Here’s a glimpse of what you’ll learn:
- How selling on the Amazon channel can disrupt your existing relationships with brick-and-mortar retailers and distributors
- The need for clean online channels and consistent branding on and off of Amazon
- The 3-legged stool framework that Buy Box Experts uses to put together a proper Amazon channel strategy
- Denise Zmuda shares the common issues associated with channel governance on Amazon
- How Minimum Advertised Price (MAP) and other online policies impact Amazon sales, and how to resolve policy control issues
- Denise talks about handling over-distribution and the internal and external costs associated with governance and enforcement
- When to stop a retailer from selling their products on Amazon—and the benefits of having an authorized reseller
- How selling on Amazon can help brands reinforce their existing brick-and-mortar businesses
- Legal and business issues brands need to address to tackle their Amazon channel strategies
- Should brands split their catalogue on Amazon to protect their business?
In this episode…
Although the Amazon channel continues to grow everyday, many brands are hesitant to join the marketplace. They see it as a small channel that does not bring in a significant amount of revenue, and therefore choose to ignore it.
However, for brands that decide to take advantage of Amazon’s large marketplace and its popularity among online consumers, there is the challenge of disrupting their existing brick-and-mortar channels. This is largely due to the presence of many unauthorized resellers, as well as various channel governance issues. So what should brands do to control their branding, grow their businesses, and increase their revenue—on and off of the Amazon channel?
In this webinar hosted by Buy Box Experts, James Thomson is joined by Denise Zmuda, the Chief Strategy and Client Success Officer at Vorys eControl, to talk about how brands can control their online presence on the Amazon channel. They discuss the common disruptions brands face when deciding to join the marketplace, the framework they can use to create a proper Amazon channel strategy, and the best ways to regain control of their products from unauthorized resellers. Stay tuned.
Resources Mentioned in this episode
- Buy Box Experts
- Vorys eControl
- Denise Zmuda on LinkedIn
- James Thomson on LinkedIn
- Controlling Your Brand in the Age of Amazon: The Brand Executive’s Playbook For Winning Online by James Thomson and Whitney Gibson
Sponsor for this episode…
Buy Box Experts applies decades of e-commerce experience to successfully manage their clients’ marketplace accounts. The Buy Box account managers specialize in combining an understanding of their clients’ business fundamentals and their in-depth expertise in the Amazon Marketplace.
The team works with marketplace technicians using a system of processes, proprietary software, and extensive channel experience to ensure your Amazon presence captures the opportunity in the marketplace–not only producing greater revenue and profits but also reducing or eliminating your business’ workload.
Buy Box Experts prides itself on being one of the few agencies with an SMB (small to medium-sized business) division and an Enterprise division. Buy Box does not commingle clients among divisions as each has unique needs and requirements for proper account management.
Learn more about Buy Box Experts at BuyBoxExperts.com.
Welcome to the Buy Box Experts podcast we bring to light the unique opportunities brands face in today’s e-commerce world.
James Thomson 0:18
Thank you all for joining us today to chat about the topic of disruption that happens on the Amazon channel when you as a brand, start dealing with Amazon, how does that work? How do you minimize the disruption and all that kind of good stuff? So, my name is James Thomson. I’m joined today by Denise Zmuda. Forward here, Denise, did you want to introduce yourself, please?
Denise Zmuda 0:44
Sure. Um, good morning. Good afternoon, everybody. As James mentioned, I’m Denise Zmuda. I work for Vorys eControl and I’m a channel management expert here at the firm and I help to advise client On a number of channel management issues as it relates to online marketplace sales, I do have a practitioner as a background or have a background as a practitioner at a technology organization who also made the foray into Amazon’s selling where we hadn’t previously done so and had to wrangle with a lot of the issues that we are going to be covering today. So I’ll be covering them from both angles.
James Thomson 1:31
Great. And I’m James Thomson. I work for a company called Buy Box Experts. I had the opportunity to work at Amazon for a number of years on the third party side and got to see firsthand what happens to brands when they have to make this adjustment to starting to sell on Amazon versus having other retailers sell their products on Amazon, whether those are authorized or unauthorized sellers. I’ve actually co authored a book with one of Denise has called on this issue of Controlling Your Brand in the Age of Amazon, I’ll talk about that a little bit later. But this issue of how do brands deal with Amazon, in a situation where, as a new channel for brands, the impact of Amazon can be rather substantial to the overall channel management strategy, the brand? And so as we think about what does it mean for a brand to become more active with the Amazon channel? There are a number of operational financial issues that that come into play that we’re going to cover today in our discussion, and we’ll take it from here so much, let’s let’s start Denise with this big question of, I’m a brand I’ve decided I’m going to be active with the Amazon channel. What do I think about the Amazon channel if quite frankly, I’ve got existing relationships with distributors and retailers? I don’t want to upset them, but I also want to do what’s best for my brand on the Amazon channel. Where do we go?
Denise Zmuda 3:00
Yeah, I think Yeah, it’s a great question. And that’s something that as a practitioner and as I work with clients here at decontrol that I had to in many brands have to wrestle with and the question is, can you do it without disrupting your current brick and mortar retailers and distributors? And I would break that down into two pieces. First and foremost, I will say, Yeah, if you’re going to disrupt your channel, but it really depends on who you’re talking about. And you know, how disruption is viewed. So folks that can be impacted are those selling on brick and mortar in a brick and mortar manner that are already selling on Amazon, those distributors that might be selling to resellers who sell on Amazon themselves, retailers or distributors that are hurting products, like all sorts of different ways in which those folks may be operating on the platform today. And, you know, I think, you know, there’s concern relative to whether or not that brand will hurt the retailer’s existing brick and mortar sales by making a foray into selling on Amazon and other marketplaces. So there’s lots of considerations that have to be taken. You Yeah, under consideration in order to determine where you fall on that spectrum as it relates to the disruption that may end up
James Thomson 4:28
taking place. So let’s just spin on disruption. What are we talking about? I’m thinking there’s potentially sales being diverted to the Amazon channel. There’s potentially issues with different prices on different channels. What other kinds of things do you encapsulate within this concept of disruption?
Denise Zmuda 4:48
I think there’s disruption to the brand itself. I think there’s disruption to you know, the channel at large and so from a brand standpoint, there are a number of brands that I have spoken with. And as a practitioner myself, you know, you just don’t even realize the amount of activity that’s taking place on Amazon. That is, in fact, disrupting your current channels of distribution who may not be operating there that are very important to you. So there is a lot of price erosion that can come from that, that plays off of different channels of distribution. There’s also disruption that happens to you as a brand. So because of the wide open nature of Amazon, as you well know, there are a number of entities that can be selling a brand’s products that you know, just aren’t held to the same quality control standards who are caring for those products and the way in which that you would like your brand to be cared for. And so the consumer experience can be impacted. And that manifests itself when we have bad reviews and all of those things that are really, really transparent to consumers create a lot of confusion in their mind as to whether or not you know they have a handle on their brand.
James Thomson 6:03
Many years ago, I used to run the business of recruiting sellers to the Amazon channel, whether they’re authorized or unauthorized doesn’t make any difference to Amazon. And yet, if someone could show up with a product and sell it work, Amazon’s quite happy to have them on the channel because the more sellers there are selling the same items, the more price competition there is. But also the crazier things get with regards to who’s submitting brand content on those listings and who’s representing your brand on this channel. It doesn’t necessarily have to be an authorized seller. And quite frankly, the disruption that we think of around pricing, there’s also big disruption around the consistency of messages that that customers on Amazon may be seeing when they look at your brand’s materials on Amazon versus what you might be spending millions of dollars and lots of people on your team focused on creating a consistent brand in all of your other so called authors. The right channels. So lots of opportunity for disruption on multiple levels, as I think of what brands are doing today, certainly 2010 2015 still a number of brands that said, Amazon is a small enough channel, I don’t have to worry about it, because it doesn’t represent a lot of sales dollars. You know, that certainly misrepresentations there around number one, actual sales going through this channel versus perceived level of sales. But this issue also again of consistent branding, you may have a number of people who are being first exposed to your brand on Amazon, and they’re seeing whatever shoddy documentation of images and content that an unauthorized seller might be putting on this channel. That creates a problem for your brand, when the customer might then see your brand in another channel. And so, as we think of all these different forms of disruption, the good news is a brand can address all these issues, but it takes Productivity on their part. And also typically a change in the way they think about this Amazon channel, it’s not about whether you as a brand are thinking I am, I am now ready to enter this market versus my brand has already entered this market potentially through a back door, I need to make sure that I control what my brand looks like on this channel. And hence, what the implications are going to be to my other established channels who have high transparency to what’s going on in Amazon, and can understandably get frustrated.
Denise Zmuda 8:34
Yeah, definitely a common scenario for the brands I work with. And as you all know, since we work with each other, yes, from the beginning, when I was a practitioner, it was a bigger mess than I had ever assumed it was because to your example, I just hadn’t been paying attention.
James Thomson 8:51
So take us through, you know, desired and an actual situation here. So that we’re talking the same the same language
Denise Zmuda 9:00
Sure, so I think at the end of the day, any brand wants clean channels, they want their product available to consumers and the way in which they want to buy them. And that can vary. As noted here, in some cases, you have consumers who want to touch and feel the product. So they’re willing to travel to a store and touch and feel that product before they buy it. They may like the convenience of online shopping. And so therefore, they go through those channels, and you want those decisions to be made in in a value added manner, and what I mean by that is I want my shopping experience to be tailored to the way in which I want to shop and so I’m going to pick those channels based on that not necessarily because in one channel, you know, for some reason, it’s significantly lower priced. And as a result of that, you know, I might get lower quality maybe depending on that. So I just really want parody as a brand, right. And I want the shopping experience to be reflective of the brand experience that I want to convey. So,
James Thomson 10:11
guys, this concept of you, the brand may not have set up this Amazon channel, it’s already there. You know, I’m just flipping ahead to the next situation, you may wake up one day to discover my brand is on Amazon. And oh, by the way, as you talked about with this phrase erosion, I don’t know who these people are selling the products on authorized sellers can include an awful lot of different groups of people, they can be authorized retailers who have decided to set up shop under a different company name over here on Amazon, or it made a straight up be product diversion happening. products being sold to people who you’ve never heard of. You have no active direct or indirect relationship with and and yet they’re the ones representing your brand on this channel.
Denise Zmuda 10:55
That’s right. That’s right. It’s not just a price issue. It’s a quality issue. So you know, my direct question As well as those of other clients that we service, you know, you’re shocked to see this dynamic happening. And oftentimes the first time you hear about it is from your brick and mortar channels, you know, what is going on over here? Yeah. And in those cases where you’re not paying attention, once you start to uncover that you experienced exactly what you mentioned, not only is it How are they getting? How are they able to sell it so inexpensively? And how does that impact the way in which they’re investing in the brand and oftentimes, what we find is that they’re not And to your point, it’s just resulting in very shoddy listings. It’s very unclear to the client, what they’re buying, they buy it, they return it, they express poor experiences, and it just becomes a real, you know, brand issue for the manufacturer that they have to manage. Right.
James Thomson 11:53
Okay, so, now the question is, you’ve shown me as a brand that I need to To be more proactive with the Amazon channel, whether that means I as a seller, I’m going to sell direct, or I’m going to work with authorized resellers to, to to represent my brand in this channel. The question then becomes, how do I do this without disrupting the existing relationships that I have with brick and mortar channels and other traditional distributor models?
Denise Zmuda 12:22
I think the fact is, is that just by the mere fact that e-commerce is here and it’s disrupted the market yet you start to have to make choices about your brand that are going to result in change in certain portions of your channel and change is always disruptive. However, it doesn’t necessarily mean that it’s equally disruptive to all four corners of your channel ecosystem. So there are some channels that are very, very thankful, very, very happy when a brand decides that they’re going to take control, right and, you know, really create some border for them. brand, and that will be reflected very well through certain channels of distribution who are very happy for that control.
James Thomson 13:07
So who’s not who’s not gonna be happy when you finally button things up?
Denise Zmuda 13:12
The ones that are gonna be happy are the ones that are on Amazon today or who are supplying sellers that are on Amazon, we traditionally find that retailers and distributors have no interest in operating on Amazon for the most part and understand or can be convinced of the fact that getting control is actually better for the entire ecosystem at the end of the day, you know, they’re very much on board with it. But if we happen to you, and oftentimes we don’t, but if we happen to find distributors and retailers that are selling there today or represent sellers who are the volumes aren’t as big as they think they are, but there’s an emotional talk, you know, component to that discussion, that data has to just follow it,
James Thomson 13:56
right. Okay, so let’s look then one of the models that our companies put together is, what are the different components of decision making that needs to go into figuring out as a brand, how to put a proper Amazon channel strategy together. And we have a framework where we Think of this as a three legged stool where all three legs on the stool need to be in place. If you only do two or one of the legs, the whole thing falls over. And let’s talk about what each of these three are. And we’re going to talk extensively here for the next few minutes about each component of these. But but in summary, channel governance is primarily the whole concept of Do you as a brand, have a clear sense as to who’s going to represent your brand on Amazon, that may be representing it from a branding perspective, representing it from a sales perspective, representing it from an advertising perspective? But how are you as a brand, making sure that you have proper control over those agents that are representing you? You may in fact Choose to go directly to consumers and be the seller of records, you may designate someone else to manage your branding, you may designate someone else to do your advertising. But at the end of the day, the people that are representing you are people that you can have conversations with. And you’re in a position to go in more of a partnership mode and be able to work together to make sure that your brand continues to be properly represented on this channel. The second part of this three legged stool has to do with the branding and what kind of content you put into the catalog. If we start with a very basic assumption that chances are somebody will find a way to get their hands on a product on your brand, get some inventory, even if it’s a couple units here or there, somebody will find a way to get some units and they will put them on Amazon. If you put a product on Amazon, you need content, you need a you need a product listing, and that product listing is going to have images it’s going to have bullet points and product descriptions and question Frankly, if I’m not the brand, who’s to say I’m going to do a particularly good job of representing the brand, it turns out Amazon has programs in place where brands can submit content in an authoritative manner, where Amazon will acknowledge that that content is the content that should be shown to represent the brand. And as a result, you can separate out this issue of do you manage your branding? And do you manage your distribution, even if distribution and managing who’s going to represent you even if that continues to be a problem? At a minimum, you can know that consumers who see your brand on the channel are seeing content that’s consistent and accurate and complete with everything else that you’re doing and other channels. So that concept of optimizing the catalog and saying as a brand, I will be proactive and make sure that my content is in fact, accurate with what I want it to be. That’s a very, very important step for brands to take and one that acknowledges that nobody cares about the brand as much as the brand And then the third, the third leg of the stool has to do with essentially driving traffic to the listing. So if you decide to use Amazon as a channel where you are authorized resellers are going to sell products, what are you doing to invest in creating traffic, you may have traffic that you can bring by way of email or other forms of external traffic. But for most brands, growth on Amazon comes by way of doing advertising. I’m not interested in investing $1 in advertising, if it’s going to drive traffic to a listing that’s not properly optimized, and hence won’t convert very well, or to a listing where the seller of record is someone authorized seller who, in fact, by investing in advertising, I’m creating the wrong incentive. I’m creating more incentive for more people who I don’t control to show up and get sales from my product. So if I have the right kind of people representing me that I can communicate with have proper catalogue content that’s properly optimized for Amazon organic search and conversion. And I’m investing in advertising. In order to make sure that I drive traffic to my listings, that model can work extremely well, to make sure that your brand at least has a realistic chance of succeeding without doing harm to your branding, and doing it in a way where there’s more likelihood that you’re going to have consistent pricing across channels, and not be in a situation where things are always cheaper on the Amazon channel. So let’s let’s let’s start with channel governance. Denise, this is your neck of the woods to tell us more about some of these particular issues.
Denise Zmuda 18:40
Sir, so I think you’ve alluded to it here and you speak about it extensively in terms of your experience at Amazon. I mean, this is an open marketplace and they are in the business of recruiting as in sort of many sellers as they possibly can that have inventory. And so as a result of that dynamic, and the fact that, you know, there’s a incentive and a propensity for so many different sellers to be on this channel, which at the end of the day really only requires one to be there to service your products and concrete, you know, sort of a lot of issues as it relates to over distribution. And over distribution always leaves a brand in a situation in which there isn’t a lot of incentive for those sellers to invest in the brand. Because to your earlier point, why would I do that? When there’s a chance for someone else to actually benefit from that, especially, you know, as it relates to quality and from a price standpoint, so, you know, because Amazon is that over that open marketplace, it really can create an over distribution issue that you have to get your own. Surround
James Thomson 20:01
Amazon launched, Amazon wants the more the merrier because the more the merrier creates, typically price competition which drives down prices, which is good for Amazon customers, and is horrible for brands. So clearly a misalignment of incentives there between what’s best for Amazon and what’s best for your brand. If you’re not paying attention to what happens on Amazon, then you’ll have an end up with a whole pile of companies selling. You know, we had a client at one point they had 140 unauthorized sellers selling their products, and they didn’t know any of these people were. And the crazy thing is, even if they didn’t know who these sellers were, there are federal laws that protect many of these brands, excuse me, Miss protect many of these sellers, from being able to continue to sell these products unless the brand takes certain steps, which we’ll talk about in a few minutes. So if you’ve got the Wild West happening on Amazon, and you as a brand, are continuing to bury your head in the sand and just say, I’m not going to worry about it because it doesn’t represent a lot of sales. If you’ve noticed what’s happened the last six months, Amazon continues to grow and grow very aggressively, and consumers are doing their shopping there more than half of all product search online starts on Amazon. And if lo and behold, someone finds your brand finds your brand’s product listings on Amazon and it’s ugly, that’s going to reflect very badly on your product. So let’s let’s keep going on Channel governance here. Tell me what’s Amazon going to do to help me manage my distribution and make sure that I only have authorized sellers on the channel?
Denise Zmuda 21:30
It won’t help you with that at all. That’s not what their incentive to do so we’ve been told by others who’ve worked with Amazon as Amazon will tell them that you know, it’s not our job to you know, drive clean channels and get your channels under control that’s that’s your job to do that so don’t expect that they will assist you in that regard. Yeah. Um, yeah, price erosion on you know, Amazon. What we found Often and you know this as well, you know, particularly for example, if you have a first party relationship with Amazon, that algorithm is going to react and be very sensitive to price erosion on the Amazon Marketplace. And so, you know, while their goal is to drive down prices in an effort to, you know, continue to keep consumers preferring them as a platform that can create a significant amount of price pressure not just on the platform, but as it relates to brick and mortar channels as well. So, this you know, this is a channel, ecosystem channel management and frankly, an issue and getting your channels to invest in your brand. We’ve heard time and time again. Even brick and mortar channels who have had a lot of pressure from the Amazon Marketplace, say hey, look, unless You can get this under control, it’s really becoming not in our best interest to continue to invest in your brand. So you know, and that’s something that’s very alarming for a brand to hear. You want to make sure that there’s a, you know, good enough profit for your entire channel ecosystem to want to continue to invest in building your brand and supporting the consumers that they’re bringing your brand to.
James Thomson 23:26
Very important point you raised here, when you think about this open marketplace where all these products are being sold by all these different sellers. We’re talking there’s north of 5 million sellers on Amazon. It’s also important to keep in mind that you may be a large, well established national brand. But there are literally millions of private label digitally native brands that are also finding their way onto Amazon. And many of these companies know how to play the game a whole lot better than some of the big national brands that haven’t really invested adequately to control what’s happening on the Amazon channel. So if you have book product listings on Amazon that look like they’re not properly optimized for content. And there’s clearly a bunch of unnecessary price erosion happening, that creates a lot of noise. And then you take a digitally native brand that people may not have heard of, but know how to play the Amazon game, have high quality content, don’t have a bunch of unauthorized sellers, they’re able to create a very clean look and feel for consumers. Turns out Amazon’s a transactional marketplace. And so, most product searches on Amazon are unbranded which results in consumers trying very hard to try a lot of brands that aren’t necessarily well known to them. And yet those brands are garnering share, and stealing share from big national brands that are used to being able to essentially buy shelf space and expect that they’re going to generate certain levels of sales. So take a national brand that isn’t paying attention to the Amazon channel. They’re going to have price erosion, but they’re also going to have a situation where I don’t want to say entitlement But they kind of expect well, aren’t we going to, you know, have some type of similar market share? That’s just not the way the Amazon channel happens. And you can have your lunch eaten by a bunch of small digitally native brands, because you’re not really paying attention.
Denise Zmuda 25:15
Yeah, it’s a category issue at that point. So it’s not just an inter-brand competition thing, but you lose out on, you know, as it relates to your IP, who should be your true competitors within the category you’re trying to succeed for them. Yeah, sorry, I just want to move my screen here about policy policy versus online reseller policy, those are two distinctly different things. So from a map standpoint, the challenge when it comes to gray market on authorized sales, is that you have no way to affect a map policy relative to those gray market sellers. And so what ends up happening when you have a map policy in place with your authorized channels is that they’ll come back to you and say, Well, look, you’re asking me to adhere to your MAP policy, minimum average. Price policy. But what about all these other guys? And you know, you’re basically negatively impacting your various channels at the expense of the great marketers that have no, you know, tied to a map policy whatsoever, because you just have no way to affect it.
James Thomson 26:15
And, Mike’s algorithm on Amazon favors lower prices. So authorized sellers who aren’t bound by the same terms of policy, they’re more likely to get more of the sales opportunity because Amazon’s pushing them into the buy box, which is the algorithm that when you click the Add to Cart button, Amazon has pre selected a seller. So if they’re pre selecting, lower priced on authorized sellers to get the sale. Yeah, that’s that’s pretty ugly. Thanks for holding me to a MAP policy when I have no chance of actually getting a sale.
Denise Zmuda 26:46
That’s right. That’s right. And, you know, whether you’re on the platform or off so it impacts like sort of, you know, both all points of the channel like an ecosystem, an online reseller policy, you know, Especially one that sort of developed and implemented from an EA control standpoint, can you provide you with a legal foundation that’s necessary to be able to take control of the channel on Amazon so that in other marketplaces, frankly, so, you know, if you’re, we really consider an online reseller policy to be the the true good foundation for effectuating sales control. And then map can be then leveraged from there as a tool on top of that, but we do not see them as interchangeable and not sort of a true choice between the two edit at an equal level.
James Thomson 27:40
So MAP policy is great if all I have is authorized resellers, but the moment you add a single authorized seller, a map policy becomes not an effective tool for handling something like that. Okay, so let’s keep going here and talk about how I solve some of these issues.
Denise Zmuda 27:58
That’s right. So it’s Not a policy versus enforcement, trade off. It’s really a policy and enforcement. So as I mentioned previously, you know, we we have an E control solution that’s, that’s rooted in developing a set of policies that you set expectations around quality controls, and set expectations around material differences that allow brands to overcome the first sale doctrine, which is a sort of a US law that protects a lot of the green market selling that’s taken place so far, and Amazon, so you really need that legal foundation on the front end, which then gives you the basis for enforcement relative to not only unauthorized gray market sellers, but also those channels that may be operating there that you consider in general authorized, but you have not authorized to sell on marketplaces.
James Thomson 28:56
So the good news is there is a way To fix all this distribution noise, the bad news, and certainly something I’d like everyone to take away from this discussion is now that there are online marketplaces that welcome everybody in anybody to sell as a brand, you now have a new cost of doing business. And that cost of doing business is the ongoing enforcement. You can’t just say, Hey, I’m gonna hire a lawyer and build a policy and I’m gonna roll it out and I’m done. Actually, forever going forward, there, there will be a need to make sure that you’re enforcing that policy to make sure that new sellers don’t show up and mess up the whole party. And you know, for some of the clients that we’ve worked with, that they say women, it’s gonna cost me 10s of thousands of dollars to clean up this mess, and I got to keep paying that every year. And the answer is Yeah, because unfortunately, online marketplaces continue to become open. At least some of them like Amazon will continue to be open which creates this challenge as a brand as a brand. Your first mistake is your brand is popular. If a brand wasn’t popular, nobody would go looking for it. But the fact is, it’s popular enough that people are interested consumers are interested in buying it, which means somebody is interested in getting products to sell and try to make a buck on those sales. So you have to continue to do the enforcement long after you happen to have a policy in place.
Denise Zmuda 30:21
Yeah, and I think there’s a couple of ways just to add to that, that enforcement or I guess even more, you know, broaden it to marketplace cleanup is there’s some brands we work with, who are really, really eager to try to figure out the root cause of, of where that gray market leakage is coming from. And they do have channels of distribution that are willing to work with them, you know, on that. And what I mean by that is, you know that many distributors, do you understand that having a healthy marketplace and channel control, impacts them just as positively as a retailer might see that and so they’re willing To participate and working with the brands to try to plug the the polls, if you will, and reinsure off those leaks that are really propagating the inventory sources to those on authorized sellers. So we do have some clients who were able to work with that as well.
James Thomson 31:17
So, I want to clean out my channel. Tell me a little bit about how I think about this issue of, I think you use the term over distribution? I’ve got 10 authorized retailers today, do I let them all sell on Amazon?
Denise Zmuda 31:32
Yeah, we don’t recommend that. Um, Amazon’s a, what we call more of a vertical channel and I, I characterize it as an online shopping mall. And if I’m a consumer going to Amazon, there’s really one front door to that shopping mall and I really only need one seller that’s really good servicing me through that channel. I think you’ve, you’ve used the analogy that you can’t be married to 10 people, it becomes really, really complicated in terms of trying to keep them all happy. And we like in having multiple sellers on Amazon like having, you know, 20 Toyota dealerships on one city block, the end of the day, you know, the only way to compete in that environment is either to come up with some really wild value added differentiation, which is not easy to do on Amazon because you are hooking into that brand listing, right. So the only differentiation you have is price. And so the only way that you’re going to be fighting for that business is to try to win that buy box and you’re going to be lowering your price. And once the price is lowered and that intense competition, you are not going to have the sellers that are investing in your brand. And so quality is going to go down and at the end of the day, the consumer is going to get the short end of that stick and so really honing in and ensuring that you’ve got one quality seller that knows what they’re doing. I think that’s the other key piece of this, you would not take a native online seller and give them permission to go, you know, open up a storefront under your brand name, a brick and mortar store, right. They wouldn’t know what they’re doing. They don’t know play anagrams, and you know, whatever building leases and whatever else goes into all that, just as you wouldn’t expect a brick and mortar retailer to be native to Amazon and understand all of the complicated nuances associated with that. You want to mitigate over distribution one and you want to pick the right seller for the job that knows what they’re doing and is going to be in this with you. From a brand standpoint, it really helps you to build your presence on that platform in the category like Interbrand competition and focus on inner brand competition, because that’s really where you win
James Thomson 33:49
with all these other brands. I mean, unless you’ve got a highly unusual product, your biggest issue on Amazon is the 5000 other competitor brands that are competing to get the sale. And so if you can’t get your own house in order with the right kind of company that understands the Amazon sandbox, if you don’t get that organized and have the right content and the right price consistency, you’re going to lose out to the thousands of other brands that also are have shown up to try to grab the same customers. That’s right. Okay, and then finally, how do I think about this issue of cost? I want to control governance. But I also am in a situation where it’s going to cost me money to do this enforcement, it’s going to cost me some very awkward conversations with some of my well established brick and mortar retailers who are saying, Wait a minute, I want to be the guy that you pick to sell to sell your products on Amazon. What do you think about internal and external costs?
Denise Zmuda 34:46
Yeah, I think there are sort of hard and soft costs, and I think you’ve hit on, you know, some of those already from an internal standpoint. Um, you know, definitely you’re going to want to get that foundation in place and there’s going to be an upfront cost associated that, and ongoing enforcement or what you know what we call that root cause trying to just shore up the leaks associated with inventory supply to unauthorized sellers, in my experience, and in the experience of brands that I deal with their 10s, if you don’t already have somebody in place to, you know, maybe maybe you do decide to continue to have a map policy and you have a map of coordinator or somebody who’s responsible for enforcement and governance of that, in my experience, we leverage that same role to do some of the enforcement work hand in hand with with the control team. And so you don’t have that already. You may have to bring that up on board. But as it relates to some of those internal costs. You know, you’ll have to be prepared for that. If you don’t know what you’re doing on Amazon, like, I didn’t know what I was doing on Amazon, you’re gonna want to hire an expert that knows what they’re doing. Now. It may be your existing channels of distribution. You have someone there who you’re convinced that they know what they’re doing, or they might pick up a Buy Box Experts to help them, you know, have their own third party presence on the marketplace. And, you know, trading off whether or not you want to build that internal competency versus you want to pay somebody to do that. Being a true channel person, I’ll hire the expert that knows what they’re doing and the space that I’m trying to expand. So, yeah, I’m not a big, you know, I’m not in favor of building competency internally. But those are some of the factors that you have to think through. And then some of the soft, you know, costs associated with this are really the change management that’s going to happen internally within your own organization because oftentimes, the brick and mortar sales team if they aren’t educated about how this is beneficial for the entire channel ecosystem, you have to spend the time bringing them up to speed and demonstrating why that’s the case. The good news is so many brands have put this type of structure in place, oftentimes in these big brick and mortar retail Taylor’s like, third? No, this is not new news to them in terms of what you know what needs to happen. And then those, you know, softer costs associated with having to negotiate with channels that might be on Amazon today and sort of expressed to them that they’re not authorized to sell there anymore. And going through those conversations and having to weigh sort of your power as a brand relative to that particular channel’s power to, you know, relative to your business, and is that a hard cutoff? Is it a phased approach? Like how do you manage through that change externally? Those are some of the soft costs that are associated with that.
James Thomson 37:41
The bad news is it could take hours for us to go through any of these in detail. I’m realizing I got about 20 minutes left. So I’m going to keep moving through the slides. Happy to have conversations with anybody here who’s joined us today. We can dig a lot deeper into any of these particular topics that the nuances of how do you actually roll out these policies? How do you actually enforce these policies? You know, there’s an art and a science to that. And we can certainly talk further as it relates to any individual brand’s situation. So, let’s, um, I want to talk about some of the case study situations, Denise, that you’ve been through as both an employee of a brand as well as a consultant advising brands. Talk to me what happens when a distributor says to check with you, Mr. brand? I don’t like what you’re doing. Mm hmm.
Denise Zmuda 38:31
So, oftentimes, what we experienced in that case is less that the distributor is trying to sell on Amazon, there’s some cases for that. But oftentimes, those are smaller distributors. And, you know, then you’re sort of there’s a different calculus that goes into that. Oftentimes, though, we find are basically the way the policy structure works that or z control puts into place, or basically we have a policy direct with that distributor, and then The request is that those distributors pass reseller policies on through to those channels that are buying from them. And they may say, you know what, that a lot of work for me or maybe they know that they’re supplying gray market sellers on the marketplace. So they don’t want to do that at the end of the day we can enforce without distributor participation in those cases. And to your point, then, you know, if you don’t have the strength to sort of overcome that, and enforcement may be a longer game for you as a brand. But the other piece of that as well as if the distributor doesn’t want to participate with the brand, I often spend time with brands talking through what are the incentives that you have in place with your distributors, oftentimes, we find that they’re very liberal. So from an upfront wholesale price standpoint, or depending on how you know, each industry calls that pricing something different. I’ll call it wholesale pricing for now. You’re very liberal wholesale pricing, and on top of that, you have a bunch of incentives and you’re really providing them What’s the margin room, or you’re in sending them to consume more inventory than their natural demand, you know, we’ll support, they’re gonna find ways to rid themselves of that inventory. And so tightening up some of those incentives just to prevent leakage or putting mechanisms in place over time that provide, you know, maybe more of a stick relative to that behavior versus a carrot and trying to leverage those incentives and those pricing structures to tighten up the ability for those distributors to behave in a way you don’t want them to. So there’s a couple of ways to go about that.
James Thomson 40:40
So next issue you may have. You may have a retailer or reseller who set up shop a long time ago on Amazon long before you decided as a brand that it’s time to smarten up your channel management strategy. How do you tell an existing retailer that may not be doing a particularly good job Representing around Amazon, how do you tell them? We’re going to replace you?
Denise Zmuda 41:05
Yeah, that’s a great question. And I always start with data. Because oftentimes brands will think and the retailer as well will think it’s a bigger deal than it actually is. They might tell you, they’re getting a lot of sales, you don’t have the data at your fingertips to dispute that. And once you get that data, you find that there is not a lot of revenue at risk there for either party, then it becomes a little bit of an emotional conversation. And then you have to enter that conversation to look. And typically, the pricing data will bear this out. Look, at the end of the day, we’ve seen our ASP s decline over time, this happens a lot. We’ve looked at trend data, this not only impacts us, but it impacts you as well. And so in order for us to create a cleaner channel ecosystem where we can both be successful, and the fact is, you’re not as successful with that. In the category as you think you are, there’s a lot of upside opportunity that we can go after here like the brand can go after. There’s also positive effects. If, for example, you’ve got a consumer that bought something online, maybe the retailer in this instance or reseller hasn’t benefited from it, if that consumer is within their brick and mortar storefront, they’re going to have some affinity to that brand. And so they’ll be more than likely to buy it within their, you know, retail space because consumers go back and forth. They’re not necessarily exclusive to one or the other.
James Thomson 42:33
There’s a couple of ways to do that. somewhat related to the first situation you may also have a situation where it’s not difficult for you and the retailer or even the distributor to come to realize that somebody has to be supplying these unauthorized sellers. It doesn’t just magically appear. And so having that hard conversation saying your job is not to be selling in this channel or selling to People who sell on this channel, as you say, somebody, somebody may lose money, at least short term as a result of having to clamp down on tightening up your distribution channels. But in the long run you as a brand, your primary job is to do its best to protect the long term equity of your brand. And that may mean having to say no to companies you’ve dealt with, maybe no having to say no to companies you’ve dealt with for a long time. But if you don’t have proper alignment of incentives, then you’re going to be in a situation where, yes, somebody loses somebody wins. But I sure as heck hope as a brand that I win, because I’ve got to be in a position where my brand is still relevant five years from now, if I don’t start cleaning this stuff up. It’s not going to take long before that price just keeps dropping further and further and further and all the money I spend on marketing and brand building outside of Amazon is going to go down as the price on Amazon continues to fall further and further.
Denise Zmuda 43:56
Nobody cares about your brand as much as you do. Period.
James Thomson 44:00
So I’m going to quickly talk through a few things here. You know, when we talk about the second leg of the stool around your optimized catalog and your branding, you want to have consistent messages on Amazon that are consistent with other channels. You want to be in a situation where you’re using some of these tools that Amazon makes available to lock down content as a brand. I talked about that earlier that the program is called Brand Registry. But you as a brand can then designate an authorized seller and say, Hey, mister authorized reseller, you’re going to be the one that’s actually going to submit content on our behalf. There’s ways of not having to jump completely into Amazon’s tools and have to learn how those tools work inside. Now you can designate the controls of driving your car, you can turn that over to somebody else, but at least someone is controlling it with you with whom you’ve got direct communication. There are a bunch of interesting things that happened on Amazon where You may have sellers that are creating different types of bundles that you don’t even offer and other channels. You know, interesting that you can learn what consumer preferences may be moving towards, just by looking at some of those bundles. And so if you’ve got an authorized seller, working with that person to use Amazon as a testing ground, for looking at ways that you might be able to create multipacks, or variety packs, or new flavors or sizes of products that you don’t otherwise make available elsewhere, you can you can learn an awful lot from Amazon rather than having to do long drawn out focus groups and market launches and all this kind of stuff. Amazon’s a pretty cool place to test things out and gather data very, very quickly. As you think about your catalog on Amazon, it’s very easy for multiple people to create listings for the viac exactly the same product that can create nothing but customer confusion on Amazon where there’s five pairs of the same running shoe. What’s the difference between those Different listings? I don’t know, as a consumer, you’re more likely to move on to some other brand and say I want to, I want to be able to understand exactly what I’m getting. And so part of the challenge of keeping up with Amazon is duplicate listings can show up at any time. Somebody’s got to be actively managing your catalog, not just now, but but as part of the ongoing Amazon channel management. Someone’s got to be looking at that at all times. And then the other peculiarity I want to mention here is Amazon’s catalog model is based on unique UPCs. There are a lot of ways to put bogus UPC codes into the Amazon catalog. And so if you’re an unauthorized seller, you can go and buy UPC s of your own and represent a brand’s products using these bogus upcs that creates a whole bunch of messiness that somebody has to go and actively manage as a brand. It’s best to be using your actual upcs to make sure that you’ve got consistency not just within Amazon but across Different online channels. If I happen to type in a UPC, I want to be able to see your product and your product only. I don’t want to have other products mixed in. And so that this continues to be part of that ongoing catalog management that’s required to be more proactive with the Amazon channel. We only have a few minutes here. So I’m going to run through this part fairly quickly. But basically, I want us as a brand, I want to invest money in driving traffic to authorized sellers who are following the policies that I’ve put in place. I want to make sure that as I spend money on advertising, I’m doing it in a way where I can also gauge our products in stock. If I’m working with authorized resellers, I can make sure that as we have inventory issues that I don’t overspend on products that I don’t have in stock, and likewise, if I’ve got new products that I want to focus more on, that I’m coordinating when advertising is going to be put in place to help drive sales of particular products. To wrap to wrap things up here, we’ve only scratched the surface on some of the details of these specific issues. Earlier this year, Denise’s colleague, Whitney Gibson, he and I published a book that you can find on Amazon called Controlling Your Brand in the Age of Amazon, a much more in depth extensive playbook of how do you work through some of these issues? How do you have some of these difficult conversations with your existing channels? What’s involved in not only doing that initial transition, but the ongoing management around the issues of channel governance, the issues of catalog and branded control and the issues around advertising and driving traffic to your listings? So we thank you for listening. We’ve got time for a few questions here. One question that came in a little bit earlier. If you’re a branded sell through a third party distributor on Amazon, Amazon can come after you and block your listing if there’s only one authorized seller, is that correct?
Amazon actually doesn’t get involved in this whole question of authorized and unauthorized. And so if you do a good job of cleaning up your distribution, so you have only one authorized reseller on the channel, Amazon’s not going to block your listing, they’re just more likely to go out and try to recruit more sellers to come on to the listing. And so, Amazon’s basically working against you to have only one seller, but they’re not going to block your listing. They’re just going to try to create more competition on that listing. But the good news is, if you’ve tightened up distribution, it’s going to be harder and harder for new unauthorized sellers to find inventory, that they can then turn around and sell on the Amazon listing. Anything you wanted to add on this particular question, Denise?
Denise Zmuda 49:48
No, I think that covers a
James Thomson 49:51
comment from one particular person I worked on the Amazon channel for a premium luggage company. I would explain to brick and mortar accounts that selling on ebay Amazon was really a way to protect the brand so we could protect their business and give us some control. Denise, anything you wanted to add there in terms of as you think about protecting your existing brick and mortar business? How have you seen brands effectively manage the active aspects of Amazon, so as to reinforce and continue to grow the retail business?
Denise Zmuda 50:26
Yeah, so, um, you know, for those brands who’ve been successful in sort of really managing and sort of taking control of their brand, you can immediately see changes in consumer sentiment about the products that are being bought on the Amazon channel. And oftentimes you can see an immediate improvement in average selling prices. And so based on what I expressed earlier about, oftentimes we have brands coming to us saying look, I met you brick and mortar retailers are complaining. There’s a lot of, you know, price erosion on Amazon. It’s impacting them consumers are coming in and they’re asking for us to match those prices, we’re going to come back to you and we are going to ask you for special concessions on trade spend, like it just becomes a very vicious cycle. And once you turn that around, you know, rising tide sort of lifts all boats, and it becomes a much healthier situation, not like again, not just from a pricing standpoint, but that surely is a benefit of that. But, you know, when consumers are a lot more excited about a brand because I have a great experience online. They’re more than likely, especially if it’s a consumable product or things like that. And they happen to be in a brick and mortar store, they’re going to pick that product up great for the brand. And they’re not going to be going to the counter and saying, look, I found this, you know, $5 cheaper on Amazon, can you match it?
James Thomson 51:55
Right? So even if you’re not dealing with consumers, challenge You the amount of special discounting and remote pricing? Absolutely, those costs may be somewhat hidden to brands today. But when you actually work out how much you’re spending as a brand to entice the channel to buy more inventory than they might otherwise want to buy, or for them to sell more inventory than they might otherwise be prepared to spend, you know, there’s a lot of kind of perverse incentives that can build up over time, where as a brand, you’re leaving a lot of margin, you’re spending a lot of money to drive sales that may be unnecessary if in fact, you tighten up distribution, you have designated sellers for different channels, and you work to create a consistent customer experience across those different channels. It’s staggering the amount of so-called wasted time that goes into the channel because you’re trying to keep everybody happy when ultimately there’s a fundamental problem where you’re not you’re not doing a good job of saying No two requests by different channels or by different retailers. It’s pretty staggering when you start to rip apart and look at the actual data around the financial cost of doing business as usual.
Denise Zmuda 53:14
That’s absolutely right. Yeah, I first had experience with them.
James Thomson 53:17
We have time for a couple more questions. If anyone on today’s call would like to submit a question through the QA on the bottom of the screen. Any other other stuff that you wanted to mention, Denise, in terms of success stories, you’ve seen where brands have gone from being not particularly well evolved? Just dress online channels to be very sophisticated when it comes to successful sales on an online channel, but also create that consistency across channels?
Denise Zmuda 53:49
Yeah, yeah. I’ll just speak generally, we do have a number of brands who were able to sort of turn that around and the conversations that change with their brick and mortar channels, you know, the changes are highly positive, you start having conversations around. Yeah. investment in building the brand, right where previously it was conversations pulling out a laptop and saying what are you going to do about this from a disruption standpoint? The other comment I’ll make is that much of what we’ve been speaking about, especially as it relates to the control piece that Boise control brings to the table is, you know, very focused on the United States a lot of the principles from a negative standpoint, meaning the challenges that brands face on Amazon and other marketplaces are definitely resident in other countries. Canada being an example Europe being an example. Canada is probably a little bit close in terms of levers you can pull to the US but Europe is markedly different But that doesn’t mean that the options available to you are not there. There’s still a way to put a foundation in place and put some semblance of control in place, maybe not as tight as the US. But definitely an opportunity to try to get some things under control. The one thing I will mention about Europe is, if a brand wants to put, you know, price policy in place, like MAP, they’re not just they’re not legal there. So you don’t have those tools in place to you. And so putting those, you know, the sales control foundation in place is that much more important.
James Thomson 55:32
So as we wrap up today’s discussion, a couple things to think about here. There are going to be business issues that you need to tackle in order to clean up your channel management. There are going to be legal issues that you need to address as you think through how to update your channel management strategy. As you think about the materials we’ve talked about today, if you’ve got legal questions, please approach Denise and she and her firm can help you if you’ve got business questions By all means approach me or my firm at Buy Box Experts, we’d certainly love to have a conversation with you, you’re not going to be able to do a full comprehensive channel management effort until you address both the legal and the business issues. Because at the end of the day, your general counsel can only do so much. You’ve got to get your sales team aligned, you’ve got to get your branding team aligned, you’ve got to get your marketing team aligned. There’s lots of pieces here needed in order to fix this. And again, this is not a once and done situation. You’ve got to evolve the way you think about managing all of your channels. You’ve got to evolve the way you think about how you launch new products, how you do promotions, all of that’s going to play into creating effective channel management that addresses a world that contains online marketplaces. So it’s a hard job, but it certainly can be done. Time for one last question here. Do you have an opinion on giving Amazon a limited portion of your catalogue to protect your retailer or brands directly to consumer sites? Do you think about splitting your catalog? And potentially using Amazon for some of the products versus, you know, other products sold elsewhere? How would you think about that? Denise?
Denise Zmuda 57:10
I think it’s a great strategy. I think also an even better One is if you’re able to create a very unique product, even if it is within that, you know, that particular space and you’re trying to get that footprint to the consumers, you’re creating something that is unique and different within the Amazon channels. So you can either apportion your catalog to Amazon, or you can create a distinctly different, you know, product specifically for Amazon or vice versa, I would say more for Amazon that might be effective.
James Thomson 57:45
One of the things I’ve seen companies do though, is putting specific products in the Amazon catalog does not stop the rest of your catalogue from showing up anyways, because you don’t have tight control of distribution. That’s so true. One must be careful that it’s not about let’s put some selection. So Amazon customers are happy, the selection you don’t aggressively manage is still going to show up on Amazon. So Amazon’s a great place to test out new selections and try things out. But you’ve still got a locked down control of all of your catalog, or at least anything that customers might be interested in buying. You’ve gotta lock that down because somebody is going to make a buck, moving on to Amazon and seeing if they can sell it. So we are out of time at this point. I want to thank all of you for joining us. Thank you, Denise for your expertise on today’s call. We look forward to any questions that any of you on the call today have. Thank you again and stay safe. Take care. Have a great weekend.
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