Competitor Analysis on Amazon
with Will Tjernlund of Goat Consulting
People who eat sleep and breathe Amazon are focused on competitor analysis of Amazon e.g Best Seller Rank.
Whereas Will wants to deep dive into the whole marketplace and analyze the seller as a whole:
- Do they have multiple products? One?
- Are they resellers or do they have own brand?
Jungle Scout and viral launch don’t tell you who you’re competing with.
Multinational brands often have no idea what individual customers want.
The Psychology of different sellers and what they want is important.
With the agency, Will has experienced so many different business models – which has built his repertoire of knowledge.
Why is it good to compete with multinational brands?
If you search for ‘air pods” from Apple – none of the listings are optimized!
Amazon is 3% of Apple’s total sales – an opportunity for people to rank for the AirPods keywords
- Have wallets open
- Intent to buy!
Pull up sales estimation software
- How big is the pie as a whole in the first 2 pages
- Who has how much of each slice?
If everyone has 10% of a market – if you take 1% off each, you can get 10%
But in some niches, the top listing has 80% of sales; remainder splits the 20%.
Taking sales off the top listing is unlikely; The rest will be fought over scraps.
Going after a growing niche and dominating it (% of market share) is often the winning strategy.
The problem of maxing out the pie
Some companies dominate 85% on amazon
They say – “We’re an Amazon company but We’ve maxed out ads spend.”
Will says that at this point, it’s up to the seller do email and social media marketing as Amazon may have reached its peak sale.
A lot comes back to psychology
For example, is a hammer sold on a need basis?
If yes, we should be optimizing for profit, if not going for past Shelf Keeping Unit.
Easier to compete with people who are adding SKUs
Will’s brother has 200,000 Shelf Keeping Units
He uploads entire catalogs.
Those people are easy to compete with as they aren’t focussed on any particular product line.
Tell us about the type of business models that get used in the Amazon space
If you see 50% off – 200,000 listings – you can figure out a couple of things are going from them.
You can order 99 from them – are they trying to liquidate something quickly?
If they have 200,000 listings, that’s what they’re doing.
Whereas if someone is doing 50% off and have only 1 product, they are going out of business!
Main business models
Listen to podcasts, tips, and tricks.
They have minimal SKUs that are focussed
They are tough to compete with as they are very aware of what is happening with relatively few SKUs and good Amazon tactical ability.
Brick and mortar stores
5% of sales on amazon
But not willing to burn bridges
These are much easier to compete with.
Used to different sales channels and middle Men
Now coming to B2C for the first time
This is what goat consulting specializes in.
Internal culture shift in going onto Amazon
When established businesses that sell B2B(Business-to-Business) or brick and mortar go onto Amazon, there is often a big culture shift.
Which departments get involved is an issue!
They are not even aware of which depts should work.
Inventory management syncing with Amazon.
Tax nexus is an issue too.
A lot of Amazon consultants choose not to handle this. It doesn’t scale via software –
But Will’s background with his family’s company shifting culture gives him a perfect background for that.
How to change the culture
Upper management is normally the issue. The older CEO with maybe 3-4 years before retirement. They don’t want to change. The person who googles for Amazon consultant and finds Will’s company is normally the person who wants them and is their champion within the organization.
The types of CEOs
People fall into one type mostly more conservative or creative.
Professional manager type CEO, some who come up with crazy bets
It’s rare that CEOs really get Amazon. The younger generation is obsessed with hacks!
How the corporate world views Amazon
This varies company to company, some JUST want to control Amazon.
One only has a MAP (Minimum Advertised Pricing in USA=RRP in EU) just BECAUSE of Amazon.
Quite a few companies only care about it! In the USA it’s illegal to actually fix the price but they have MAP – it’s a bit hush-hush! They threaten Walmart – we’ll never sell you the product again – bully them into pricing.
They don’t want brick and mortar stores complaining so they want to maintain MAP.
Selling directly to Brick and Mortar vs. Direct to the consumer via Amazon
These companies are mostly used to Vendor Central style of selling. They are confused and intimidated by Seller Central. Some of them are intimidated by the transparency of the P & L too. Other companies have to go via two warehouses and make complex calculations.
They are used to Brick &Mortar stores Labeling and shipping etc. are very intimidating to companies. After 2 hours on the phone, they can explain it’s not that bad!
What are the biggest issues (and solutions) to integrating Amazon into an existing system?
Some inventory systems are not integrated into API. There are some lovely APIs like Taxjar for $50/month
One company had systems in place to manage a lumber inventory system from 50 years ago. This was terrible for most retail products.
- “Ship station” all the APIs work well.
Amazon forces companies to have an integrated system -which they should have had anyway!
Some companies send over a quick spreadsheet for Will. Then you, jungle scout, the brands and they are doing $250K a year in some categories!
Brick and Mortar vs. Amazon/direct sales
Companies compromise, putting some Shelf Keeping Unit on Amazon and some to Brick and Mortar. Sometimes repacking and re-branding existing Shelf Keeping Unit for Amazon.
DO you have to choose between selling to stores vs. Direct to the consumer?
Yes, Will wants to cut out the middle man! They don’t add enough value.
With some brands, they email all their stores – if you’re stocking products on shelves, keep doing that – If you resell on Amazon, you’re not adding value, we are stopping you.
They give them 2 months to place a purchase order, and 4 months to stop Amazon sales.
In a perfect market, the only variable is the shipping
A can of coke in China, France, etc. should be the somewhat different cost but that’s all (but only in a “perfect market”)
Price matching – leads to a perfect market
Best Buy HQ in Minneapolis
They do aggressive price matching.
And you can’t legislate against window shopping!
Eventually, this means that shipping becomes the ultimate price difference
Retail arbitrage is the foot soldiers marching towards a perfectly balanced market, this is not a sustainable business model – you can still look for rare comic books, etc. but overall it’s not going to last.
What are the other business models on Amazon?
Merchant fulfilled Chinese retailers – sell product and deliver it within 2 months!
B2B selling stuff on Amazon but don’t know what is going on.
- an extra motor on the pool on your house.
B2B(Business to Business) Business
Fewer specialty people have home improvement/home depot is massive in the USA.
Broadening horizons – a lot of people get deep into private label had a company helping a company do electrical things
Housebuilder building 25,000 homes at once the idea is all stuff in stock on Amazon will crunch the numbers
First, 14% goes out the door to Amazon. It made no sense to this business economically.
So Amazon will need to figure out the fee structure for business- at the moment, there are no economies of scale.
For 3 printer ink cartridges, 5% off is okay but above that, the fee structure doesn’t make sense. The businesses negotiate over 0.5% – so 14% is just not viable.
B2B vs. B2C
In B2C(Business to Company) companies, we are trying to be found!
In B2B (Business to Business), everybody knows the 3 brands – so discovery is not important; it’s driven by price.
It comes down to size – Business to small Bussines!
Will had a B2B(business to business) company that sold labor law posters – used to be sold via the catalog.
If you’re buying accessories for your food truck is viable on Amazon.
If for NASA – that’s not viable! 30,000 titanium nuts.
When Buzzfeed gets bored – they find crazy things on Amazon – normally it’s a 3rd party seller.
Click To find out more about Goat consulting.
To contact Will directly, email: firstname.lastname@example.org
For another recent interview with Will, Click here
Michael Veazey 0:55
Welcome to the 10 k collective Podcast the place to be for six-seven and eight figure sellers particularly if you’re based in the UK but not only there’s a lot of listeners to the amazing FBA or sister podcast based in the America and as the tank a collective podcast develops better to be value on both sides of the pond, Turkey of Americans you’ve got one of the biggest The thing is in the Amazon space of really sharp sort of street economist is the word I use about him will turn and go consultant will is one of the guests was one of the best known Amazon sellers around a while ago, former amazon seller and Vanda now he’s a consultant at go consulting go consulting is an Amazon agency specializing in brand management on Amazon. pretty seriously insightful guy. So we’ll fantastic to have you back on the show. Thanks so much for coming on. Oh, yeah.
Will Tjernlund 1:41
Thanks for having me.
Michael Veazey 1:42
So we’re going to talk about dealing with the competition of Amazon and offline as well as the online thing. So obviously, we are all in a way hyper aware of competition, but the way in which we kind of analyze it and assess it, I think you have a pretty unique view on So tell us a little bit more about your take on competition on Amazon in 2019, in the broader strokes, and then we’ll come back into zoom in on some detail.
Will Tjernlund 2:08
Yeah, traditionally, when I talked to someone within the Amazon bubble, who kind of eats, sleeps and breathes this stuff, and goes to all the different Amazon conferences, they tend to be very, very focused on stuff like DSR, they’re looking at competition. And they’re trying to look at sales ranks. And they’re really looking at those types of metrics, where I’m much more interested in kind of who the actual different sellers are, if they’re Amazon selling the product, if it’s a bunch of merchant fulfilled people, or if it’s just a bunch of private label owners who have two products each, and really kind of deep dive into basically what’s going on in the entire marketplace. Each listing kind of tells a story between seeing if the seller is selling a bunch of different products, see if all those products optimize, see if anyone else selling those products, or if they’re the only brand owner of their products and getting an idea of kind of how sophisticated their Amazon knowledge is, before entering a niche, because there might be niches that you can put all the different stats into virologic Jungle Scout. And it might seem like the perfect niche to get into, we have no idea really who you’re competing with, you’re competing with some multinational brand that does billion dollars in sales, it might not be a good thing to get into. On the other end, if you are dealing with a multinational brand has billions dollar sales, it might be the perfect product to get into because they have no idea what their individual customers want on Amazon. And so it’s really thinking about things from a holistic point of view. And thinking about kind of the psychology of the different sellers, and what they’re all trying to achieve with Amazon Marketplace. With our Amazon agency, we deal with a bunch of different brands that have us optimize their Amazon listings, but never have any intention of ever selling on Amazon. There’s all sorts of kind of unique situations out there. And hearing from all the different types of sellers and vendors out there. All the different business models that they have on Amazon, kind of build my repertoire of knowledge of all the different ways people can make money on Amazon ways to kind of fill in the gaps in the market.
Michael Veazey 4:13
Cool. So just reflect back I guess, typically, if you remember you saying to me that you know you did a I think it’s mechanized degree in it. But you just you couldn’t quite bring yourself to do all the detailed analysis and some of the dotting the i’s and crossing the T’s. But you do have class of holistic take on life, which is quite unique. And I think this is why I really, really wanted to talk to you about this subject. And it’s so important because what you just pointed out that really I guess, sometimes you can’t see the wood for the trees, right? You look at all the numbers. And people say the data doesn’t lie. But it depends which bit of data you’re looking at. If you’re looking at one particular tree and the exact nature of the bark on that tree, you may not notice that the woods on fire until you look around you right. So very important point. So let’s talk about there’s so many places to go with this, as it was this with you as a multi faceted conversation. Tell us a little bit about how you figure out who you’re competing with first. And so you said that the nature of competing with multinational brands can actually be good people to compete with, it’s just an interesting thing. Let’s start with that first multinational brands Why? Why is it good to compete with multinational brands on the safer face of it, it looks a bit scary.
Will Tjernlund 5:18
Because they just there’s a bunch of different examples. So first and foremost, if you search for like air pods on Amazon, we had some brand analytics, I’m pretty sure it’s a second, third or fourth most search keyword and all of Amazon. And if you search enterprise right now, from an apple, one of the largest companies in the world, none of their listings are optimized, they don’t even care about the Amazon sales channel, because it’s 3% of their total retail or something like that. And so when they’re that big, they don’t care about Amazon’s a sales channel, there’s an opportunity for a bunch of people who sell a bunch of air pod looking headphones to rank for the air pod keywords and get all that traffic that’s going to Amazon with their wallets open with with intent to go buy wireless headphones, they don’t really see the apple one, I guess I’ll just buy something else. That’s only $20. So that’s that’s one example. But um, basically, when I’m looking at competition, the kind of the first thing I’d look at is pull the virologic Jungle Scout, or whatever your sales estimation software choices, and figure out exactly kind of how big this pie is, as a whole, on the first day, two pages of sales, and of the few keywords you want to go after, and then also who has how much of each slice. And if you go into a market and everyone has 10% market share of the monthly sales, then you know, you can go in there and you might be able to slide near still half percent for everyone, you can have 10% Real quickly, then it’s not that bad of a marketplace where if you go into other ones, you can find some niches where the top listing has 80% of sales, and then the 20% of sales is split up between next 20 listings after it. That’s the kind of marketplace where I doubt you’re going to be able to take too much from the 80% market share company. And then if you’re stuck with last 20% competing with 20 other sellers, you’re kind of in a niche that’s doomed from beginning. Those are the kind of things I think about when I first look from a 10,000 foot view a competition and figuring out is this niche competitive or not? Is how much is the market share split up? And how much can I kind of take for myself?
Michael Veazey 7:23
super smart. And I’m really glad to hear you say that. I mean, it’s I spoke to Kevin King the other day, he’s another person, he’s got a very good overview were thinking, although he’s very numbers driven. But you know, he’s also got a real sort of street smarts in this stuff. And it’s quite reassuring to hear that because I’ve been telling people for ages that they really respect the market share thing that you’re referencing. And the reason I have the courage to say that is we see that coming up a lot in the 10 k collective mastermind, where the people who are killing it, and really they aggressively growing their business and cash flow positive, very much dominate their markets and people who struggle or just disappear for the mastermind, because they can’t really make it work and the people who got me to products where they end up owning a pathetic part of the marketplace. And it really comes down to that star principle, doesn’t it by Richard cashew I’m Brad says a Brit, which is I usually in the online sort of business space. But the star principle is from the Boston Consulting Group matrix, very, very simple idea, but very poorly implemented, which is you want to go after things where you can be the number one in a niche, and it’s growing fast. And there’s so many fast growing niches on Amazon, like you just puts on air pods, which probably didn’t exist as a niche for four years ago, anywhere. But if you are like bringing up the rear, and somebody has 50% of the market, they can get all the economies of scale, they are the preferred providers, so they can probably get a higher price point. They got all the social proof and reviews and stuff and the ranking in itself as social proof right near the top of page one. So it’s impossible to beat. So yeah, it’s it’s really great to hear you say that because it’s what I’ve been banging on about the last couple of years and really seeing successes and failures on that basis as well. And I think it’s something that is completely ignored by people because as you say, you don’t see that information given not explicitly anyway, and viral on Twitter got whatever.
Will Tjernlund 9:01
And we see it from this point of view to where brands come to us and want their sales increase on Amazon. And where we get to a point where we tell them, Hey, we got the 85% market share. There’s nothing we can do. We’re an Amazon only agency, we don’t do social media marketing, we don’t do email blasts, we don’t do any kind of off Amazon marketing. And that now you’re at the point where you just need to make the pie bigger as a whole. We’ve we’ve done our part on Amazon will conserve your 85% market cap, market share and hold on that as long as possible. We’re doing our job. But now it’s your job to make the pie bigger as a whole. Because there’s only so much traffic on Amazon. We’re constantly maxing out our ad spend, and trying to figure out different ways to spend advertising dollars because we’ve maxed out the entire kind of pie within our Amazon ecosystem. It’s always kind of shocking when you figure out how small the pie actually is sometimes.
Michael Veazey 9:53
Yeah, that isn’t something you hear so much. Because I mean, most companies don’t have the cash to, you know, Max, either to fund the inventory needs or if they do then to fund the advertising needs as well, which can be pretty substantial. But yeah, and that’s an interesting point. So they can be a problem of maximum out of the pie. And but I think that’s a that’s a real quality problem to have. Because, you know, you may want to make more sales, but the sales, you’ve got to be defensible and profitable compared to spreading yourself incredibly thin and having 10% of Amazon and like 5% of the sales and eBay. And then you know, whatever percentage of the high street sales, right?
Will Tjernlund 10:28
Yep, and the one that’s when it goes back to the psychology to of just how many people are buying a hammer on Amazon every month? And is there anything we can do to encourage people to buy more hammers? Are they just a need basis, and there’s nothing we can do about it. Because at that point, we should really be optimizing for like profit margin, that type of thing. Because even if we get our brand in front of more people, if we’re not going to expand our skew count past just a few hammers we sell, then we’re basically stuck. And so then that’s again, like one thing I’ve looked at when I’m looking at the competition to see at how big is their catalog? Are they looking to launch more skews in the future? Or are they just focusing under two skews that they have for the last 10 years? Because if they’re focused on their two skews and never going to budge off those two skews, I don’t really want to compete with them. I want to compete with someone who’s growing their skew count. And maybe we’ll forget about some of their older skews that created in the past.
Michael Veazey 11:19
And seeing so really, that the people that are easiest to compete with are the people who are expanding their catalog and just kind of abandoning their older products. Is that right?
Will Tjernlund 11:28
Yeah, my like, my brother has a couple hundred thousand skews. And he easily could steal the buy box from him 90% of the time, I want to excuse and he wouldn’t even notice. But if you still 90% the buy box. Two skews. Obviously the noticed the second happens?
Michael Veazey 11:42
Makes it a lot of sense. I mean, yeah. Do you say your brother has to and to test his keys Now listen to you, right?
Will Tjernlund 11:47
Yeah, he has a bunch of like hardware and b2b companies that have a bunch of spare parts, stuff like that. So he’ll just like upload an entire catalog has like 10 Filipinos helping them? Do this Excel? spreadsheet?
Michael Veazey 12:00
Yeah. So listen, say I mean, so there’s, as you were talking about business models, I mean, I think people get very confused between Amazon as a sales channel, Amazon as a marketing channel, Amazon as a fulfillment channel, all of which you can be, or you can split it into those bits. But also, it’s not a business model. And people get confused by that. But I guess because a lot of us come into it. And my I was the same from a non business background on some marketing, I’ve done online marketing stuff. But yeah, we don’t really come in thinking clearly about business models as a separate thing from Channel, right. But it strikes me that the more I learn, and especially you in the position, that there are lots of different business models to tell us a little bit more about that, how would you sort of classify the business models that operate within the Amazon space will use it as part of their model.
Will Tjernlund 12:44
A quick example kind of tangent, but kind of on the same topic, that is imagine that you see a product that you’re competing with that is on sale, 50% off, and you go and look at their seller account and you see that they’re selling 200,000 listings, you can kind of assume that they can care less about that brand, and that they’re just trying to liquidate old goods, or they’re just going to move this quickly, because they got this for cheap price. And so right there, I would try to order say like 99 from them just to see how many they have in stock to see if they’re going to be continuously selling this at 50% off. Or if they’re just trying to liquidate something quickly, where if I looked at, say, another competitor, and they’re 50% off, and I look at their seller account, and that’s the only product they sell that I’d assume that they’re basically going out of business, it’s kind of a different thing to think about when you kind of look at their catalog size, and think about what their company’s doing, we have one skew and everything’s 50% off, that’s probably not a very good side. So I don’t know, I don’t know if you have any comments on that, that kind of explains the business models a little bit. But um, the main business models that I see are, it’s a private label, or who listen to podcast and keep the top Polish tricks, tips and tricks and tips. And they’re tough to compete with, because they care a lot about all the different hacks, and they didn’t have minimal excuse they put focused attention on. There’s actual brands, it’s how brick and mortar store where Amazon has maybe 510 percent of their total revenue. But it’s something that they’re interested in, they know it’s growing, but same time, they don’t really care too much. And they’re definitely not willing to burn any bridges anywhere else to help Amazon out. And then we we also see now more and more b2b and like manufacturing companies that are used to selling through a million different sales channels to get to their customer. And now they’re thinking about for the first time cutting out all those different middlemen, sales reps and selling direct to the customer. And that’s kind of where our agency specializes and tends to have a lot of clients is in the realm of companies doing b2c for the very first time. And so it’s kind of interesting, but also pretty scary cultural change for a lot of these companies.
Michael Veazey 14:52
So you guys specialize really and then helping these the lasses, a group of people then the most way so they’d be to be to be, they’re getting used to direct to consumer things so that the sales, the sales channels have fundamentally changed, or, you know, the nature of them have changed so much that they’re doing b2c. And that’s what you guys specialize in, right?
Will Tjernlund 15:12
Yep. And they have to debate internally. Is Amazon, something that the marketing departments going to handle the sales departments gonna handle? are both going to handle it, and they’re going to take turns on it? Or how are they going to handle this internally? And then how are the sales are going to be collected? And how are they going to incorporate into their 40 year old accounting software and all these kind of questions that a lot of Amazon consultants don’t want to go anywhere near. The one of the big issues that we encounter with these kind of b2b companies that are trying b2c for the first time is that they’re not even fully aware of who has kind of what roles in the Amazon field, they don’t know, if it’s a marketing departments job, they don’t know if it’s the sales departments job, they should work together, whose advertising budget, it should be taken out of how the inventory management systems going to sync up with Amazon, how they’re going to account for different taxes now that they have Nexus and a bunch of different states, a bunch of different questions like that, that more than not, the Amazon consultants out there just don’t want to handle them. And we have no problem. And I see why they don’t want to handle them. Because solving those problems don’t really scale. There’s no like software or anything easy. You just talk to people a lot. But it’s something that coming from my original story of working for my family’s company, and then eventually had turning that company into a totally different thing. Kind of resonates with a lot of these companies. And we’ve gone through a lot of the pain points culture wise, of teaching people how to kind of reinvent their company. And so we feel totally comfortable doing that where other agencies don’t really want to go near those culture changes.
Michael Veazey 16:50
Yeah, that makes a lot of sense. And I think the the main thing that strikes me there is that it’s unusual to have had that culture shift. And being I’m thinking, as you said, I mean, a lot of the time, it seems like people have actually pretty solid background in software engineering, or engineering, it seems like the engineers like Casey, viral launches, obviously, it’s super smart guy really lovely as well, I mean, just very calm person. So like Greg Mercer, very positive person who’s just fantastic at systems. But the fact is, they came from a sort of systems or software engineering background, and then got into Amazon, and then quickly thought I can put these two together, whereas you, you’ve got a bit of a journey there. And there was a couple of guys in the tank, a collective mastermind that run in London, actually, it’s not as unusual as you might think that there’s one person who’s like eighth generation family business and his for his family for about 10 years to bring the business First of all, not sell b2b selling to big box retailers. But to bring it direct to consumer and to start with their own website. And then, of course, Amazon much, much more recently. And then there’s somebody else who’s in the early stages of that, and you can see him sweating with the effort of changing and he’s like fourth generation of his family business says, like 100 years of tradition of one way of doing it, and you can sweating to kind of get his head round, it is a really big culture shift. And I think those Missy comes straight into Amazon, don’t have any of the supply chain expertise he has or the production or the brand that he’s built. But at least we’re not carrying that baggage. It can be quite heavy baggage content, and how do you deal with moving people on from that.
Will Tjernlund 18:18
And that’s the deal is that it is usually more upper management and lower management who is hesitant. Usually, we get someone who was Amazon was kind of thrown under desk one day saying, hey, figure out the Amazon problem. And they started looking into it. And the more they research it, the more they realize they know nothing, and that this is kind of its own monster. And so they go and Google Amazon consultant and find us more times than not that person who initially googled us, like loves us wants to hire us, is our champion. And then it’s working with that person takes lean to like their board of directors or their CEO that they need names on consultant to get this under control, because there’s no way they can do this by themselves. And so it’s interesting, because usually, like the lower level employees are all for us coming in helping them do their jobs better. And it’s more from the kind of older strategic point of view where you have some CEO who say 5560 years old, and they got three more years, four more years until they’re out the door. Last thing they want to do is change the entire business model they’d rather just conservative serve conserve the last few years before they head out.
Michael Veazey 19:24
Yeah, that makes total sense. And yeah, that is a problem isn’t this is sort of a non alignment of interest. And I guess this one of the realities with even you know, quite a smallest business, even if you know, the smallest number being too if you got a business partners, just like in a marriage, I guess it’s the same thing that just because you’re basically going the same direction doesn’t mean everything is aligned, you know, the interests of one person may not be so and particularly Yeah, not all the CEO is not the same isn’t an owner founder, who’s hungry for the business. I mean, Jeff Bezos is in his 50s. But he’s very prepared to change a lot, although be interesting to see, you know, as in when some upstart company comes up against Amazon in 10 years time, you know, five years time, or maybe it’s growing right now. But there are some cultures where the CEO is, is very, very aggressive about change. But that’s probably pretty unusual. Right? I mean, is that your your experience as well? I mean, how common is it that people are resistant versus open to the change there?
Will Tjernlund 20:16
The other way of discouraging me is that Yeah, there’s the growers and the founder kind of CEO type people who to get higher as CEO down line, if you need kind of to revamp everything they can grow and build stuff. And then you get like the professional CEO who just manages and can do everything conservatively. And every once in a while you get a Jeff Bezos, or Elon Musk, or Steve Jobs I dude, who can be a professional CEO and consumer, but at the same time, come up with crazy new ideas and take the right bats all the time. But those are obviously don’t happen very often, usually more one or the other. And I can tell you that like, specifically, my co founder, and I have my consulting firm, he’s more of the conservative side, I’m more of the creative side, we work well together. But definitely, we’re not both amazing at both skills. And that’s a pretty rare thing to have. And so dealing with companies out there, rarely do we talk to our CTO or some executive where they’re super, super sharp, and it’s like, oh, man, this guy totally gets it. This guy’s a vision. This guy has gone places. He’s crazy. It’s more times than not, you’re just talking to your friend’s dad.
Michael Veazey 21:23
Yeah, makes sense. And partly a generational thing, I guess, isn’t it? I mean, it seems to be linked to that. I’m not trying to be sort of a just I’m not I know, some very good sellers who are older. But yeah, it’s it’s more likely that somebody younger they get the internet, but then, of course, they have the problem of not understanding the value of building, you know, decent quality products in a brand that last for more than five seconds, I guess is the opposite. Right? Yeah, no. Okay. So tell me a bit more.
Will Tjernlund 21:51
Why just in with our generations I protest with hacks and such and their generation to is more on the generation before us and more willing just to putting the hard work and just do the hard thing. So that’s always kind of a interesting cultural thing, too.
Michael Veazey 22:05
Yeah. And I suppose I’m 45. So Ryan, between the two. And it’s interesting that actually, because what you just said, I mean, I know you’re a new what, late 20s. Now, I guess, that I’m an uncle, I’m 45. And then some of the CEOs are so in their 50s or 60s. And I guess that I’m less excited by hacks, though a lot of the young people seem to be in that I’m never going to be the person on YouTube, getting a million hits, going, here’s the latest hack. And look at me, I’ve just made a million dollars overnight. I mean, I’ve not done it, I can’t see myself ever doing that either. But I don’t miss the value I bring it. So I think it’s a blend for me of strategy and hacks and hacks and tactics need to fit within a strategic objective for a particular department or particular push or particular type of channel. And then with that, that sits within a sort of overall objective of the business over the next 10 years, and whatever, as far as I’m concerned. So it’s, it’s interesting, isn’t it? That actually, I think all good businesses need a blend of the two. And most people tend to fall on one side or the other. And I’m definitely not particularly taxi type person. And I’ve realized I get a bit bored of that, because it just has such a short shelf life, really. But so talking of how people see it, I mean, how you’re talking about types of CEOs? Can you generalize a bit more about how bigger companies see Amazon? Or is it just kind of very company to company,
Will Tjernlund 23:16
um, it tends to be very company company, some just want to get Amazon under control just to get there. All they care about Amazon is their minimum advertised pricing, I talked to a company last week that has minimum minimum advertised pricing only because of Amazon. And that that’s that’s what got them to instill the policy. And so the model brands we’ve talked to who was basically only care about minimum advertised pricing is shocking. And for the people who may not know, they don’t advertise pricing is this kind of like fictitious standard retail price that companies put out there that this is the price, they prefer the product to be sold that in the US at least, it’s illegal for them to actually tell you what price sell the packet, if they tried to like sue you for saying you need to sell for a specific price. That’s actually against the lots of price fixing. And so it’s something that is kind of a hush hush thing. So that’s why when you go to a store, all Apple products always costs a lot of money no matter what is because they have minimum advertised pricing. And they basically threatened target Walmart and sites saying, hey, if you guys don’t sell this, at this specific price, we’re never going to sell you a price again, and you really don’t want that to happen. And so they’re able to kind of like under the table, bully people into certain pricing. And since you can’t really bully people on Amazon due to the buy box. A lot of brands just want to get that under control. And so they don’t really care about that the sales revenue goes up or down, or in fact that they just want their price under control, because all their brick and mortar stores complaining to them, that it’s being sold for so cheaply on Amazon. And so that’s kind of an interesting cultural change compared to the private label sellers, who can kind of really care less about all that kind of stuff and just would never compete for the buy box in the first place since their supply chain is so basic and boring.
Michael Veazey 24:59
Yeah. Now that makes a lot of sense. And by the way, this is a very similar thing in the European Union, which UK is still in at the moment, which is our RP recommended retail price exactly like and mark. I mean, in theory, just like in the EU’s illegal to have a monopoly or even state support for a lot of things and pretty similar to America. Like in theory, it’s one thing and in practice, it’s exactly the same thing, as they’re like all warm as to which I think is even part of all markets, you know, starts selling big biros for, I don’t know, 10 pence per packet when they should be 50 pounds and big simply going to turn around to them and say, Look, we’re not going to supply you with ease. And I guess you can’t legally oblige somebody to supply things. Some of the things, there’s probably lots of complicated legal arguments. But yeah, you know, the fact is that, understandably, they’re trying to maintain price, because of their relationship with the retail stores. So tell me a bit more about, I mean, everyone wants to keep a decent price. But there’s that particular tension that people have, or businesses have that sell, to brick and mortar and sell to direct to consumer in general, and more specifically on Amazon. So how do companies I mean, this, you mentioned one aspects of it, what are the other aspects that come up, driven by that, that sort of relationship between brick and mortar and, and direct to consumers,
Will Tjernlund 26:11
to a lot of our clients, the Amazon fee structure is very confusing. They’re used to kind of more of a vendor central business model, where they get purchase orders from Target and Walmart. And sometimes they get like, some of these purchase orders like quarterly. So it could be really big purchase orders, and they ramp up for one big purchase order, sell it off to Walmart, and then count their money and wait for the next purchase order to come in. And so they fee paying for the advertising so directly, I think some companies get kind of intimidated by how transparent all the numbers actually are. And that how simple it is sometimes to just really calculate down exactly how much profit margin we’re making each unit and that we should spend more money on advertising. And other companies get more intimidated because they have very complicated things where they have to ship items to warehouse before they send them into FBA. And you had to calculate all these different shipping price in to figure out what the exact profit margin is. And they’re not used to sending an inventory and not being actually sold yet. And it sells once on each individual customer buys it. And like that, that type of thing really kind of throws them for they’re very used to selling to these traditional brick and mortar stores have that settled and figured out for the last 40 years. And the Amazon has a totally different business model, different way of shipping things, labeling things, really throws them for a wrench. And for a lot of companies. It’s very, very intimidating. And once we get on the phone with them for like two hours straight, explaining everything, they usually walk away with it being a lot more comfortable, because it’s actually not nearly that bad. Like, as you said, You’ve talked to dozens and dozens and dozens of people who have sold stuff on Amazon and they can figure it out. I’m sure some multinational corporation can figure it out.
Michael Veazey 27:55
Absolutely. Listen, some of the people that I’ve worked with, they’ve managed to sell stuff online. You know, they can do it. anybody in the world could do without being Yeah.
Will Tjernlund 28:05
Yeah, a 15-year-old student from my high school class, I teach that he had to borrow his mom’s credit card he sells on Amazon send stuff into the fulfillment center. So he can do it when he does he never a driver’s license, I’m sure yes.
Michael Veazey 28:19
Having said that, though, to be fair to them. I mean, you’ve got to one at one of the issues that I’m realizing as you scale up any kind of business even with amazing FBA, which are my main focus these days, and like like yourself on a much more modest scale this so consulting side, rather than selling side at the moment, anyway, but it whichever it is, it doesn’t matter whether it’s consulting, or Amazon selling or anything else, you got to figure out ways to handle complexity. And I was just having a team meeting. And I’m like, Guys, thank you for making the time. I know that it feels like you don’t need to be here for half of it. But the issue is coordination, I think that’s like 80% of the job. So to be fair, if you have, you know, 2000 10,000 skews, and you’ve got a track, where they physically are, how much inventory you’ve got, how much inventory you’re going to need, and do the cash flow forecast for that, and then work out the logistics and then do the accounting, you know what you’ve actually spent on it, to be fair to them that that is a just monster size job, right? It’s not a casual thing to change that. I mean, what are the processes that you see people successfully implementing in terms of their overall business structure? And obviously, you don’t take responsibility for their overall business. But I guess you got to help them integrate Amazon into their structures, what would you say are the biggest issues and the big solutions on the big scale solutions? So one of the big issues that we run into is anytime a company has an extremely old inventory management system that especially doesn’t have ties to any API’s,
Will Tjernlund 29:42
because there’s so much awesome Amazon software out there, that costs like 1520 3040 bucks a month, that these big brands can care less about, spend that kind of money on it. And if something like TechStars going to make their life easier, they’re going to spend that money on this half-second. But if packs are, can’t properly link and type their personal accounting system, and it’s kind of all for not. And so we have one company, I can think of specifically that like, way back when 15 years ago, they used to sell a lot of just like plain lumber, like just two by fours and wooden such, and that their inventory management system, since they didn’t want to switch over how many decades ago, they are now kind of using a lumber management system to manage the inventory of their entire publicly-traded company. And none of this stuff actually lines out and it doesn’t make any sense. And every, they still think like the system still thinks you’re selling lumber, but you’re really selling say, power tools or whatever. And it’s like, such a mess, to kind of get a company like that organized opposed to some company that just uses ship station, and just has all their API’s already set up and has a modern company that’s a breeze
Michael Veazey 30:51
makes a great deal of sense. And I think what it comes down to is, again, it’s a more general business-building slash adjusting discipline, right. So strategies, and there’s a really brilliant book that I’m really sort of not just absorbing, but trying to just sort of program into my head called scaling up by Verne Hornish, which is a really fantastic book because it’s geared to highly scaling companies, not necessarily publicly held corporations like Jim Collins discusses in great by choice and all that they are really really great good books, all the Jim Collins and importance, all that stuff. But this is so actionable. And yet it’s not simplistic. And the real reason that you can’t be simplistic in your business planning and my experience, even at the tiniest level, like the stuff that I’m doing, and some of the more serious and aggressive scaling companies is exactly that future-proofing thing, just because you kick can down the road a little bit for the quarter or for the year is ok. But if you kick it for five years, and you have a really ridiculous disconnect between a system and the sort of thing that the system is there to manage like a lumber management system, managing your sports shoes or something, then that’s really going to come and bite you and bumps so hard. At some point, you don’t even necessarily know when because you might be in 1990, updating your software or not updating it, you don’t know Amazon’s going to be big, it doesn’t exist yet. But the fact that something like ours is going to come along and need it is one of those things that you can kind of predict you see what I mean? It’s like a business strategic way of thinking versus just doing things in a rigid way for 50 years.
Will Tjernlund 32:20
What in this The sad part is to we get so many people set up on Shopify ship station, everything, not only will everything run that much smoother, and be automated and easy and have great API’s, but also there probably will be spending whatever 50 grand a year they are for whatever hosted web service they have now for their shopping cart, you know, I’m saying like, I guarantee not only are these old software’s are using clunky, but are I bet they’re very expensive, too.
Michael Veazey 32:46
Yeah, it’s a bit like Moore’s law with the processing of that, that they created for Intel, right? That the processing power, so doubles roughly 18 every 18 months? And I think Yeah, the cost of any given software type activity, your computational links activity that you used to have a team of accountants and a bunch of calculators or before that my grandfather used to work in a bank and there were no calculators a bunch of guys with probably slide rules and just pieces of paper and pens. And a lot of late nights, you know, I mean that the cost of that computation tends to come down shockingly large amounts every few years and certainly every decade so yeah, it makes sense. I mean, if nothing else is it says sort of having to go through the Amazon sort of thing is probably a microcosm or just like a small thin and the wedge for a process they probably should have been forced to do decades ago by the sound of it anyway, I mean, is that your experience?
Will Tjernlund 33:37
Oh, for sure. It’s one of the times where they have to now organize their entire catalog have it all in one place have all their images in one place. And that’s the thing is that we work with some companies and like the second we sign up with them, um, they’re able to send us a spreadsheet with all their UPC pricing images, everything within a half-second and other companies they’re like oh man, it’s gonna take me a bit too all these assets together and it just kind of shows you what the company is going to be like working with moving forward for sure.
Michael Veazey 34:07
I can really understand why nobody else is bothering to do this because it is the kind of it’s almost like a quixotic quest that you’re taking the guys who are stuck in a really not just pre Amazon or even pre inset or pre direct to consumer way of operating but just not a very integrated type of company in terms of their information systems anyway. And you know, bring them into the 21st-century nevermind onto Amazon.
Will Tjernlund 34:33
When the Jungle Scout the brands and see that their listings are doing a quarter mil each month in sales, you’re going well what the heck would we can get this going ASAP kind of thing where if somehow lock themselves into having a sweet brand after 50 years feminist family business or something I don’t know. But it’s crazy. Some of these companies you talk to were, for one reason or other people just love their brand.
Michael Veazey 34:54
Absolutely. And this that’s the thing. It’s like a question not throwing the baby out with the bathwater either. And again, I’m going to reference one of the Mr. 10k, let’s mastermind like the fourth generation selling a very niche type of product, obviously not going to break any confidentiality about what it is. But it’s not that exciting. I guess it’s not like a fashion trend thing. It’s not trending on Twitter and hasn’t been any time in the last few decades. And so he came into the room of the mastermind, saying, you know, well, wondering about getting out of this market niche, it seems a bit boring, and we’re like, holy, you know, Batman, you’ve got a massive brand here, you got a great expertise in the production side, you got a ton of stock for starters, and you got all the supply chain set up. And you know, it’s no question of changing who you are, and having an identity crisis is like, but you need to have the identity crisis of the right kind is like you still sell x y Zed widget. It’s just the x, y z for the Americans is just that now you’re going to do it directly to the consumer. So in a way, I think it comes down to articulating the brand even stronger. I mean, one of the brick and mortar come kind of things that you hadn’t I’d like sorts of this is a say you setting up biros, right, and then actually, he’s selling it online as buyers are us or something. So there’s a bit of a conflict there, because he’s selling under this sort of real brand, as it were of the company, family business, on brick and mortar stores, and they’re selling on Amazon or something different. He’s getting that awkward point where he’s going to have to decide almost between really annoying the brick and mortar sellers and being, you know, fully competitive on Amazon versus fighting with one hand behind his back. Is that a process you’ve seen in your consulting?
Will Tjernlund 36:30
Yep. And sometimes we are able to kind of come to some sort of truce with some of the resellers and say, Hey, you guys sell these skews will sell those skews. Sometimes brands just want to come out with a whole new category of their products or just all of their skews. But then it’s dash AMC, and they have basically the same exact skew they sell on Target or Walmart, they come out with an Amazon version, so known bugs them and they are the only ones who have the control that skew. And they don’t have they don’t distribute to anyone else. No bugs, mobile pricing, that always seems kind of the best way to do it. But yeah, there’s a bunch of different kind of ways to get around it or work with it. But it’s um, yeah, it tends to be a problem for most people for sure.
Michael Veazey 37:14
Yeah, it is a problem. So repackaging and rebranding, the existing skews is probably, as you said, the most elegant solution because you kind of retain your, your brand, and you kind of retain the catalog, although it does strike me that really, sooner or later. It’s a business model decision. At least that’s my perception because there is a massive tension between those two. Is that so your perception? Or do you think it’s just a long term sustainable thing?
Will Tjernlund 37:39
My Yeah, my mission at our company is to get rid of all middlemen, I think they kind of just all are just a waste, don’t really add too much value along to the supply chain. And the ones that do are actually adding value because they’re getting it the product and the unique area that’s hard to get to or something like that. But for the most part, yeah, I don’t want to compete with them, I would just be the only seller. If you’re creating the product from scratch, you should get all the value that created for your brand. And we’ve gotten to the point before with brands where we’ve sent out kind of the mass email to all the wholesalers saying, hey, just you guys know, October 1, no longer anyone’s allowed to sell on Amazon. We have people selling an Amazon people selling below map pricing, and we just can’t have that anymore. So if you’re stocking our products on the shelves and showing them to customers and adding value to our brand, letting customers hold touch the product and such keep doing what you’re doing. We love what you’re doing, keep your brick and mortar store open. If you’re buying our stuff and reselling it on Amazon, you’re not really adding any value to our brand. It’s something that we can do normally and that Your time’s up, I apologize. But it’s, it’s true. And so to prevent them from just kind of liquidating the product and taking your brand to give them whatever two to six months depending on how much inventory they haven’t stopped lead time to let them know that hey, two months now is our last purchase order four months now No more talking and Amazon
Michael Veazey 39:02
makes a lot of sense. And yeah, so you basically give them notice because as you say people gotta add value. I mean, in the end, the market isn’t gonna sustain any anyone who’s doing any activity doesn’t add value. Because white Why would it is got a sharp in economics, particularly in a very transparent world where there is if you like very perfect markets are a quite liquid and transparent market. So like you’ve had on the stock exchange for years is now coming to retail. Right? I guess that’s one it’s no coincidence that Jeff Bezos used to work on Wall Street, right. And he wasn’t a guy in his college dorm room creating a company as well as Zuckerberg. Right. So he was on what I think it was an options trader or something was new, but it was certainly very sharp, very, very sharp about the allocation of capital and value and all the rest of it in a very transparent market. And in a sense, you could say you brought some of that, that way of thinking that way of operating to retail, I guess I’m not really made the connection before. But now you said that
Will Tjernlund 39:54
they are to make kind of thought is that without getting too out there is that a perfect market, everything’s the same price to everyone always. And that the only variable is just the shipping. So like in a perfect world, whatever, it should cost me the same amount of money to buy a can of coke in China, as it does in us and it does in Paris as it does in South Africa. It just the shipping should be the only thing from where it was made to was shipped to do the only fans variable on it. And I think eventually, hopefully with everything getting digitized and such eventually we’ll get there.
Michael Veazey 40:30
I guess so. Yeah. And syncing ideals? I mean, in a way, it’s quite a sort of economists way of looking at life. Let your life be after sort of intellectual ideal. But yeah, I mean, certainly from a practical point of view, it’s interesting that you’re saying basically you think people need to choose and yeah, as you say there is a certain type of consumer they’re probably always will be I mean, we’re not going to get 100% penetration of retail by e-commerce ever. But if somebody needs to physically touch your product in your retail store provides that experience for your brand. And you are I guess they’re adding value. And then if they don’t add value, and all they’re doing is the figure on Amazon, they’re just adding to the competition in the mass, right. So that’s not really good.
Will Tjernlund 41:09
Yeah, here’s one more person clicking, I have this ad, or I think it says click this to sell this product to or something like that. If you’re just doing that, you’re not really adding too much value compared to actually having a brick and mortar store and advertising your brick and mortar store getting foot traffic in there and selling on the product. But I’m back in kind of last subject and kind of tie a bow on all this is interesting with we have BestBuy headquartered here in Minneapolis, and they do a really aggressive price matching with Amazon. So even if all the customers aren’t online, in the distant future, we still can’t get to a point where all prices are the exact same.
Michael Veazey 41:48
Because that makes sense. Because otherwise, people are just going to start using stores to do what they already do, which is that they’ll go into like a bit of Waterstones around the corner for me, which is a nice bookshop and you can it’s very civilized, they got a cafe there and they sell they have nice selection of books and they have reasonably knowledgeable staff compared to Amazon seller seems to support a and which is a low bar, but and they have coffee and stuff because so many people go into places like that they’ll look at the books and then they’ll just get the phone out go on Amazon and just buy it cheaper. So if you don’t compete on price sooner or later as you said there’s the shipping thing you know, it’s it’s not going to be a very sustainable price model because everyone’s doing it it’s just standard consumer behavior that’s incredibly it’s impossible to legislate against right
Will Tjernlund 42:32
yeah and if shipping is only variable and you can ship 30 big screen TVs two one best by location and get economies of scale on on Amazon after buy each one individually and ship it individually to my household eventually BestBuy wins that
Michael Veazey 42:46
price. Okay, just tell me a bit more about that the economics of that haven’t quite followed up.
Will Tjernlund 42:51
So imagine basically TV s be sold for the same price everywhere because everyone just price match with everyone else and it basically gets to a point where the markets pretty affected TVs cost as much money so then it’s going to come down to the only thing it’s variable it’s gonna be the shipping whereas the TVs in Chicago it’s gonna cost me more to ship it to Minneapolis and if I lived in Chicago Well yeah, just real quick Yeah, so TV can be slightly more expensive for me because I’m slightly further away slightly more gas to get it to me. But if say like a Best Buy store can order 20 TVs at once and it seems like prices to Amazon’s getting them but they can have me kind of subsidize shipping by picking up in the store and doing the last mile myself opposed to Amazon app and actually pay for the last mile eventually Best Buy could actually win the price war the only reason people when price for games Best Buy currently is because you will find a map for the most part and they got some crazy deal on the product.
Michael Veazey 43:44
Yeah, that makes sense. And and the thing is also so yeah, like There goes retail arbitrage is embraced as a business model talking of business models on Amazon that doing don’t work. So
Will Tjernlund 43:54
yeah. And there is it we have retail arbitrage other Sorry to interrupt, but yeah, retail arbitrage I like the foot soldier marching us towards the perfectly perfectly balanced. Yeah,
Michael Veazey 44:03
I like it. Well, I’m glad they I hope they see themselves as fulfilling that economic mission in a nice, I’m just making a nice little quote, by the way to love chose the foot shoulders masters towards a perfectly balanced market. I like it. I guess, as the market becomes more balanced than that retail arbitrage opportunity is going to get less and less right? How many Would you agree with that? What’s your view on retail arbitrage as a business model over the next couple of years?
Will Tjernlund 44:29
Yeah, retail arbitrage will turn into something like people who go to garage sales and look for deals where it’s like, yeah, guys, you can get rich every once in a while. But it’s not a sustainable business model type of thing. It’s like, I guess you can keep looking for that rear comic book that no one knows exists still, and you can go sell it on a marketplace. But um, yeah, I wouldn’t want to if someone told me that’s what they’re planning to do for the next 40 years or life, I’d say good luck.
Michael Veazey 44:52
Yeah. And then again, it’s a generational thing is now I’m looking forward to years ahead. It’s probably not something that anyone’s doing very much these days. But sir, not in retail arbitrage. So tell me a little bit more just to sort of wrap that up. Because business model Sunday you sort of opened with Tell us a bit more about broadly speaking, the business models, we talked about the business model of selling to brick and mortar and the fact that it conflicts the direct consumer model? What are the variants? Or I don’t avoid business models even quite right. But what are the kinds of business models or patterns Do you see that are in the, in the bigger picture of how people are making money or exploiting the opportunity on the Amazon channel platform?
Will Tjernlund 45:31
Yeah, I see, it just I don’t know, it’s only a few buckets. There’s Yeah, like I said, the brand new cells and brick and mortar also gets sold on Amazon, you might be the brand selling, it might not be the brand selling it, there’s a private label sellers out there. There’s the merchant fulfilled Chinese sellers out there who sell everything at bottom barrel prices, and you get the product two months from now. And I don’t really know where they’re going to go in the long term, they kind of just seemed that they kind of pop up and get suspended the next day and pop up again. And then lastly, there is kind of like, yeah, like these b2b companies, that people are selling their stuff on Amazon, but they don’t really know who it is, or what’s going on, really. And they’re like, an extra motor for your filter on your pool that you have in your house. And it’s like this weird kind of b2b product that usually only pool installers would even know it existed 20 years now and you’d have to buy it, contact a pool installer who would contact a wholesaler would order it from a catalog, then they pick it up and install it two weeks later. Now you can just look at the model number and buy directly on a site and just install it yourself with a quick YouTube video. And so stuff like that is going to be kind of like a big emerging trend. I think moving forward is less special to people and things that are don’t really need to people and more kind of home installers just kind of doing stuff themselves. I know it’s not nearly as big over to Europe, in the UK, the Home Improvement Home Depot crowd, but it’s obviously very large over here in the US everyone loves improving and maintaining their homes.
Michael Veazey 46:57
Yeah, and it’s not as big in the UK as actually building your own home is quite a tradition in Germany, for example, because I spent some time in Germany, and that’s obviously second biggest market in the world off the US. So I do think that’s pretty big. I don’t have so much Home Improvement as actually home creation in the first place, which is actually quite big. Knowing the Germans, they probably have a somewhat different structure doing it. And it’s probably more regulated because they everything they do is that way, but I don’t I’m not a specialist in that. But but just an interesting point. I mean, I think that the business to business thing, that’s another thing to point out really that having you know what, just when some consumer goods, companies, you’ve got used to going from b2b. So they sell from the people who own the rights to or even own the factories to make a product to brick and mortar you then sell on to and consumers just as those guys are getting used to selling directly to consumer business to business sales. And Amazon is getting a real push from ours. And they’re really pushing that platform on a and so that you can integrate things like your tax number and invoices and what have you, and make it convenient for business or business. And apparently business a business sales as a percentage of sales on any commerce are just about set to overtake business to consumer. So what’s your take on the business to business thing via the Amazon platform?
Will Tjernlund 48:09
Yeah, no, I think it’s definitely interesting. I had a guy contact me from Amazon last week asking about business to business saying you have a bunch of companies that would be interested in joining the Amazon business, I can help them organize their listings and get on Amazon, basically all the jobs that we do, but he do for free. And he do it from Amazon site, which sounds appealing on one side, the only thing that stinks is that like we had one company that was sold like hardware for helping Home Builders and stuff do electrical things. The interesting thing was that they get 10 these deals with these builders that built a 2500 homes at once and this huge housing development. And so they were thinking at first they wanted all of their stuff to be in stock and Amazon and all their builders to buy their stuff through Amazon. And so we start kind of crunching the numbers and go Okay, for this $500,000 purchase order, the first 14% right off the bat just goes out the door to Amazon fees, like you’re losing $70,000 right off the bat just to Amazon fees, let’s keep this in house, it just do these deals off Amazon, there’s no reason to bring this over to Amazon. And so the b2b thing on Amazon, they’re going to really figure out their fee structure for that to actually makes sense in the long run, where if I’m trying to buy some extra ink for my printer, some extra reams of paper or something like that at Amazon b2b. And I’m not really buying at economies of scale, I’m just buying whatever, three things and bank or something like that, then the Amazon b2b, give me an extra 5% off or something like that for buying three cartridges. That’s a fair use of it and whatever. But it’s fairly limited compared to the entire b2b market, because the b2b market, like you said, probably is overtaking the b2c market just because of the large orders that are out there. And no one wants to pay 40%. They’re sitting there trying to negotiate these b2b contracts, and like a half percentage point, let alone get 14%. Right out the door just for the
the ease of using Amazon’s website.
Michael Veazey 50:00
Yeah, I mean, the difference between business to business and business consumer, I would say is, is that I was about to say. I mean, maybe it’s one of those artificial distinctions. I mean, we’ll burn harness you again, who I respect to lighten scanning a book said there’s two artificial distinctions made in business models. One is between products and services. Because all products, companies eventually add services because it’s more profitable. So you’ve you’ve moved from one to the other. And all service businesses eventually add products because they’re more scalable. So like the consultants who create the SAS stuff, so we’ll see what you’re doing in five years time, the software as a service thing. But the other one is b2c and b2b b2b. But I have to say, from my sort of, I’m not wearing harness, I’m not as clever but it does look to me that it, it works in different drivers, because although everything’s ultimately emotional sale, because we’re all humans, but the emotional driver in businesses looking sharp and clever, because you save half a percentage point of a 10 million pound deal, which is still worth saving, because that’s, you know, quite a bit of money. Yeah, given that is not as impulse driven. It’s not about convenience and speed. It’s much more about the numbers, as you say, I think there’s been much more profound shift. And I was in because like you have, I was looked at that. And I thought if I was purchasing manager for something, and I went on Amazon and just bought, you know, 10 of something, it would matter. But if I bought 10,000 units, I’d probably be fired, because that would be such bad value. So I can’t really see them anyone taking it seriously, unless they pay a kind of separate platform or really separate rules or something. And what do you see?
Will Tjernlund 51:25
Yeah, I see it from a point of view of where we are trying to sell some random widget on the internet, the internet is so vast and large, we’re never going to be able to get our widget to be found. But we are willing to give a 40% of our retail price to be found and found by a person with their credit card, save their shipping address saved have a thing, where and these b2b companies, I don’t think they’re trying to be found nearly as much. I think a lot of them, everyone knows who the three brands are. And they just negotiate between those two brands. It’s not as much discovery where Amazon really helps with discovery, none of these people who you talk to you talk about private label brand without Amazon, because the discovery thing was so important to them. And then the sacrifice that 40% no prob for the discovery aspect, where if you’re selling $10 million with a five sets, there’s only three other companies that sell that many plumbing accessories in the UK. And it’s fairly simple to figure out who they are by just googling.
Michael Veazey 52:20
Yeah, that makes a lot of sense. And, yeah, it’s a profound difference between the two. So and it’s interesting that that argument, which is probably a bit like in business schools, you know, how many angels dancing the head of the pin is? b2b versus b2c? profoundly different? Yeah, maybe not, ultimately. But I think you’re right. I mean, that discovery thing, I think the thing is, once you create a very specialized product, but at a very high scale, it only makes sense for certain the marketing and it supports a quite a small number of businesses doing that, right. There’s a big consolidation. So like, I don’t know, steel pins for reverting together airplanes. I mean, there’s probably some supplier that supplies Boeing that probably another couple of competitors that supply Boeing or something, but they probably only have them there just to keep them entertained, because that’s a very consolidated industry. Right. So yeah, I think it’s gonna be an interesting space to watch. But I think what we’re saying in conclusion is probably, if you’re a b2b seller, then Amazon is not going to be the holy grail for you anytime soon.
Will Tjernlund 53:15
No, definitely not. It’s Um, and I think it just types of b2b, I think it’s the, there’s b2b where we worked with a company in the past that sold Labor Law Posters. So they sell a poster that has all the different labor laws on it, that in the US, you’re mandated to have inside your small business. So that’s kind of a sweet little b2b company, because traditionally, they had to buy this, this poster through like this work supply company catalog. And now they can do business because easily buy it on Amazon. And that’s kind of a different beat. Like, it’s like being too small be type of thing is a totally different business and b2b where a hotel is buying a bunch of bed frames, 5000 bed frames from bed frame come at a totally different type of Peters be, you know, I’m saying it’s almost like a b2b Enterprise first, like a b2b, small business.
Michael Veazey 54:06
Yeah, that’s true. That’s very interesting. That the that’s a good distinction, actually. I mean, maybe that’s why that a lot of these generalizations are a little bit crude. Because, yeah, the sizes of businesses and the way they operate is profoundly different days. If you’re like a solo printer, or got a tiny like a mom and pop business, I guess. Then there’s somebody I know, that sells accessories in the food space. And again, I’m trying to talk about the model without revealing the exact price hope. We turkey sometimes, but, and basically, that is the sort of thing that people do as a hobby. But it’s the sort of thing that people also do in a sort of, not industrial-scale at all, but not even an enterprise scale, but just kind of as a sort of evenings and weekends or sort of part-time business or maybe enough to employ one person. And yeah, you’re right for that kind of thing when I was in is a great place to buy it. Because again, they value time, because the number of units is so small, they wouldn’t get any kind of decent deal from a traditional supply chain for b2b anyway. So in a way, they would never cater for in the first place by existing systems, right?
Will Tjernlund 55:02
Yeah. Like b2b for you’re buying accessories for your food truck, or b2b and you’re buying accessories for NASA? Yeah, you know, it’s like they’re one it’s like, Okay, I’m just looking for an industrial-grade spatula. And I’m looking for three of them within two days and other ones like I need you to mechanically engineer this titanium nut and I need 30,000 of them. Yeah,
Michael Veazey 55:27
yeah, yeah. 30,000 Titania nuts, you know, although I’m looking forward to having a little look on Amazon later this evening and see if I can find that because there are some strange things I’m as it was as simple as that 100 million skews or maybe it’s a lot more now but I think to take him nuts may not be a big seller.
Will Tjernlund 55:44
Whenever BuzzFeed gets bored, they use the search some weird thing and go keynote you can buy houses for sale on Amazon do not there’s a life-sized robot for sale on Amazon. They always quoted as Amazon’s now selling a robot are now selling a house and almost every time it’s a third-party seller, and so that you can put anything you want up on Amazon just get a PR boost. Yeah, that’s a
Michael Veazey 56:06
good question. That’s a good point actually for PR stuff is probably quite a good thing but like I always say to people that he will evaluate in the market just to bring that one to close. And guess what you can list anything you’re like for any price you like when I was in? That doesn’t mean I was gonna buy it.