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Are you considering attending an Amazon sellers conference? In this episode of the Serious Sellers Podcast, Helium 10’s Director of Training and Customer Success, Bradley Sutton speaks with James Thomson, Amazon’s first FBA (Fulfillment by Amazon) account manager about selling on Amazon and helps clear up a little supply chain terminology.
In episode 41 of the Serious Sellers Podcast, Bradley and James discuss:
- 01:30 – What Are the Benefits of an Amazon Seller Conference?
- 02:20 – Networking Your Way to Success on Amazon
- 05:12 – Unidirectional Information Flow Is Not a Good Thing
- 06:12 – Bradley’s Amazon Speed Dating Conference
- 08:20 – What’s with All the P’s?
- 10:30 – Amazon Needs 3rd Party Sellers
- 11:00 – 1st Party Versus 3rd Party Amazon Selling
- 14:45 – Controlling Your Own Pricing and Branding
- 21:55 – A 3rd Party Sellers’ Biggest Challenge
- 24:10 – Bradley – Will Amazon Merge the Seller/Vendor Portals?
- 25:50 – There Will Always Be a Need for Third Party Sellers on Amazon
- 28:56 – 1st of 2 Important Questions – How Do You Control Your Own Branding?
- 29:16 – Question 2 – How Do You Maintain Control of Your Distribution?
- 32:00 – 1st Sale Doctrine and The Grey Market
- 33:52 – Dealing with Amazon’s Buyer-Centric Model
- 34:55 – How to Contact James
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Sutton: Today, we’re going to talk to James. He is going
to give us unique insight into why going to Amazon Seller Conferences is
beneficial and also some definitions of supply chain terms, like one P and
three Ps, and which might be the best bet for you.
Bradley Sutton: How’s it going, everybody? Welcome to another episode of The Serious Sellers Podcast. My name is Bradley Sutton, and I’m very privileged to have James Thompson on the line with me. James, how’s it going?
Thomson: It’s going great. Thanks for having me on today, Bradley.
Bradley Sutton: It’s a pleasure to have you here. Now, James, you bring a lot of unique knowledge. That’s one thing I like doing on this show – bringing people from different backgrounds, different specialties. And you have a couple of specialties that I wanted to talk about today. And we just recently went to the Prosper Show, which you are one of the cofounders of. And this is something I wanted to talk, not necessarily just about the Prosper Show, but my personal experience, which I don’t think I’ve ever told you before, some of the listeners have heard, is how I even got started in the whole Amazon game really. One day, I just, on a whim, went to a conference—an Amazon conference in Chicago. It was called Zhan Squad Live. I don’t know if you have ever heard of that one. I think it only happened for one or two years. But it literally changed my life—the networking there and the information just opened my eyes. I’m sure the great, great majority of our listeners probably have never been to an Amazon conference, let alone, maybe a conference about entrepreneurs. But can you talk a little bit about why you think people should attend conferences? What are some of the benefits are and some experiences that you’ve heard?
James Thomson: Well, let me start by saying, in my time working with Amazon sellers, I would have to define this as potentially one of the most lonely existences possible. Most Amazon sellers are basically islands onto themselves, and whether they’re working out of their home or their garage, or a little office trying to figure out what’s going on, what other people have done, how to learn from folks that have already gone down this path, you’ve got north of 3 million sellers today on Amazon, and the reality is there’s only so much secret sauce to go around. And a lot of it is not really the secret sauce. A lot of it is really just experience. “Hey, what did you do when you ran into this problem?”, and “What did you do when Amazon changed this setting?” And unless you’ve got a network of other folks that are in a situation where you can bounce ideas off each other, it’s really hard to figure out what’s going on, because Amazon doesn’t exactly release information in depth explaining exactly why they’re doing what they’re doing and how to make the most of the change.
James Thomson: I run an agency working with large brands, and I need to connect with other folks that are also managing brands because again, Amazon is —I’m going to use the word secretive. It’s not very good at explaining in detail what’s going on, and often changes are made, and Amazon doesn’t even make any announcement. And by having a group of other folks that you meet at conferences but then can continue to interact with after the show, naturally, we’re all in this together. Even if we’re competing against each other, we’re all in this together, because we all have to figure out how to survive in this Amazon sandbox.
Bradley Sutton: Absolutely. Me, personally, in my going to conferences, I almost get as much—if not more value from even just sitting down with sellers during the breaks and the networking and sitting together with a group of sellers I’ve never met before at lunch. Is that your experience from the feedback you’ve gotten? That it’s a two-edged sword? It’s not just about going there for the knowledge download from the seminars, but the actual networking as well.
James Thomson: At the end of the day, if you attract enough of the right people with reasonably good content—yes, you’ve got folks who will come to the show because they’re saying, “Oh gosh, this is a session on this and that topic and I want to learn about that”—but you’re absolutely right. If you can meet other strangers, other folks who are in the same boat as you being sellers on Amazon, and you realize, “Gosh, these folks are similar enough to me that maybe I should connect with them and talk to them after the show, and I can bounce ideas off of them, and I can figure out how to deal with some of my daily struggles where I don’t really know what I’m doing.”
James Thomson: I hope I know what I’m doing, but maybe somebody else has been down this path before. Maybe somebody else has an excel spreadsheet or a template or has some sort of a recipe that allows them to figure out how to solve certain problems. You know, that kind of networking is super, super useful. I’m not suggesting necessarily that people have to be part of big mastermind groups, but at the end of the day, we’d all like to have a handful of people that we can reach out to and say, “Listen, I’m stuck. What am I supposed to do? Where do I go to solve this problem?” And when you go to a conference—an educational conference—everyone’s got the same idea, which is why we’re here to learn whether that’s from each other, whether that’s from the speakers, we are here to learn. And if we can build a better network of other contacts of folks who are in similar boats as us, that’s going to all make us stronger.
James Thomson: So I’m not trying to be a proponent of any one particular show one way or the other, but I think at the end of the day if it’s one-way education—people just telling you what’s going on—then you’ve missed the whole rest of the conference. It’s really got to be networking.
James Thomson: A couple of years ago at Prosper Show, we explicitly decided to try to make it easier for folks to meet other sellers that might have similar interests. And we invested heavily in some software and actually some physical equipment to get people able to set up and meet each other. At the end of the day, you walk into a room, there are 2000 people in the room. Who exactly am I supposed to talk to? How do I find somebody who’s got answers to questions that I have? And that’s being in a position to spend money on networking equipment and get folks to connect with each other. In some ways, it’s kind of like a professional dating where you’re trying to find somebody who’s got interests similar to yours and hopefully, they in a situation where they can help you and likewise you can help them. That’s all really, really important stuff.
Sutton: You just gave me an idea about a new concept of
conference. We could do a speed dating, but for Amazon sellers, where we have
them all on the line and see if we can make it. So who knows? We might just
come up with something right here, James.
Thomson: Well, at the end of the day, it’s a very lonely existence being a
seller. And there’s no reason to continue to be lonely like that. And I don’t
say this in a comical way, but the reality is we don’t need to solve every
problem by ourselves because most problems, somebody has figured out how to
solve in some way. There’s just not a lot of good ways for stuff to be
documented. I’m not a big believer in the seller forums, which is one way that
sellers today try to get information because again, I don’t really know who’s
behind any of the comments, and I don’t know if things or terms of service are valid.
I don’t know if somebody is making something up. I don’t know if somebody is
trying to sell me something. Whereas if I can meet somebody in person at a
conference to say, “Yeah, that person seemed like a reasonable person—not that
I’m going to trust everything they have to say—but that person seemed
reasonable enough, I would very much encourage sellers to look at the overall
process of personal development and say “In a 365-day year, am I prepared to
spend three or four days out of the office interacting with other sellers to
try to figure out not just new content that might be offered at the conference,
but also meeting five or six or 10 other folks who I can reach out to and
continue to network with throughout the year?” That’s really, really valuable.
And yes, we’re all very busy running our businesses, but in some ways, you
don’t see the forest if you’re just staring at the trees all day long running
Bradley Sutton: Yeah. And again, going back to my personal experience, that was I think 2016. Now in 2019, I still have in my personal network, people I’m communicating with on Facebook Messenger, WhatsApp on a weekly basis from that I met at that conference. It’s so powerful—the connections you can make. Just completely pivoting here, something you had mentioned earlier, you’re working for an agency now that deals with a lot of bigger brands. And that made me think of 1P, 3P—the Ps—I’d like to talk about. Most of our listeners might know exactly what we’re talking about, but I know we have a lot of listeners as well who have no idea what does 1P mean? What does 3P mean? What are all these threes or what are these Ps? Can you give a quick definition of what 1P and what 3P means and then how it relates to what we’re talking about with Amazon?
James Thomson: Sure. There are two primary sides of the Amazon marketplace. Well, part one is what’s called 1P or first party, which is the business of brands, wholesaling products to the Amazon company. It’s also known as Amazon retail. Amazon buys the inventory from the brand, and then Amazon becomes the seller of record. The relationship the brand has with Amazon in that situation is a typical B2B wholesale relationship, something that most brands already have with other big retailers. When Amazon wholesales the product from a brand, Amazon has pricing decisions, inventory decisions, and so on over the brand. So that’s a typical relationship for larger brands. For example, if you’re Proctor & Gamble, Amazon has a vendor manager who works with Procter & Gamble and buys the product on pallets and truckloads. That’s your typical 1P relationship.
James Thomson: The other side of the house is what’s called 3P or third-party sellers. And that’s where you’ve got north of 3 million individual sellers who are either brands themselves, they may be resellers, they may be folks doing retail arbitrage, but these are folks that own the inventory they’re selling. It comes to the Amazon marketplace. They get to list their products and try to get sales on Amazon. If they get a sale, Amazon takes a selling commission. But the seller of record is this third-party seller. That third-party seller makes decisions about what products they’re going to carry, what prices they’re going to charge and so on and so forth. Most of us are not Amazon; we’re third-party sellers. Some of us may have first-party relationships with Amazon, meaning we wholesale to Amazon, and some companies have the unusual situation of having a hybrid relationship where they both wholesale to Amazon, but they also have a third-party account where they may sell some of their products. But when you look at the two sides of the house, Amazon absolutely needs third-party sellers, because third-party sellers bring hundreds of millions of SKUs worth of selection to the platform. And then Amazon typically, on the first-party side, will cherry-pick the bestselling, most visible brands and put those into the first party.
Sutton: Okay. Now let’s dive a little bit deeper into
this, because I’m sure people might already have this question or if not, just
based on what you just said, they might have this question. What are the
advantages and disadvantages of both the 1P and 3P model—selling yourself or
selling to Amazon? Talk a little bit about the advantages and disadvantages of
that somebody might be able to make an educated decision on what might be
better for their brand.
James Thomson: Before I answer that question, I want to qualify one important issue: Amazon has to invite you to become a first-party seller. So even if you decide that first-party makes the most sense for you, you may not get an invitation. And so, if you don’t get an invitation, good luck with that. And in fact, we’re seeing lots of recent trends where Amazon is actually streamlining the number of brands that are in the first party and pushing more and more of them to the third party. So happy to answer your question, but just to be clear, even if you decide, “Hey, the first party sounds like a great opportunity for my brand.” Don’t expect to an invitation from Amazon anytime soon unless you’re a very large brand that has gotten a lot of attention off of Amazon. And now somebody at Amazon says, “Here’s this brand that we really should be carrying, and we’d like to have a conversation with the brand about potentially wholesaling the product.”
Sutton: Yeah. So I guess I should’ve framed the
question as, Let’s say either (A) somebody already has an invitation and now
they’re deciding which one to do, or (B) maybe they’re already doing one, but
they’re wondering, “Hey, should I keep doing this or should I go back to the 3P?”
James Thomson: So where to start. Hmmm. Let’s start with the situation where you don’t have a first-party relationship, but somebody from Amazon calls you up and says, we love your brand, and we want to do business with you. Now, the big question for the brand is: Do we want to do business with Amazon directly? Or instead, might we consider becoming a third-party seller ourselves and going direct to consumer? For very large national brands or international brands, if you’re Proctor & Gamble, you’re Unilever, you’re Coca-Cola, you’re already a B2B company.
Sutton: And on the most part, you know, most of the
product you sell, you’re already wholesaling to somebody else. So as a company,
you understand that model. You’ve got salespeople who’ll create and handle
purchase orders from the channel. It’s a business model that’s well understood
by most large brands. When you’re a smaller brand or an up and coming brand and
in you do in fact get that invitation from Amazon First Party, there’s a number
of issues that you need to think about and I’m happy to talk about a handful of
them here. Although in fairness, there are literally dozens of issues, dozens
of tradeoffs that need to be evaluated, but the most important issues have to
do with who’s going to control distribution, who’s going to control your
pricing, who’s going to control your branding, who’s going to control your
inventory levels and selection?
James Thomson: Those are the primary issues that brands need to think through. And if they turn around, and they wholesale product to Amazon, Amazon owns the inventory, now Amazon gets to make the decision about the retail price that’s going to be charged for those products, Amazon will have what’s known as content authority, meaning they ultimately get to decide what your brand looks like on the Amazon channel. All of that happens when you’re wholesaling products to Amazon. And for some brands, they say, “You know what, we don’t really want to have to get our hands dirty and understand how to sell a product directly to consumers. We’re willing to let Amazon sell our products and make choices about the retail prices. We’re happy to submit content into the Amazon catalog with the understanding that Amazon openly may choose to alter that branding. But you know, we’re okay with that because we love the fact that Amazon wants you to business with us and there are some pretty big volumes, they’re looking to place through their purchase orders that all sounds pretty good.”
James Thomson: I’m a big believer that brands should control things like pricing and branding, and what often happens the moment Amazon has your inventory, meaning you’ve wholesale products to them, Amazon has another side of the house where they go out and they scrape the prices of your products on literally thousands of other websites, and if they find the product is being sold at a lower price elsewhere, especially a channel that’s a critical competitor to Amazon, for example, target.com or walmart.com, the moment Amazon has inventory of yours, they control that inventory. It’s much easier for them to control the pricing on that product. And so, let’s say, for example, your product, you’re trying to sell it at $40 in all channels. Lo and behold, Amazon discovers the products being sold somewhere else for $35. Amazon is now in a position because they have some of your inventory, they can start offering your product at $35. I understand that Amazon wants to protect its own customers from potentially being overcharged or being charged more than what another channel might offer it at, so by Amazon being able to lower that price and match someone else’s a lower price, that that makes sense if you’re trying to protect the Amazon customer.
Thomson: The problem is as a brand, you may not know even where that other
$35 price points coming from, and now that Amazon has matched it, guess what?
Just about every other retailer online or offline can easily see the Amazon
price, and that becomes the new norm for your pricing. And so that $35 price,
instead of that $40 desired price, you’re going to have to deal with the
challenges of now having other resellers who may have been told by you, “Hey,
we want you to sell at $40, but now guess what Amazon sells at $35.” So, if you
don’t have pricing discrepancies across channels and Amazon is carrying your
products, that can be a good model for you because it’s fairly straightforward
and consistent with what you do in other channels. Unfortunately, if you’ve got
a lot of price discrepancy across channels, Amazon is well set up to find and
take advantage of that lower price that they find elsewhere. And because
Amazon’s so big online, both for product search purposes and for purchasing
purchases, consumers come to Amazon before they come to just about any other
online site. And so if you don’t control your pricing off Amazon and Amazon
finds those lower prices, they match it. And now that’s your new normal price
that every retail or online or offline it’s going to look at.
Bradley Sutton: Yeah, I noticed that. If I’m going to Best Buy or FRY’s electronics to buy something, they actually take Amazon as a price match. You know, Amazon prime is one of the price matches. So yeah, if Amazon prime price is all of a sudden $30 bucks, but I want FRY’s electronics to be selling at 40, well Fry’s has to drop it to $30. That could very much affect the relationship that you have with those other companies because now they have to cut prices and now, they don’t make any money. Well, guess what, they’re going to probably cut you off.
James Thomson: Price erosion can accelerate very quickly if Amazon has access to your inventory, because they’ve got very good tools for finding product prices elsewhere and then matching to that price, which then other retailers will match to. Before you know it, it’s all downhill. To be clear, there are reasons why companies may want to sell the first party, potentially because it’s easier internally for them to handle another wholesale client like Amazon buying products from them. If a brand has done a good job and is investing heavily in marketing and other channels and wants to make sure that its brand is positioned consistently across channels, it can sometimes be a little bit difficult on the first-party side to succeed in making your branding just the way you want it because you’ve got to get Amazon to approve every image, every title change, every bullet point change and so on. But if your catalogs fairly stable, and you’ve got stable pricing across channels, that model can work reasonably well. What typically happens is Amazon will engage in a first-party relationship with the brand. There’s a honeymoon phase where for the first few months, you’re thinking this is fantastic. Amazon’s placing the big purchase orders. You’re getting the product out to Amazon. Customers are starting to see the product on Amazon. Life is good. It is not uncommon for Amazon after a few months, once their algorithms are kicked in, they’ll realize, “You know what, we asked you for full access to your full catalog, but we only really want 30%, 40% of your catalog.” So all those other products are no longer being purchased by Amazon to be ultimately sold to Amazon customers. And so the brand is left thinking, “Well, what am I supposed to do to get the rest of my catalog available for consumers to buy?” And so that can become a challenge for that B2B brand that thought that they were getting their full catalog onto Amazon. But now that’s no longer the case.
James Thomson: You’ve also got a situation where—I don’t mean to generalize too much—but it is not uncommon for Amazon after a few months to say, “Hey, Mr. Brand, thanks so much for doing business with us, but it turns out your return rate is not what we thought it was going to be. Inventory over here is not moving as fast as we thought it was going to be. Bottom line, it’s costing us a lot more to handle your product than we thought. And so we really need you to lower our wholesale prices. Otherwise, we’re going to be challenged in continuing to carry your product.” Well, if the brand has made careful financial analysis around the choice as to whether they’re going to go to Amazon or not, and now the pressure’s on for them to continue to lower their wholesale prices, that can be an unexpected shift for brands that they may not be prepared to handle. On the other hand, if the brand is selling the third party, meaning they are the seller of record, they make decisions around what prices they’re going to charge, which products selection they’re going to provide their inventory levels for each product so as to decide to stay in stock or not. Those are all important decisions for brands to make. But again, a brand that’s not used to being a B2C brand may not have people in-house that know how to build forecasting models or know how to decide whether or not the retail prices in fact are the best prices to drive demand. For a brand that has a Shopify or big commerce or Magento site, they’re already selling to consumers somewhere else. That decision to become a third-party seller may not be as challenging. We have run into several large brands that have said, “We’d also like to have a third-party business, because we have end-of-year inventory that we want to clear through or we want to be able to test new SKUs in small quantities and gather Amazon customer data to see whether or not there’s actual interest in these new pack sizes or flavors or what have you. In those situations, a third-party account can be a very, very good thing for a brand. On the other hand, because a third-party account is a relationship you have directly with the consumer, one of the single biggest challenges for any B2B brand in becoming a third-party seller is a recognition that they’re on call 24/7. Amazon has a requirement that you have to answer customer emails within 24 hours, 365 days of the year. The fact that you don’t work weekends, or you take July 4th and New Year’s Day off, that’s nice. But if an Amazon customer sends you an email and you have to respond within that timeframe, well that’s your job. Unlike a traditional brick-and-mortar retailer who can lock the store and go home at the end of the day as an online third-party seller on Amazon, you’ve got to have somebody on call to check emails every day. And that becomes kind of exhausting, especially if your volumes don’t lead you to think “I’m going to continue to invest in this channel.”
Thomson: There’s no sandbox on Amazon, meaning that there’s no warmup
period. If you’re a third-party seller on day one, you’re held to the same
performance standards as somebody who’s been a third-party seller for years and
years and years. And so you can’t really dip your toe into Amazon. I think of
it as sort of like being on jet skis; the moment the boat pulls away from the
shore, you’re on your jet skis and you’re going a hundred miles an hour or
whatever speed it is, and you don’t get to warm up. So that can be very
challenging, especially if a B2B brand says, “You know what, we’ve got this guy
or this gal in our company, and now they’ve got some experience with the online
selling. Why don’t we put them in charge of the Amazon third-party account”
only to discover Amazon has a ton of performance metrics on which we’re evaluated,
and somebody’s got to know what needs to be done to make sure we trend well on
all those criteria. And so you’ve got to have somebody who actually knows what
they’re doing from the get-go. It’s kind of like saying, “Hey, let’s do some
brain surgery. I think I’ve been a doctor once so I can probably figure this
out.” No, it doesn’t work that way. Day one when you’re doing brain surgery,
you better understand how to do brain surgery because the patient is tracking
your every performance; that’s kind of what’s happening with Amazon.
Bradley Sutton: Yeah. Some people are saying that this whole thing you’re talking about might eventually become a moot point because of possibly Amazon merging 1P and 3P, and now, there’s no longer just a Seller Central and a Vendor Central but something called one vendor. Can you give us any insight into that? Is this whole discussion even going to be a discussion in a few months if that happens?
James Thomson: I think it’s important to understand what we’re talking about when we say merging these two platforms. Today, if you’re a third-party seller, the portal you use to communicate with Amazon is called Seller Central. If you are on the first-party side wholesaling products to Amazon, you use a different portal called Vendor Central. Vendor Central, I don’t want to talk out of turn, but it’s basically an antiquated system. It hasn’t been updated in a long time, and quite frankly, it needs a major upgrade in order to provide vendors with better data, a much clearer user experience, and so on. Seller Central—while people complain that it may not be perfect, it’s a whole lot better than the Vendor Central portal and there has been a push to take the functionality within Seller Central and apply it and offer it up to vendors such that there would be only a single portal through which any company, whether that’s a first-party brand, whether that’s a third-party seller, they would all be using the single portal—call it whatever you like—let’s call it this one vendor portal where you go in and you’ve got access to your inventory and your financials and so on, so forth. While the software components might be merged, there will still always be a need for third-party sellers and the vast majority of third-party sellers will never have a first-party relationship with Amazon. It’s important to understand what Amazon’s doing here. If you’ve got 500 million SKUs in the catalog, you want to have 500 million SKUs, per Amazon, because you want customers to come to the platform and find pretty much whatever they’re looking for.
James Thomson: On the other hand, if you’re Amazon, you don’t want to be in the business of carrying inventory on 500 million SKUs and so you need third-party sellers to take that inventory risk to be able to carry all that selection while at the same time Amazon gets a selling commission every time that third-party seller makes a sale. Amazon wants to carry first-party inventory on only the biggest, most important high-traffic inventory because as we talked about earlier, Amazon needs to be able to control pricing on the most important products that the greatest number of customers coming to Amazon are looking for. At the same time, Amazon is not interested in caring for for the extra small purple Polka dot version of something that one customer a year might go looking for. That’s just not very interesting inventory management, but it’s really good if Amazon can get that selection on the platform, because when that one customer does come looking for it, I want to make sure they buy it on amazon.com versus going to some other website where they might decide in time to do more and more business.
Bradley Sutton: All right, that makes sense. Now, one thing I think that’s important that some brands might wonder. There are some big brands, there are some small brands where maybe they don’t have a personal presence on Amazon like they don’t have their own account, but their stuff is sold throughout Amazon. Maybe even in the millions of dollars. Who knows? You know, somebody like Samsung, let’s just say, for example. But you know their viewpoint that like, “Hey, our products are being moved. We’re still getting money. It’s down the line because somebody’s buying a wholesale, you know, somebody buying an arbitrage or whatever, but what would you tell brands like that who just say, “Oh yeah, I’m fine with just letting everybody wholesale and arbitrage my products.” Would you tell them, “Hey, that’s fine” or would you 10 out of 10 always suggest making their own presence, whether it is 1P or 3P. What would you say to that?
James Thomson: Let me answer the question a little bit differently. If you’re a brand that has enough customer interest and customer demand, somebody’s going to put your product on Amazon. And whether that’s the retail arbitrage first, whether that’s somebody reimporting product from another country, whether that’s a gray market seller, somebody is going to get their hands on your products and sell it. I’ve talked about this in the past where it’s as simple as little Johnny gets a birthday present from his grandmother. He doesn’t want the item this grandmother sent him; he can open up an Amazon account, turn around and sell that product on Amazon. Did you see how easy it was for little Johnny to create a new selection on Amazon? Well, if you’re the brand of that product, you’re saying, “I don’t want my product on Amazon.” Well, guess what? Amazon’s an open marketplace. And if your brand has any level of interest among consumers, somebody’s going to put it on there to make a buck selling your product. So there are two absolutely critical questions every brand needs to ask of itself. Number one, if we assume our product’s going to be on Amazon one way or the other, whether we want it to be or not, who are controlling our branding? And to me, that’s the most important question to answer. The second question and I’ll come back to the first submitted, but the second question is how are we going to control distribution? Control branding, control distribution; they’re separate book-related questions. The first question on branding, nobody cares about your brand as much as you do like the brand owner. If you own a brand, no one knows what exactly the right wording is for your brand, the right images, the right context in terms of how we sell this to consumers and make it obvious that consumer’s problems are solved by using your product. Nobody cares about this as much as you do, and so if you the brand choose to overlook or underinvest in what your brand looks like on Amazon, then you’re going to find out that—guess what—the content used for your brand on Amazon is not what you want it to be. If we recognize the fact that somebody somehow, will get your product on Amazon, whether you want it there or not, it’s important for you as the brand to get your catalog content set up on Amazon. So Amazon has these tools like brand registry where you can go in, lock down your content so that you at least if somebody else comes along, somebody you can’t even recognize that somebody else who’s got your inventory and start selling on Amazon, you know that they’re going to be selling, most likely selling, using the content that you’ve provided to the Amazon catalog.
James Thomson: That way the Amazon customer, the experience they have when they look at your brand on Amazon, is going to be consistent with what they would see if they went into one of your channels that you do actively manage, like, for example, a brick-and-mortar channel. So number one, get your branding under control. Make sure you manage it as a brand because if you don’t manage it, you’re going to end up with some cruddy iPhone photo and somebody who spent 30 seconds putting a title and bullet points together to describe your brand. That’s probably not the way you want your brand represented because what is branding? Branding is delivering consistently on the promises of whatever features and benefits you’re trying to deliver. If you can’t consistently message what your brand looks like online and offline, then you just become another has-been brand that’s garbage in, garbage out.
James Thomson: Let’s get your branding consistent no matter what. Now we deal with the question of distribution control. Who’s going to make sure that those people representing your brand on Amazon are in fact the companies you want representing your product? Companies who you hopefully are in a position to have a conversation with because you know who they are, and you can talk to them about what kind of pricing they’re using. You can talk to them about what inventory and selection they’re carrying of your brand. If you can’t have those conversations with them, then you’ve basically got a bunch of strangers representing your brand. Now, Amazon is an open marketplace that basically anybody can show up and start selling product, and there’s a whole bunch of case law in the United States called the first-sale doctrine, which is a case law that says if you are in a position where you acquired product legitimately, meaning you bought it from some retail source, the brand can’t tell you whether or not you can resell it.
James Thomson: And Amazon is full of gray-market product where somebody bought a product over here and then turned around and sold it on Amazon. And brands get very frustrated because they don’t know who these sellers are. Often these sellers sell at prices below what the brand wants to see their products being sold, but these sellers are able to protect themselves using the first-sale doctrine. Now I’m not a lawyer and I want to be very clear, I’m not giving legal advice here, but there are ways that brands can protect themselves from sellers who are using the first-sale doctrine as a mechanism to basically get themselves to become sophisticated gray-market sellers. There are brands that are building what’s called online reseller policies, and they’re enforcing different forms of a trademark that allow them to be able to prevent the first-sale doctrine as a legitimate argument for these gray-market sellers representing these brands on Amazon.
Thomson: Please, please be clear. I want to make it absolutely clear. I’m not
a lawyer. I work with lawyers; the lawyers do the lawyering; I do the business
stuff. At the end of the day, if you’re a brand and you are concerned about
your consumer pricing on Amazon, and you don’t know who all these resellers are
representing your brand, then you need to talk to attorneys who specialize in
online reseller policies, who can help you enforce your trademark and be in a
position where you have more say over who’s ultimately going to be selling your
products on Amazon or any other online channels.
Bradley Sutton: Interesting. Yeah, I think that could almost be a podcast in itself—the frustration that some brands have about the lack of control because Amazon is so buyer-centric. If they try and complain, so many sellers just get the canned response from Amazon and I forgot how it goes. Something like we do not police wholesaling agreements. You know what I’m talking about. It just frustrates these people. I work for a diet pill company and what was happening was that they didn’t want people reselling it because there’s a two-year expiration date on this product. So technically speaking, this product actually was being sold in Walmart and Target. Somebody could pick up this diet pill at a Walmart, leave it in their 110-degree car for a year and a half. Technically, it’s going to be okay for an expiration date and somebody’s going to get it and probably get sick and something might happen. But who’s the one who’s going to get the lawsuit? It’s going to be the diet pill company. And they’re like, “How do we control this kind of thing?”
Sutton: Definitely, I’d love to talk more about that. We’ve
reached our time here, but if brands do want to reach out to you to get questions
answered about that or help with getting on Amazon, how can they reach you,
Thomson: I can be reached at email@example.com—that’s B U Y B o x
Sutton: All right, James, thank you very much for your
time. I appreciate you coming on the podcast and until the next time we have
you back, we will be in contact and hope you the best in everything you do.
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