Podcast transcript
Introduction
Hi, and welcome to another live episode of Marketplace Masters. Brought to you by MerchantSpring, the leading marketplace analytics platform for Amazon agencies and Amazon vendors. Marketplace Masters strives to go deeper into the challenges that vendors and agencies face in order to lift e-commerce and marketplace performance via really practical actions and insights.
Paul Sonneveld
I am your host, Paul Sonneveld, and today we're going to explore how businesses and brands can use a hybrid account strategy to optimize their sales and reach their target customers through a first-party or 1P and third-party Amazon channel. Now, to help us do this, I've invited Chris Turton to join us and share his expertise and perspectives.
Christ Turton
Hi, Paul How are you doing?
Paul Sonneveld
Hi Chris. Let me introduce you to our audience. Chris is the Managing Director of e-commerce Intelligence, an e-commerce consultancy that currently handles over 5.5 million pounds in sales on the Amazon platform every month with a team of incredible account managers, sponsored product experts and analysts solving some of the most complex catalogue problems with Amazon.
He's an Amazon seller and vendor consultant with 10 years of experience across both platforms, ranging from working with startups to corporates and brands that are known worldwide. It goes without saying that he's going to bring a lot of experience to the conversation today. So thank you so much for agreeing to come on the show today,
Chris.
Chris Turton
Thanks, Paul. Yeah, it should be, an interesting, interesting conversation.
Paul Sonneveld
We certainly have had a record number of people expressing interests both through our social media platforms and others, which just means that this is a hot topic. And, yeah, maybe before we get into the nuts and bolts of hybrid strategy 1P versus 3P, it might just be worth pausing and thinking about, Why are we talking about this now? Now why is everyone so interested in this particular topic right now? I mean, what do you see, across your clients and across the industry in general?
Chris Turton
Well, I think the reason this kind of conversation has come about Paul, especially in the last 12 months, is because the landscape in Amazon's certainly shifted, especially over the last sort of 12, 18 months. We're seeing different things occur within the vendor space. So, we're seeing Vendor Managers becoming either invisible or leaving the space entirely.
And we're seeing a huge round of unfortunate layoffs within the platform. Staff that are even in the advertising sector, the core teams that are really profitable are unfortunately being laid off and this is causing a lot of ripples within the space and a lot of vendors are being left without vendor managers or support, which I think is, therefore, are left many of them to look elsewhere for developing their presence on, you know, the world's largest marketplace.
There's also a lot of input that's coming in from external factors. We've seen the marketplace pulse the really big analytical, database for e-commerce events and things. You know, reporting how there's a slow shift that is still continuing to grow between vendor and seller. And according to them, the annual sales meeting from Amazon, a statistic that was raised was that a team of 15 people, overseeing a retail category within vendor would have their growth outperformed by one person on the 3P marketplace.
Which as we've seen with recent layoffs means it's more sort of operationally effective for them to work within 3P rather than 1P. Which has led to a lot more self-management of the system on vendor, which is also the same as what happens within seller. So, it's quite admin-heavy. So it's quite, that's also been a big balance in terms of things like the tools that are available.
So, Once upon a time when we were looking at working with vendor, 2015, 2016 vendor was the place to be. Vendor had all the tools. It was brand analytics only. The analytics programs itself were pretty strong. When we looked at things like ARA Premium, and the real goodies that were there, which is available within Amazon vendor. Now they're available in Seller. So there is becoming fewer incentives as such for them to be able to grow within just one platform alone.
So, there's a few other things as well just to carry on. So, we know that there's a big thing that came out in March, I think about Amazon and the EU. They're now pulling away from sourced product ranges within vendor. So we know that by January 2024, and we know that's going to break off over the next few months.
Amazon Vendor will no longer take owned manufactured products into their PO. So that's going to reduce some of the brands there. So only manufactured brands can work with Amazon Vendor. That's becoming a huge thing now because that's definitely a large part of some of the clients we worked before were using a lot of kind of again, a hybrid model of itself within retail platforms.
They were using their own manufactured ranges, but also, they were sourcing grocery products in large volumes, which was probably a large portion of their retail volume that will now. But I suppose it's not all deeming gloom. I'm not trying to sort of, discount vendor in its own rights.
I think the stats are and I think some of our vendor esteemed analytical experts will kind of tell us, but I'm sure that it's about 30-40% of the range of retail sales that come to an Amazon are still from vendor products. Predominantly from your big FMCG brands, and your bigger headliners. Of course, your Sony and your real headline brands, they're still very high in that retail space.
Paul Sonneveld
Yep. Now there's certainly a lot going on and it's probably worth emphasizing that n not all of these dynamics are playing out at the same speed across different markets. Obviously, we've saw a lot of this in the US two, three years ago, and big focus now in Europe.
I mean, I think it's fair to say that across the board, headcount is reducing, even here in Australia where there's still a bit of a growth market for Amazon. There've been challenges around headcount here as well. And I think this is really at a turning point where a lot of brands particularly those that have distributed via or sold to Amazon via distributors and other intermediaries into the vendor space are now a bit at a crossroads and having to think really hard about these sorts of topics.
You know, do I go 3P, 1P combination and the like. So yeah, it's certainly an interesting space. I mean, on one hand, you can obviously understand this from Amazon. I think, you know, you mentioned maybe prior in terms of why would you carry the working capital risk, if you can just get someone else to do all that and essentially take a clip of the ticket across selling fees, and FBA and make money that way, more of a platform.
But of course, there's always the bid around, you know, how do you maintain price leadership if you're not controlled pricing, straight away through the 3P model? So, I think it's always that balance between maintaining price leadership which is really hard to do without a vendor account. You know, and some of the people probably tuning in to today been on the receiving end of that.
Chris Turton
Absolutely.
Paul Sonneveld
So yeah, it's hard. I can't see Amazon getting rid of it, but clearly, they're thinking very hard and along about what is the, sort of, what's the minimum model that they need versus, just onboarding, you know, vendors left, right, and center.
Chris Turton
Yeah, absolutely. Yeah. Pricing is the core, I think it's sort of like the catalyst that is making this conversation come about. It falls down to the pricing. So even though we've mentioned that there's all these little sort of elements of the tools that are available now in both channels. That once upon a time vendor was quite glorified. The ultimate goal of course, and what we're all after for all our clients is profitability. And that is one of the biggest downfalls, I think is the Vendor Management Structure being reduced.
And we've seen that certainly in our client range, you know, where we've had hybrid clients, tend to be the ones that don't have vendor management, but then our clients that are still on vendor are the ones that have vendor managers. So it, you know, and because they can make it work, they can communicate those values.They can communicate any issues that their Net PPMs, you know, all those kind of values and vendor can still be communicated better. But without that vendor management, the rug kind of is being pulled under from a lot of the smaller brands specifically.
Paul Sonneveld
There's a lot of debate particularly on social media and LinkedIn around, good opportunity, let's get rid of 1P altogether. It's about time we've gone to 3P and there's, certainly there's certainly a view that it's kind of you have to pick which, which part you're going to be in and kind of move accordingly. But today actually we want to talk about the hybrid model.
So we're actually trying to play both fields or play both games. So as we get into that, maybe set the scene for us, Chris, a little bit. You know, what do we even mean by running a hybrid model with Amazon across 1P? You know, practical, what does it mean theoretically and what does it practically?
Chris Turton
Well, technically it's the art of being able to run an Amazon vendor or 1P as, as we call it, within the history accounts, alongside a seller, one or 3P. And actually it was a feat a few years ago. That was a bit of a big no-no. You know, vendor used to be King had the best marketing.
You know, you'd have these really expensive packages that would come on boards that have now sort of been adapted, developed for brands overall. But now with Amazon's focus towards brands, the real advantage on vendor is certainly things like getting ahead of the game in terms of things like promotions, deal of the day, certain, you know, prime days, a big one as well.
Prime day, you know, vendors will take the full capabilities and be at the forefront of the queue for that. And then the ability to get into other niche Amazon programs. So within, within the UK we have, AmazonFresh, you know, in Amazon's retail markets, which we also got, you have in the US. I'm not sure if you have them in Australia.
But there are certain sort of niche areas where vendor specific clients can get into. So that there is definitely pros there. But in terms of the overall model, you have the ability to do both. So, the real reason why vendors may look at going into a seller is because a lot of the issues we've mentioned before in terms of inventory and pricing and that because the inventory itself, may not be viable to vendor.
You know, you might find that they don't see nations being profitable, you know, as you'll hear us talking about things like, you know, CRAP, can't realize a profit products and, you know in that respect, it means that vendor are not going to place purchase orders. Their systems are being done more and more algorithmically now to be able to find what's going to work in line with the platform, what they're going to purchase and now we're hearing more about as well these new AI tools they're bringing in to kind of make more calculations in this space too.
So to effectively replace what we think to replace a lot of the vendor management roles. So the pricing points that vendor retail for may not align with the retail pricing goals of a specific client. And that's been another huge issue. So in terms of, we know that vendor obviously set the retail price once you've given them cost pricing.
Paul Sonneveld
Yep.
Chris Turton
That may not really work very well in terms of your goals alignment with your retailers. So we have a big client that has that works with all major UK supermarkets and of course those retail pricing points might not match their expectations of their supermarkets. And of course, vendor has full control of the pricing and therefore there may be a reason to take that product from vendor, put it into the seller platform, which then gives you that pricing control.
Paul Sonneveld
Try to reduce that. Remove the fuel from the fire, not create channel conflict around very sensitive KPIs and SKUs.
Chris Turton
Yeah, absolutely. And I think one of those kind of what we hear a lot of time in terms of people talking about vendor and seller is, is that vendor is typically cheaper than Amazon seller. And that may be the case, but when we've broken down the numbers so deeply when we start looking at down to the labor charges of reducing things like chargebacks or shortage fees or anything within vendor, sometimes that may not always be the case.
So, we know that on Amazon you've got a very set fee in terms of, seller fees, which can range from about 8%-15% in the UK. And then FBA fees are effectively balanced on the basis of performance of that product and that stock and the category it's in other variables including storage and the like. The problem we have when it comes down to vendor is the fact that terms are unique for every single vendor.
We've seen clients that are operating, they've come on board with us, and we've seen them operating at terms as high as 23, 24%, which then when you leverage that against the other kind of fees in terms of making sure that your advanced shipping notifications are going out the sheer running of that platform, it can be more costly. But it's really key to mention as well that that's not always the case in terms of going, well, you know, everything we're going to look at, you know, in terms of dollars and cents, pounds and pence.
Because what we might see on the flip side of that is if a product is performing well within vendor, and even if the pricing and the margins are slightly better within the seller platform, Would you really make that adjustment? Because you might find that e purchase orders are maintained, your margins are at a certain level, but then the actual idea of being able to take that item, putting it into seller rebuilding that listing, making sure you're getting the same sales velocity as you were through vendor could be a bit of a difficult one.
And it's very difficult to almost go pull that away from there and do it in another channel. So you've really got to leverage this. And I think every step of this kind of discussion we are having and every sort of element that we are going to mention is everything is almost a line by line basis.
You have to be able to review what is the best strategy. So everything to do with when we talk about what the hybrid model effectively is, is it's effectively a balancing act between what works at an ASIN level for you or for your client with every product. And, and that's the, the really key takeaway I think from understanding what the model consists of and what you need to do.
Paul Sonneveld
Yeah. I'm just going to ask a small clarifying question there. Is it rare for a brand to sell the same ASIN across its vendor and seller? In other words, I mean this might be completely academic, but I'm just interested in your answer. Do you see examples where a vendor will compete with Amazon themselves, for the buy box or. Is that more, and perhaps I'm time to answer my own question here is, is that more as an overflow? When Amazon runs out, there's a seller account that can take up some of that demand and not miss out overall. I mean, have you seen much of that interplay or is it always like a clear line?
Chris Turton
Yes, sir.
Paul Sonneveld
This ASIN Amazon vendor, that ASIN Amazon seller, you know, what does that look like in terms of delineation?
Chris Turton
What we've found when we've spoken to potential clients or clients that we come on board that are already using a hybrid model or they've they've already started looking at Seller Central is there is this huge mistake that so many businesses make and I'm sure a lot of the vendor agencies will pick up on this.
So many where a client will go, I've got that product set up on Amazon vendor. They'll then also send it into Amazon FBA. And if you think about it as an idea, it's not a great one. Just for the fact of someone is going to get an issue there, you're either going to have your vendor purchase orders are going to be impacted because FBA wins the buy box. Because it again has the prime and you've got the stock in or vendor will have the buy box with your purchase order and your FBA stock will become a stuck in this loop of no buy box. It will then affect what we call your IPI score, which is your sort of credit score, against your FBA stocks.
So that's a no-win situation. So, it's really clear that when you are looking at an ASIN level, you choose one or the other. Now, FBM as in fulfilling yourself is slightly different because we've been told through vendor managers in the UK and I know this has varied across every single person you'll speak to will have a different way of doing this.
FBM obviously slightly different because even though there could be some buy box conflicts, we've been told that effective, even though vendor would take the buy box and it should do, because the overriding factors there, including prime and all those bits and pieces should win the buy box. If there is an issue with that ASIN, if it gets pulled from stock, if there's some sort of technical issue within vendor, FBM can still pick up that slack.
And again, what we're aiming to do there is. to be able to still fulfill that item to the consumer. Because at the end of the day, everything is about the customer experience at the end of the day, isn't it? So running vendor FBM is not the best scenario, but it's definitely a better scenario than trying to run vendor and FBA, that is a super conflict. You'll either upset vendor or you'll impact your FBA scores. So you, you want to make sure that the analysis is at ASIN by ASIN level.
Paul Sonneveld
Yeah, you really want to make, keep my comment before as a theoretical academic potentially could, over be a perhaps, practically stay away from it. We're hearing you loud and clear.
Chris Turton
Yeah, yeah, definitely.
Paul Sonneveld
So, Chris, I'm just curious. I mean, I know, obviously a little bit about your business. You manage a lot of brands that have opted for the hybrid model. So, I'd love to just understand, I know there will be a lot of agencies kind of tuning into that as well. Maybe they're just focusing on the vendor side or the 3P side, and I'm sure the hybrid conversations come up.
I'd love to just hear a little bit from you in terms of, what have you seen in your business as you've tried to implement hybrid strategies? What have been some of the biggest highlights for you and maybe some of the painful learnings?
Chris Turton
Yeah, that's a really a good question in terms of the whole space is so interesting because it depends purely on a client by client basis. So what tends to happen is if a client comes to us with vendor, it depends on their queries, first of all. So, we have clients that are still purely vendor and that works for them operationally, the purchase orders work, the pricing works. For some, it doesn't. And it depends on how that client comes to us. Some clients have come to us with already creating a hybrid model. Their story tends to be that they've started with vendor, they've got frustrated with that model. And they've gone, right, we'll just go straight to seller.
Now the problem with that is you've got to really do that analysis. You've got to not only look at where are the margins and where are the gains, but also looking at the intricacies of what's happened. Because you might find a client that has a vendor account and created a seller accounts. They may still have an active vendor manager.
They still might have options to be able to utilize Vendor Central correctly, but out of their frustration have just gone, let's go on to seller.
So really what we are doing is when we do this analysis, we will look at the business holistically and again, almost line by line and say, what's working in terms of profitability? Where are you in terms of your overall operational structure within in vendor? What's made you go to seller?
And, we've had some fantastic case studies. I think in terms of what we've done in terms of doing the hybrid model, some that stay on vendor, I think when we look at our client list, I think we've got about eight or nine vendors that are on the hybrid model, but only a very small percentage of those that maybe one or two that are just within vendor. And that's because we've done the analysis. We've looked at their ranges. We've either made that suggestion to stay or they're operationally only are able to stay on vendor.
So, One of our biggest wins in terms of hybrid was the client I've kind of briefly mentioned before. They came to us, they'd already started the vendor. They'd started to sell accounts. They already came to us already sort of hybrid set up. They'd created pretty much they'd recreated their inventory within seller that was already on vendor.
So we almost had to do that sort of analysis of saying, as I said before, Don't cross the streams effectively within those ASINs. They were doing, you know, about 16,000 pounds a month in 2021. We're hitting revenues of 35,000 pounds now a month. So, kind of more than, you know, doubled that year on year.
Back then, their product balance was 50/50 vendor and seller. But what was happening was there was no effective process behind either vendor or seller. They didn't really know how to manage it. They didn't really have any level of support, and I think that's where that started from I think the vendor management had pulled out, even though this brand were a really big brand.
So they are a really big brand in their sector. They are very big within in the retail world and sell to many high street brands and businesses. But they'd already tried to implement FBA stock into lines. They're already on vendors, we've already stressed, that's a big no, no. And I think that's a very common thing that people are doing incorrectly. Because you're going to just impact one or the other and you're going to upset Vendor if you're doing FBA.
So what we did is yeah, we did the price analysis, we looked at the performance, the account management, and the key issue being the lack of management and having no vendor management meant that we were able to make certain Amazon's work where POs were ineffective and we managed to basically move those products into a seller scenario, making sure that their margins were there, making sure they're very clear, and making sure that there was just good profitability between both elements.
So they've still got today even, two years later, they've still got an element of ASINs on vendor that work better for them. They have good POs, the profit's there, everything works really well. And to be fair, this is without vendor management. So we're still able to maintain that with certain lines. But then others, ASINs that we're just ineffective or where their Net PPM targets were just not met.
We just went, okay, let's put these on seller, let's make this work and balance the two. So it's now about an 80/20 split. You know, its Brito principle, in terms of how their account works, but in doing so, we've managed to double that revenue. So it's definitely something that works because you do end up getting very stuck in that rut if you cannot make vendor work operationally. So, it is really key to do.
Paul Sonneveld
Yeah, that sounds very tricky and really your points around really considering every client's unique and almost every ASIN is unique and having a
Chris Turton
Yeah, and FB terms.
Paul Sonneveld
And every term is unique around that. So if I just pull up a little bit. And by the way, for those that are watching, we've got quite a few people watching live today. We are going to be taking a couple of questions depending on how we go for time. So, pop them in the LinkedIn comment section. That's our main way of getting your questions.
And I'll be delighted to ask Chris, shortly.
We've got a few already there. Chris, just in terms of, maybe just go up a level again, in terms of brands that are considering the hybrid model. Let's assume they're on 1P and they're thinking about going to the hybrid model, maybe in the US or Europe or agencies thinking about supporting their clients to do that.
I'm specifically going in that direction because someone rightfully brought it out on LinkedIn today that this week that 1P is invite only, so it's not always easy to move the other way, particularly in the current context. It's probably a bit more of an academic exercise. What would you sort of say, where would you sort of sum up some of the benefits to drawbacks to watchouts? What are the four or five pieces of advice and considerations you would give to those considering the hybrid model?
Chris Turton
So, I mean, the key and main benefit behind doing this is the diversification of your portfolio and of products. And that really gives you a second bite of the Amazon platform without having to risk not being able to present your product range to all consumers. And it's a win-win for both. If it's not profitable for Amazon to buy the product from you, it's perfectly reasonable for them to not want to invest in a slow-moving range or one that is not meeting their profit demands. But then you're still able to offer that product line to the consumer. And still talking about and it's cut. So that's the real crux of it.
I think when we look at the real drawback of it, and I know this is one that a lot of your viewers in the US will find is that some brands in the US and I think this is a really, really key point. Some brands in the US have had vendor managers that have said, you can't go onto sale. If you do that, we'll deactivate you.
Paul Sonneveld
Yeah.
Chris Turton
But then my point to that is, if you've already got a vendor manager and you are an account manager and you have those coms, work on that relationship. I think if you ever see, I mean, with all the LinkedIn posts from people like Martin Heubel and James Wakefield, they will consistently talk about communication with vendor managers being absolutely key. And I think what happens is people are very quick to kind of throw their hands up and say, not doing this, and they go to the seller platform.
But really, if they've already made that point of saying, Hey, you can't go to seller, there's already an element of communication there. So, you know, you've got to be clear with your expectations, their expectations. You've got to be clear and negotiate and discuss and work on those Net PPM figures which is what everything will fall around in terms of building the price point. Which is we've discussed is one of the big reasons that people are moving from vendor to seller is the pricing point.They can't get that cost pricing up. And that's something you've really got to work with.
You've got to give that communication, you've got to build a good rapport and communication with Amazon. Not just on vendor, but you know, on all aspects of Amazon. So I would definitely say that if you have vendor management do that, but it can be a big drawback if you've been told, you know what, you can't move to seller. But the other side of that is you should be able to communicate in that way. So that can be a really big, drawback in terms of that.
Another thing to remember as well is, is vendor is still as I call it, the catalog king. So in other words, you know, having ASIN on Amazon vendor will mean that the contributions for or product content will feed from vendor. Meaning if you try and update, you know, you build that listing again now into seller central. You may find difficulty putting your contributions for that content into seller, even if you are the brand owner and you've got brand registry connected to both. Yeah, it can be a really challenging way of doing it.
However, I, I don’t know if you know any of the viewers can, establish this but we have had, last week, we had an update from brand registry support asking us whether or not we wanted to accept 1P contributions or 3P contributions to an ASINs. So I don’t know if this is a new thing that's been brought out, but there seems to be some leverage there or maybe that's something that's being brought in.
But it is important point that if you move an ASIN away from vendor to seller, at the moment you will need to be able to still maintain the content and the listing that's still within vendor. Especially if things like your item specifications are changing and you've got multiple retailers that are working with yours something along those lines. It's all about crunching the numbers.
That's the key thing to take away from it is taking, you know, getting those numbers in. Analyzing the time that it takes you to do every element of labor. Whether it's looking at how it takes to do your shipping. Every single element of that in terms of making sure that you maintain that level of profitability should then define where you pivot towards. And then also consider, What are Amazon buying? How are they buying it? You know, that there is so many things to consider in terms of the overall process. In terms of it, it really is a balance. We talk about benefits and drawbacks. It really is a balance.
Paul Sonneveld
Yeah, there's definitely, careful consideration requires on all fronts.
Chris Turton
Absolutely.
Paul Sonneveld
We're about to move into a question section. I'm going to kick off. We've got a bunch of questions lined up here already. So, unprompted, we'll get to those in a sec, but I was going to start off with the idea of playing different ASINs across different platforms to optimize profitability and working is great.
However, what is your experience in terms of dealing with vendors particularly in the grocery space? Actually, the readiness to actually manage and run a 3P business, you know, quite different to a 1P business and certainly where a lot of these brands have come from. Have you come across that question across your clients?
Chris Turton
In terms of looking specifically at grocery businesses?
Paul Sonneveld
Yeah, just general readiness. I mean, Because I think sort was articulated very loudly, but if you read between the lines, maybe this is more of an Australian thing, but a lot of Amazon vendors will say, 3P is just a little bit too hard, too difficult. We don't have warehouses set up, we don't have all the manpower, we don't have the expertise. We're good at account management with the Tesco’s and the Saintsbury’s, and a little bit of account management with Amazon. And we've got a marketing team who can do the PPC. But that's kind of where our skills stop when it comes to merchandising and, and e-commerce and as well as logistics. If you come across those sort of conversations and how do you overcome those barriers?
Chris Turton
We had a meeting this week with one of our, we have quite a lot of grocery clients. I don’t know if it's just the way that Amazon is over here. So we were with a really major cereal brand in the UK and they shipped to all the major UK supermarkets and we had a quite an interesting conversation in terms of that account manager who's effectively our liaison, our client in terms of how he handles those retail markets.
So he's kind of under the impression that with Amazon, that it sort of ticks the same boxes as it would with some of the UK's big supermarkets like Tesco or someone like that. Where really it in my view, he's will be quite different in my view. It's fairly simplistic in terms of order management, getting that product out there and everything. Amazon has always been a lot more self-service, hasn't it?
You know when, when we talk about looking at things like listings, content, advertising. Vendor and seller, there is still the same amount of input that is required to get the most out of that platform. I think when we look at things like, yes, Amazon Fresh. So if the conversation is more about fulfillment and logistics processes for fresh groceries where they need things like, you know, frozen fulfillment. Yes, 3P can't do that. And again, this is a line by line, ASIN by ASIN check. If you've got a client that's selling frozen product, you can't do FBA. That is Amazon, Amazon Fresh, Amazon Go, you know, those platforms that are again, invite only to vendor and only platform.
But when we talk about that process of retail operational businesses that are doing multichannels like some of our clients, I always say that it's definitely 50/50 and I think what surprised our client is how much input he had to give. So it's fine and easy to go. Right. Okay. You know, Tesco will do, you know, we'll create these purchase orders, price agreed, terms agreed. That process gets fulfilled. But then with vendor, having the exact same format as seller effectively, where listings and content have to be right. You know, advertising has to be right. There's a lot more tick boxes and things to deal with. And I don't think there's too much of a differentiation between the two.
I think traditionally people have thought that Vendor is operationally easier where you go, okay, well vendor prices the order and it's done. Where with FBA, we still own the stock and we've got to do this, that, and the other. But I think really there's not a great deal of difference between them. If that's kind of where that questions come from.
I think it's definitely they as channels, they are still as technical as each other in a way. And if anything, vendor can be a bit more technical, you know, we've got to look through vendor codes and we've got to make modifications. If we want to do variations, we can't just create a platform variations, we then have to go to support to say, create this variation. So there's a lot of toing and froing there.
But in terms of the actual management organization, the two platforms are very similar. And they're not the same as, you know, I don't think, anyway, I'm not a retail seller. But I wouldn't have thought there's as much, input needed with those retail businesses, would be my sort of thought process on that.
Paul Sonneveld
Yeah, yeah. Okay. Yeah. Great. All right. I'm looking at the clock. I think we've got a few minutes left. We've got quite a few questions, so apologies to and thank you first of all for all who submitted it. We're going to try and do some rapid fire answers, without noticing Chris.
Chris Turton
Okay.
(Both laughs)
Paul Sonneveld
So let's see. There's some really great questions here, by the way, and I'm sure we've got other people in. We're happy to jump in. I'm going to Jack Cooper. He's asking us, would you use the hybrid model to address issues with Amazon vendor, if they're not accepting price increases? If so, how? Very topical question. I would say thanks for that, Jack.
Chris Turton
Yeah, it depends how you mean approach them. So the process that I would follow is if the purchases aren’t coming in and Amazon is saying, you know, you've got to give us more leeway in terms of the pricing. I wouldn't follow that through, I would say if there's no communication, I mean, what it sounds like from what Jack's saying is that he's had some comms there from vendor management and therefore I would say work with the negotiation with that vendor manager.
But if there isn't that process there and Amazon aren't buying that product, the purchases aren't there. I would certainly analyze looking at that in seller again. We use the caveat of saying, look at it line by line. Is it profitable? Is it financially viable to you? To then be able to move that line into an FBA scenario because there is no point if vendor will not purchase. And you know, at the end of the day, what we are here for is to look at a client's profitability.
There is absolutely no point of selling on the platform if client's profitability isn't there. You know, we know all those costs and those fees have exploded over the, you know, just, I mean, when we look in the UK with you know, with Brexit and fuel and all those costs that have implemented the overall, the war in Ukraine. All those kind of things have really sort of 37 implemented cost increases.
And I think most of the listeners today will agree that they're not asking for. You know, a price hike and they're profiting from it. I mean most of you are probably looking for that 20, 25, 30% margin that you can make comfortably to support the business that you are operating within and to have a fair pricing point with Amazon.
And I think even when you know if you don't have that negotiation available with your vendor managers and you can't produce those net PPM data and really make that clear and nothing's happening, you are left with without a choice. And in a way you are providing a better service, I think because you are still able to provide that item to the customer.
Your retail price point may be the same, may be cheaper than what vendor is selling. So it's not like you’re trying to upsell and undercut or frustrate vendor in that way. But you are providing an ASIN that's still available to the customer because without that, you might not find it profitable, it might not be available as the customers.
So the customer experience is lost. All that great data and sales history and reviews and everything you've built gets lost because no one, unless of course you're selling it to other retailers and they're buying for the buy box. So, yeah, I would definitely look at that if it makes financial sense to do that and there's no communication within vendor that you can achieve.
Paul Sonneveld
Okay. Thank you. Let me move on. We've got a got another up vote as well from someone else. So, any recommendations this coming from Matt, Any recommendations for opening a 3P account without upsetting your 1P vendor manager relationship? Assuming you still have one. Setup a different legal identity? Tell your 1P Vendor Manager directly that you’re going to do for X reason? Yeah. What, what's your council here, Chris?
Chris Turton
I would have that discussion only after you've been able to make those negotiations within vendor. So, you know, if you're not getting those terms accepted, if you are, if you're able to have that plan in place where you're not able to make those points to your vendor manager. If they're not accepting it, I would then raise that point.
If they turn around to you and say, Hey, we are going to deactivate you. If you move from seller, then that's a different issue. But it, again, like I said before, communication is key. Speak to vendor, work that out. Work through all your numbers and data. If there's nothing there, there's no response. Then, you know, by all means, make that jump. But it's all about communication and, and I think that's the biggest, one of the biggest things that we find in terms of this whole discussion and fallout in certain times with vendor is the communication there.
So I would follow that process, have that conversation. If they say no, I would make it very clear as to why that's happening, what the problems are, you know, where that, that is. You sound quite fortunate if you do still have vendor management, because I'm talking more within the UK because I know it's different in locations.
But in the UK vendor management has, I mean, we, over the past two years, it's just died. I mean, we've, like I said, we've got two clients that are on vendor that have vendor managers now. That's it. You know, and we have quite a few vendor clients. And it's a shame cause there's probably more we could do in both, both elements. But I would definitely say start with your vendor manager, get those comms through and just work that through that process through before making that jump. And of course, if they say, don’t make a seller account or we'll suspend you, obviously work through that. In terms of the other question about setting up a new legal entity and stuff, be very careful.
Again, review Amazon TOS because as you probably all know, you can't just do making new account in terms of with seller accounts, for instance, you can't make two accounts with vendor and seller. You can make two accounts, but I wouldn't try and do anything that misguides or misleads Amazon. Again, review the terms, have a chat with the vendor managers before making any points like that. I definitely use that as a caveat. Absolutely.
Paul Sonneveld
Thank you, Chris. Unfortunately, we are out of time. So, those moments, I feel like the bad guy having to wrap it up. There's so questions there. I'm sure you're quite happy to jump into the LinkedIn comment section late and respond to some of the other people there.
Chris, I just want to thank you for coming on the, on the show today. Really appreciate the expertise around this quite complex topic. Thank you for it is yeah, demystifying at us a little bit and really building our understanding. I was going to ask you if there's anyone that's listening and wants to get in touch with you, explore your services or just want to pick your brain on something, what's the best way for them get it touch with you?
Chris Turton
Yeah sure. I'll just kind of wrap up the last thing I was going to say really quickly.
Paul Sonneveld
Sure.
Chris Turton
I think the biggest takeaway I can give to this discussion today is the conversation we've had today is that flexibility does exist from the platform. And it's not a case of being able to do all or nothing. So I think it's, it's a fair comment that a lot of vendors lack of understanding, might make, want someone to make the quick move to seller without fully reviewing their options. So, crunch those numbers. See if there's a vendor manager working within vendor support to create reasonable goals.
Vendor's, definitely an art form. But it's also true that without proper support available on vendor, it's making a lot of brands explore possibilities in other areas, especially on seller. So, you know, especially when they see their competitors wiping the floor within their category, that might be on FBA and stuff.
So it's all about communication. It's all about really having that flexibility taking that time. But no, thanks very much Paul. So yeah the best way to kind of contact me of course is through our website, which is, christurtonecommerce.com. Fill out our form or if you go to LinkedIn, please add me on that. I always love, reading. Really, you know, deep insights into people's, what they're experiencing on Amazon, whether it's seller or vendor or anything like that, new things that are coming out of the place. I'm a bit of an addict to it, and I'm sure I'll be posting my comments on there. So, and yeah, I'll be happy to kind of go through the comments from today's podcast and see what I can answer there and any kind of assistance I can bring.
Paul Sonneveld
Awesome. Well thank you so much for your time, Chris.
Chris Turton
Thanks again Paul. Thanks everyone for bearing with me.
(Both laughs)
Paul Sonneveld
Most welcome. Alright, well guys, that is it for today's episode of Marketplace Masters. I hope you found that useful. Thank you for watching. Thank you for your questions or if you're listening on demand afterwards, thank you for tuning in. Don't forget to head to MerchantSpring for exclusive offers and other on demand podcast that talk exclusively about Amazon vendor topics. So head to merchantspring.io. Until next time. Stay safe and see you then.
