Beyond Online Selling: A Fresh Perspective on Amazon Strategies

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/
For more information about Phelps United, please visit: https://phelpsunited.com/

Transcript

Speaker 1: 0:00

Welcome to the Planet Amazon podcast with Adam Schaefer, where we explore the world of Amazon and other e-commerce marketplaces. Join us as we delve into the latest strategies and tactics for successful selling on the world's largest online marketplace.

Speaker 2: 0:17

Hello, I'm Adam Schaefer and welcome to Planet Amazon, where we talk about all things Amazon. Today we have an awesome guest, somebody that has really helped us out on and understanding the Amazon platform and strategies. I'm pleased to have James Thompson with us. James, if I get this wrong, you've been around so many different places, but I believe you're currently managing partner at Equity Value Advisors, so I have that right. You're a board member, investor and advisor to many global commerce companies. I've looked and you have quite a portfolio. You've been in and around the Amazon ecosystem for over 16 years. I think you can correct me there. You were also at the very beginning of the Amazon 3P marketplace model. I think you were part of the team that actually developed that marketplace model and launched it on Amazon. You could correct me when I'm wrong with this awesome introduction. You're the co-founder of the Prosper Show, which has become a staple in the industry, where Amazon sellers, brands and service providers go every year to talk about and get educated on and share their stories on Amazon. That's an awesome, awesome show that everybody definitely goes to. I met James. He was the chief strategy officer, I think was your title there, but you were a founder at Bybox Experts, which was an agency, quite a large one. It helped brands develop their strategies and grow and navigate Amazon, something that our company always wanted to aspire to doing. We had this buy and sell model, but we're also kind of an agency.

Speaker 2: 2:08

James has written a few books that I've read. I have to say they're staples. They're things that you, if you're going to be in the Amazon business, if you're thinking about being in the Amazon business, you should read them. They're not long reads but they're really, really helpful. One is called the Amazon Marketplace Dilemma, which I'll show. One is called Controlling your Brand and the Age of Amazon. Really, I learned a heck of a lot from these books. They're fast reads but really really full of great information. With that long introduction, james, thank you and welcome to the show.

Speaker 3: 2:47

Thank you for having me, Adam. It's great to be back together.

Speaker 2: 2:50

Yes, and so I wasn't really trying to plug the books, but I read them. The first thing that I recognized was the importance of explaining to brands and working with brands and trying to get them to understand. Whether you want to be on Amazon or not, you've got to have an Amazon strategy. Maybe you could expand on that a bit.

Speaker 3: 3:16

We can talk about different ways to sell on Amazon, but even before you decide whether you want to sell on Amazon, it's important to understand that Amazon is this massive channel hundreds of millions of customers just here in the United States that will either buy products on Amazon or at least go and do their research looking up products on Amazon. The question you have as a brand executive is what do I want to do to leverage what Amazon has to offer? Most people typically think of Amazon as a place where you go to sell products. Okay, we can talk more about different ways to sell, but Amazon's also becoming a very effective place to go and advertise. Today, companies may be spending money on social media. They may be even doing print or TV or radio advertising. Well, some of the stuff that Amazon's doing today on its advertising platform are more advanced when it comes to targeting customers than any of these other types of advertising that we've talked about. I see a world where Amazon probably in the next five to seven years, they're going to start to replace a lot of the big TV ad dollars. They're going to start to replace a lot of the radio and the print ad dollars and have them now move to an Amazon platform or platform that Amazon helps to control, allowing brands to do hyper-targeted advertising.

Speaker 3: 4:36

This question of do I sell on Amazon? Do I advertise on Amazon? And then, thirdly, to what extent do I use Amazon as a data source to understand more about my products, my competitors' products, my category of products? You have this extraordinary amount of data that's sitting publicly available for anyone to look at to understand what are customers liking, what are they not liking about different types of products. As you get into actually selling on Amazon, there's additional information you can get about. What does my customer look like?

Speaker 3: 5:06

I've worked long before my Amazon days. I worked for management consulting firms where big Fortune 500 brands were spending millions of dollars doing focus groups, millions of dollars going out and asking people what do you think about this? What do you think about that? When I look at the kind of data that's available on Amazon, it certainly doesn't fully replace the kinds of data you can get from market research, but there's an awful lot of information you can very, very quickly glean from tens of thousands of product reviews that you and your competitors are already collecting on Amazon and use that information to figure out are there product gaps? Is my product not necessarily properly designed for customer needs? Is my product falling behind on different types of functionality relative to what customers are looking for?

Speaker 2: 5:50

What's interesting, it used to be a black box and now Amazon's been opening it up a bit for sure every year, slowly, slowly yeah.

Speaker 3: 5:58

So, again, even if you are a company that has spent a lot of money on market research for, say, there's so much valuable information that's publicly available on Amazon, if you know where to go and if you know how to use it as well as how not to use it. So, as a brand executive, it's very difficult to ignore Amazon and say we don't want to sell there. Well, fine, if you don't want to sell there, there's reasons you may choose not to sell there. But what are you doing to advertise? What are you doing to use it for data collection? Maybe you don't sell, maybe you don't advertise, but any Joe Blow can go on the website and start collecting information about what types of customer preferences there are about different items. What are customers liking and not liking about products that are in your category? Well, that's really useful information and it's real time. You can find out in the last 30 days, where has customer sentiment been around? The types of products that I sell, extremely useful and so hard to say.

Speaker 3: 6:56

Amazon is something I don't want to have anything to do with. I would look at it differently, which is in what way are you going to leverage Amazon to help drive your business, and whether it's the selling, the advertising, the data collection or some combination of all three of those. You've got to have an Amazon channel strategy. I also want to add that brands will say, well, I sell on my own direct to consumer site or I sell on some other marketplace. They say, great, that's good. You should do that. If that works for you, that's great. But keep in mind that there are more customers shopping on Amazoncom in the United States today than any other e-commerce channel, and so to what extent are you leveraging all that information or all those customers or all the inventory of advertising that's available to you? Start with an Amazon channel strategy. If you get your Amazon channel strategy in good place, then you'll be better prepared to roll out additional marketplaces or you'll be better prepared for thinking about how does my DTC business complement or potentially compete with marketplace businesses? That, I might add.

Speaker 2: 7:59

Yeah, the other thing that I found is and Shopify has been a great platform and Amazon friend or foe with everybody, right, but there's definitely a benefit to having your own DTC and you say, well, I own the customers there and I'll have to pay the fee, but Amazon is now providing discounts for advertising off Amazon. On Amazon, there doesn't have to be catalog parity anymore unless you tell me I'm wrong on that and you don't have to have your full assortment on Amazon. So it's not a bad way to get new customers and then, if they like the brand, they're going to come and visit your website. So I do think it works. And Amazon also is helping with logistics for Shopify customers. So it's pretty interesting days. But it's funny. We talk to brands all the time and there's some brands and there are B2B brands in so many cases and they say we don't sell on Amazon, you know that's not for us. Blah, blah, blah. And then we choose them. They're already there and they just have zero control over what's going on there. I mean, you've seen that no-transcript.

Speaker 3: 9:07

If your brand is at all popular, that's your first mistake. The reality is, if somebody is looking for your product, someone else is going to figure out how to make that product available to them. Very few brands have such tight control on their distribution. The product doesn't leak onto a massive channel like Amazon. If it does leak onto a channel like Amazon, then somebody else is creating brand content and putting it out there and saying this is the way we're going to represent your brand.

Speaker 3: 9:35

Well, I've had more than my fair share of experience working with crazy unauthorized resellers who are running around just doing deals, reselling whatever they can get their hands on, and that's okay.

Speaker 3: 9:47

But those types of resellers rarely invest as much time on building high-quality brand content that aligns with all the millions of dollars that a brand may have spent in building and communicating its brand over the years to consumers. So, at an absolute minimum, when we talk about Amazon channel strategy, I don't care if you as a brand decide you are not going to sell a single dollar on Amazon. At a minimum, recognize that someone else is going to try to sell your products on Amazon. So why don't you go in as a brand and at least control the content. Make sure that what customers see is consistent with what they see everywhere else. That's what a brand is, is consistent delivery of promises. If you're not properly managing the content that's on Amazon and somebody else is putting random content out there, then you're going to create customer confusion, as much as you like to say, well, but that's not my content, 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 if I'm buying my Levi's jeans in this store or I'm buying my Levi's jeans online, it's all the same stuff, it's all the same sizing charts, it's all the same messages around how this will make me feel or what functionality I'm going to get out of the products. I don't want to see something that's so wildly out of line with everything else that the brand is actively managing. So you've got to create a high quality customer experience, even if you're not going to be the 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 good content for your brand and your products out there. Build a brand store, have something, even if you don't care about it, a lots of people are going to see it because it's a popular platform. And then it also blocks not a perfect block, but it does block some of these rogue guys from creating rogue content and so I 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 brand executive tell me this, they'll say well, we don't have to worry about all those other types of companies on Amazon because we don't see them in our brick and mortar channels. They're not competitors to us. Okay, so you sell in a physical retail channel. There might be two or three other competitors whose products are on the shelf next to yours. If that's the world that you see as your competitive set, and everything else outside of that is irrelevant. Well, talk about a wake-up call.

Speaker 3: 12:10

You go on Amazon. You start searching for some of the generic product terms that are used for finding your products. Chances are a bunch of brands. You've never heard of brands that only exist on Amazon. Brands that often are doing a significant market share on Amazon are actually the ones that are winning the sale. They're winning organic search on Amazon, and so I don't really care. If you have 40% market share in physical retail, chances are you don't have anything close to 40% online or specifically on Amazon, because the platform has been built to enable random entrepreneurs to say I'm going to build a brand, I'm going to slap a brand name on, I'm going to buy some UPCs. I'm going to start competing and grabbing pie from some of the bigger brand names that everyone else has heard of in physical retail. Those very brands are not actively playing and not actively managing an Amazon channel strategy. Thank you very much, but there's customers looking for those types of products. We're going to sell them, our version, our brand, of those items, and we thank these big brands for staying away.

Speaker 2: 13:11

Yeah, no. And what's interesting is that those unknown brands a lot of them are offshore, some of them aren't they'll buy the brand names when they're advertising so we sell again. These are kind of interestingly odd products but they're B2B receipt printers that people use at point of sale and there's some big names in that business. You'll pretty common names. I'm going to say we don't necessarily work with them all but Epson Star, my Chronix, hewlett Packard. But when you go to look, if you punch in Epson receipt printer on Amazon, there'll be seven or 10 brands you've never heard of that sell more receipt printers than you would imagine. Like, I'm sure those brands want those sales but they're playing off the big brands and they'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 had already talked to every major brand there is to talk to and said come and sell on Amazon. And some of those brands said yes, some of them said no, some of them said don't ever call me again. And then Amazon said well, we need to continue to grow selection, and one of the best ways to grow selection, amazon decided, was to go overseas and to start recruiting manufacturers companies that were making these products for the big US brands that we've all heard of. But talk to the manufacturers and 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 and fulfill it and store it and do all that kind of stuff. We'll even help you bring it into the United States through customs and get it directly into our warehouses. All you need to do is make the product different enough from whatever else you're making for some other brand and let's create a brand name for you and let's start selling it on Amazon. And so now you have literally tens of thousands of Asian manufacturers who a few years ago knew nothing about selling direct to consumer, who now have fairly decent size direct to consumer businesses on Amazon, selling brands that they now own, and these products are quite often of high enough quality that they compete with the national brands, because it's the same manufacturers who make the national brands today who are now also selling their own brands, and so you don't typically have the same quality problems that you might have had six, seven, eight years ago when some of these manufacturers were getting started with their own brands. You've got very high quality brands. They're just brand names that most of us have never heard of.

Speaker 3: 15:37

And that brings me to another interesting issue. If you think about Amazon, about 70% of all product search on Amazon today is unbranded. People don't go on saying show me NFS and printer. They go on saying show me a receipt, printer, boom, here's a bunch of brands you've never heard of and, by the way, a lot of those brands are going to own the first page of product search. Well, brands live or die based on whether they can show up on the first page of organic search. And you may be a big national brand that has major market share and physical retail channels, but on Amazon, if you're not even on page one, a lot of consumers will never go looking for you because there's lots of other choices from brands, albeit brands they may not have heard of, but brands that are playing the Amazon game well enough to build up a lot of product reviews. They've got decent, quality content. Maybe they're spending money on PPC in order to also do well with paid search results, and these are the brands that are winning sales. And so this whole issue of well, I've spent so much money building up my brand.

Speaker 3: 16:38

My customers are loyal to my brand. Well, let me show you Amazon. One of the first things you'll notice on Amazon is that brand loyalty really isn't the main play here. The main play is that the Amazon channel is what customers are loyal to. Amazon doesn't care what brand you buy once you come to Amazon. What they care about is do they have enough of the national brands and enough other choices that when you come onto Amazon and look for something, there'll be enough choices, enough of them that are high quality. Looking that you'll say you know what I'm going to buy this product I'm not the product that I thought I was going to buy when I came looking, but I found something that's good enough to 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 they are. I mean some of these brands. So we go back to the original part of what we're talking and like these larger brands because they're not managing their brand and they're not managing their content and they're not managing their customer experience at all. Somebody might have posted the product on Amazon, maybe bought it from overseas and brought it in, so it's from outside the territory, maybe it's got a different cable and somebody's not happy and they leave a bad review. So now you're a well-known brand with a bad review and maybe you have one star or two stars. And then there's a company that's actively trying to manage and get great reviews and have great product and they have thousands of great reviews and you have a one or two star in the brand. I mean, my God, people are going to say I really don't want that brand. I want this brand, even if I did 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 product reviews, everything gets squished together. On a product review, I'm talking, a customer does or doesn't like the delivery of the product, does or doesn't like the packaging, does or doesn't like whether the product looks new, or maybe it's in use condition, or it actually has something to do with the actual product itself when they open it up and start using it. And so all that noise that can happen from other sellers selling a brand, other sellers creating content, other sellers doing fulfillment of those orders all that can be additional noise that ends up hurting your brand. And so the day that the brand says you know what, we really should be actively managing our Amazon channel presence. They may already be starting in a whole, because there's a bunch of one and two star reviews on their listings brought on by poor performance from random sellers who were representing the brand in the past.

Speaker 3: 19:09

That's all the kind of noise that brands should work really hard to avoid getting themselves into in the first place and instead say let's accept the fact that there's hundreds of millions of customers on Amazon. We now need to ask the question what'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 to do that. But at least they're actively saying we're going to use this channel not just to sell products, but we're going to use it to protect our brand. And we've got to do it because the reality is we made the mistake of building a popular brand.

Speaker 2: 19:45

Yeah, and you know one thing, one bit of advice that we try to give these brands that are thinking about selling on Amazon maybe they're selling on Amazon and they're having issues controlling maybe the sellers selling at a minimum advertised price, maybe selling US product and not foreign product, and so we say you kind of have to have a strategy around that too. And I know you live through this a lot where you're working with brands and they absolutely a thousand percent agree with what you're saying, but they just don't want to do it. They're scared. I mean it's like they got to put their big boy pants on and have a real strategy for that, because they're going to get clobbered out there if they don't. 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 an unauthorized seller of watches. I could get my hands on all sorts of stuff and make a few bucks and learn how the Amazon channel worked, learn how seller central worked, learn how venture central worked. You know it was easy to get products because brands in that particular category of watches you know a lot of them are not paying attention to the Amazon channel or they choose to ignore the fact that, yes, products are being re-imported from elsewhere, or you know the version, a European version is being sold as the US version here in the United States. At the end of the day, that's all destruction of your brand, and if you, the brand, are choosing to pretend that that's not an issue, then you've got a big problem. But here's the scary thing A lot of brands, when you actually start looking at why is this happening, it starts first and foremost with you've got sales incentives in place within your organization that are not actually aligned with protecting the brand.

Speaker 3: 21:29

Their incentives are all about let's sell as many units of product as we can, and of course we'll assume that you know everybody's going to play appropriately 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 and all the exciting things you can do there as a brand, all the scary things you have to manage away, but a lot of it comes down to what is best for the salespeople within a brand is often not what's best for the brand, and so you've got this situation where the sales team does great, they get their big bonuses and the brand gets pimped out to everybody and anybody who wants to offer up money for a PO. Well, that's not really a good long-term strategy for building a successful brand. And so this is where we start to get into figuring out who's evolved to account for the fact that the world today has highly fluid, highly transparent e-commerce channels that are disrupting the way that brands do distribution in all of the channels that they normally manage. And so you've got to be thinking.

Speaker 3: 22:34

As a brand executive, I can't just continue to sell to my favorite retailers, my favorite distributors, and assume that they're actually all doing what's best for my brand. You know they're doing what's best for themselves, and what's best for themselves often may be selling the product off to other people who then, in turn sell it on Amazon. And if they sell it on Amazon and the brand's not paying attention to content or to pricing, you know you can end up in a situation where random companies you've never heard of have constant supply of your products that they sell at undercut prices, creating channel conflict where your physical retail partners are complaining saying why is the product always cheaper on Amazon? This conversation I'm having with you right now. I was having it 10 years ago.

Speaker 3: 23:19

It's the same conversation because a lot of brands still are saying you know what? I'm going to let the next round of executives handle this problem because you know I'm close to retirement being a brand executive and I don't really want to have to deal with that because it's complicated and, quite frankly, you know we may suffer loss sales for a short term period of time, while we tightened up control. Well, guess what if you don't tighten things up? Someone else is going to manage what your brand looks like. Someone else is going to manage what customers think about your brand. Someone else is going to decide what the selling price of your products are, either online or offline. Someone else is going to decide where your brand is relative to other brands that are selling in the same category. That's an awful lot of giving up control to random people who you may never even meet or may not ever be able to identify.

Speaker 3: 24:08

This all comes back to this idea of you've got to say okay, whether we've got a problem or not.

Speaker 3: 24:13

Today we need to recognize the Amazon channel is here to stay. We need to proactively manage it in whatever way that means, whether it's controlling content, whether it's also becoming a seller of record or deciding someone else will represent us. But you can't pretend that a couple of hundred million customers a month shopping on a channel that's not important in some manner to your overall business, even if Amazon represents 5 percent of your total sales, the conflict and the noise that that channel can create for the other 95 percent of your channels is absolutely deafening. Again, we could talk about that all day long, but it's one of those things where brands need to recognize that they need to be proactive on Amazon. They may need to invest in a number of things they've never had to invest in things like online content channel control, saying no to certain types of partners in the past who have been good trade partners but might, in fact, be selling products out the back door to all the wrong companies, who then, in turn, sell the products on 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 retailers screaming at us and we got to get those guys off Amazon. Help us get those guys off. Okay, we'll try to understand the policies, but first of foremost, who are these guys? We say this company is really this company and this company is really. Yeah, really, we know those guys. Those are our best dealers. They're your best dealers.

Speaker 2: 25:48

What do you think they're doing with your product? Oh, no, no, no. They have a value added channel. They're selling directly to consumers and to resellers and they're out there somewhere, but they're not selling them. No, no, no. They're selling. All their sales are coming from Amazon. 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 can easily call them up and tell them to stop doing that. Maybe you should, or maybe you should 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 of our favorite distributors because they're our golfing buddies. We've been golfing with them forever, we like them, we know their families. Okay, but what does that have to do with the fact that their incentives are different than your incentives? At the end of the day, if you're trying to build a robust, consistent brand across channels with consistent pricing, consistent messaging, you need to have companies that are also willing to buy into that story and are willing to commit that. That's what they're going to do for you.

Speaker 3: 26:54

I don't have a problem if somebody wants to be an unauthorized seller, but recognize that they don't necessarily help you as a brand to create the consistent messaging, the consistent pricing that you're looking for in your overall business. Maybe you're a brand that says we don't really care what price our products are sold and let customers figure out the cheapest channel where they want to buy products. Okay, that's fine. Just recognize that other companies who do clean up the channel and make consistent content for both their online and offline channels, they're going to have a much better and much easier way of telling that story over and over to customers and repeat customers, simply because they're properly managing their brand. Then you get into some of these major multinational brands where every single country has its own sales team. Every single country has its own 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 at sourcing product from different trade zones around the world, you don't really care where it's coming from and whose numbers it hits within the brands. You just care can you get the product consistently and be able to make a few bucks selling it on Amazon. So, as a brand executive, you've got to recognize that there are very clever people on the other side of the table who are looking for ways to make money with your product. And your product is just a skew, it's just a widget. It's a widget where, if they know how to play the Amazon game better than you do, they're going to make a bunch of money. And when the time comes that you, as a brand, decide to shape up and start to tighten up distribution, tighten up content, those entrepreneurs will move on to some other brand that hasn't got its act together or hasn't got its eyes open to what's going on with these massive 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 seeing lately, and it's because Amazon I think you used and you probably know much better, but Amazon was looking at the brand and the profitability of a brand and they were focused on growth. But now it seems they're much more focused on profitability and they've been really really putting the screws to their 1P partners, their vendor partners, trying to get more and more advertising dollars, more and more margin from them, more and more funds, and so what we've been 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 and they're selling either through 3Ps or they're creating their own 3P, and you've lived through this one. What's your thoughts on that? But it definitely seems to be the trend.

Speaker 3: 29:38

So I can't comment on whether 75% makes sense that there are a lot of 1P brands that would prefer not to be 1P because they see how they can make more money being a third party seller. They also see that some of the margins that Amazon's coming after on the 1P side make it unsustainable for them to continue to wholesale to Amazon. That being said, amazon does have a manufacturer policy in place specifically to ensure that Amazon gets first crack at being able to wholesale products from brands. And so if a brand is already 1P and they're thinking about moving to 3P, unless they're kicked out of 1P by Amazon because Amazon says you know what? We can't make any money selling this, and we really don't. You're too insignificant to the overall category, we're not going to bother with you. In most cases, if a brand says I'm going to go 3P, they better not be telling their vendor manager, because the vendor manager is going to instantly say heck, heck, no, you're not going to do that.

Speaker 3: 30:36

And, by the way, if you start doing that, amazon has a bunch of systems in place to go out and detect whether a third party account is tied to a 1P account, meaning, do they have similar shipping addresses, similar tax IDs, credit card, bank accounts, whatever, and so I have worked with many 1P brands that have decided to go 3P but done it in such a way that it's resulted in their 3P account being shut down but also the vendor manager getting understandably ticked off. Now I'm not a lawyer, I'm not going to get into the arguments around whether this is fair or not. It's kind of irrelevant. It's Amazon's marketplaces and until somebody chooses to challenge this in a court of law, amazon continues to tell which brands you know, to tell big brands whether they're allowed to sell 1P or sell 3P. If you're invited to sell 1P, a lot of brands say, great, another wholesale channel for us. But it's not just another wholesale channel. It's a wholesale channel where the rules are a little bit different than selling to a traditional retailer who has certain types of economics in place.

Speaker 3: 31:43

Amazon's looking to find ways to continue to drive costs down and, like many retailers, amazon's not going to respect a map policy in many cases.

Speaker 3: 31:52

But Amazon also has the added advantage that they have huge numbers of servers that actively go out and scrape tens of thousands of websites every hour to look for cheaper prices. And so if you're a brand that says you know what. We're going to authorize our Northern Florida division to sell this product this weekend at 20% off. Well, amazon's going to find that right away. And if they're wholesaling products from you at 1P, it's often the case that Amazon will immediately match that lower price that they found in some regional sale and that now becomes the national price on Amazon. But furthermore, if you as a brand are doing that kind of stuff enough, where you're creating lower prices outside of Amazon, amazon, as I say, will match that price and they'll often there's a point where they will send you a bill for all the loss of margin that they have now had to incur, and so Amazon will always get its money back in one way or the other.

Speaker 3: 32:50

And so you've got to ask yourself, as a brand, what do I need to do to make sure that I don't upset Amazon so much that I lose my ability to sell on Amazon or, worse yet, I upset all of my physical retailers that may account for a much larger market share? It's this really challenging balancing act, because, at the end of the day, amazon doesn't care if you don't make margin. That's your problem, that's not Amazon's problem, that's your problem. And yet Amazon is sophisticated enough to be able to go out and find the cheapest prices that are out there and decide whether they're going to match to those prices, and often they will match to those prices. And now you've got this. As I mentioned earlier, you've got this big problem where that now becomes the Amazon price, which is highly visible to anybody who goes on to Amazon to see 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, they could try and claw it back. So there were some bad players out there lowering the price. So you know Again, I see, I see hybrid is important. I definitely think there's definitely a way to do it. Definitely not flounder and if on their front of them, but using trusted third parties definitely helps for sure, because it's another third party selling the products. I, you know, I definitely think there's some insulation, but what? What they've been complaining about also is that they get these random vendor managers or brand managers Whatever you want to call them category managers at Amazon and they're just basically reading off the script. There's no Negotiation, there's no discussion, it's black or white and it's been struggling a struggle for them.

Speaker 3: 34:29

So it is true that the 1p Process has become much more automated, but it's also true that most brands Don't do a particularly good job during their annual vendor negotiations with Amazon. They don't show up with the right data to push back on Amazon and say, well, we're actually in a position that we can make you more money if you push these products, or we're gonna launch new selection that we 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 process of letting Amazon essentially dictate the annual pricing adjustment. That's not a good model, but it's it's. If you, as a brand, let yourself be dictated by Amazon, it's further reinforcement that you don't know how to play the Amazon game. The Amazon game says bring the data, show me the data. And while you may have given up a few points to Amazon in years past, it doesn't mean that your product mix going forward is going to remain the same. Maybe you need a new vendor code for New types of selection you're creating, maybe you're creating a new brand that has different physical shipping dynamics, that that create different cost structures. And you've got it. You've got to be saying yourself what is it that I am doing with my selection, with my product availability, with catalog selection, with new selection, with different types of promotional dollars, with different types of ad dollars? But what, what is the package I'm putting together for Amazon to make them want to do business with me? It's, in some ways, it's not that wildly different than what a brand does to break into a physical retailer for the first time. Help me, as the you know the target vendor manager. What? Why should I give you shelf space?

Speaker 3: 36:10

Well, with Amazon, it's much the same thing. I. You want to sell one P, you. You're getting lots of volume, you're in a good place, but you've got to make it worth Amazon's while. Well, at the same time, you've got 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 able to push back on Amazon While the automated process or what?

Speaker 3: 36:31

While the selling process is becoming more automated with one P, if you don't have data that you can introduce to the conversation, then yeah, like, like any channel, you'll get steamrolled. Amazon's really good at steamrolling if you don't have the data. But, but again, other retailers, it's the same thing. You know everyone's going to ask and ask for more and more and more. And if you don't have Data to say actually the story is not quite what you think it is and let me show you my side of the story, my data that then the situation won't be particularly good. So, as frustrated as brands can get with being a one P vendor, sometimes they need to look themselves in the mirror and ask the question what can I be doing differently to manage my relationship with Amazon, even if I stay one P? What? What do I do so that I can get some of what I want out of this relationship Versus just, you know, 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 been at an agency helping brands and now you're doing something Kind of completely different, like like so, so just to get caught up on your life. Man, like what, what are you up to these days? I?

Speaker 3: 37:41

Don't. I don't work with brands doing this. That the very tactical stuff that I used to do, you know, when I was at my agency, we were helping brands with day-to-day activities loading content, you know, deciding whether to approve purchase orders, figuring out what to send into FBA if they were a third-party seller, filing tickets. I don't do that kind of work anymore. I help brands and, more importantly, the investors of brands think about what it is that they need to do in order to be able to succeed in a world where there's online channels and offline channels. So I'm helping with like big macro questions and they're not even necessarily Amazon questions that they're. They're these big questions around how do you as a, how do you evolve as a brand In order to be able to adapt to a world that has big e-commerce channels and some of this fluidity fluidity of data or public public so much public data that's now available that you know in the past, when you were just selling to retailers, you could hide your terms for one retailer and hide your terms for another. Well, I may not be hiding the terms that I'm selling or wholesaling products to Amazon, but a lot of people can back enough things out to kind of get a good sense as to where you are as a brand and what you're likely doing in order to enable Amazon to be able to sell your products. So some of those higher level questions are big questions that I help, especially investors, with, and I've had some private equity companies come to me and say we own a brand, we want to shorten the amount of time that we have to own it In order to see the kind of growth that we want, so that we can then eventually exit. Well, that's, that's about understanding of all the channels you sell in. Where are the levers that you can actually apply in order to drive profitable Margin and different channels, and do that in a way where you're not just looking at one channel, disregarding the fact that the product also is being sold in other channels and product leaks across channels. Looking at that holistic distribution model, holistic control and pricing and all these types of decisions that have to be made for one channel that now have to be made across all these channels. So it's a little bit of a you know, different type of world that I live in now that I did when I was on the agency side, but it still comes down to a basic understanding that Amazon's here to stay.

Speaker 3: 39:52

It's very powerful.

Speaker 3: 39:53

It's got huge amounts of data some of the data it has unique access to but your brand is likely going to have to have an Amazon channel strategy to Either sell products, the to either sell products to advertise products and find new customers, or to manage content, or even just to collect data on some of your competitors.

Speaker 3: 40:17

If all you do is a brand is go on Amazon regularly and say, who are all these new hotshot companies that I've never seen before that are selling my types of products on Amazon, you're gonna discover some of those very companies that are likely one day gonna come and steal share from you in physical retail when they go to physical retailers and say listen, we're the number one, number two best selling brand on Amazon. We do this many sales, we've got this many product reviews. We've built such an efficient business that we can afford these types of margins. Get reinvested back into the channel. It's only a matter of time before some of these well-established brands in physical retail find out that they're no longer being welcomed in physical retail because there's better brands that physical retailers will pursue.

Speaker 2: 41:03

So random marketplace question. Obviously, amazon in the US is the biggest right, but if you were a brand and you're selling on Amazon, would you sell on Walmart or would you really focus on Amazon and get great at that before you start trying to play on different marketplaces?

Speaker 3: 41:24

I think you need a mature Amazon channel strategy first, and what does that encompass? On a very tactical level, you've built the right online content. You've got the right images and video and A plus detailed page and you've indexed everything properly. You've got the right keywords, that basically you know where your products fit in in the Amazon catalog so customers can find them as often as possible and are more likely to be able to convert into sales. You get that built out with the right kind of content and the right kind of expertise. All of that information you can use in other channels. It turns out a lot of online marketplaces not necessarily here in the US, but a lot of the foreign marketplaces are built off of an Amazon-like catalog process, an Amazon-like search process, and so if you know how to play the Amazon game, it's like playing a board game that's based on other board games. Learn how to play the Amazon game first and you'll be better equipped for being able to learn these other channels.

Speaker 3: 42:22

I have seen brands do well with Amazon and then they go on to Walmartcom, and certainly during COVID, a lot of brands were looking for opportunities to grow everywhere they possibly could and a lot of them were a little bit surprised that when they went on to Walmartcom they weren't seeing the kinds of sales they expected, in part because the brands that were winning on Walmartcom were typically brands that were available for in-store pickup, which is to say they were brands that were on the physical shelves.

Speaker 3: 42:51

So they were 1p in Walmart and brands were trying to sell them 3p on Walmartcom, and it didn't work very well because customers took the ones that were available in-store. Walmart's made some important improvements with their fulfillment capability since then, and so there are FBA-like options available for sellers that sell on Walmartcom. The traffic's definitely not as large as it is on Amazoncom. Walmart's looking to address some of that gap, but I don't anticipate anytime soon that Walmartcom is going to be head-to-head in terms of the volume opportunities. Yes, there are going to be lots of exceptions where you may have a very specific product that speaks to the Walmartcom customer and you've done some good things attracting customers in that channel. But, all things being equal, a generic brand start with your Amazon channel strategy. In time you may diversify into some other channels. I would rather you build out a DTC business first before you build out some of these other marketplace channels, especially if you're looking at someday selling 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't do that by having a bunch of marketplace channels.

Speaker 3: 44:02

You're going to have to do that by building a DTC business. Your ability to do experimentation on a DTC site is certainly stronger than it would be in most marketplaces. If you're a very large brand that has decided to go 1P on Amazon, building that DTC business is absolutely fundamental, because it's probably the only place you get to have direct interaction with consumers and you want to be able to learn how to be a B2C company. If you've been a B2B brand forever and now you're selling on Amazon through 1P, you're still a B2B business, but there's all these companies that are learning to be really good B2C companies, collecting data on consumers, figuring out where the product gaps are, figuring out how to improve on your products. You, as a brand, need to start using that data and not relying exclusively on your retailers to do that kind of work, because your retailers don't do market research like that. You, as the brand, need to do that in order to capitalize and 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 to predict how the holiday season is going to be, because I don't want to date the podcast too much, but I'm hoping that sales pick up. We definitely saw a slowdown. You mentioned COVID and it was just like the most horrible event ever, but it was a great event for online sellers. So we've all kind of come through that. We're now trying to all grow again. Are you seeing the marketplaces growing 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.

Speaker 3: 45:47

But a lot of the companies that I work with they're coming to me because they need a lot of help and it turns out a lot of help to get onto Amazon and to get set up properly and to get the right stuff in place.

Speaker 3: 46:00

You can still see some significant growth, much larger than 12% 15% a year. If you're starting from a point of, basically, you've dug yourself a hole by not being attentive to what's happening on Amazon. So we may be working with slightly different types of brands, but the companies I'm working with, they either have dug themselves a hole and realized they need to fix it, or they've got investors behind them who say how do we run faster and grab share from others? What do we need to do to grab share more effectively? So on either one of those fronts, many of the companies I'm working with are still growing 20% 30% a year Because they're doing a better job of paying attention to the metrics that matter on Amazon, but also the competitor data that they can leverage to figure out what do they need to do to position themselves better Against customer demand.

Speaker 2: 46:49

That's motivating. That makes me feel better, Good. Well, James, any final words for the audience and really thank you so much for participating today.

Speaker 3: 46:57

Amazon's a hard place to sell. But if you spend the time and you continue to invest and you remain nimble and you recognize that none of us have figured it all out because Amazon keeps evolving, but if you invest enough time every week in your business, you play by the rules. There's a lot of opportunity to make good money on Amazon. At the same time, it doesn't matter how big the opportunity is on Amazon If your product's not very good fundamentally. Once a customer tries it, they discover this is garbage. I don't want this. You've got to go to market with a decent enough product that customers say this is great.

Speaker 3: 47:34

I had one colleague who really impressed with the way he thinks about Amazon. Every time you place an order with your manufacturer for product, ask yourself the question there are two or three things I could do to make my product just a little bit better. Maybe the packaging gets improved a little bit. Maybe the internal parts get improved a little bit. Maybe the messaging I put on the product detail page gets updated slightly in order to reduce confusion that might exist with customers. Think about, every month or so, what can you do to make your overall business that much better? Because the reality is you got all these private label brands on Amazon doing exactly the same thing. By the way, they're also pinpointing inefficiencies in your brand and saying we can actually make a much better version of that moustrap. This is no longer grandpa's corner 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 lot out 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 we talk all things Amazon.