this whole issue of well, I've spent so much money
building up my brand.
My customers are loyal to mybrand.
Well, let me show you Amazon.
One of the first things you'llnotice on Amazon is that brand
loyalty really isn't the mainplay here.
The main play is that theAmazon channel is what customers
(16:51):
are loyal to.
Amazon doesn't care what brandyou buy once you come to Amazon.
What they care about is do theyhave enough of the national
brands and enough other choicesthat when you come onto Amazon
and look for something, there'llbe enough choices, enough of
them that are high quality.
Looking that you'll say youknow what I'm going to buy this
product I'm not the product thatI thought I was going to buy
when I came looking, but I foundsomething that's good enough to
(17:13):
meet my needs.
Let's move forward.
Speaker 2 (17:15):
Well, and what's shocking is I mean you mentioned
reviews and how important theyare.
I mean some of these brands.
So we go back to the originalpart of what we're talking and
like these larger brands becausethey're not managing their
brand and they're not managingtheir content and they're not
managing their customerexperience at all.
Somebody might have posted theproduct on Amazon, maybe bought
(17:37):
it from overseas and brought itin, so it's from outside the
territory, maybe it's got adifferent cable and somebody's
not happy and they leave a badreview.
So now you're a well-knownbrand with a bad review and
maybe you have one star or twostars.
And then there's a companythat's actively trying to manage
and get great reviews and havegreat product and they have
(18:00):
thousands of great reviews andyou have a one or two star in
the brand.
I mean, my God, people aregoing to say I really don't want
that brand.
I want this brand, even if Idid come looking for it.
I want to try this.
It's amazing.
Speaker 3 (18:13):
So it's important to understand as a brand that when
you look at all those productreviews, everything gets
squished together.
On a product review, I'mtalking, a customer does or
doesn't like the delivery of theproduct, does or doesn't like
the packaging, does or doesn'tlike whether the product looks
new, or maybe it's in usecondition, or it actually has
(18:35):
something to do with the actualproduct itself when they open it
up and start using it.
And so all that noise that canhappen from other sellers
selling a brand, other sellerscreating content, other sellers
doing fulfillment of thoseorders all that can be
additional noise that ends uphurting your brand.
And so the day that the brandsays you know what, we really
should be actively managing ourAmazon channel presence.
(18:56):
They may already be starting ina whole, because there's a
bunch of one and two starreviews on their listings
brought on by poor performancefrom random sellers who were
representing the brand in thepast.
That's all the kind of noisethat brands should work really
hard to avoid getting themselvesinto in the first place and
instead say let's accept thefact that there's hundreds of
(19:18):
millions of customers on Amazon.
We now need to ask the questionwhat's the best way for us to
have our products represented,whether it's us, whether it's an
authorized third party reseller, whether we want a wholesale
products to Amazon.
I mean there's lots of ways todo that.
But at least they're activelysaying we're going to use this
channel not just to sellproducts, but we're going to use
it to protect our brand.
(19:38):
And we've got to do it becausethe reality is we made the
mistake of building a popularbrand.
Speaker 2 (19:45):
Yeah, and you know one thing, one bit of advice
that we try to give these brandsthat are thinking about selling
on Amazon maybe they're sellingon Amazon and they're having
issues controlling maybe thesellers selling at a minimum
advertised price, maybe sellingUS product and not foreign
(20:07):
product, and so we say you kindof have to have a strategy
around that too.
And I know you live throughthis a lot where you're working
with brands and they absolutelya thousand percent agree with
what you're saying, but theyjust don't want to do it.
They're scared.
I mean it's like they got toput their big boy pants on and
have a real strategy for that,because they're going to get
clobbered out there if theydon't.
(20:28):
And we see that all the time.
Speaker 3 (20:29):
Yeah, you know this may be amusing for your audience
, but many years ago I was anunauthorized seller of watches.
I could get my hands on allsorts of stuff and make a few
bucks and learn how the Amazonchannel worked, learn how seller
central worked, learn howventure central worked.
You know it was easy to getproducts because brands in that
particular category of watchesyou know a lot of them are not
(20:52):
paying attention to the Amazonchannel or they choose to ignore
the fact that, yes, productsare being re-imported from
elsewhere, or you know theversion, a European version is
being sold as the US versionhere in the United States.
At the end of the day, that'sall destruction of your brand,
and if you, the brand, arechoosing to pretend that that's
not an issue, then you've got abig problem.
(21:13):
But here's the scary thing Alot of brands, when you actually
start looking at why is thishappening, it starts first and
foremost with you've got salesincentives in place within your
organization that are notactually aligned with protecting
the brand.
Their incentives are all aboutlet's sell as many units of
product as we can, and of coursewe'll assume that you know
(21:35):
everybody's going to playappropriately and stay in their
own lanes.
Well, that's not how it works,and you know I wrote a whole
book on.
You know product diversion andall the exciting things you can
do there as a brand, all thescary things you have to manage
away, but a lot of it comes downto what is best for the
salespeople within a brand isoften not what's best for the
brand, and so you've got thissituation where the sales team
(21:59):
does great, they get their bigbonuses and the brand gets
pimped out to everybody andanybody who wants to offer up
money for a PO.
Well, that's not really a goodlong-term strategy for building
a successful brand.
And so this is where we startto get into figuring out who's
evolved to account for the factthat the world today has highly
(22:23):
fluid, highly transparente-commerce channels that are
disrupting the way that brandsdo distribution in all of the
channels that they normallymanage.
And so you've got to bethinking.
As a brand executive, I can'tjust continue to sell to my
favorite retailers, my favoritedistributors, and assume that
they're actually all doingwhat's best for my brand.
(22:43):
You know they're doing what'sbest for themselves, and what's
best for themselves often may beselling the product off to
other people who then, in turnsell it on Amazon.
And if they sell it on Amazonand the brand's not paying
attention to content or topricing, you know you can end up
in a situation where randomcompanies you've never heard of
have constant supply of yourproducts that they sell at
(23:06):
undercut prices, creatingchannel conflict where your
physical retail partners arecomplaining saying why is the
product always cheaper on Amazon?
This conversation I'm havingwith you right now.
I was having it 10 years ago.
It's the same conversationbecause a lot of brands still
are saying you know what?
I'm going to let the next roundof executives handle this
(23:27):
problem because you know I'mclose to retirement being a
brand executive and I don'treally want to have to deal with
that because it's complicatedand, quite frankly, you know we
may suffer loss sales for ashort term period of time, while
we tightened up control.
Well, guess what if you don'ttighten things up?
Someone else is going to managewhat your brand looks like.
Someone else is going to managewhat customers think about your
(23:49):
brand.
Someone else is going to decidewhat the selling price of your
products are, either online oroffline.
Someone else is going to decidewhere your brand is relative to
other brands that are sellingin the same category.
That's an awful lot of givingup control to random people who
you may never even meet or maynot ever be able to identify.
This all comes back to this ideaof you've got to say okay,
(24:12):
whether we've got a problem ornot.
Today we need to recognize theAmazon channel is here to stay.
We need to proactively manageit in whatever way that means,
whether it's controlling content, whether it's also becoming a
seller of record or decidingsomeone else will represent us.
But you can't pretend that acouple of hundred million
customers a month shopping on achannel that's not important in
(24:36):
some manner to your overallbusiness, even if Amazon
represents 5 percent of yourtotal sales, the conflict and
the noise that that channel cancreate for the other 95 percent
of your channels is absolutelydeafening.
Again, we could talk about thatall day long, but it's one of
those things where brands needto recognize that they need to
(24:57):
be proactive on Amazon.
They may need to invest in anumber of things they've never
had to invest in things likeonline content channel control,
saying no to certain types ofpartners in the past who have
been good trade partners butmight, in fact, be selling
products out the back door toall the wrong companies, who
then, in turn, sell the productson Amazon.
Speaker 2 (25:19):
I mean, just recently we met with a brand that we're
working with and they're like,we keep on getting these phone
calls from our biggest retailersscreaming at us and we got to
get those guys off Amazon.
Help us get those guys off.
Okay, we'll try to understandthe policies, but first of
foremost, who are these guys?
We say this company is reallythis company and this company is
(25:40):
really.
Yeah, really, we know thoseguys.
Those are our best dealers.
They're your best dealers.
What do you think they're doingwith your product?
Oh, no, no, no.
They have a value added channel.
They're selling directly toconsumers and to resellers and
they're out there somewhere, butthey're not selling them.
No, no, no.
They're selling.
(26:01):
All their sales are coming fromAmazon.
Don't you understand?
They're not doing.
There's no value add for you.
They're just taking it,lowering the price on Amazon and
causing you problems.
They're like oh my, we caneasily call them up and tell
them to stop doing that.
Maybe you should, or maybe youshould really have a policy so
they have to follow your policy.
You can't go up.
But they were like shocked.
That can't be.
Speaker 3 (26:22):
Not them I've had clients who have said well, we
don't want to say no to some ofour favorite distributors
because they're our golfingbuddies.
We've been golfing with themforever, we like them, we know
their families.
Okay, but what does that haveto do with the fact that their
incentives are different thanyour incentives?
At the end of the day, ifyou're trying to build a robust,
consistent brand acrosschannels with consistent pricing
(26:45):
, consistent messaging, you needto have companies that are also
willing to buy into that storyand are willing to commit that.
That's what they're going to dofor you.
I don't have a problem ifsomebody wants to be an
unauthorized seller, butrecognize that they don't
necessarily help you as a brandto create the consistent
messaging, the consistentpricing that you're looking for
(27:05):
in your overall business.
Maybe you're a brand that sayswe don't really care what price
our products are sold and letcustomers figure out the
cheapest channel where they wantto buy products.
Okay, that's fine.
Just recognize that othercompanies who do clean up the
channel and make consistentcontent for both their online
and offline channels, they'regoing to have a much better and
(27:27):
much easier way of telling thatstory over and over to customers
and repeat customers, simplybecause they're properly
managing their brand.
Then you get into some of thesemajor multinational brands
where every single country hasits own sales team.
Every single country has itsown sales goals.
Speaker 2 (27:46):
All kind of make their numbers right.
Speaker 3 (27:48):
Yeah, and everyone of them might have an online
business and an offline business.
Well, guess what?
If you're really good atsourcing product from different
trade zones around the world,you don't really care where it's
coming from and whose numbersit hits within the brands.
You just care can you get theproduct consistently and be able
to make a few bucks selling iton Amazon.
So, as a brand executive,you've got to recognize that
(28:12):
there are very clever people onthe other side of the table who
are looking for ways to makemoney with your product.
And your product is just a skew, it's just a widget.
It's a widget where, if theyknow how to play the Amazon game
better than you do, they'regoing to make a bunch of money.
And when the time comes thatyou, as a brand, decide to shape
up and start to tighten updistribution, tighten up content
(28:32):
, those entrepreneurs will moveon to some other brand that
hasn't got its act together orhasn't got its eyes open to
what's going on with thesemassive online channels.
Speaker 2 (28:43):
Okay, I mean absolutely 100% agree with you
and we see it every day.
One thing we've been seeinglately, and it's because Amazon
I think you used and youprobably know much better, but
Amazon was looking at the brandand the profitability of a brand
and they were focused on growth.
But now it seems they're muchmore focused on profitability
(29:04):
and they've been really reallyputting the screws to their 1P
partners, their vendor partners,trying to get more and more
advertising dollars, more andmore margin from them, more and
more funds, and so what we'vebeen seeing, and what I've been
reading also, is that about 75%of 1Ps are now hybrid in some
way.
They're selling to Amazon andthey're selling either through
(29:27):
3Ps or they're creating theirown 3P, and you've lived through
this one.
What's your thoughts on that?
But it definitely seems to bethe trend.
Speaker 3 (29:38):
So I can't comment on whether 75% makes sense that
there are a lot of 1P brandsthat would prefer not to be 1P
because they see how they canmake more money being a third
party seller.
They also see that some of themargins that Amazon's coming
after on the 1P side make itunsustainable for them to
(29:59):
continue to wholesale to Amazon.
That being said, amazon doeshave a manufacturer policy in
place specifically to ensurethat Amazon gets first crack at
being able to wholesale productsfrom brands.
And so if a brand is already 1Pand they're thinking about
moving to 3P, unless they'rekicked out of 1P by Amazon
because Amazon says you knowwhat?
(30:19):
We can't make any money sellingthis, and we really don't.
You're too insignificant to theoverall category, we're not
going to bother with you.
In most cases, if a brand saysI'm going to go 3P, they better
not be telling their vendormanager, because the vendor
manager is going to instantlysay heck, heck, no, you're not
going to do that.
And, by the way, if you startdoing that, amazon has a bunch
of systems in place to go outand detect whether a third party
(30:43):
account is tied to a 1P account, meaning, do they have similar
shipping addresses, similar taxIDs, credit card, bank accounts,
whatever, and so I have workedwith many 1P brands that have
decided to go 3P but done it insuch a way that it's resulted in
their 3P account being shutdown but also the vendor manager
(31:04):
getting understandably tickedoff.
Now I'm not a lawyer, I'm notgoing to get into the arguments
around whether this is fair ornot.
It's kind of irrelevant.
It's Amazon's marketplaces anduntil somebody chooses to
challenge this in a court of law, amazon continues to tell which
brands you know, to tell bigbrands whether they're allowed
to sell 1P or sell 3P.
(31:25):
If you're invited to sell 1P, alot of brands say, great,
another wholesale channel for us.
But it's not just anotherwholesale channel.
It's a wholesale channel wherethe rules are a little bit
different than selling to atraditional retailer who has
certain types of economics inplace.
Amazon's looking to find ways tocontinue to drive costs down
(31:46):
and, like many retailers,amazon's not going to respect a
map policy in many cases.
But Amazon also has the addedadvantage that they have huge
numbers of servers that activelygo out and scrape tens of
thousands of websites every hourto look for cheaper prices.
And so if you're a brand thatsays you know what.
We're going to authorize ourNorthern Florida division to
(32:10):
sell this product this weekendat 20% off.
Well, amazon's going to findthat right away.
And if they're wholesalingproducts from you at 1P, it's
often the case that Amazon willimmediately match that lower
price that they found in someregional sale and that now
becomes the national price onAmazon.
But furthermore, if you as abrand are doing that kind of
(32:32):
stuff enough, where you'recreating lower prices outside of
Amazon, amazon, as I say, willmatch that price and they'll
often there's a point where theywill send you a bill for all
the loss of margin that theyhave now had to incur, and so
Amazon will always get its moneyback in one way or the other.
And so you've got to askyourself, as a brand, what do I
(32:54):
need to do to make sure that Idon't upset Amazon so much that
I lose my ability to sell onAmazon or, worse yet, I upset
all of my physical retailersthat may account for a much
larger market share?
It's this really challengingbalancing act, because, at the
end of the day, amazon doesn'tcare if you don't make margin.
That's your problem, that's notAmazon's problem, that's your
(33:15):
problem.
And yet Amazon is sophisticatedenough to be able to go out and
find the cheapest prices thatare out there and decide whether
they're going to match to thoseprices, and often they will
match to those prices.
And now you've got this.
As I mentioned earlier, you'vegot this big problem where that
now becomes the Amazon price,which is highly visible to
anybody who goes on to Amazon tosee what the price is.
Speaker 2 (33:37):
And so Amazon wants and if Amazon has some margin
guarantee with them.
Like you were saying, theycould try and claw it back.
So there were some bad playersout there lowering the price.
So you know Again, I see, I seehybrid is important.
I definitely think there'sdefinitely a way to do it.
Definitely not flounder and ifon their front of them, but
(33:58):
using trusted third partiesdefinitely helps for sure,
because it's another third partyselling the products.
I, you know, I definitely thinkthere's some insulation, but
what?
What they've been complainingabout also is that they get
these random vendor managers orbrand managers Whatever you want
to call them category managersat Amazon and they're just
(34:18):
basically reading off the script.
There's no Negotiation, there'sno discussion, it's black or
white and it's been struggling astruggle for them.
Speaker 3 (34:29):
So it is true that the 1p Process has become much
more automated, but it's alsotrue that most brands Don't do a
particularly good job duringtheir annual vendor negotiations
with Amazon.
They don't show up with theright data to push back on
Amazon and say, well, we'reactually in a position that we
can make you more money if youpush these products, or we're
(34:51):
gonna launch new selection thatwe believe is going to be really
important to Amazon customers.
Instead, the brands to say,okay, okay, you know, we'll give
you an extra 2% this year.
Okay, you know the this processof letting Amazon essentially
dictate the annual pricingadjustment.
That's not a good model, butit's it's.
If you, as a brand, letyourself be dictated by Amazon,
(35:15):
it's further reinforcement thatyou don't know how to play the
Amazon game.
The Amazon game says bring thedata, show me the data.
And while you may have given upa few points to Amazon in years
past, it doesn't mean that yourproduct mix going forward is
going to remain the same.
Maybe you need a new vendorcode for New types of selection
you're creating, maybe you'recreating a new brand that has
(35:36):
different physical shippingdynamics, that that create
different cost structures.
And you've got it.
You've got to be sayingyourself what is it that I am
doing with my selection, with myproduct availability, with
catalog selection, with newselection, with different types
of promotional dollars, withdifferent types of ad dollars?
But what, what is the packageI'm putting together for Amazon
(35:57):
to make them want to do businesswith me?
It's, in some ways, it's notthat wildly different than what
a brand does to break into aphysical retailer for the first
time.
Help me, as the you know thetarget vendor manager.
What?
Why should I give you shelfspace?
Well, with Amazon, it's much thesame thing.
I.
You want to sell one P, you.
You're getting lots of volume,you're in a good place, but
(36:19):
you've got to make it worthAmazon's while.
Well, at the same time, you'vegot to make sure that you're
actually making money doing this, and so you've got to show up
with the right data to be ableto push back on Amazon While the
automated process or what?
While the selling process isbecoming more automated with one
P, if you don't have data thatyou can introduce to the
conversation, then yeah, like,like any channel, you'll get
(36:41):
steamrolled.
Amazon's really good atsteamrolling if you don't have
the data.
But, but again, other retailers, it's the same thing.
You know everyone's going toask and ask for more and more
and more.
And if you don't have Data tosay actually the story is not
quite what you think it is andlet me show you my side of the
story, my data that then thesituation won't be particularly
good.
So, as frustrated as brands canget with being a one P vendor,
(37:05):
sometimes they need to lookthemselves in the mirror and ask
the question what can I bedoing differently to manage my
relationship with Amazon, evenif I stay one P?
What?
What do I do so that I can getsome of what I want out of this
relationship Versus just, youknow, a bunch of low margin
volume?
Speaker 2 (37:23):
So so you've been at Amazon, you've been on both
sides of the table, you've beenat an agency helping brands and
now you're doing something Kindof completely different, like
like so, so just to get caughtup on your life.
Man, like what, what are you upto these days?
I?
Speaker 3 (37:41):
Don't.
I don't work with brands doingthis.
That the very tactical stuffthat I used to do, you know,
when I was at my agency, we werehelping brands with day-to-day
activities loading content, youknow, deciding whether to
approve purchase orders,figuring out what to send into
FBA if they were a third-partyseller, filing tickets.
I don't do that kind of workanymore.
I help brands and, moreimportantly, the investors of
(38:01):
brands think about what it isthat they need to do in order to
be able to succeed in a worldwhere there's online channels
and offline channels.
So I'm helping with like bigmacro questions and they're not
even necessarily Amazonquestions that they're.
They're these big questionsaround how do you as a, how do
you evolve as a brand In orderto be able to adapt to a world
(38:25):
that has big e-commerce channelsand some of this fluidity
fluidity of data or publicpublic so much public data
that's now available that youknow in the past, when you were
just selling to retailers, youcould hide your terms for one
retailer and hide your terms foranother.
Well, I may not be hiding theterms that I'm selling or
wholesaling products to Amazon,but a lot of people can back
(38:48):
enough things out to kind of geta good sense as to where you
are as a brand and what you'relikely doing in order to enable
Amazon to be able to sell yourproducts.
So some of those higher levelquestions are big questions that
I help, especially investors,with, and I've had some private
equity companies come to me andsay we own a brand, we want to
shorten the amount of time thatwe have to own it In order to
see the kind of growth that wewant, so that we can then
(39:10):
eventually exit.
Well, that's, that's aboutunderstanding of all the
channels you sell in.
Where are the levers that youcan actually apply in order to
drive profitable Margin anddifferent channels, and do that
in a way where you're not justlooking at one channel,
disregarding the fact that theproduct also is being sold in
other channels and product leaksacross channels.
Looking at that holisticdistribution model, holistic
(39:33):
control and pricing and allthese types of decisions that
have to be made for one channelthat now have to be made across
all these channels.
So it's a little bit of a youknow, different type of world
that I live in now that I didwhen I was on the agency side,
but it still comes down to abasic understanding that
Amazon's here to stay.
It's very powerful.
(39:53):
It's got huge amounts of datasome of the data it has unique
access to but your brand islikely going to have to have an
Amazon channel strategy toEither sell products, the to
either sell products toadvertise products and find new
customers, or to manage content,or even just to collect data on
(40:16):
some of your competitors.
If all you do is a brand is goon Amazon regularly and say, who
are all these new hotshotcompanies that I've never seen
before that are selling my typesof products on Amazon, you're
gonna discover some of thosevery companies that are likely
one day gonna come and stealshare from you in physical
retail when they go to physicalretailers and say listen, we're
(40:36):
the number one, number two bestselling brand on Amazon.
We do this many sales, we'vegot this many product reviews.
We've built such an efficientbusiness that we can afford
these types of margins.
Get reinvested back into thechannel.
It's only a matter of timebefore some of these
well-established brands inphysical retail find out that
they're no longer being welcomedin physical retail because
(40:58):
there's better brands thatphysical retailers will pursue.
Speaker 2 (41:03):
So random marketplace question.
Obviously, amazon in the US isthe biggest right, but if you
were a brand and you're sellingon Amazon, would you sell on
Walmart or would you reallyfocus on Amazon and get great at
that before you start trying toplay on different marketplaces?
Speaker 3 (41:24):
I think you need a mature Amazon channel strategy
first, and what does thatencompass?
On a very tactical level,you've built the right online
content.
You've got the right images andvideo and A plus detailed page
and you've indexed everythingproperly.
You've got the right keywords,that basically you know where
your products fit in in theAmazon catalog so customers can
(41:44):
find them as often as possibleand are more likely to be able
to convert into sales.
You get that built out with theright kind of content and the
right kind of expertise.
All of that information you canuse in other channels.
It turns out a lot of onlinemarketplaces not necessarily
here in the US, but a lot of theforeign marketplaces are built
(42:05):
off of an Amazon-like catalogprocess, an Amazon-like search
process, and so if you know howto play the Amazon game, it's
like playing a board game that'sbased on other board games.
Learn how to play the Amazongame first and you'll be better
equipped for being able to learnthese other channels.
I have seen brands do well withAmazon and then they go on to
(42:26):
Walmartcom, and certainly duringCOVID, a lot of brands were
looking for opportunities togrow everywhere they possibly
could and a lot of them were alittle bit surprised that when
they went on to Walmartcom theyweren't seeing the kinds of
sales they expected, in partbecause the brands that were
winning on Walmartcom weretypically brands that were
(42:46):
available for in-store pickup,which is to say they were brands
that were on the physicalshelves.
So they were 1p in Walmart andbrands were trying to sell them
3p on Walmartcom, and it didn'twork very well because customers
took the ones that wereavailable in-store.
Walmart's made some importantimprovements with their
fulfillment capability sincethen, and so there are FBA-like
(43:08):
options available for sellersthat sell on Walmartcom.
The traffic's definitely not aslarge as it is on Amazoncom.
Walmart's looking to addresssome of that gap, but I don't
anticipate anytime soon thatWalmartcom is going to be
head-to-head in terms of thevolume opportunities.
Yes, there are going to be lotsof exceptions where you may
have a very specific productthat speaks to the Walmartcom
(43:31):
customer and you've done somegood things attracting customers
in that channel.
But, all things being equal, ageneric brand start with your
Amazon channel strategy.
In time you may diversify intosome other channels.
I would rather you build out aDTC business first before you
build out some of these othermarketplace channels, especially
(43:51):
if you're looking at somedayselling your business.
Speaker 2 (43:54):
Right.
Speaker 3 (43:55):
Investors like to see that you're building customer
data of your own, and you can'tdo that by having a bunch of
marketplace channels.
You're going to have to do thatby building a DTC business.
Your ability to doexperimentation on a DTC site is
certainly stronger than itwould be in most marketplaces.
If you're a very large brandthat has decided to go 1P on
(44:16):
Amazon, building that DTCbusiness is absolutely
fundamental, because it'sprobably the only place you get
to have direct interaction withconsumers and you want to be
able to learn how to be a B2Ccompany.
If you've been a B2B brandforever and now you're selling
on Amazon through 1P, you'restill a B2B business, but
(44:40):
there's all these companies thatare learning to be really good
B2C companies, collecting dataon consumers, figuring out where
the product gaps are, figuringout how to improve on your
products.
You, as a brand, need to startusing that data and not relying
exclusively on your retailers todo that kind of work, because
your retailers don't do marketresearch like that.
You, as the brand, need to dothat in order to capitalize and
(45:01):
continue to be a leader.
Speaker 2 (45:04):
James some really really good stuff today, and so
I'm not going to ask you topredict how the holiday season
is going to be, because I don'twant to date the podcast too
much, but I'm hoping that salespick up.
We definitely saw a slowdown.
You mentioned COVID and it wasjust like the most horrible
event ever, but it was a greatevent for online sellers.
(45:25):
So we've all kind of comethrough that.
We're now trying to all growagain.
Are you seeing the marketplacesgrowing again, or you think
it's going to be flat?
I'm not going to hold you to it, but what do you think is going
to happen?
Speaker 3 (45:40):
here we're seeing mid-teens percentage growth.
But a lot of the companies thatI work with they're coming to me
because they need a lot of helpand it turns out a lot of help
to get onto Amazon and to getset up properly and to get the
right stuff in place.
(46:00):
You can still see somesignificant growth, much larger
than 12% 15% a year.
If you're starting from a pointof, basically, you've dug
yourself a hole by not beingattentive to what's happening on
Amazon.
So we may be working withslightly different types of
brands, but the companies I'mworking with, they either have
(46:21):
dug themselves a hole andrealized they need to fix it, or
they've got investors behindthem who say how do we run
faster and grab share fromothers?
What do we need to do to grabshare more effectively?
So on either one of thosefronts, many of the companies
I'm working with are stillgrowing 20% 30% a year Because
they're doing a better job ofpaying attention to the metrics
that matter on Amazon, but alsothe competitor data that they
(46:44):
can leverage to figure out whatdo they need to do to position
themselves better Againstcustomer demand.
Speaker 2 (46:49):
That's motivating.
That makes me feel better, Good.
Well, James, any final wordsfor the audience and really
thank you so much forparticipating today.
Speaker 3 (46:57):
Amazon's a hard place to sell.
But if you spend the time andyou continue to invest and you
remain nimble and you recognizethat none of us have figured it
all out because Amazon keepsevolving, but if you invest
enough time every week in yourbusiness, you play by the rules.
There's a lot of opportunity tomake good money on Amazon.
At the same time, it doesn'tmatter how big the opportunity
(47:20):
is on Amazon If your product'snot very good fundamentally.
Once a customer tries it, theydiscover this is garbage.
I don't want this.
You've got to go to market witha decent enough product that
customers say this is great.
I had one colleague who reallyimpressed with the way he thinks
about Amazon.
Every time you place an orderwith your manufacturer for
(47:41):
product, ask yourself thequestion there are two or three
things I could do to make myproduct just a little bit better
.
Maybe the packaging getsimproved a little bit.
Maybe the internal parts getimproved a little bit.
Maybe the messaging I put onthe product detail page gets
updated slightly in order toreduce confusion that might
exist with customers.
Think about, every month or so,what can you do to make your
(48:02):
overall business that muchbetter?
Because the reality is you gotall these private label brands
on Amazon doing exactly the samething.
By the way, they're alsopinpointing inefficiencies in
your brand and saying we canactually make a much better
version of that moustrap.
This is no longer grandpa'scorner store.
Speaker 2 (48:24):
This is a very very impressive, it's a real deal.
James, thanks so much.
I really really appreciate it.
I'm sure everybody got a lotout of this today.
Thank you.
Speaker 3 (48:33):
Thank you for having me, adam, it's been my pleasure.
Speaker 1 (48:36):
Thank you for watching another episode of the
Planet Amazon podcast, where wetalk all things Amazon.
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