How to Build and Sell a Successful Brand on Amazon?
May 25, 2021
James Thomson 7:07
Yeah, that’s a very unusual situation for someone who wants to be an entrepreneur. Let me ask you this. You’ve been involved in a lot of e-commerce businesses before coming to Stryze, what has drawn you specifically to the Amazon centric private label brand. And what are some of the kinds of issues that have surprised you the most working with these types of entrepreneurs?
Sebastian Funke 7:30
I mean, I have been, the thing is, we didn’t build the company as The Stryze Group, it says it is the follow on company which I had before I was myself an entrepreneur in the FBA space. I had an FBA business, which is called ManuCo Group. The ManuCo group was an eight digit company in the end, after three years, four years, it was an eight digit revenue base company. And I was in the space anyways, I have been in DC before thereby other companies had VC investors. And then people in 2020, and seeing the travel model came up to me and said, Hey, you know what, why don’t you do that? Why don’t you take some money and they grow your business through acquisition? It’s a great idea. I tried to do that in the past. Nobody wanted to give me the money to do that. Yeah. And actually, actually, at the end of 2020, we created this price group, took all my experience. I took my team from the ManuCo, I took a very good friend of mine, who is from the VC space, I worked with him several times on other businesses, I took another friend who worked for Goldman Sachs, 14 years in m&a. And my co founder of the ManuCo and we for them created The Stryze Group and had some great investors, you can check them out, one of them is up and 90 is an investor. And then we also have German investors. And now we’re trying to acquire the good brands, not just in Europe, we also know starting in years, and what I think is very interesting about this market is the people who work in this market in the last four months, I personally have talked to around 400 entrepreneurs, okay, the first cause myself, okay. Then I met people between the ages of 17 to 70. people doing this on a part time, part time job doing this on a full time job doing it alone doing it with 20 people doing it from Africa doing it from Thailand, doing from DS and operating in Germany or Europe. So it’s very interesting. I met a janitor. I met someone who is a professor who doesn’t decide, making 3 million in revenues with one product. Over half a half a million Profit just on the side. I’m really impressed by the people, very entrepreneurial people, very nice people, very open minded people. And it’s amazing. So that’s, that’s what I really liked about this industry.
James Thomson 10:14
You also build brands of your own, you’re not just acquiring. And that’s a little bit unusual compared to many of the aggregators right? Now. How do you think about the role of building brands versus just getting big by buying companies, I
Sebastian Funke 10:29
think in this industry, that you can have a long term success. By just buying them, I think it was struggling to be successful. Why? Because you have to have the DNA, understanding how the brand works, how you add new products to that. I always, I always compare it to real estate, building a listing on Amazon, it’s like building a house, at least to Germany, I know in US it takes longer, but in Germany, usually 12 to 18 months to build a house, very similar to a listing until you take the full revenues, it’s probably a 1218 months. And by acquiring them, you’re saving that time, and you’re reducing your risk. But since we have the experience of building those listings, those products, we are going to continue that not just for our brands we have but also the brands we acquired, because that’s the organic growth you need in order to be really successful. As you think about
James Thomson 11:31
Amazon as a marketplace, they encourage as much competition as possible, you could have 500 people selling basically the same type of product, along comes the 500. And first, who’s willing to give up a little bit on margin, spend a little bit more on advertising, knows how to play the Amazon game. Well, that 500 and first company could beat the other 500 as you think about those types of dynamics, as well as a world where today, anybody can go to China and get a manufacturer to build something. How do you embrace that enthusiasm? To create a situation where recognizing there’s often not a lot of moats around some of these businesses? How do you create a stronger business yourself, recognizing that you have every other seller out there that could potentially be a competitor to what you as a company do today?
Sebastian Funke 12:25
Think? First of all, you have to like products. I think that’s important. If you’re on Amazon, you have to like products. What do you mean by that? What I mean with that, it’s like I, I enjoy looking at my products and trying to develop them further. I said that in the past, I’m still doing this, I cannot do it for all the products you understand. But if this is the DNA of the company, where we are a marketing and product company, we’re using FBA credit acquiring, just to grow faster. Okay. So we are a product marketing company, as I said, and therefore, I think to be successful, you have to develop your products. What I mean by that is if you want to, if you’re entering the market with exactly the same product, yes, you can go down with a price you can go down with a where you have to invest more marketing. But ideally, you have something which is a little bit different, it doesn’t have to be hugely different. But for example, the easiest thing is another color. printer, it’s worth it. Sometimes it’s worth really looking at the colors which are offered. Sometimes there are certain colors not offered or not, not for whatever reason, and not put to the marketplace. And then eventually people sell pieces and more packs, you sell three pieces. In a way it reduces your margin, but it also gives you a competitive advantage. These are just a few examples of what we are doing. I think that if you just add another product, it’s difficult to succeed. And I always like to give one example. We started with one product in the past in 2016, which was a baking mat. I always tell everyone to start, there was one baking mat in the like, which was sold for 899. Okay. Now five years later, we’re selling 10 pieces for 999 instead of making an almost the same margin, why? Because we’re buying so many because we’re dominating the market so much that we still can get the margin as in the first place. Wow. So a pattern was an isolative process, then it was two then it was three then it was four you have to continuously work on your product. If you don’t, your product will go down in rankings. That’s what everyone, that’s what everyone forgets about this. This is this business.
James Thomson 15:00
But let’s shift gears. I want to talk with you about where investors are finding these brands, at least here in the United States, it’s still common for many of these companies to go and look at brokers and see what brokers have available for sale. I’ve heard some pretty crazy stories of brokers putting a company out for bid and 10, 12 Companies will all show up with cash offers. And it’s just his feeding frenzy, quite frankly, how does your company think about using brokers, using connections, going outbound to brands to find them and tell them that you’re interested? What do you think about all of those different ways of eventually finding the needles in the haystack that look good for your business?
Sebastian Funke 15:45
First of all, it may be interesting for you to know, we don’t have those platforms. We don’t have Empire Flippers, we have one or two very small platforms. So basically, the entire deal flow we are using we’re selling or trying to buy originated by yourself. Okay. So we just do outbound all the time. Okay. And that works through, basically very similar to what we did in the past, by identifying new products. For the portfolio, we identified products, and through the products were identifying sellers, and at least Europe, I think it’s different in USA Today. But at least in Europe, you find the entire address, the telephone number, and email address to the insurance, which is mandatory in order to operate on our analysis. So through understanding what products work, you identify the seller, and then you contact them. But of course, now when we go to the Yes, we’re also going through those platforms, checking out what kind of offers they are. But we also will have to create our own deal flow, but I’m pretty confident that’s possible. If you approach people in the right way, if you’re friendly, that’s why I do it myself. Yeah, I know, as you see over the company. Nowadays, I would say 70. Currently, people are growing quite fast, probably at the end of the year, probably at 150 years old, but I still do like to do not all of them, but some of those costs, because it’s very important to approach entrepreneurs at the same level. Possibly that that is an interest because there has to be another entrepreneur because I think that’s, that’s, that’s important for the sellers. Also take it seriously. Let me
James Thomson 17:48
ask you, when you because you’re doing outbound to brands, some of these brands may not necessarily have top of mind, I’m preparing my business for sale, some of them may be thinking at some point, there is an opportunity to accent as you go back and think about these conversations you’ve had with these entrepreneurs, what are some of the steps that you wish more of these companies were doing to get their business in a position that exiting at some point might actually be feasible.
Sebastian Funke 18:19
In the end, it comes down to the product portfolio, I would say if you have a can be also more than one brand, but it brand has to be kind of consistent brand is not just one product, you should have five or 10 products which fit into this category, which have the same design design now there’s sometimes you have sellers who have a little bit of here and there you see that they were looking for opportunities. Yes. Which, which for the cash generating business, take the side hustle, that’s okay. Yeah. But if you want to have the highest sales price possible, develop a product portfolio which is consistent, you can also have two brands or three brands. But that also means sometimes taking in products, which eventually are not the top four top sellers, but they belong into the product portfolio in order to be a consistent product offering. What I’m saying is having it also invest some time into the brand into the design of the packaging. So it should look nice. In the end, the acquirer is also just a human being and is also looking at it and and and feels like hey, this looks good, because customers will also think that looks good.
James Thomson 19:51
So let me ask you, Sebastian on Amazon. What is a successful brand? What does it mean to be a successful brand versus being A collection of products that you can sell to make money.
Sebastian Funke 20:05
I mean, in the end, it’s its design. Yeah, of course, the brands, everyone has the same brand name, then a consistent design. And a, let’s say, a product portfolio in a niche, let’s say, I mean, for example, home and kitchen, you could say, I’m in this category, home and kitchen. So I have a brand, but it’s probably like, a better brand would be, I have a brand for barbecuing, which is still at home and in the kitchen. But it’s a nice brand. I just have one brand with just products on barbecuing. How do I explain myself?
James Thomson 20:48
Yeah, that makes sense. But tell me more about it. Okay, so I have five products that are barbecue products. How does that make a brand on Amazon? What does it mean to be consistent on Amazon? What does it mean to have a brand that’s extendable into other products or other product lines?
Sebastian Funke 21:06
Do you have a brand store? Yeah. Which unites everything. The value in the end comes through reviews, reviews is what the FBA buyers are basically paying for. So trying to have a good rank doesn’t have to always be top top top sellers. Because if you have just top sellers, there’s less potential for a buyer to improve going forward. True, true. Therefore, somewhere in the middle or high, high middle is also good. Yeah. And then then if you have a consistent brand, as I said, the design, but also the entire content on Amazon on all the listings is the same. Sometimes you do some cross selling, and that’s in the end the brand on Amazon a consistent brand.
James Thomson 22:00
So let me ask you this, you’ve talked at length about your philosophy of how you run your business. For our audience of brands, brand owners, what makes The Stryze Group different from other firms that are also buying FBA business?
Sebastian Funke 22:17
I think we have two main differentiators. One is maybe three. One is that we are for many years, an FBA, sold ourselves. So we are from space. They’re not just some finance guys. just buying businesses, we know what we’re talking and also from the from, from all the talks we have with sellers, we always get the feedback, hey, you really understand what we’re doing, especially in those cases, which are not so easy sometimes to understand, because they’re a little bit more tricky. Here there. Yep. Yep, that’s the one thing. Second thing is for American sellers. I think it’s interesting. Why? Because we can take your brand to Europe and leverage on the reviews you have built up in the US. Why is that interesting? Because the number of reviews in the US is normally by a factor of one to 3x higher than in Europe, because the market is bigger. And with the products, you can take them nowadays, you can take the reviews, also to the other platforms. And we have the in house, we have the in house team to basically do the translations. We have all the text topics. So we’re ready to take the products to Europe, if I compare us to us players. And then there’s the third thing is, we believe that not only on Amazon, we believe in direct to consumer direct to consumer habits on the one hand on Amazon. But on the other hand, also on social commerce. And also, we are also building social commerce brands. With a big difference that this is another belief we have is that a brand which is on Amazon, you cannot take to social commerce. But you can take the product with a new brand to social products. Okay. And that’s interesting, because you already have the production facilities, you have the entire metal manufacturers, which is very helpful. And you already have a certain scale and taking down the product, rebranding it repricing it to social commerce. Yes. Why do I say that? And why do I believe it’s not possible to use both channels for the same brand? Because it’s two different channels. Amazon is a poor marketing channel. There’s a demand already existing. Okay. Whereas in social. It’s a push marketing channel, you have to create the demand. And I can tell you, I can show you several examples where you have a brand, a product, a product demo brand, a product on Amazon, selling, for example, a massage gun, many of you, you know that, yeah, it’s sold on Amazon for $80, roughly, in Germany, roughly starting at $80. In social commerce, it’s sold for $400. Why? Because the marketing spend is so high, in order to bring it there, because you have conversion rates and social costs, which is somewhere between 0.5 and 1.5%. In Amazon, you have 15 to 25%. It doesn’t work. And I saw so many people try it and never work separately, it works. So let me ask you this, what do you see
James Thomson 25:50
brands needing to think through to determine is now the right time to exit to one of these investors? Or should they continue to build their business? And wait six months? Wait 12 months? wait two years? How do you help companies think through that issue? Well, and obviously you have a vested interest in being able to build your business yourself.
Sebastian Funke 26:12
Thanks for the question. Because it’s, I think it’s a very valid question. And I would not answer it with time, I would answer it a different way. The company is going like that. It’s not growing linearly. What I mean with that is the following. There are two different steps where you as an entrepreneur have to make certain decisions. The first step is you do Amazon on a side hustle. And it grows. Yep. And suddenly you have the question of, should I do it full time? It’s the first very difficult question. So people can do it or not do it. If you don’t want to do it. Good time to say, make some money and start a new one. Then you come into the next step, where you as an entrepreneur, do it full time. Maybe with your wife, or family and friends, you don’t have any employees. You grow your growth. And suddenly, you need employees. Like, ah, I don’t know, should I employ someone? Yeah. Yeah, yeah, I’ve seen that probably. Next good time to say, because just because of your limited resources, you’re not going to grow further. If you don’t want to take the risk. Good time to save for the new one. Tell it again. Then you have a couple of employees. And guess what? employees cost money, businesses growing responsibilities. Working capital is messy. You don’t have enough money used to further roll. You have to go to a bank, you have to put your house in. Everything is at risk. Yep. Good time to say that I would say the answer. If you have the feeling you’re reaching a certain limit with the resources you have. I think it’s a good time to approach someone and try to sell it.
James Thomson 28:03
This is a fantastic answer. I’ve never heard anybody describe it this way. But you’re absolutely right. There are step function decisions, where you have to decide Am I all in? Or do I want to take a break? Am I all in and take a break? Thank you for sharing this question. that was really good. Let’s talk a little bit about what do you think is going to make your business successful long term, when there are so many other people trying to do similar types of things, buying companies, expanding them into new channels, finding efficiencies and so on? What’s going to differentiate you and your ability to keep growing?
Sebastian Funke 28:43
In the end, I think what is very, very important in this business is bi business, intelligence, and tech. Why do I say that? Each product is competing in its own markets. It’s different than if you have one, one webshop membership, you’re competing against other workshops. For an Amazon each product has its own market, competing, as I said, as you said earlier, 500 competitors, yep. If you have three products, it’s easy to monitor the markets. You know exactly your competitors what they’re doing, you’re looking everyday at them. If you had 30, it’s more difficult. If you have 300. It’s more difficult if you have 3000 it’s more difficult. So you have to monitor each product very well. You have to have a system telling you if something is happening with the product or the environment around that product, prices, go down reviews, go down, new entrants, whatever. This is what I believe makes us difference. heavy investment into technology and business intelligence which helps you to identify the right products and sellers to approach them, monitor your products in the right way that your toys when something happens instead of. So basically, you just have to react and you don’t have to monitor their likes by yourself by hand. And the third one is, through technology, analyzing all the data you get from Amazon conversion rates, click rates, yada, yada, yada, improve your products. And this has to be done through technology. And I think that’s important. A lot of people think they’re just buying assets like real estate, and this has to do a little bit of maintenance, you know, it’s hard work. Yeah. And if you scare them, you have to monitor them. And I also know from our investors, which are very deeply involved in the entire market, that they are businesses with 30% of our performance, and 70% of the portfolio is going down. Because it’s very difficult to monitor everything. And I think that that’s a big, big difference in destiny, which is worth doing. That is just my belief. The other people will say, if you have enough money, yeah, money is out there. That’s not the question. Currently, there’s enough money out there, you have to show that you can develop your portfolio further. That’s why we’re also investing into organic growth, we’re adding more products also to the existing and brands we are buying. So it has to be an e-commerce company. It’s not just an acquisition company.
James Thomson 31:34
I want to wrap up our conversation today, especially by asking you, when you look at what’s happened in the last year and a half, two years of you buying companies, but also what you’ve done in the past building brands yourself. What are the things that have surprised you the most about this whole process of being an investor buying other companies?
Sebastian Funke 31:55
At the end is finding the right thing that’s very difficult to find at the right price in the way that the other side is also happy with it? Yeah. I think that’s, that’s, that’s one of the big challenges. Because now everyone thinks they can ask all kinds of skyrocket prices. But in the end, it also must make sense for the buyer to financially, and we basically have to refinance ourselves with investors. And therefore there’s a natural cap at what we can offer now. And I think that’s that that was a little bit, which surprised me sometimes that people, although they have been educated in Amazon, and also know that there is a certain market price. Yeah, I mean, as you can guess, sometimes asking for those abnormal prices, which don’t make sense at all and feel kind of upset when you don’t follow those price ranges now. But, you know, at the end of the negotiation, and if they don’t want to sell, that’s fine with me. There are other buyers. And then, in general, I’m always like, like the ones which were buying. We also try to learn from them, not just on the specific product level, but also in general about how they see Amazon and how do they do Amazon and there’s always more nitty gritty tactics they they’re using, yes, which are not applicable to their own brand, but also to the entire portfolio because they are general tactics, which you can use on Amazon as an experience game. You have to have experienced that. There’s not a playbook in everything, which is nothing in YouTube. I think there’s a lot of great videos on YouTube where you can learn from, but the latest news you have to experience yourself running an agency.
James Thomson 34:05
I know exactly what you mean. Yeah. Sebastian, I want to thank you for joining us today on the Buy Box Experts Podcast. For those of you interested in learning more about The Stryze Group, please visit stryze.com, that’s stryze.com. Join us again next time on the Buy Box Experts Podcast. Today’s episode is brought to you by GETIDA. GETIDA is a global leader in Amazon FBA auditing and reimbursements. GETIDA analyzes your Amazon data, reconciles your FBA inventory and files claims and reimbursements on your behalf, no obligations, no hidden fees, just GETIDA recovering your money. GETIDA helps you get your money back into your pockets so you can focus on investing in more inventory and growing your business. To learn more, check out getida.com that’s getida.com.
Outro 34:58 Thanks for listening to the Buy Box Experts Podcast. Be sure to click subscribe, check us out on the web and we’ll see you next time.
