Podcast transcript
Introduction
Hi, and welcome to Marketplace Masters, the podcast dedicated to uncovering the strategies that drive success on Amazon.
Paul Sonneveld
I am your host, Paul Sonneveld, and today we have a very special episode lined up for you. We're diving into the world of global expansion through Amazon Vendor Central, a topic that's crucial for brands looking to scale their operations beyond their home markets. Now, to help us navigate this complex landscape, I'm really excited to welcome our guest, Jérôme de Guigné. And Jérôme is the founder of e-Comas, and he's quite a familiar face to the Amazon community. He brings over 20 years of experience in brand management and Amazon strategy.
Today, he'll be sharing his expert insights on how to effectively use Amazon Vendor Central to take your brand international, including the key factors you need to consider and the potential challenges to watch out for. Whether you're currently operating in a single country or already eyeing new markets, this episode is packed with practical tips and strategies that can help you make informed decisions about your global expansion. So sit back, relax, and get ready to learn from one of the best in the business. Jerome, thank you for being on the show today.
Jérôme de Guigné
What an introduction. Thank you, Paul. Very happy to be here.
Paul Sonneveld
Yeah, fantastic. Just before we dive in, a reminder to our audience, this is actually a live episode and we always do it live, which means we can answer your questions, right? How exciting is that? So for those that tune in regularly, you know what to do, but use the LinkedIn comments section to pop your questions in, and I will try and do my best to put all these questions to Jérôme and get some answers out of him. So just a reminder to make sure you're disciplined.
Jérôme de Guigné
I’ll do my best to answer.
Paul Sonneveld
That's it. We can also strategically ignore certain ones if we want to, but no, we do try and get to all of them. All right, let's jump into it, Jerome. I think when we're talking about international expansion, we tend to talk about 3P, right? Amazon Seller Central. And I'm just in case you're wondering whether you misheard me, we're talking about Vendor Central today.
So, you know, how would you summarize like the primary benefits for a brand for choosing Amazon Vendor Central over Seller Central when expanding into new international markets and there's probably like a small caveat assumption here we're probably assuming that you're already running a vendor central account in domestically that might not be the case. How would you summarize uh the benefits Vendor Central when it comes to international expansion?
Jérôme de Guigné
So first, it's nice to be able to talk about a bit of Vendor Central because in the recent years, we've been talking a lot about Seller Central and it's probably in terms of what's expanding or the number of accounts growing, it's more on the Seller Central side. So it's great to be able to talk about Vendor Central and that introduction gives a bit the flavor of what's happening in the Amazon space.
In terms of benefits, the usual benefits in general about Vendor Central versus Seller Central is that Seller Central, you control your pricing, the end user price, because you're the entity selling. Vendor Central, you don't control that, but you have a very simple logistics setup where Amazon buys from you and unrelated, you don't have to know what they're selling, they're buying from you as a normal retailer.
So the logistics is very simple for you. And if you're also in a B2B2C space where you sell to retailers and you don't want to compete against your retailers and partners, Amazon is another retailer. So you're not seen as competing directly with other retailers. So those two aspects is simple logistics because you don't have to worry about taxes, VAT compliance because everything Amazon is doing. And that can be very helpful when you're going into Europe, for instance. And the fact that you're not seen as a competitor to your own retailers.
Paul Sonneveld
Absolutely. That's a great summary, Jerome. And you already hinted at, when we talk about international expansion, particularly in Europe, on the seller side, we very quickly get into content localization and VAT and all the kind of regulatory aspects of that. What are some of the, what does it look like on the vendor side? You know, obviously, some things don't exist, but what are some of those common challenges that vendors still have to think about as they expand internationally? You know, whether it be like from one country to another in Europe, or, maybe to some of the larger markets like the US or even a country like, like Australia.
Jérôme de Guigné
Yeah. So. And maybe I downplay the complexity of VAT services like the taxes, the compliance. When you go into Europe and you start a seller account, you need to start to think, OK, how am I going to handle the tax aspects? Where am I going to warehouse my goods? Which countries should I have? VAT in all the countries. In one country, there's a complexity element and every country has got its own VAT. Some take six months to get VAT, like in Germany. Some get it in two weeks, like the UK. Spain is very, very complicated. So there is complexity.
If you're a vendor or you have a vendor account, you're selling B2B. So as long as you're B2B, you don't have to have that VAT factor. It's all included. So it's very easy. From that point of view, you can get started from day one. And Amazon takes care of all of that, as well as all the warehousing close to the market, let's say. So you don't even need to worry about that. You only need to worry about being able to deliver within usually in Europe, it's a five days delivery window. So that means if Amazon orders on a Monday, you need to be able to deliver within the Friday, otherwise you get penalties.
So the only constraint, let's say, which is more benefit to the seller account because you don't have that window, basically, if you're selling to FBA at least or sending to FBA, on vendor, you need to be able to deliver within those five days. So if you're based in the US, it's going to be difficult to be able to ship products from the US to Europe, so you will need to have a local warehouse, but the rest is very simple.
Paul Sonneveld
Yeah, I was going to get to that around having stock in-country. Are there other examples where Amazon places purchase orders internationally, like on a with a longer lead time basis. I mean there is some ability to configure this right when you set up your catalogue, are there exceptions there or Is it largely that five-day rule that you're that you're talking about? Are there any options or flexibility?
Jérôme de Guigné
Yeah, there's a general of those five days. Now, we've had customers which got a deal with Amazon like the Amazon logistics and the global logistics part where they say, okay Amazon could even buy FOB from Asia and buy containers in and get things in or from the U.S. and if you're a larger vendor and you're interested in simplifying logistics then it is possible.
I'm not always in favor of that because Amazon's core knowledge is not specifically in international logistics, so it's easy and it happens. It's the same as when they were saying they're stopping now VAT services, for example, for seller. For many years, they would say, oh, we can do everything for you. It's super simple. It's not simple.
So when sometimes Amazon says it's super simple, at least to vendors or to like brands, I would be careful. It's super simple to any consumers, but they're not as good on the other part. So to your point, yes, you can have this whole logistics things, but it needs to be very well oiled and it takes a bit of time for it to really work.
Paul Sonneveld
Makes sense. So if let's talk sort of within Europe first, right? Part of my question is how easy it is actually to expand internationally. And we know it's not easy. We know it's not really hard these days to get into the vendor program. But I was just thinking, given Amazon's particularly sort of more of a pan-European or European set-up now, at least they've certainly moved to that for a lot of brands.
How is that impacting the ability to sell across Europe in different countries? That is probably one of the easier international expansion examples, but so let's sort of start there like On the scale of sort of zero to ten, you know easy sort of super hard to super easy, in your experience What does it look like in Europe and then we can talk about some other geographies.
Jérôme de Guigné
So there's lots of layers of complexity. There's one, and we might talk about it later on, is like getting access to a vendor account. But there's one layer of complexity. Now, let's remove that. You've got a vendor account in Europe, and you want to expand in Europe. Actually, this is very simple, and it's a good and a bad thing. Why? It's very simple because although the teams of Amazon are organized per country, the vendor managers and each country is a P&L inside the Amazon world, and each vendor manager, even if they're Pan-European, they report to a general manager, which is a local general manager.
Although this organization is local, the algorithm of Amazon, specifically the one doing the purchasing from the vendor side, is completely European. So it means if for a given product you've got two vendor accounts, like could be you and let's say a distributor from old times has got a vendor account, the system will probably buy from you if you've got the best price. But then if you can't deliver, it will send an order to the other vendor account and you will not know about it. So the supply is totally pan-European. Only in Europe. It won't go to the US because they are not connected. So that's the first thing.
On the sales out part, it's completely shared. Let's say you open a vendor account in the UK and you say, oh no, I haven't got a distributor in Germany. I don't want to disturb his market. Well, OK, Amazon will sell in Germany even without asking you. Even at Brexit, there was a bit of a pause on that. But since then, they've found ways. So except for a product of very low margin, and they can't make money with that.
But basically, your product, if you've got a vendor account anywhere in Europe, Amazon will start to sell in all the other locations. So it's not because you've got a vendor account in Germany or in France or in UK that it will sell only in that location. For some people, it's wow, it's great. It's amazing. It's super simple to sell everywhere. And it's true. But to others, it's like, oh, no, it's not good at all because I have a distributor. I don't want to disturb or I have this market I want to protect.
Going the vendor way is simple, but the other side of the coin is that you lose control completely about it. That's why a lot of brands are looking into seller, because especially when you're looking at expansion, you maybe want to test, see how it goes and control prices and see how, you know, get a feeling. And for that, vendor will get you much quicker, but also without control.
Paul Sonneveld
Yeah, the aspect of control is such an important one. You know, I almost have weekly conversations with our customers to try to explain why they see such a big difference between the manufacturing view and the sourcing view within Amazon at a regional level or at a country level, right? And a lot of the times it's exactly what you're talking about, right? Amazon is playing its own little game in Europe and moving things around.
Jérôme de Guigné
And to interrupt, Paul, one thing on that point is that the data on the vendor side is a bit confusing. Let me explain. you've got what you said, a sourcing and a manufacturing view, which is you can see what has been sold from your account. But if you're a brand owner, you can see the manufacturing view, which you can see everything which has been sold under your brand name.
Now, the problem is, let's say if your vendor account, let's take the example from before, you sell into the UK. As soon as your product goes outside of the UK, it disappears from your reporting on your vendor account. So if, for example, you see a lot of sales in to Amazon and very little sales out, and your stock is going down, it means Amazon is selling elsewhere.
The problem with that system is, whereas on the seller account, you have a lot of transparency on the numbers, on the vendor account, there's zero transparency because it's Amazon sales, to be fair. But it means, once again, you lose control and you don't even know where it's being sold. So you could use tools such as Helium 10, JungleScout, or any others to try to assume the market or how much is sold of your brand in another market, but it's really assumptions. So once again, it's very simple, but you lose a lot of information. And with a lot of brands looking into expanding, control, like you said, Paul, is sometimes critical to the success of expanding.
Paul Sonneveld
Yeah. We've just got a live question here from Kerry. I'm just going to bring it in because I think you've already mentioned this, but just to clarify that for the rest of our audience here. Kerry, thanks for your question, actually. Please keep the questions coming. That makes this show fantastic and the interactivity. But she's asking, Jerome, just to clarify, as a vendor trying to go into France, our product can be sent anywhere in Europe?
Jérôme de Guigné
Yes, 100%. And most probably because Amazon is much bigger in Germany, for example, the products will funnel quickly. If there is a market or demand in Germany for your product, it will quickly go there. And we've had examples of larger groups, for example, we’re having different subsidiaries. And earlier on, now it's less the case, but they we’re having different price points, each one having his own vendor account.
And like the French team was super happy because their sales was you know the roof and then but it was all going to Germany so at some point the Germans say okay we need to agree on a similar price point and then they lost like 70 percent of their sales next year because obviously now the system was saying oh well it's the same price I'll buy from Germany.
So, this is the dynamic which is going with the vendor account. You have to see that Amazon is an American company. So in the States, you've got States, but it's the same country. And I think that IT people at least developed the system the same way as in it was a new US, right? So for them, the borders from an IT perspective and the system perspective didn't make really sense. So it's like all that is mixed. But some part were very done to like to countries, but some were really like a bit like the United States.
Similarly to like end-user prices or commissions on seller account are based on prices with VAT in Europe, similar to the States, because States you don't have tax prices on the price on the platform. So it's interesting to see that such a big company has actually kept the sort of habits of the US market and sort of put it into Europe.
Paul Sonneveld
That explains actually, that's I've never heard anyone explain it like that. That is very insightful.
Jérôme de Guigné
So what is usually in France or in Europe, you wouldn't pay commission on on taxes, right? Does it like why would I pay Amazon a dividend on like taxes? That doesn't make sense. But I think it's just for them. The IT people just said it that way.
Paul Sonneveld
And they've never bothered to fix it because it's obviously it's good for them. Right. I want to pick up on the kind of the commercial aspect. I know this is not like we've got other episodes on vendor negotiations and how to prepare and we can talk for hours about this, but you mentioned about obviously different, not just different cost prices, maybe even driven different trading terms, driven by different vendor codes in different countries.
And it strikes me that if you don't do this properly as a vendor, or if you're not on the bull, you could end up in a terrible situation here. Like, you know, Amazon could literally just end up pick your best trading terms or from their perspective, best cost prices and try to homogenize those across Europe. In terms of, you've seen suppliers or vendors do, like, how do you think about this as a vendor? And how do you avoid the fact that international expansion becomes like margin compression across Europe, for example?
Jérôme de Guigné
Well, we have a lot of conversations with brands we work with, very big brands, very small brands, about, okay, which is the best type of account, what account I should go with, and so on. To be fair, the smaller the company is, the easier it is for them. Because the larger ones normally have a wide distribution, have prices which are distributors which have got larger discounts, smaller distributors and so on.
Some people are ready to make very little margin and selling online. This question for me is the key question. I don't think there's a good and a bad way of selling on Amazon like oh 1p is great 3p is awesome. The people who say are there's only like you should only look at 3p. Doesn't make sense.
Each company will have a different situation and a different strategy. So, the real problem is having no strategy or not knowing why you're going on Amazon or what's your ultimate goal. We have customers which their goal is branding. Sales is not really the issue because they don't want to hurt their distributors. Fine, then you don't want to go in a system where the prices could be compressed.
Some are really sales, sales, sales. So maybe if price compression is less of a short-term problem for you. So it's really defining why you're there and what you want to achieve. And I usually tend to say, if you don't have a strategy, Amazon has one for you and you don't want it, right? So you really want to think about that.
And to answer more specifically on the point of saying, OK, if there's a risk of price compression, I would not go. And if margin sustainability or long-term investment or protecting the face value of your products, I wouldn't go on the vendor account. And we've had customers where they had lots of buybox issues. If you see on a product like 15, 20, 25 sellers selling the same product or competing for the buybox, you know there will be price compression by default because there's so many people fighting for it.
If you go as a vendor that will put pressure on because the vendor system will try to win the buy box and they usually say they're not price setters but price followers and they're very quick to follow and it will sort of drive the market down. So if you see the market is very complex with a lot of people selling and pricing issues and the face value is very important for you. Don't go on the vendor system. If you want to go fast and you have pressure from behind or from above to generate sales and, well, you know, distributors we don't really care, then go on the vendor account because you will grow probably quicker.
Paul Sonneveld
Yeah, no, that makes sense. There's some really good frameworks in what you're saying there. I want to just move one level up and move just outside the European context into this conversation. I imagine that many of our listeners are interested in the topic around either, obviously, the US very large vendor base, despite it's probably shrinking, but it's still very large. And the sort of purchase sort of values that are being ordered there are significant.
So lots of interest there in terms of moving into Europe with a vendor account. Certainly, we've seen lots of interest in UK vendors moving into the mainland. That's how the Australians talk about Europe. What are you seeing in that front? I mean, are you seeing examples of vendor expansion internationally happening in those flows? Or is that a little bit of an academic exercise these days?
Jérôme de Guigné
So it's true that the access to, and we were talking about it offline before, it's like the access to vendor accounts is becoming very difficult to get. In the US since already a few years, in Europe recently now it's very difficult to find someone who will be open to open a new account. So you need to have a sizable vendor business somewhere probably to get a chance to get another vendor account or your brand needs to be very important in a category for Amazon to notice.
If you're lucky to be in a category where Amazon wants to grow and they're not very big, and I can give examples of automotive, for example, is a category Amazon wants to crack, like services sometimes or things like where they're not yet very big, then you have more chances to get a vendor account. If you're not in that specific category, or you're not big enough, or your brand is not that well known, it's going to be difficult to get a vendor account.
Now, let's say you're one of those happy few, which have got one already, and then you have at least someone who's probably going to give you, oh yeah, okay, I'll help you out to get a vendor manager who will be open to open an account. And then you get into that negotiation phase and so on. The point, once again, is to know why you would want to go out on a vendor or on the seller opening and how is the market and have a look at things. My recommendation and to all the new brands we work with, we really recommend to have an audit of what's happening. And there's basically three things. It's the size of the pie. So how big is the market of my products in that country or in that region?
Second, what are the price points? Do you have a big stretch of the prices? Will you get a buy box or basically? And the third is your P&L. It's like, how much can you make money with the price point you've seen and really make a calculation as a vendor, as a seller? At the beginning, more or less, the margins will be the same. The price point of your product will make a difference.
The general rule is that a cheap product mine like less than 15 euros probably the vendor account will generate the best margins because you control your cost price above 20 euros and above the seller account might become more interesting. But that has to be checked so those three things is size of the market, price points and your P&L are the things you need to check really before jumping into one or the other and once again there's no good or bad solution there's good or bad strategies i would say.
Paul Sonneveld
Yeah, no, that's very useful. I mean, it's really the point about price points. I mean, there's also the other thing is once you sort of get below $15 and this will vary between markets, it's very hard to run a profitable business on the 3P side, right? Once you factor in those fixed costs around FBA service fees and the like, absolutely makes sense.
One sort of controversial follow-up question from me, or maybe not so controversial, but I have noticed that it's become increasingly common for people to buy dormant or vendor accounts as a way in. To be honest, I'm not familiar enough with this particular topic to say that it's even legitimate or it's sort of done slightly under the radar and the like. What's your sort of perspective on that practice?
Jérôme de Guigné
It's certainly, yeah, it's I would say at least a bit shady and a bit risky. Because the account usually is linked to one category and expanding into other categories is not always straightforward. So there's some elements of risks and to be fair, except if you've got a very cheap price point or really you can't do seller.
The reasons to get into a risky way of doing business, I don't see the benefit of that. If really you don't want to get into distribution or you don't want to get your hands dirty with all the logistics and find a distributor, we at e-Comas, for example, help some brands. We have our own seller account and we act as a distributor, but agency distributor, where for the ones who don't want to act like that.
So what I mean is you've got a lot and we're not the only ones. So there's other options. I don't think it makes sense to pay a lot of money to someone to go to a vendor account and all of a sudden it works because the support from the vendor side, unless you're a really big brand, is very minimal. And if no one is answering your support cases and basically down to a seller account with no control and not much data. So for me, I would not go into that way of doing business, to be fair.
Paul Sonneveld
Yeah, I think I tend to agree with you there. And as you rightly put, there are some alternatives. It's not purely 1P or 3P. There are providers like yourself who will run 3P accounts, but basically offer a 1P service to brands. Likewise, I am also aware of other players who do the same, but on the 1P side.
Jérôme de Guigné
And distributors with 1P. The only problem is having a distributor with 1P. You lose like already with 1p you lose control but with a distributor you lose a bit more control so it's like you're giving away a lot and what brands are, you know, when I started doing business, I was in distribution and the power was so much in retailers. Like I remember going to Media Markt in Germany and the big buyer or FNAC in France, a big buyer would tell you yes or no, you would live or die on that one guy's decision. And you would be very successful or not successful at all. And that gave them a lot of power. The barrier of entry was so difficult.
Nowadays it's very different, you can enter and the decision maker is really the end consumer, it's not at all the buyer. Now the power, which was within the retailer before, who had the decision to let you live or die as a brand, now it's your own. So I wouldn't give that away to anyone else. And your power is to decide who's going to be able to buy which product from you.
If you go through a distributor, which goes through a vendor account, you're losing like 80, 90% of that, right? So that's why I tend to talk with brands, say, okay, you have that power, which is given to you. 30 years ago, 25 years ago, it was impossible. So that has a lot of value. And you can see the space of distributors has shrunk a lot. There was loads of distributors. Now there's only stronger ones which offer really value. But still, there's in-between man. So the question is, OK, what do you want to do? And us as an agency, we want to protect the brands and to give them as much value and as much control as they can.
Paul Sonneveld
Yeah, no, that makes sense. Why give up all of that control if you're in a position to regain or retain, I should say, a lot of it for your brand? Great. Well, let's finish on this last question, which is really kind of looking forward. So as you look ahead, you know what? Obviously, there's been certain trends, and we can see them clearly in terms of the shift towards 3P, it's becoming harder, Amazon essentially setting much higher thresholds for maintaining vendor accounts. But based on where you're sitting, and particularly as you're engaging with your client base, what are the trends and changes that you foresee in the Amazon vendor landscape that may impact the question of international expansion?
Jérôme de Guigné
For now, the trend we've seen throughout the years is that when Amazon is new to a market or to a category they are very open, they are eager to grow business and they know that the vendor side because they have control sort of drives where they're going to go. So new markets like South Africa, for example, and the new ones, they will open. Maybe you have chances to get a vendor account much easier, like in an easy way, because they will be open to it. And maybe it's a chance to go and grab their one account first so that you can play with it, because afterwards it's going to be less open.
Clearly, Amazon is all about scale, like their software, the way they work, the way they organize everything is about scaling. They recognize that vendor for them is a very costly way to scale because they need people, they need to buy stock, it can cost them a lot of money at their stage. So clearly the seller environment is much less cash-heavy for them. So I don't see that that shifting back to back to vendor.
So like seller, you're hidden in a bigger crowd and sometimes it's it's a good thing.Vendor if you have a vendor account vendor managers is, you know trying to get benefit from you I don't know if that's good. So generally if we're looking for. In the time is like Africa is maybe not tomorrow, but the day after tomorrow. Right. Like this market is huge. And I guess South Africa is their first toe in the water. And then the expansion there is huge. Right. Asia is probably other things to do.
So for me, it's that shift into new markets, which is interesting. And if we look a bit, we take a step back, is trying to find maybe other actors which can challenge Amazon. And I think for me, for customers, for Amazon itself, it needs a challenger. And it's not good because otherwise they'll get split up because all the authorities will say, you're too big.
So I think they need to have competitors also to go and innovate and so on. So I'm looking forward to that, both those two axes as one, getting into new geographies because our DNA is expansion and Bose is looking at other players coming to the market in the States. Walmart is really investing a lot and we see a lot of things happening in the rest of the world. I'm interested to see what the Sheins of the world, the Temus, all the others are trying then to see how the ecosystem will evolve.
Paul Sonneveld
Yeah, that's great. Prediction of the future there. I think your point around the whole piece around antitrust. And actually, we do need, we do need competition in different markets in order to keep Amazon viable as well. You know, don't end up in a sort of, you know, Microsoft-type situation or where they're forced to divest things. Not that, you know, I don't want to spread rumors, but you can see it happening, right? Very interesting. Fantastic.
Well, Jerome, unfortunately, we're out of time, so we'll need to wrap it up. Thank you so much for joining us today. Your expertise, I know you've been in this game for a long time, you've worked with lots of vendors, but your expertise has really helped clarify some of the complexities in terms of global expansion through the Amazon Vendor Central platform, and appreciate your sharing some tips and frameworks along the way as well.
Now, you do this stuff for a living, particularly the consultancy side of things in evaluating international strategies for Amazon brands and enterprise brands. So for those that may be tuning in today live or watching this after, if there's anyone who's interested in learning more about your services, what is the best way for them to get hold of you?
Jérôme de Guigné
So we're very active on LinkedIn. So LinkedIn is a good way both on my page and on the company page. And then we have our website, www.e-comas.com. And the email is sales@ecomas.com. So like any of these things, we're very active in responding. And yeah, feel free to connect with us. We love talking about expansion. That's really our DNA is how to grow. Having discussions with companies about how to expand is, for me, what makes me excited.
Paul Sonneveld
I can see. I can see the passion radiating there, Jerome. So thank you so much. It's been super useful and I really appreciate it.
Jérôme de Guigné
Thanks, Paul.
Paul Sonneveld
All right, everyone. That is it for today. Now, Jérôme spoke about getting in touch. So I do want to do a little plug for myself here. I'm going to be traveling to Amazon Accelerate in a couple of weeks. I'll be in Seattle. I know it's more of a seller focused event, but Guess what? I'm much more interested in talking about vendor topics.
So if you're actually in the Amazon vendor game and you're going to be at Amazon Accelerate, drop me a DM. I'd love to catch up, grab a coffee, grab a drink, just talk Amazon vendor topics. It probably doesn't fit with Amazon's agenda, but that's where my passion is. So reach out to me if you're heading down there. All right. Well, thank you so much for tuning into today's discussion on global expansion via vendor.
Of course, if you're looking for more insights, check out our video-on-demand library at merchantspring.io for a wealth of content. And of course, if you are ready to take your vendor analytics to the next level, feel free to reach out to me directly or our team here on LinkedIn. We're very happy to share how MerchantSpring can support your vendor growth. All right, that's a wrap. Take care. Until next time, bye.
