Podcast transcript
Introduction
Hi, and welcome to a very special episode of Marketplace Masters, your go-to podcast for all things related to improving your Amazon vendor knowledge and commercial performance. This episode is brought to you by MerchantSpring, the most intuitive insights platform for Amazon vendors and hybrid sellers.
Paul Sonneveld
My name is Paul Sonneveld, and I'm your host and facilitator for this session. Now, today's episode comes with a bit of a twist. We're shaking things up a little with a format unlike any we've had before. Instead of our usual one-on-one interviews, we are thrilled to present a panel of distinguished experts, each a master in their field and ready to share their wisdom and insights for a successful 2024 in the Amazon vendor space.
Let me explain the format a little bit more. Each panellist will have exactly three minutes to share their perspectives and top tips for succeeding in 2024. This rapid-fire format promises to be packed with value, delivering concise, powerful strategies directly from the industry's best. Now, after that, the floor is yours. When they've shared their insights, we'll dive into our live Q&A session. And this is where you, our listeners, and our viewers come in. To make this interactive and tailored to what you want to know, we need your input.
Now, you can submit your questions via our website using this https://bit.ly/vendor_ panel_Q, or simply via the LinkedIn comments section. I will direct your question to the relevant expert who will then have 60 seconds to provide a sharp and focused answer. OK, let's kick off with a quick introduction from each of our panellists. Please welcome Matt, Martin, Bruno, and James.
All
Hi, Paul.
Paul Sonneveld
Welcome, guys. Let's start off with some really quick introductions. The questions are already starting to flow in. I can see that. So I know the audience is super keen to get into it. So yeah, let's kick off with you, Matt, and we'll go to Martin, Bruno, and then James.
Matt Anderson
Hi, I'm Matt Anderson. I'm the Chief Strategy Officer of Optimizon, formerly the MD of Marketplace and I've been selling on Amazon for 14 years, supporting vendors like Eat Natural Ferrero, Brabantia, and the like. And yeah, super happy to be here, Paul. Thanks for having me.
Paul Sonneveld
Thank you for joining us. Martin?
Martin Heubel
Yeah, thanks, Paul. Hi, everyone. My name is Martin Heubel. I'm Ecommerce Strategy Consultant, helping particularly first-party vendors on Amazon to make a sense of this ever more complex becoming online retailer, but also then, of course, helping them to see certain ways in order to navigate more effectively, but of course, even more profitably, their negotiations and annual trade discussions with Amazon. Thanks for having us here. I'm really excited, and I think we are going to dive into a lot of exciting topics that are top of mind for brands on Seller as well as on Vendor Central.
Bruno Ferreira
Hi, guys, I'm Bruno. I'm from BlueDot eCommerce. I have more than eight years experience managing Vendor Central accounts globally and I will try to help. We specialize in helping vendors focusing on their internal operational setups for success. And I hope I can contribute with some positive insights today. Thank you for having us.
James Wakefield
Hi, Paul. Hello, everyone. Thank you for having me. My name is James. I'm the founder of Wake Commerce. We're an Amazon specialist agency focused very specifically on vendor central. I've personally got marketplace experience going back to 2002, but over the last few years really dived into the vendor piece and all the kind of nuances and interesting challenges that come from being on that channel. So yeah, thanks for having me. I think it's going to be very, very interesting discussion today to see what this year will bring for everyone.
Paul Sonneveld
All right. Thank you, everyone. Those are the introductions out of the way. So let's start with a slightly more structured and formal part, where each of our panellists is given, I think I wrote down here, three minutes or less. That's 180 seconds. Bruno, just checking in with you. Where, for the purpose of today, everyone's focusing on a, there you go, James got a clock, I need a big buzzer or something for the purpose of today, uh, you know, everyone's obviously focusing on different aspects, so you get, we'll deliver as much value to the audience as possible. Um, so to kick us off, um, I'm going to hand it to Matt, who's going to give us his thoughts on, uh, 2024 about vendors, uh, should be thinking about what's important to them.
Matt Anderson
Yeah, I think from a marketing trend point of view, is being able to target your most profitable customer. Certainly, if you're like an FMCG brand, looking at lifetime value is going to be super important. We know all the profit concerns that we have in the economy as a whole around the supply chain. And net PPM, which I won't go too much into, is like the net profit margin. It's an area that Martin will know and talk about significantly.
But from brand's point of view, we've got a background of increasing cost per click, increasing logistics costs, and margin pressures. How are we going to target the most profitable customer is going to be really the key moving forward into 2024. Because Amazon's going to want you to spend your dollars and spend more dollars and put more into your terms. So that's going to be the real key for 2024. How can you target your most profitable customer for lifetime value?
Paul Sonneveld
Thank you, Matt. Nice, concise, to the point and insightful. Appreciate that. Martin, what's different this year versus next year versus last year?
Martin Heubel
Ooh, is there much difference? I think a lot of vendors have hoped, particularly in their commercial discussions, that Amazon's profitability focus would cease to exist in 2024, because a lot of brands have really gone through an excess amount of negotiation iterations last year already, which was really lying down and linked to very harsh net PPM and margin conversations between themselves and vendor managers at Amazon.
So I think the notion of a lot of brands was, OK, 2024 will be certainly the year of a lot of growth again, and where Amazon will also move the pendulum away from a profitability stance, more towards a growth and expansion stance. And I personally think we are going to get there from potentially the second half of the year onwards. But in light of the recent AVN discussion, so annual vendor negotiations, the focus of vendor managers is pretty much still sitting on net PPM-related and contribution margin-related conversations that really tie back towards all of those conversations that brands have had over the last year.
So I think there are a couple of things. Also, when we look at Amazon's financial performance, Amazon is going to reveal and publish their earnings release for the fourth quarter of last year, this Thursday, where I expect that Amazon will further reduce the losses that it has incurred in its retail operation. And that seems to be the key kind of target for Amazon as of right now, where also Andy Jassy as a CEO wants to potentially show to shareholders that they can as a leadership team pursue and maintain a healthy breakeven point for the retail business at least over more than just one or two quarters. So we will certainly see this first and second quarter of 2024 under the kind of key notion of improving and maintaining the profitability level still.
So brands really need to kind of take note of that because I think it's on the one hand, a little bit of a challenge because a lot of retailers will expect more volume growth. So cost price increases as a means of increasing your growth with retailers is a playbook that comes out of the pandemic and will no longer work, not only with Amazon but also with the likes of Walmart, Target and others. And on the flip side, we are also seeing that it comes down to a lot of the basics again.
So there are a lot of buzzwords such as AI, machine learning, et cetera, and this is all good and fine. But when we are looking at the key commercial building blocks, it really comes down to doing your homework between the annual vendor negotiation cycles and to ensure that you're having the right portfolio, you're driving efficiencies to the right portfolio mix and investing your budgets in terms of advertising and price promotional dollars in the right areas. And I'm sure we are going to kind of dive into a lot of those as part of our conversation today.
Paul Sonneveld
Absolutely. And just to remind everyone, we're seeing lots of people already submitting questions. Best to use the LinkedIn comment section in the event, post your questions, and in about five minutes, we'll start tackling them. So look forward to those. Okay, over to you, Bruno. What are your thoughts on 2024?
Bruno Ferreira
Well, I will grab the words from Martin and considering what we specialize in, the internal setup and operations, we still see a lot of vendors that are pushing Amazon to not go according to their compliance. You guys know I call it the rules of the game. And I believe, I strongly believe that they should make an effort to look inside first to start preparing their own house.
They can gain Martin was mentioning about the cost price increases. Amazon isn't very reluctant to accept and we all know that. But from our experience, we also know that if we went and we if we go and review our internal set up mainly in the supply chain, there's always parts that we can renegotiate with our carriers or align our teams with different training for pick and pack. So basically find efficiencies in those fulfillment of the orders to Amazon.
We all know that chargebacks occur and they are caused by non-compliance. So instead, I continue to see vendors to get really frustrated with chargebacks. And instead of making that effort internally to understand what's causing them and work with their teams to fix them. They see them as a pain. I've had conversations with vendors that at some point, they started to include a percentage from the history of chargebacks on top of their costs to Amazon. I think it will be more efficient for them to work with their teams to sort those issues that are the root causes for that.
So I think that for 2024, I hope that vendors start finally to see how important it is to align your cross-functional team, to give them the proper training, to make them more efficient, to have proper SOPs, those standard operating processes compliant with the Amazon rules and requirements. And I can see that a lot of the success for vendors will come from there. And hopefully 2024, vendors will finally start to see that as we see it here at BlueDot.
Paul Sonneveld
Thank you, Bruno. I look forward to getting to some of those operational supply chain topics shortly as well. Last but not least, James, how do you think about this year in the context of being an Amazon vendor?
James Wakefield
I'd say the fundamentals haven't really changed. You know, there's often noise around certain things and Amazon taking different priorities maybe compared to the previous year. But when we speak to vendors, there's often a lot that they can go out to really accelerate the channel. And that comes down to the basics, really.
So, you know, looking at catalogue, optimization, what's the marketing strategy, really digging into the kind of operational model as Bruno's alluded to, because Vendor Central is such a specific and nuanced, essentially wholesale channel, and there's a lot that can go wrong, or there's a lot of efficiencies that can be made in terms of the processes of processing orders, getting stock into Amazon.
So, I think really vendors need to look at everything in the round, really take the channel seriously, probably look beyond this year and think about, where is this channel going to be for them in the next three to five years. I know certainly with a lot of the vendors that we work with, they probably didn't have a vendor account five years ago. And today it's potentially their biggest wholesale account, the wholesale customer. So they've had to adapt to that and often things have been missed along the way so that there's always improvements that can be made to improve that performance.
Yeah, and I think it's a case of resourcing it appropriately, getting the right support, whether that's internally or externally, and actually investing time, knowledge, and resources into managing the channel, if you're really thinking about where it can potentially be in three to five years time.
A big kind of stat that sticks out for me currently is that Amazon is about to overtake Tesco as the UK's largest retailer, and the growth that they've seen over the last few years is significant multiples above what Tesco have been experiencing. So if brands aren't already in the game, they really need to be. Not that Amazon is necessarily the right fit for every brand, but those that see it as an opportunity, I think, actually really need to double down now and address all these different nuances and departments that contribute to a functioning and efficient vendor channel.
Paul Sonneveld
Thank you, James. That was a great, great summary. Thank you all. And that sort of gets us to the pre-planned part of this show, right? The good news is that we've seen lots of questions here flowing in. So I'm actually going to start picking them and kind of putting them in front of the panel and see where we go.
Now, quite early on, when we just started, there was a question around advertising here from from Nils. So Nils asking, what, from your perspective, are the latest developments or methods to maximize the results in advertising? And I guess we're looking for a particular lens around being a vendor, specifically in the context of all these platforms and investments that Amazon's making on that front. So, Matt, I'm going to give this one to you to respond to.
Matt Anderson
Do you mind repeating that because you broke up slightly on my link?
Paul Sonneveld
Yeah, sure.
Matt Anderson
I've got it here. Yeah, I think there are some really cool things happening with Amazon Marketing Cloud which essentially is like a big data clean room that you can pull in lots of different data sources, DSP being one of them. To be able to analyze and understand your customer better, they've just recently opened up Amazon like a persona planner.
So to be able to understand which audiences are most profitable, which acquisition channels that you can, are most profitable as well across the piece. So, I mean, definitely, there's real opportunities there for vendors to really understand how they can target their most profitable customer by lifetime values mentioned at the start. And, you know, I'm really understand the customer from a, you've never been able to do it from a bricks and mortar perspective.
James mentioned Tesco, for example. Imagine, as a brand, being able to tell a customer, OK, your most profitable customer, your lowest cost proposition is this kind of customer, a 25 to 34-year-old women, have a car, perhaps a dog, children, et cetera. Giving brands that level of granularity and understanding their customer from a data point of view is really exciting. It means that I think you're probably going to see a real step change in the effectiveness of Amazon advertising.
Ultimately, if you can get there, I mean, I guess the bad news for vendors is that, you know, AMC is complicated. You need SQL knowledge. You need probably a data team or a software engineer to be able to understand how to get the most out of it. Whether Amazon, and I believe they will do, will be providing more self-serve tools like the brand-tailored promotions piece that you've already seen in the likes of Seller, for example, in the US, where you can re-target people like abandoned carts, for example, or customers that are the most profitable.
I think that's probably going to be the most exciting area from an advertising point of view. Being able to have all that information that you don't really know from a cost per click and a keyword point of view, being able to really understand your customer better and target them better, I think that's the most exciting developments that are going on at the moment. And some of this tech is freely available. Some of it's probably a bit more restricted for certain vendors. But yes, certainly to be aware of and start A-B testing and testing and learning with it.
Paul Sonneveld
Yeah, great. Thanks, Matt. Given the number of questions that are here, we should probably try and stick to a sort of one-minute max. That wasn't part of the brief, but I'm sort of implementing a new rule now, I think. But just sticking with Nils here, because he asks, actually, he asked another question, which is probably more in man's, you know, line of work here. But, you know, his second question was, you know, what do you see as the biggest lever for the annual discussions to minimize Amazon's net PPM demand and still close the AVN?
Martin Heubel
Yeah, great question. I would say it's doing your homework between AVN cycles. And this is usually the biggest pitfall that a lot of brands are falling in because they are granting Amazon more investment in their AVN 2023. And then, of course, they go away. They don't think about it anymore. And Amazon comes back and says in the next AVN, OK, hold on a second. We haven't reached our margin ambitions. So how can we actually do that? We now need to You're at more investments. And of course, we all are not going to increase or accept your cost price increase request.
But I think there are a couple of things here. First, brands should really become more data-driven and understand what were the kind of ambitions and key objectives of your last AVN of the previous year. And have those been met from both sides? So have you done your part of the homework? And have you kind of launched a new selection that is maybe more optimized for the e-commerce channel? And has then also Amazon, as your negotiation partner kept their promises?
So if they have outlined to you a growth ambition against which you have invested, let's say, for example, a plus 25% growth for 2023, now is a good time to revisit that. So has Amazon actually delivered and have you both delivered on that growth ambition? Or have you seen that, for example, due to the fact that Amazon is now focusing again more about its just-in-time ordering model, a significant decline in orders, which has, of course, led to a miss in your net receipts targets, for example. And those are then things that should really create the foundation of your storyline that you are establishing as part of your vendor negotiations.
Now, Net PPM is always a good proxy KPI to look at the state of your business. I would urge brands to go above and beyond that because you want to ideally become very quickly focused on the true bottom line, which doesn't necessarily sit in your Net PPM because Net PPM does not capture things like packaging improvements, so SIP or SIOC, as well as any supply chain initiatives that may save costs not only for yourself but also for Amazon if you're implementing them effectively.
There are a variety of initiatives available that Amazon offers to brands such as a direct fulfillment model, direct import model, as well as then outbound related initiatives such as a vendor flex model where you carve out an entire step out of your supply chain with Amazon, which of course can come at cost savings for you as a brand because you do not have to ship these goods to an Amazon warehouse.
But on the flip side, Amazon also saves some costs because the products never hit their warehouses. So of course, the associated costs come down as well. But I think the key and concise answer to this is do your homework in between AVN cycles, use your storyline and back it up with data.
Paul Sonneveld
Thanks Martin. I'm going to throw in a supplementary question here from Debbie. You know, you did make a good point around, sort of moving beyond net PPM, but I think she's got a very practical question here, which is, what should the net PPM really be? She's talking about block products where net PPM was over 50% and really struggling to get answers from Amazon themselves. Any guidance, rule of thumb, obviously there's some differences between categories, but what advice can you offer here?
Martin Heubel
So my rule of thumb that I typically advise brands on is that around 35% in net PPM should be really your key ceiling in consumer goods categories and around 40, maximum 45% in hard lines categories. So if you are having very heavy, bulky products, of course, the net PPM is likely having to be higher because it also costs every party involved more to ship these goods to the end shopper, but also to store them.
Any more investment beyond that should really come out of joint cost-saving initiatives, such as I mentioned earlier. So packaging improvements or supply chain initiatives that target the joint costs that are sitting in the joint value and supply chain. Because if you're just inflating the net PPM further from this point onwards, it's very likely that you are getting not a good return on investment and that you are running quickly into issues on keeping these products available in the buy box otherwise in a way that is unprofitable for you, it is becoming more profitable for Amazon, of course.
So I think looking at the right model that exists, and then also making tough choices around, do I maybe not offer a certain or particular product on Amazon? Because it may not be something that I can competitively offer, but do I have the opportunity to maybe launch an exclusive alternative pack instead, or to kind of use this information in order to inform my NPD process with my product development teams? Those are questions that we need to raise.
And without taking it too far, I think it comes down to really adopting a more mid- to long-term focus when it comes to Amazon, and even more so with Amazon Vendor. Because most of us are really focused only on the next six to 12 months, because we have those targets that are coming from our finance departments, and if you're a publicly traded company, also from our shareholders. So even our C-level is focused only on the next 12 months sometimes. But here is also where we as experts in the vendor community in our organizations need to really educate our key stakeholders and leadership teams that a more long-term focus is really needed in order to also sustain our bottom line, not only for the next 12 months.
Paul Sonneveld
I'm going to shift gears. You want to add something to that, Matt?
Matt Anderson
Briefly, so I think it's just moving away from the thought that Amazon typically vendor managers will go, OK, well, let's just list everything. And clients coming to agencies like ours and saying, well, we just want to list the whole catalogue. I think it's really being focused and strategic about what are the most profitable products. So there's a win-win. There's the work for the brand and for Amazon and exclusivity and driving volume of that top 20% of products that are driving 80% of your revenue because you only have a limited Ad budget, you only have a limited amount of time to be creative.
So actually being a bit more strategic and being more like sellers really that they look at like manageable ranges of products 20 to 30 in total rather than trying to list hundreds and hundreds of products and trying to, because more products, more issues, more packaging issues, rebate issues, et cetera. Make it manageable and focus on what is profitable and what works for both Amazon and yourself as a brand.
Paul Sonneveld
Thank you, Matt. That's very, very useful. I'm scrolling. We've got a lot of questions here. So if I feel like I'm taking a little bit of time, it's because I'm scrolling here. I wanted to get into some of the hybrid conversation, and particularly around there was a question here around brand control. I'm just trying to pull it up here. I hope they're not disappearing here. It's going quite a long list here. Let's go. All right. Ok.
Yeah, it actually was a question from John. Obviously, there's a big, again, more around the hybrid stretch. I've got a few other questions here, so we don't have to go too deep there. I've got a few others. But this question around brand control and that being a big driver of switching from 1P to 3P, I want to ask you, James, how do you feel, what are your thoughts on brand control in the context of a vendor and is switching to 3P the solution here or are there other things that vendors can think about this year?
James Wakefield
It's a really big and quite contentious topic within the Amazon space, because generally in this space, the majority of providers, consultants, and agencies are dealing on the 3P side. So they maybe don't get as much exposure to 1P vendors, certainly as we do. And so there's certain misconceptions around what each platform is, what it's for, what it does, what the kind of variables are. And often this question comes up in terms of, I'm struggling with certain aspects of my vendor account. So the obvious answer is to just switch to seller. But it's really easier said than done because I think the way that you've got to look at both platforms is that they just function very, very differently.
They're essentially based on a different business model, and they are designed for different business models. And if we look at what a vendor is, it's essentially a B2B wholesale platform. There's obviously similarities between Vendor Central and Seller Central but just the whole psychology around the fact that you're receiving purchase orders, responding to those, selling your stock to Amazon is very different to managing, for example, an FBA account where you're deciding exactly what stock to send in you've got to be managing that whole stock management process a lot more closely. And you're essentially still interacting directly almost with the customer.
So the typical challenges that arise on the vendor side, pricing is probably the biggest. And that's often a reason that vendors will decide to switch or try and maybe supplement some of their range on 3P. That's fine as long as it's managed effectively, but from a pricing perspective, if your objective is to put products onto seller because Amazon is undercutting you or underpricing them on the vendor side, that's actually not going to solve your issue because Amazon's got quite a strict policy on pricing, which they have been enforcing a lot more recently. And if you look at the fundamentals of the marketplace, it's based on selection and everyday low prices.
So if you try and kind of circumvent that, the algorithm will work it out and it will actually block your offers on the seller side. So yeah, there's a lot of nuance and different things to consider when switching or supplementing to 3P. But often they get sort of lost in the generalizations that we see.
Bruno Ferreira
If you allow me, Paul.
Paul Sonneveld
And there's a lot of opinions out there on this topic as well, of course. I actually wanted to expand the topic slightly larger and the role of really the hybrid model this year versus prior years. In fact, both Tim Shelton, based here out of Australia, thanks for staying up late with me, Tim. Thoughts on the hybrid strategy for brands in 2024? And then also, Toby, in the UK, what is the most compelling reason for a brand, should it be an option for them to use a hybrid model, as opposed to either sticking in the 1P or the 3P lane? Is hybrid the way to go for 2024, or were less so than in prior years, or more so? So maybe I'll get you to respond first, James, and I know there'll be some other views maybe as well.
James Wakefield
So yeah, I can give a very quick answer on that. And for me, it really comes down to resourcing. So majority of vendors or sellers we come across have not adequately resourced their Amazon accounts. And that's kind of to my earlier point of, where is your account going to be in three to five years. It's not really the time to be necessarily penny-pinching, particularly if you're in the sort of early stage of Amazon journey, you've got to invest in the channel to set yourself up for long-term growth. And if you do that, if you do that initial investment, you're going to be in a much better position further on in future years.
But resourcing is really key when it comes to the hybrid model, because the points that I mentioned earlier, these channels operate very, very differently. So if you don't have the adequate expertise, people who really know what they're doing, how to manage those channels, then you're going to run into problems. And the biggest one that I've seen is where brands are operating a hybrid model and they're basically competing with themselves because there's no strategy behind the product selection. They're just kind of, you know, sending the same products to both channels, which really is pointless and suicide if you're, you know, trying to maintain sell-through and everything else.
So yeah, hybrid needs to be done. For us, it's almost as a last resort. You know, you've got to make your existing channel perform to the best of its ability. And you can only do that with adequate resourcing. And if you're still running into problems with very specific ASINs, OK, fine, look at hybrid, but just be aware of what you're getting into.
Paul Sonneveld
Any of the other panellists would like to add anything to James's comments?
Bruno Ferreira
I would like just to add, Paul, very quick. I'm grabbing the first question. I can't remember the name of the person. I'm sorry. What is brand control? When you get invited to be a vendor, you are in a long-term partnership with Amazon. So you are in control of your brand. It's your brand. You own the brand.
I think that I'm a huge supporter of vendor, as you guys know. I think that once again, I continue to see vendors, they get invited, there's no training. They select their team from the team that was running the online page for the brand. But everything is different on vendor. I'm a huge supporter of getting your cross-functional team with the proper training, understanding exactly how vendor works.
Let's keep in mind that vendor is a B2B business. Yes, you are always in control of your brand, so maybe considering looking internally to your setup, to your team, and then maybe those questions about going ivory because you feel frustrated with some details, some day-to-day challenges that are happening to your brand. Will they be sorted with a hybrid model? I am now connecting the dots from the words that Martin said and James, because, What will be the improvement? You will be just fighting against your own brand that Amazon will buy.
Let's keep in mind, too, that the Amazon price matching system is coming from your own internal price strategy. Why are you selling lower prices to your distributors that without you knowing are either a third party or a seller or even a vendor to Amazon in a different country? Why don't you align it first internally? So all of these control of the brands, all vendors on the brands, they should be in control and they should first understand how it works. Like, unfortunately, even on a C level of our clients, we continue to see a huge resistance to try to understand how Amazon vendor works. And instead of aligning themselves with vendor, with the vendor central, because they agreed to supply. They continue to think, oh, this is not logic. This is not correct. And they get super frustrated. And then, oh, let's consider to go seller because we'll sort all the issues.
So the key message that I want to pass is each vendor or an official distributor for a brand is always in control of the brand. Don't think that you're not. But Amazon consider each vendor as a long-term partnership. Do you consider Amazon? the same way, maybe you should start asking that question. I just wanted to add that very quick.
Paul Sonneveld
Thanks, Bruno. I think, Matt, you've added your hands up. Maybe take just 10 seconds, final words on this one.
Matt Anderson
You know that you as a company should control your brand, your decision, your selection for Amazon and other retailers. You know, Amazon is not the only retailer in town. You know, it's obviously B&Q and Tesco is launching their own marketplace, etc. If you can control your brand and have exclusivity, then you can demand a premium price, for example.
So yeah, essentially, nine times out of 10, brands come to us and they say, well, we want to look at a hybrid model. It's the reason because they've lost control of their brand. They have lots of distributors. They have lots of third parties competing on the buy box. Amazon craps out the product, and you see it over and over and over again. Because I'd say the reason why people want to go to a hybrid model, nine times out of 10, is because they've lost control of their brand. So anyway, that's my point.
Paul Sonneveld
Thanks, Matt. Some really great points there. There's a lot of practical questions. Viewers really asking for some practical advice. So I'm just going to pick a couple of those and get right into it. I want to start with a question from Rizza, really around, how do you grow? I mean, I'll ask you just three of those questions. What do you recommend in order to grow sales for a newly launched brand on Amazon Vendor? It's not a new private label brand, he says. It's been around for a while, but only recently launched on the Amazon Vendor platform. Now, I appreciate this is a big overall strategy, but what are some points you guys would offer here? James, take it away.
James Wakefield
Yeah, interesting one. What I would look at before anything else is what is actually happening with that brand on the Amazon channel currently. If he's saying it's an established brand, there's a very strong chance that products are already on there. which is good and bad in many different ways. But what you need to understand, and you can do this by literally just searching for the brand name in the search bar, doing a full audit of, OK, what listings are actually live? And then you need to dig a bit deeper in terms of, OK, are these listings using the correct barcodes? Have the products been set up appropriately? If yes, then you can jump on those products by adding them to your vendor account and start capitalizing on the existing rankings and sales that they've been generating.
But inevitably, there's also likely to be what we would describe as rogue listings, which have been listed with illegitimate barcodes. They might be duplicates. They might be random bundles or packs that have been broken up. So you need to kind of quantify, OK, what is actually generating the sales for my brand on the platform, and how can I capitalize on that through my vendor account? And it's not a kind of easy project. There's a lot of things you need to look at and take into consideration. But even before getting all excited about listing your official listings, I would be looking at, Ok, what is actually happening with my brand on the channel right now?
Paul Sonneveld
Thanks, James. I'm going to throw up one here from Dan. It's a long one. It's got to do with forecast accuracy. So they have very seasonal products, and we find that the forecasts, very inaccurate. I mean, the focus provided by Amazon has proven very difficult to ensure accurate stock and order levels with really no solution on the Amazon side. Any thoughts or tips or advice for Dan on this topic, forecasting and seasonal products?
Bruno Ferreira
I think if you guys allow me, I'll go here. So I'm a huge supporter of data and data analytics, not the data analytics that sometimes we see within the Amazon Vendor Central web interface, but work the data. You know your category, you know your products, you know what seasons. Just go back to your internal system.
You don't need the data just from the web interface available on Vendor Central. You have your own data because you invoice your products to Amazon. You also have your returns if you don't have a return agreement with them. So you know exactly which were the periods of peak. So use all of that data and construct a model. I'm not saying it's easy, but can be worked out a statistical model that will have an error rate very, very minimum and it will probably help. So use all of that data and don't just guide yourself from one single place.
Paul Sonneveld
Thanks. Martin?
Martin Heubel
Yeah, I really like that one. But also maybe to just throw it out there, I mean, especially if you're selling in a highly seasonal category and you're a significant brand for Amazon and especially your vendor manager, there is, of course, the opportunity to have pre-orders arranged. However, it's really on the brand in order to kind of ensure that you're initiating those conversations with Amazon, you're making your vendor manager aware of it. We all know that vendor managers often rotate in and out of the position within 12 to 15 months. So the new person who comes onto your account may not be necessarily aware of certain key ordering deadlines that you may have internally.
So just make sure that you are really the advocate of your brand. You are proactive and not reactive. Don't wait for Amazon to reach out to you to place a pre-order. And also make use of particularly the tools that Amazon has developed over the last few years in order to ease the pain, so to say. One is Born to Run, right? Especially if you're currently negotiating with Amazon, think about negotiating a Born to Run budget, especially for the more seasonal times, if that happens to be in the fourth quarter. Because then you are not necessarily seeing your bond to run being blocked in Vendor Central as for a lot of other brands it is. Because Amazon shifts its focus to outbound in the fourth quarter from the inbound focus it has usually.
And second of all, if you are, again, a relevant brand in the Amazon category and you have a dedicated vendor manager negotiating with you, Amazon these days offers also a commitment ordering program, which gives you their buying forecast instead of just the demand forecast or the P70 that is demand-oriented towards the end shopper demand, which can be an attractive additional data point in order to inform your forecasting decisions as well.
Paul Sonneveld
Thank you, Martin. Invites to become a vendor. I think two people, Ian's asking and I think there's another viewer's asking a very similar question. In 2024, what's the likelihood of getting a vendor invite and how do I increase my chances is the way I would paraphrase it. James, you've got your hand up.
James Wakefield
Yeah, I realized I actually wanted to mention this in the introduction. But from the perspective of the UK market, I've been advised that Amazon has kind of tightened up its criteria around now, actually. So the change has happened quite recently. So they've got quite a focused list of brands that they want to onboard, which might be brands that are new to the marketplace, or they might be trying to coax them away from 3P.
In our own experience, actually, it's been more challenging to get certain brands onboarded than it used to be. The lead time has been longer, because if you're not on this list, then they basically have to escalate it. There has to be an exception. But if you are a prominent, sort of mid-level and above consumer brand, they're particularly interested in ones that have got what they call Nielsen products.
So whilst the overall brand might not necessarily meet the criteria for a vendor account, there might be specific products that they're very keen to have in their catalogue, and they will make exceptions for those. So yeah, not as easy as it's been in previous years, definitely.
Paul Sonneveld
Thanks for that realistic answer, James. Let's talk a little bit about PICS. So, Ana is talking about the fact that they declined the invite for PICS. But since then, they're really experiencing a very low, but lots of orders, very fragmented, costly orders. And Amazon won't let them raise the minimum order value. How do you best deal with this? Tips, suggestions for Ana to consider?
Bruno Ferreira
Well, my first question would be the reason to decline the PICS. I think the PICS program or super PICS are very useful to align your internal costs on the delivery. So, we don't know that of course, but in the question you mentioned and MOV, I assume that it's the minimum order value. I always advise my clients instead of a minimum order value. And Martin can probably advise better on this. But I think that working with your master box for your products, if you sell a product that comes in into a box of 20, just work with your vendor manager or your brand specialist to map internally and you can do that yourself through the self-service menus on the web interface.
Map each agent to your master carton box, your inner child product, do all of that work and then you will have a minimum order quantity according to your transport case. You are immediately reducing the pick and pack timings, you are assuring to reduce those PQV, those product quantity variants that everybody knows as shortage claims.
And then the system will only send you a purchase order when it gets to the minimum, but not based on a minimum order value. It will send you a purchase order when it needs that stock, and it gets to the minimum quantity that if you do the work properly and map that to the master box quantity, then they will start ordering on those master box. I think that will be a great help.
Martin Heubel
Maybe just to add on, because I looked into the chat and Arne said, okay, the reason for rejecting it was because the charges at 4.8% that is too high, which is fine. But I think in general, right, I mean, you can always negotiate a percentage and you can also, of course, ensure that you're having a holistic conversation about your trading terms.
As with any other retailer, Amazon is no different here. You would do the same if you would negotiate with a Walmart or Target, of course, But if you're looking at jointly improving your cost savings, then there needs to be a conversation about how to do that with supply chain initiatives, and how you're also being able to move and switch certain existing investments in other areas that may have not worked towards this target over the past into areas that unfold more profitably for both parties. Now, that doesn't mean that you're moving the full 4.8% from, for example, an auto marketing into PICS.
But typically, there's some leeway and some wiggle room, both for you as well as for your vendor manager to agree on moving a certain percentage away from other terms that may not drive a lot of return on investment for you and for Amazon. Because in the end, what all the parties involved in a negotiation want to achieve is a more sustainable bottom line. And if you are having cost savings, which you likely have, because Amazon is shouldering the distribution of products into its own warehouses, then hopefully there's a little bit of room to then also find a mutually agreeable agreement, so to say.
Paul Sonneveld
Thank you.
Bruno Ferreira
And I will just add now that we know that the we've seen in the past years that Amazon now is charging for the PICS program on a percentage basis. I always advise people, vendors to consider, think about that. So if you imagine product A and product B from your brand and it's the same product, but one, the Amazon cost is £50 and the other one is £100 and it's basically the same transport box, the same weight, but one is a wired product and the other one is Bluetooth. So think about that. You will be paying 4.8% from £100. and 4.8 percent from 50 pounds when basically it's the same volume, it's the same weight.
So try to discuss with your vendor manager or brand specialist not to allocate a percentage across your catalogue but try to build it in blocks with similar products within catalogue and then you will probably be in a better place. But try to push to have that negotiation not focused on a percentage agreed to all your catalogue. Try to put it in different silos. And then you will once again find some efficiencies and cost savings doing that too.
Paul Sonneveld
Thank you, Bruno. I want to pick on one other theme that we haven't really spoken about, which is the human interaction with Amazon. Certainly, we've got some commentary here from Mark. He seems to have had a pretty tough time in terms of even getting hold of anyone from a vendor point of view. And then I also noticed there was another question earlier on around, Amazon's structure and how do we best play into that? So let me bring it up right at the top here. Yeah. from Tomasz. With Amazon's growing presence in Europe, can you shed light on whether the company is moving towards having a singular contact for vendors across the EU? Is the approach still to maintain individual vendor contacts by country?
Probably just kind of leave it there. I think there's a broader theme which is around how do I organize myself as a vendor to interact with Amazon and how do I build a responsive relationship? And how do I get some cut through when no one seems to be returning my calls? We'll start with you, James.
James Wakefield
Yeah, sorry for answering every question. But this is one that I'm quite passionate about. Essentially, there has to be an acceptance, a realization that dealing with Amazon is very difficult. There's everyday issues that happen, particularly in relation to listings, things being changed, things being broken, various contributors updating things that they just shouldn't have any authority over.
And the only way around it is to liaise with vendor support or on the seller side with seller support. It's very frustrating. The responses are usually canned responses. Sometimes they answer an issue that's just totally unrelated to the topic at hand. Sometimes issues will get resolved in a single try. Other times it might take months. And there's some issues that unfortunately just never get resolved.
In our work as an agency, particularly on the catalogue side, we basically have to build the infrastructure to work this into our methodology. We've got a very sophisticated system where we're tracking tickets, the relevant people in our team have to keep on top of the tickets that they've filed, keep chasing those, keep following up, reopening them if they're not getting the required response. And unfortunately, it's just a case of being very persistent, very consistent, kind of quite unemotional about it, and just keep going and trying. But also, knowing about various points of escalation where you're just hitting a brick wall. But yeah, I feel people's pain, definitely.
Bruno Ferreira
I'm also sorry for answering so many questions, but James gave great insights. And I will just add that every vendor should be aware that the support team, when we open a case, it's always a human there. All of you have heard me saying this before. It's a human. Don't start an email. I always start my emails and I train my teams. Hi, team. How's your week so far? And then talk to that person as you were talking to a six-year-old person. Give all the description. Give everything that you have available of the issue that you're trying to describe. Dispute number, invoice number, whatever you have. If you have to repeat it, do it all over again, it will help a lot.
But I think that some vendors start a support case, usually they are very frustrated. And they put that frustration in that email, because that's an email, the person on the other side will receive that on an email, they won't see that box that we complete the support case. And think about this, that person is receiving 100 of those an hour. And she goes or he goes through that list and one of them start, hi, Tim, how are you today? Which email do you think that person is going to select to start first?
I have a high rate of success sorting cases with a support team. And I truly believe that it's through the approach that I use and I train my clients' teams to open the support cases. There's always a human on that side. AI is coming very quick, but we can see that on the dispute modules and other places. But when you open a support case, someone will open it. That's for sure.
James Wakefield
And it's definitely got harder, I'd say, over the last sort of year, 18 months, because Amazon's catalogue is so monstrous and broken. And it's got all these different contributors, resellers, third party sellers, et cetera. The algorithm has to make a decision about what content changes it's accepting. And it's not infallible. It makes mistakes. It does lots of crazy things. But yeah, Amazon really needs to do a better job of actually giving brand owners more control over their listings, their merchandising. We've got brand registry. But I just think it's not good enough. Matt.
Paul Sonneveld
Five seconds, Matt. I think we're close to out of time. So final words.
Matt Anderson
I made a big prediction. Amazon are going to have to increase their support for certain types of vendors. Say, for example, if you're a hazmat or hazardous products or medicinal claims, for example, because there's so many catalogue issues. As a brand, you've got to make a call. You know, we have to resource this channel to deal with all of this. Do we actually sell on Amazon or do we? Because we're not getting the support.
So I think it's really making things but having an understanding that you're going to have to put a lot of effort into getting certain kinds of products live on Amazon now, and you're not going to get the support from Amazon unless you're Bose or a huge brand. So making those judgment calls about editing and investing time, we're not going to have access to humans, and building inefficiencies, and also the margin, because you'll need to resource it yourself. Amazon's not going to do it. So just make those calls as a retailer. And go into the relationship eyes wide open.
Paul Sonneveld
Thanks, Matt. Sorry, I just wanted to interject because we've hit an hour. We do have to wrap up. I just want to apologize for everyone's submitted questions. We've probably got through about 30% of them. So thank you for that. We will go through them after the event, and we'll reach out individually with answers and ways we can help and support you. And we'll work that together with the panel, probably more of them than me. They're far more knowledgeable.
But to finish us off, I wanted to ask one last question from each of our panellists. In 30 seconds or less, what is your number one prediction of something that we're going to see on the Amazon vendor front by the end of Q1? We may have a follow-up session then, just to see if our predictions have come through. But what is your number one prediction? Who wants to kick us off?
Martin Heubel
I'm happy to start. So my prediction for 2024 is certainly that the first half of the year will be all under the theme of profitability. And then from around Prime Day onwards, I believe you'll see a strong push towards volume growth. In light of the rising competition from Temu, Shein, TikTok Shop and others, Amazon is eventually forced to play this card of growth and expansion again in order to ensure that also sellers as well as vendors stay on their platform. So account for that. Don't spend all of your budgets right now as part of your AVN. Keep also money available in order to fund price promotions and volume growth in H2, especially when it comes to the fourth quarter.
Paul Sonneveld
Fantastic. Who wants to go next?
Matt Anderson
I will. I'm speaking for someone who spoke to a brand recently that spent £300,000 on A-plus premium content as a vendor when they could have got a free three-seller. I think Amazon's going to be pushing additional options regarding access to data and understanding your customer more. So you're going to actually get vendor managers wanting to charge additional terms to get more access to data about your customer. So that's my prediction.
Paul Sonneveld
Excellent. Thanks, Matt. James?
James Wakefield
Yeah, on a similar point, more of a prayer than a prediction, but the data provision on Vendor Central is just a bit rubbish, really. And often, when people are comparing 3P and 1P, there is an argument that the 3P data is better. Amazon rolled out a new dashboard, I think, about 18 months ago. They took some things away. They've been slowly reintroducing certain things. I don't know if it was kind of an intentional move to mask certain data, but that data is really useful, particularly from a kind of optimization and merchandising position to make improvements. So my plea would be more data, not less.
Paul Sonneveld
Excellent.
Bruno Ferreira
Well, my prediction to Q1 is that coming from a very strong last year in challenges, probably Amazon will review their compliance book. We already saw some changes in the U.S. and we know from experience that they will take a couple of months to reach Europe and other markets. So my best guess is that building from Q1 to Q2 and Q3 there will probably be some changes regarding compliances, labeling. We saw some comment from Chris Khoo from Khoo Commerce recently that made us all aware that in the U.S. they already ruled that out. So I'm expecting very soon to Europe too.
Paul Sonneveld
Thank you, Bruno, much appreciated. That brings us to the end of today's episode. A big thank you to our wonderful panellists, Matt, Martin, James and Bruno for the useful and practical insights shared today. If you are hungry for more, don't forget to visit our on-demand library right on our website under the resources section, and you'll find a treasure trove of videos and other content. And of course, if you are aiming to streamline your analytics to gain sharper insights, reach out to us and discover how MerchantSpring can transform your journey.
Thank you all so much for watching. I want to say thank you to all of our wonderful panellists. It feels like every time we do one of these sessions, we've just scratched the surface. I think all of us just want to keep going for about three hours and really get to the bottom of it. I'm sure we'd have very few viewers left. We would have a good time anyway.
If you have a particular topic, and actually I might go through the questions at the end of this session, that you really want us to cover in a lot more depth. I think there were some great questions there we didn't get to. Please let us know and I'm very happy to find, work with one of the panel members here or another expert and put on some great content for you. So yeah, thank you very much and wishing you all the best of success in 2024 as you kickstart the year that hopefully will be a very successful one from a commercial point of view. Thank you so much. Take care, everyone.
Bruno Ferreira
Thank you, Paul. Bye, guys.
Martin Heubel
Thanks, Paul. Thanks, everyone.
James Wakefield and Matt Anderson
Bye!
Paul Sonneveld
Until next time, keep thriving and keep innovating. Take care.
