Podcast transcript
Introduction
Hi, and welcome to Marketplace Masters, sponsored by MerchantSpring, your go-to for marketplace analytics and agency client reporting.
Paul Sonneveld
I'm your host, Paul Sonneveld, and today we're diving into channel distribution strategies on Amazon. Joining me today are experts from Valuezon, Frieder Kuhn and Florian Schneider. Let me briefly introduce my distinguished guests for today. Frieder, with his extensive background in digital sales, e-commerce and strategy, has held key roles at Puma Group, including General Manager for Switzerland and Austria, and the Global Director of Business Unit Management. He also brings experience from the Boston Consulting Group, where he worked on high-impact projects.
Florian is an Amazon seller or was an Amazon seller since 2019 and leads Valuezon distribution business unit. He has collaborated with startups and companies across various industries like fitness equipment, supplements, and FMCG. Since 2022, he has spearheaded Valuezon’s internal distribution business, partnering with brands to sell their products exclusively under Valuezon's account.
And together, Frida and Florian will share their valuable expertise and perspectives on optimizing your Amazon distribution strategy, building successful brands and navigating the complexities of e-commerce. Well, thank you so much for being on today's episode, Frida and Florian.
Florian Schneider
Pleasure. Thanks for having us.
Frieder Kuhn
Hello, Paul.
Paul Sonneveld
I need to sit a little bit lower. I noticed that I'm sitting probably on a very high chair. I'm trying to get my head aligned with yours. There we go.
Frieder Kuhn
We try to move up a bit.
Paul Sonneveld
Yeah, that's perfectly in line now. Excellent. Okay. Well look let's start off maybe with you Frieder. Just you know, I've spoken to a lot of agencies on this podcast and I work with hundreds of agencies on a daily basis I mean nothing personally obviously, but you guys are a little bit different and unique and I'd love to just set the scene give us a quick intro about values on and how you guys started that?
Frieder Kuhn
Yeah, actually, the story of Valuezon starts even a few years before Valuezon, because together with Hanno Dayle, my co-founder, we founded a company in the sleep business, a third of life. And we grew on Amazon. And from our former network, you just mentioned a few of my former jobs. People approached us and said, hey, can you help us on become successful on Amazon, how do you do it? And that's when we founded Valuezon.
So we are entrepreneurs. We are a seller. We live it still every day. And we, of course, also the same time we also live the same pain as all our clients. And that's when we founded Valuezon six years ago. We are Munich-based, we are an agency, we are a consulting company, but we are also a distributor, where we act as a distributor or broker for our clients, and that will be one of the topics today. Um, that's it, mainly how values on has been created. It's driven by entrepreneurs, also our, um, client managers. And that's also our approach for our clients.
Paul Sonneveld
Yeah, fantastic. Thank you for giving that introduction and setting the scene there. Um, so let's try and unpack our topic. And today I want to start quite high level. You bring the sort of perspective, particularly from Germany here, you're obviously an agency, but do consultancy as well. How do you see the current Amazon ecosystem? And what does it take to succeed in 2024? Particularly from a distribution angle?
Frieder Kuhn
Yeah, I mean, there's a lot to say, of course, but when we just look at one country like Germany now, where more than 50% of the e-commerce is covered by Amazon and it's still growing, we see a massive change and collapse in the supply chain. That's one of the things to give an introduction. The supply chain, when it comes from manufacturer to consumer, manufacturers are coming in heavily.
On the other side, also the system, the established system between the brands and supplier and manufacturers but also their retail partners online and offline with all the buy box topics we see massive problems which we have to solve and mostly the brands can solve on their own. So that is one of the topics why we think the sales channel of marketplace and especially amazon has to be managed in a professional way it has to be managed very specifically how to deal with it as a vendor, as a seller or even using a distributor broker model and that is our journey into offering this full service.
The next thing is especially how to play on Amazon. Most of the brands try to cover or try to sell all of their product portfolio on Amazon, which is fine, but usually it's a I call it the highlander game. It's a bestseller game. So you try to establish and build bestsellers um to make it very briefly and the and the other thing what is very special about amazon is the performance marketing site which we also cover of course but the performance marketing site which is the sales department next to the content which is very important the two main the two main pillars.
Nevertheless and that's the my last point on that there is some other very important tasks which we have to cover. This is having the right product. So we also develop the right product with our clients. We do this database, we do it kind of target re-engineered product development together with the clients. We need a very data-driven business management. So we not only want to cover content and performance marketing.
Paul Sonneveld
Thank you for that big picture perspective there. That's, that's very useful. I want to zoom in a little bit more on some of these strategic approaches, right? Particularly around distribution, because, you know, even before we started this podcast, we were talking about, probably 10 years ago was, or even five years ago, you know, you're, you have to choose. You're either a vendor or a seller, right? And then we evolved from, Hey, let's move from vendor to becoming a seller.
And then two years ago, we started talking about, hey, how do you do the hybrid approach? This model continues to evolve constantly. What are the strategic approaches that you see today in terms of how do you maximize your sales and grow your business across the Amazon platform?
Frieder Kuhn
Yeah, we see it exactly the same way. And we saw it in our developer and our own company, but also with the clients, to be honest. We also did not have the same approach three or five years ago. I want to start maybe one level more up. You either don't sell on Amazon, which well, there might be some companies who still consider that. Then you sell to Amazon as a vendor being in the vendor program. You can be a seller or yes, you can also have this selling being done by a third party. It can be one of your retail clients, but can also be this broker distributor model.
Nevertheless, most of these, whatever model you chose, we see a development for certain reasons and that will be the main part of the podcast in our opinion to show what are the cases what cases appeared for our clients when did it make sense to add another sales another model like not only being a vendor but also being a seller and especially as we call it this not only hybrid to using two models but also now using three models the broker and distributor we call it dry hybrid model and it's again not always choosing now one of the three it's really like seamlessly orchestrating between the three channels.
And that makes it so interesting because for different cases and use cases, we are using all of the three. Of course, there is an emphasis, mostly a focus on one of the three, no question. But this will be the most important and interesting part, in my opinion, to go through a few examples when to use number two or number three. And then it's exactly as you said, then it's just a question of orchestrating and not of selection.
Paul Sonneveld
So really, I just want to sort of paraphrase before we sort of dive into the detail here. Really, what we're talking about now is really the next evolution of around, you know, being as a brand, actually having multiple distribution avenues towards Amazon seller, vendor, and then you mentioned sort of the broker model, you know, and using a combination of those, all those three. Now, before we go into specific case studies and examples, can you just explain, particularly for those, you know, maybe sellers that are not used to the terminology, how would you explain, how would you put the broker model in layman's terms in terms of mechanically how that works? And I'm sure we'll go into a lot more detail in a sec, just conceptually be great.
Florian Schneider
Yeah, I just want to add one more point to what Frieder just said is nowadays, especially in 2024, the approach that we have is, you know, it's more about diversifying your business as well, right? So you either, as he said, you used to be either a seller or vendor, you choose your approach, then you moved into maybe considering being a hybrid. But now Amazon is so multi dimensional. And it's so complex throughout the years that it is really about diversifying your business.
So what exactly is a broker or a distributor? Well, I usually frame it that way you could look at it as a let's say, as a strategic distribution channel partner for your Amazon business. So, what that means is, if you work with a broker, that combines the convenience of a vendor approach with the expertise and scale potential of the seller. So you sell your products in that particular case to a broker. And then the broker does all the heavy lifting. He sells your product in whatever distribution channel, whatever markets, Amazon marketplace that you decide on.
So there's obviously different types of brokers, but a real good broker is someone that covers the entire value chain, meaning they do the SEO for you. They do the keyword research. They build the listing. They build out the content in a very strategic way. They handle all the PPC, your campaign management. They do price promotions on Amazon, customer service. So everything from A to Z, you don't have to worry about anything. It's basically just like a turnkey solution. And the good thing about that is you have basically 0% of the risk, but you get 100% of the upside. So that's how I usually summarize what a broker model is.
Paul Sonneveld
Yeah, I find it very interesting because that certainly a refreshing definition of maybe the one that's floating around in my head based on past experiences. Because the way you're describing is really you're talking about a full service offer that the broker does, actively managing your Amazon account, and on top of that, you know, purchasing the stock. You know, whereas traditionally, certainly here in Australia, brokers have a bit of a bad reputation for like, just selling stock, but not actually doing all the hard work. But really, what you're saying is actually this, this model is different to that. It's like the full service agency with, you know, the whole, you know, purchasing of stock associated
Frieder Kuhn
Yeah.
Florian Schneider
And usually just to add one quick point, usually what most companies claim is that, you know, we do everything for you. You don't have to worry about anything, but really the good brokers are, you could see them as, as a partner, right? It's not, it's not someone that you hire and it's not a service that they provide. It's more like a partnership, right? The better, the better of a job I do as a broker, the better I sell your product and the better I sell your product, the more money you can make. And the more money I can make, the more I can reorder. So it's a cycle, right? It all comes back to it. And I would love for people to look at this as a partnership rather than a service or an agency service.
Frieder Kuhn
Yeah, absolutely. I can underline that because coming from a retail world, we have had in the former companies like Puma, we have had distributor for countries where Puma did not start their operations on their own and that's exactly what it is it's a partnership. It's a real sales channel partnership and why do we see it like this because we want to or we are addressing companies that that don't have the capabilities, the resources at all to be B2C.
So a B2B company, which we have as a client, for example, they said, we don't even want to build up B2C capabilities, resources, or anything. It can be a manufacturer, which is even less B2B, sorry to say sometimes, than brands. And it can be also D2C companies, which are specialized in social or other Google or shopping topics and they say guys I mean maybe it's better you take care of it can also be for a certain time and that's when we also will come to dimensions it's about countries, it's about can be product topics it can be period of time topics when this model can jump in and that's exactly where we are heading to the examples now.
Paul Sonneveld
Yeah. Yeah. I was going to say, I would love to, I think that that's kind of the theory, right? Um, I would love to hear some examples or even just maybe within your own client portfolio. Um, you know, how did they get to the conclusion of using multiple channels? Why did it make sense for that client? You know, what does it look like? Um, if you can share, uh, some examples with us, that'd be very interesting.
Frieder Kuhn
Of course.
Florian Schneider
Yeah, sure. So what we've seen throughout the years, obviously as an agency working with hundreds of clients, we've always seen the same issues and challenges arise, right? So, I'll give you a quick example of, let's say you're a vendor and you sell on Amazon and all of a sudden your products get crapped, right? And Amazon decides to not reorder the product or leaves the buy box. And the product has been doing well over the years and gathered some good reviews and it's been doing well.
And all of a sudden Amazon decides to leave. What happens with the listing? If you have a backup option, you could still sell the listing. You could sell the product rather to Amazon, you sell it to a broker, and then the broker continues to sell the product. So that's one example, if you're a vendor. It's just like a backup option so that whatever you build throughout the years doesn't get lost and you continue your success with that product. Does that make sense?
Frieder Kuhn
Yeah. This buy box topic is one of the things like being out of stock because the buyer doesn't order anymore. They do external price crawling and find somewhere in the Internet, they find a lower price and either they reduce the price as well or as a seller, they take away the buy box. It's always about alternatives to be still active. If you have the pressure from annual negotiations, you at least have an alternative.
Of course, you can also do it as a seller. And that's what I said. It's not always then the broker or distributor model is the solution, but it can be one of the very fast and good ones. And one of the examples I like also very much is one of our clients. He is just preparing for a certain emergency in case his account is maybe blocked or anything else. And he said, I want to be able to sell my products the next day still. I don't want to lose sales of one week, one month or whatever. It's too important.
So we set up a certain emergency system for them to be able to sell his products right the next day. Things like that, like account suspensions and or the same thing, removal of selling authorizations. So that's this topics of jumping in, for example, one of the big, big use cases.
Paul Sonneveld
Yeah, absolutely. And then is there, I mean, the theme I'm hearing here is there's a big use case around building in redundancy in the system so that you can keep maintain operations, keep selling, particularly if your vendor account is temporarily disrupted or permanently disrupted. And my follow-up question then would be, you know, how do you think about, because at that point, having another seller account versus a distributor account could also be an option. But for which type of clients and customers and what type of scenarios actually does this broker model provide a better fit than, hey, I've got a seller account, and I'm running that because, you know, why go for the broker model and in what situations?
Florian Schneider
Yeah, I'll take that as well. So, I mean, regardless of your sales strategy or your approach, we just touched on an example of a vendor, your vendor, Frieder just mentioned a few points, and I did as well. So it's more like a backup option, in case something happens to your account, or Amazon decides to not reorder products. But then also, from a growth perspective, from a strategic growth perspective, it could also make sense, right.
So I'll give you another example. Let's assume you are a seller, and you sell in Australia and you're very successful and you've maximized your potential in Australia. And now you decide you want to take your brand abroad to Europe, right? It's very complex to set up the infrastructure in Europe. It's very fragmented. So there's a lot of marketplaces in Europe. You have countries like the UK, like Germany, Spain, France, and each country has their own specific regulations. Not just that, but they also have different tax implications.
So for you now, in order to test Europe and to see if Europe works for you, you would not have to go and set up all the infrastructure. You would have to register taxes in all these countries. You would have to make sure that your products are compliant. And if your product is compliant in France, it might not be compliant in Spain, for example. And it's very costly and takes a lot of time and very resource intensive.
So if you now have a partner, someone that already has set up the entire infrastructure for that continent, and is registered in all the countries and knows exactly how the product should look like and what are the rules in the UK and knows all that and now takes your product and launches it in all these European marketplaces.
First of all, it's a lot quicker. you feedback right away. You get feedback instantly basically as soon as the product launches and it takes out the guesswork right before you actually do the heavy investment. So either you're fine with having the broker selling your products now in Europe or at some point you decide that you want to take that in-house as well.
And you want to take that on board yourself. And after some time, you then set up the infrastructure and you register for taxes because you've seen it work. But then that's sort of a bridge approach. You start with the broker. It's going very well. And then you take it back and you sell yourself or you continue to work with the broker because it's easier. You need less resources. You need less people managing the marketplaces. Just two examples there.
Frieder Kuhn
So, yeah, if I may add one point, just so it's really this regional dimension, either from Germany to Europe in one in one day, kind of if you don't want to do that pan-European step with Texas and all the other challenges from the US or Australia to Europe, or, of course, also for European companies to go to the US, which is also possible relatively fast, very cost efficient, exactly as Florian has explained it.
Paul Sonneveld
Yeah, no, I think that definitely resonates with us. Because many years ago, when we were running an agency here in Australia, we did bring some clients from Australia to the US and regulatory issues aside and set up that that itself is a big burden. But also, of course, you start with a seller account that has no history, and no is an asset, and then you have products that have no reviews and everything, right? Now, of course, on the product side, you may not be able to do something about that, you have to build that up. But at least you have a selling account that has a reputation, a history is an asset. And you can sort of get going a lot quicker.
Frieder Kuhn
Absolutely. Exactly. And that's also one of these new cases. And by the way, of course, we also have clients who go to the US and we support them with their own seller account or vendor approach. No question. We are coming back to the very beginning. It's about orchestrating. But if they go into a country where they don't want to make a bigger investment or anything, or they want to try some single products like product launches, new product, whatever development, then it's a very easy way to do it. We even do it in Germany right now for one of the partners who don't have any connection to B2C right now, rather B2B to be driven. And they say, let's just try it. Let's just sell a few products and see if it works, because for less money, we cannot try it out. And that's exactly this happens.
Paul Sonneveld
Yeah. No, that makes absolute sense. So I'd love to go a little bit deeper on that into that specific broker model. Let's for argument's sake, I am, you know, I have a successful Amazon business here in Australia, and I do want to expand into Europe. And the broker model sounds like a really good, short to medium term option for me. Take me through it, how does it actually work? You know, how would I work with someone like yourself? What do I need to do and think about versus what will you do for me? And I, you know, Florian already described some of this, but, you know, practically speaking, what does it look like?
Florian Schneider
Yeah, sure. So first of all, the great advantage to, to that approach to that model to Amazon vendor is it's very flexible. You could speak to a broker, you could negotiate things. It's a very flexible approach. It's not a set in stone approach that Amazon often has in terms of payment, in terms of payment terms as well, and their contracts. So that's certainly a big advantage. And so it's a very individual approach.
So let's say you decide you want to expand and you want to go to Europe. So the first thing that, of course, is to define a strategy with your partner. You want to be able to align with them in order to really understand where you can take this. And then the responsibility is mainly on the broker side. So what you have to make sure, obviously, is that there's always enough stock available. That's on you.
That's your responsibility as the brand. And you might want to provide more insights into the product in terms of also digital assets. If you have any videos, if you've done any photography in the past, that's something that you want to share. So that's also on you, but not necessarily. A good broker is also someone that has in-house teams, graphic designers, and is able to portrait your product in the most efficient way. Of course, always coordinating that with you.
Another responsibility that's on your side is the logistics. So you have to make sure that the products are being shipped to your partner. And apart from that, then it's really up to your strategic partner to make sure that the products are optimized, that the products are listed, that everything runs smooth, that the account is being monitored, that products are live and nothing gets flagged, and that the campaigns, the performance marketing campaigns are officially running. And then you have regular performance reviews with your partner, with your broker, where you align on the strategy and see where things are going. And that's pretty much it. It's a very straightforward, very easy approach.
Paul Sonneveld
Great. Can I ask a few follow-up questions there? There's a few things. I just want to go one level deeper, right? Let me just outline a couple of questions, and then you can sort of tackle them. We'll do them in Rapid Fire. The first question I have around, does the broker buy the stock off me? Or is it on consignment? And my probably my second question is, what is the X, you know, and how do you actually go to multiple questions? Stock? Do you buy the stock? Is it on consignment?
Second thing is, how do we agree on a marketing budget? Because that's probably a tricky bit. And then, thirdly, how do you deal with things like damages and returns that happen on the Amazon side of the fence, right? So, you know, particularly on the vendor side, that can be very, but even on the seller side, you know, it could be actually product issues. You know, how do you how do you carry that risk between the broker and the actual brand? So there's three questions to unpack there. So a lot there.
Florian Schneider
Let's start with the first one. Maybe Frieder can take the second or third.
Frieder Kuhn
Yeah.
Florian Schneider
So in terms of the model, this is, as I said, it's very flexible, right? I'll give you a few details here, but there's, there's certainly more to it. So let's say you, I mean, the broker could buy your product. That's one opportunity. That's one possibility, right? So the broker buys your product at a wholesale price, right? That you both agree on. where you make your margin, then the broker buys it. And then it's his responsibility to sell the product. That could be one approach.
Also, could be another approach where you guys are splitting the profit, right? So, you basically provide the product at production price, but there's no margin on your side. But then the broker, does all the heavy lifting and make sure the product is optimized and sells on Amazon. And then you split whatever is left over. You split the contribution margin. It could also be an approach. So it's not, there's not a set in stone way to do this. It's more like depending on your goals, depending on your situation, you can speak about it. It's a very flexible approach. That's a great thing about it.
Frieder Kuhn
Let me add one part. It's when we talk of our approach, we buy the product. So we definitely buy the product because that's what we experience from our clients, that this is their favor. So we have set up the whole organization like this. We buy the product and pay the invoice. So we are like a key account partner to them. Very easy one.
And then, of course, there are different ways how to contribute, as Florian has correctly mentioned right now. The marketing side is always in an exchange, of course, but at the end, we are also responsible for the marketing topics because usually our clients do not really know how it works. Of course, we explain them, we take them in as a partner, but like a key account seller in the offline world, they try to explain to the brand what they are doing.
And of course, we are very transparent, by the way, so we are very data-driven. We have a BI tool that is top-notch in my opinion so we even share these kpis with them we try to explain what we are doing how we are doing it but of course it has limit and it's good it has limits because they should not if they understood the entire Amazon world and business, they would do it on their own. That's exactly what they don't want to do.
So it's very split in. We do everything. They only have to do the product development, the brand management, provide the product, ship them to Amazon, and we take over with the content. And that's also how we set up then the margin and the remuneration model, I would say. That's for the marketing. We try to explain that there is no real marketing budget, absolute marketing budget.
What a lot of big companies are thinking about, OK, what's the absolute marketing budget for this month, for the year? We try to tell them, hey, it's a percentage. So the moment it's running and we are growing, there is no absolute limit or something. We should just move on. But they usually fastly understand that. Maybe we can also I don't know did we answer the first two questions already correctly because the damages is I think a totally different.
Paul Sonneveld
Yeah, look, you know, obviously there's a lot of detail the real I guess but i'm, you know my broader question here and maybe it's way too much detail for today, but i'm interested so i'm going to ask anyway is there are some things as a broker you can't really control or you know you could but you'd be carrying like a disproportionate part of the risk. So I'm just trying to understand that balance between, hey, I'm just buying you a cost price for your product.
And as soon as it's in, everything is our responsibility, including marketing, including, you know, if there's a faulty product, and the product has to come back, and there's a lot of damages, and obviously, that's going to cost you quite dearly. I just wanted to sort of get a sense, and I'm sure it's different for every category, product and agreement, but philosophically, like how you view that tension, right, between kind of risk versus kind of partnership.
Florian Schneider
I think it always comes back to, of course, we do our homework first. We're not saying we, but in general, a broker. They would obviously validate the product first, right? So it has to obviously make sense to sell a product has to be as the margin has to be right, there has to be potential in Amazon to actually to be the for the risk to be worthwhile, right? But then at the end of the day, there's still risk involved, of course, right? So there's always this. Yeah, the risk is always there. So it's, but then we try to do as much homework as we can and validate the product as good as we can, and then decide if and also communicate with your partner.
Frieder Kuhn
It's a little bit like in the offline world still. I mean, you're a partner, you try to cover a few by a contract and by certain arrangements, of course. And there are other things where you just then have to talk and exchange. But that's also a development, a learning step by step, which we also did in the past two years. We learned from what happened. And it's a trial and error, as always in the marketplace world. And of course, you're here and there, you pay on top a little bit. You didn't cover a certain risk, but as I said, we always see it as a partnership and they also, they're very happy. They are very appreciating our services. So they also want to continue usually. And then you try to find a solution for it. But of course, yeah, there's always a certain risk.
Paul Sonneveld
Of course. Yeah. There's no business without risk. Of course. Fantastic. Unfortunately, we're out of time, so we're going to have to wrap up here. But before we say our goodbyes, I just wanted to ask for anyone that's tuning in live today or watching this on demand and just looking at this going, actually, this broker model or this tri-hybrid model that we're talking about actually really appeals to me, appeals to my particular use case. What's the best way to continue the conversation with the both of you?
Frieder Kuhn
Well, would be great to get in contact with us directly. I think you will have our contact. There is two things. We are already working with other agencies and consulting companies, also the big strategy consulting companies, to be honest. So we are also always open for an exchange with other agencies, consulting companies in the US, in Australia. We are not in a light tower or completely closed or something. We do that already with strategic partners, so we are also open to have that conversation.
We are very much in discussions for this last case of distributor when companies want to exit Amazon completely, which obviously then they could still cover it by distributor, but also when entering, and we had that case already. In my opinion, just contact us through you and on LinkedIn, and we are open to discuss all the approaches.
Paul Sonneveld
Perfect. Well, on that note, Florian and Frieder, thank you so much for appearing on our episode today and really bringing to our audience a new and different way to think about Amazon distribution. I really enjoyed as you probably would have picked up. I really enjoyed quizzing you about this particular topic and I loved hearing those particular use cases particularly around, you know, how do you build your backup options or how do you use this model to quickly or more rapidly enter and test a new market before fully investing yourself. So thank you so much for being on the show much appreciated.
Florian and Frieder
Thank you.
Paul Sonneveld
All right, everyone, that is it for today's episode. Thank you so much for tuning in in this live discussion on optimizing your Amazon channel distribution. For more insights, visit our video on demand library at merchantspring.io. Now, if you do want to streamline your analytics, reach out to me, DM me on LinkedIn to learn how MerchantSpring can help. Last but not least, I'd love to hear your topic suggestions for future episodes. Let me know and I'll do my best to find the right expert to address them. Thank you so much for listening and watching. Until next time, take care.
