Amazon Direct Import: The Good, The Bad and The Profitability

Jun 21, 2022 12:00 pm1:00 PM EDT

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Key Discussion Takeaways

More and more Amazon brands are gravitating toward direct import. But how do you know if this path is right for your specific brand?

Direct import may seem intimidating, but changing back is possible, and you don’t have to go all-in. The problem is that direct import requires a lot of work to undo, so it’s important that you have the right plan and strategy in place before jumping into the process. When done right, direct import can set your Amazon business on a sustainably profitable revenue path.

In this virtual event, Aaron Conant is joined by Peter Beke, Co-founder of The Hawkers Club, and Hannah Blackburn, Co-founder and Director of The Hawkers Club, to discuss direct import best practices. Together, they explain the reasons why a brand might go the direct import route and the best ways to do so. They also answer questions about forecasting, setup, challenges, fulfillment styles, and more.

 

 Here’s a glimpse of what you’ll learn:

  • Is direct import a good option for your Amazon brand?
  • Advice for managing stumbling blocks in the CDS portal and direct import process
  • Are there benefits for a brand when switching Amazon operations?
  • The best way to approach direct import forecasting and setup
  • Dealing with delays in direct import shipments across the globe
  • How to implement a direct import program — and turn a direct import ASIN off
  • Common pitfalls that could cost brands
  • Peter Beke and Hannah Blackburn share their key takeaways for Amazon direct import best practices
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Event Partners

The Hawkers Club

The Hawker’s Club was founded by former Amazon employees and provides strategic insight and support to drive result driven growth on Amazon.

Connect with The Hawkers Club

Guest Speakers

Peter Beke

Director at The Hawkers Club

Peter Beke is the Co-founder of The Hawkers Club, a company that aids vendors and sellers in their eCommerce journey. He has held positions at Amazon, 4C Associates, the Cranfield School of Management, and Microsoft. While at Amazon, Peter focused on vendor operational excellence, seasonality tracking, and vendor experience. Realizing that he could offer more support and advice than his schedule would allow, he decided to leave Amazon and start The Hawkers Club.  

Aaron Conant

Co-Founder & Managing Director at BWG Connect

Aaron Conant is Co-Founder and Chief Digital Strategist at BWG Connect, a networking and knowledge sharing group of thousands of brands who collectively grow their digital knowledge base and collaborate on partner selection. Speaking 1x1 with over 1200 brands a year and hosting over 250 in-person and virtual events, he has a real time pulse on the newest trends, strategies and partners shaping growth in the digital space.

Hannah Blackburn

Director at The Hawkers Club

Hannah Blackburn is the Co-founder and Director of The Hawkers Club. After receiving her undergraduate degree, she became an Auditor for PWC. Realizing she preferred creating over auditing, she joined Amazon in 2015. Before co-founding The Hawkers Club, Hannah focused on in-stock management and profitability at Amazon and joined their Australia launch team. 

Event Moderator

Peter Beke

Director at The Hawkers Club

Peter Beke is the Co-founder of The Hawkers Club, a company that aids vendors and sellers in their eCommerce journey. He has held positions at Amazon, 4C Associates, the Cranfield School of Management, and Microsoft. While at Amazon, Peter focused on vendor operational excellence, seasonality tracking, and vendor experience. Realizing that he could offer more support and advice than his schedule would allow, he decided to leave Amazon and start The Hawkers Club.  

Aaron Conant

Co-Founder & Managing Director at BWG Connect

Aaron Conant is Co-Founder and Chief Digital Strategist at BWG Connect, a networking and knowledge sharing group of thousands of brands who collectively grow their digital knowledge base and collaborate on partner selection. Speaking 1x1 with over 1200 brands a year and hosting over 250 in-person and virtual events, he has a real time pulse on the newest trends, strategies and partners shaping growth in the digital space.

Hannah Blackburn

Director at The Hawkers Club

Hannah Blackburn is the Co-founder and Director of The Hawkers Club. After receiving her undergraduate degree, she became an Auditor for PWC. Realizing she preferred creating over auditing, she joined Amazon in 2015. Before co-founding The Hawkers Club, Hannah focused on in-stock management and profitability at Amazon and joined their Australia launch team. 

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Aaron Conant

Co-Founder & Managing Director at BWG Connect


BWG Connect provides executive strategy & networking sessions that help brands from any industry with their overall business planning and execution.

Co-Founder & Managing Director Aaron Conant runs the group & connects with dozens of brand executives every week, always for free.


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Discussion Transcription

Aaron Conant  0:18  

Happy Tuesday. My name is Aaron Conant. I'm the co founder and managing director here at BWG Connect. We're a networking and knowledge sharing group of 1000s of brands. And we do exactly that we networking knowledge share together to stay on top of the newest trends, strategies, pain points, whatever it might be that shaping digital, I spend a lot of my time talking with brands 20 to 30 a week to stay on top of the trends, but also helping people out with service provider selection. And one of the cool things is just asking everybody, Hey, not only what are your biggest pain points, but who's helping you figure things out as a whole. And when the same pain points come up over and over again, and the same experts, we host an event like this, we're gonna do close to, I don't know, between 250 and 300, probably virtual events like this this year, we're gonna do close to 100 in person small format dinners, and then tomorrow and midtown, if anybody's in New York City, we have a full day event that's just networking, knowledge sharing no sales pitches, there's, I think, seven different panels, it's going to be a blast, so encourage you to register for that you can find on our website, they will drop into the chat here. You know, as we get started kicking this off at three to four minutes after the hour, we're gonna wrap up with at least three to four minutes to go in the hour as well. The other thing is we want this, this session and all of our sessions to be as educational informational as possible. And so any point in time, if you have any questions whatsoever, just drop them into the chat, you can drop them in the q&a section there. Or you can always email me Aaron Aaron@bwgconnect.com. And we'll get those questions answered real time in with the email includes tomorrow next week, you forget to ask a question never hesitate to reach out. And if you ever just want to have a conversation on digital strategy, or partner selection, put time on my calendar. Always love those conversations. And but now, you know something that's come up over and over again, is this idea of direct import, I think is people are getting crunched on margins and everything else right now it's looking more and more attractive people have spent the last couple years trying to figure just Amazon and content and paid media trying to manage maybe it's channel control on authorized resellers, even on the direct to consumer side cookies going away and iOS 14.5 updates. And now all of a sudden this idea of direct import, and what would be the potential impact on my Amazon business? What would it be? And so he got some great friends, partners supporters, the network come highly recommended from multiple brands in the network for their their work in this space. And so, you know, Hannah, I'll kick it over to you. If you want to do a brief intro on yourself and Hawkers Club, that would be awesome. And we can kick it over to Peter, and then we can kind of jump into conversation. Sounds good?

Hannah Blackburn  3:00  

Yeah, sounds great. Um, yeah. So some of you guys know, as to anyone that doesn't, we started the agency nearly six years ago now. We both kind of worked in separate corporate roles, Peter as a consultant, myself as an accountant, and then both kind of looking for something more interesting, like something more dynamic ended up working at Amazon. Peter managed the largest direct import vendor in the EU. And that's why he's our resident expert. And then my role was larger on supply chain for Inc brands, launching new marketplaces such as Australia. But Amazon was changing. And as you anyone that's been with Amazon, since for the past six to seven years, will notice that it's harder and harder to get hold of a VM. Even if your account could be doing better. Even if you have a relatively easy question. You can't get a hold of anybody. And being from the Amazon side, Peter and I both struggled with the pressure of I know I can help your account. I know that I can solve this issue for you. But Amazon won't let me talk to you. And that's why we launched our in our own agency so that we could actually see the brands we wanted to work with grow in the way they wanted to do. Did I miss anything PD?

Peter Beke  4:15  

Oh, I don't think so. I think it was really, really thorough.

Aaron Conant  4:19  

Awesome. So just a reminder, for those who have joined you have any questions drop into the chat, drop them the q&a, or email them to me Aaron Aaron@bwgconnect.com. So I think the first question that I want to kick off here and others you can drop questions in as we go is how do you know if direct import is a good option or not? I mean, Amazon likes to throw it around there quite a bit. But you know, how does the brand take a step back and say, Hey, step one, is this even an option for me? You know, is it 99 times out of 100 that it works or 99 times out of 100? It doesn't we'd love to hear your kind of thoughts as people can break down on their own if it's worth exploring or not.

Peter Beke  4:59  

Yeah, sure. So So, like criterion number one, if your manufacturing is not in the US than di is an option for you. Whether it's the right one or the right one, currently, that's the second layer of determination. And usually we see sort of five business cases were number one would be, you feel uncertain on profitability, because of the trading terms increases, you get on your domestic business almost on every year around. And if you're wondering, what is it gonna be next year, what is Amazon's gonna ask for next year, then do maybe the right path for you, because we the I, there are no trading terms at all, there are payment terms, but zero trading terms. And so it can't be more certain than having zero and that not increasing. So that's, that's number one. Number two is, of course, for no reasons, every vendors increasing their prices into Amazon, some successfully some less so. And one as a vendor you may be going through is you got your wholesale increases accepted, chances are, you'd be getting the retail price increase as well proportionate to the wholesale increase just to make sure Amazon's margins are not squeezing. And so that may lead to price elasticity, which which usually compromises your revenue growth. And di has has an answer for that. That's sustainable. Number three, it's it's all about if you didn't get your vendor central price increases. In that case, you know, you may have great revenue coming in, and you're hitting your top line targets. But if ultimately your profitability is nor is diminishing, in some cases, in some cases, you may be losing given money on considering moving them to Seller Central, if any of those thoughts occurred. In that case, please give the consideration because it can be a tool that can help you out. And then last but not least, beyond know the supply chain challenges of today, how difficult it is to get a container, how difficult it is to get a container put on a vessel and then the vessel to arrive on time, which they usually don't. which then causes of course, availability problems on your Amazon account. And so by leveraging Amazon's end to end supply chain, you simply cut that risk element out of your supply chain, increasing product availability, which then in return increases your revenue potential as well. And then as the fifth one writes on our which, which actually talks with you,

Hannah Blackburn  7:51  

yeah, so that's the one I feel most kind of passionate about is a lot of people's VMs start to pressure them into Di. And that can be a stressful time, because it feels like the VM is looking for yet another reason for to have a cost decrease and, and to make things cheaper, but I always say to think about it in two ways. The first one is it's a huge compliment. Because it's Amazon saying we're going to commit to actually putting our cash into more of your stock, it is worth it to the customer for us to risk buying three, four months worth of goods and not sell them. And then the second is most VMs, as you know, don't even really want to be talking to anyone. So if they're reaching out to you for di, it means that they're doing an early warning, saying, look, we've got problems on the account, and we're trying to solve this issue to keep going. So I've more than it being a stressful moment. I always think of it as a natural evolution of your account. So maybe di wasn't a good fit for you a couple of years ago or last time you reviewed it. likelihood if your VM is talking to you is it must become a good fit for you. If you want to keep growing, if you want to keep achieving results on Amazon.

Aaron Conant  9:04  

I think you nailed it though. The the scepticism behind why am I vendor managers all of a sudden reaching out, that's where you know, people start to think they there's a 5050 shot, this is actually in my best interest. And you know, as a 5050 shot that it's in just in Amazon's best best interest. But you're saying if they reach out? Like there's a good possibility that it's for the right reasons.

Hannah Blackburn  9:32  

I think there's a good possibility for the right reasons. But I also think that it's an opportunity where if you do it correctly, and you get your pricing right, etc. You can make it for the right reasons. So yes, the BM might just be thinking about profitability, but you can then have benefit on your account from it.

Aaron Conant  9:52  

All right. Awesome. So a couple of things here. Have you seen emails from VMs asking for freight offset funding for oh, this is fun. Look at the look at these things pour it. Have you seen emails from vendor managers asking for freight offset funding for Di? Is there a changing perception of di internally at Amazon with the increased freight costs?

Peter Beke  10:16  

What Incoterm is the person asking doing if we can get that? Because that will help. If it is the normal FCA MPP FOB an FB for sort of Incoterms. In that case, definitely. FCA right. So that would not be the first step that Amazon would be doing. And so chances are there would have been a couple of steps before indicating that there may be some problems with the products or the essence of economics, that's one and a second pieces. What you might want to look into, is there's the location set up in CDs or Amazon speaking up. And is there a better way, like let's say, if you're making multiple factories, collect the stock at one place, is there a better way of doing so. And in that case, that's that's just gonna go away. So those would be the first two things, I'd look at the product economics and then pick application.

Hannah Blackburn  11:28  

And then I would say on pitas product economics pot, whenever Amazon ask you for anything, always think about it as the VM just wants more profits. So they just want more money, you don't always have to give them money in the bucket that they want. They're happy often if you give them a separate bucket, and focus on one that you could potentially grow out of or that is a one time non commitment, rather than anything that's locked in like a trading term. There is,

Aaron Conant  11:55  

that's interesting, though, a one time commitment because you know, the vendor manager who is tied to you right now won't be tied to you a year from now. So maybe they're just open to committee knowing is not going to be their issue to handle later on. And excellent. Just

Peter Beke  12:10  

one more thing to to build on what Hannah said. Always think about what IBM does they do like they have a goal to achieve in which case may genuinely be to offset the freight increase. They'll ask you for what's the easiest for them to achieve that goal, not what's the best for you. And usually those two don't necessarily align. And hands on last point is very important on how else can you give them that money, especially if it's temporary or not?

Aaron Conant  12:39  

Awesome. Since we're already in direct employer program, however, there's a major stumbling block with their CDs portal, have you heard anything about

Hannah Blackburn  12:49  

this? I can take that with me to usually it's on a product by product basis and a shipment by shipment basis. So it would depend on why you're seeing these issues. Is it that you they believe you don't have a full container? Is it that you're seeing a lot of cancellations? Is it that you're trying to book in the shipments before Amazon's actually going to let you do so? Yeah, it would very much depend on the issues that you're seeing we we have managed to root cause and solve several issues on CDs, I mean, other than the fact that it's a bad bottle. Oftentimes, there's a base reason in the way your account is set up, that that's causing the issues. Awesome.

Aaron Conant  13:43  

Next one, how can a brand avoid showing our cost of goods sold during the cost of goods during the direct import process with Amazon when they require being the importer of record? I believe we can avoid this but not sure on the actual Incoterm? Or what the process is?

Peter Beke  13:59  

Yep, I'll take that one. So as long as the incoterm you're doing is either MSB or MPP, you'll be fine. Because those are two Incoterms, when you will be the importer of record yourself. And in that case, in most vendors cases, your freight forwarder that otherwise would be doing your freight forwarding can just do the import process. And so you're not showing Amazon your cost that the factory is charging you for. Awesome,

Aaron Conant  14:33  

love it. Next question that comes in is around like overall benefits. So Amazon's asking for it, but how do you see it from a brand? Are there a certain benefits? Are there certain pitfalls that pop up when it brands evaluated? I mean, we kind of got into it looks like a couple of them here. But if somebody takes a step back, you know, what are the what are the common benefits they should be looking for? And then what is that story that they're going to tell an executive team on They say, hey, we want to switch, you know how we're

Peter Beke  15:02  

operating with Amazon? Sure. So um, ultimately, the base structure of di relies on cutting unnecessary cost out of the system, and unnecessary because you don't need it as a vendor, also not really needed. And the customer certainly never woke up and said, Well, I wish I was paying more for it. And so cutting out the trading terms, and cutting out the supply chain costs from the system allows you to redistribute some of those savings. And you can use them for multiple reasons, which we'll go through in the minutes. And so, ultimately, as as long as you do that, you're getting the, you're getting the benefits of the eye. And here's a practical example. That's live on Amazon today. And just to show everyone sort of the power behind it, this is one a sense, p&l, and all the numbers with the exception of the trading terms in the middle are actual numbers and a trading terms, I just assumed a 20%. Because domestically, that's what give or take, most vendors will be around that that mark. And so when we have a look at the DI column, that's if a unit of the product goes through the direct import supply chain. Whether it's FCA FOB MSB, MVP, that doesn't matter, because it doesn't change it. Or it goes through the same unit of the same product via the domestic supply chain route. And the important pieces here, of course, the product cost doesn't change, disrupt happens to be at a 25% tariff level as of today, which you gotta pay. Either way, of course, it will be Amazon would, you'd need to account for that later on the wholesale price. And then the first big one is if you assume a $15,000 container, which is rather, you know, free contract now, to see that number. In that case, there's the first saving, which leveraging Amazon supply chain, they get containers significantly cheaper than than any of us on the score. And so it's not only the content of price, but as I said, the preferential treatment and the speed of supply chain that generates an immediate saving here. Afterwards, you'd need to truck and rail from your destination port to the warehouse. That's another cost element that you're going to be incurring, which already gives a big advantage when the product arrives into their house. On top of that, you exclude domestic warehousing, any storage, big back fees. And then, of course, the trading terms. Now when you redistribute that amount that ultimately, you don't need to be paying. In that case. In this case, your margin is increasing, Amazon's margin is increasing. And the customer is able to save 13% on the retail price. Now, the reason this is huge is like we all know, the price of everything is going up these days. And to be able to offer even just the same retail price to the customer or even cut back on it a bit. That's going to have very, very obvious positive influence on the conversion rates. And what I'm keen to highlight is how you distribute the percentages whether you give a bit more margin to yourself, or you give a bit more to the customer. That's something you can influence from the outside. But ultimately, redistributing the savings here is what gives the ability to provide sustainable and profitable revenue growth that domestic right now can't keep up. And it doesn't matter what domestic product you're going through. The difference between the two are just so amplified in the past couple of years. That it's very, very difficult to compete with. Awesome, so

Aaron Conant  19:20  

that's great. That slide is awesome. Couple more questions coming in here. We're considering di for FBA business. I'm concerned with the impact on our IPI score. What's a good rule of thumb on how many weeks of cover to ship into the eye.

Peter Beke  19:38  

So if you're considering an FC on vendor central than IPI score, so ultimately, you'd want to pick one route, if you're worried about your IPI score, then it would be mainly Seller Central, if you want to do FCA that bit of under central in that case, you'd want to migrate everything onto under central as an older units going through Ubuntu Central and build up your IPI score using different ASINs. or maintain the IPI score using different reasons.

Hannah Blackburn  20:12  

But if you are wanting to do global import directly through FBA, that's to be honest, pretty much a call in itself and always happy to answer questions on that. The rule of thumb is around about three months worth but three months worth of a very realistic view of what your product is selling at. So if it's something very seasonal, for example, I wouldn't put like say it was a Christmas product, I wouldn't put any in where it was going to be sitting there for most of the year as an example, that that's kind of the same with everything. So di is in on both sides, vendor center Seller Central, is if you imagine, pretty much like domestic but amplified, so all the rules that you'd usually stick to to protect your score, you would do the same with di just pretty much three months worth of the size of what a week would usually be.

Aaron Conant  21:07  

Awesome. So a couple more questions. And thanks, everybody for the great questions that are coming through. And so I have a chat and a question around around the DI approval process for costing gold, silver, bronze. What's the best way to approach forecasting for di versus domestic need? We have a lot of styles that are bronze, but see Amazon ordering high quantities through DJI driving them to be Overstock, and then little domestic orders? Is there a best practice

Peter Beke  21:35  

here? First, you, you'd want to decide what percentage share of your units you'd want domestic and what percentage share of your going to tip one di, in, in this question, the most likely reason is without having access to the data would probably be domestic availability problems, and Amazon's trying to balance it out. It's significant di orders. If an essence of valuation is bronze, ultimately, you shouldn't be expecting consistent di orders and so on definitely look to improve that to at the very least silver going forwards. What's the what's the typical?

Aaron Conant  22:28  

Like engagement look at our look like? The like? Do they the brands that are sending these in? Are you helping them look at that you mentioned about data as a whole. And being able to get in there and scrub through it is that is that where you guys sit is kind of is an advisory board in that area as a consultant in that space where you're helping them decide whether or not it's worth it. And what's the right gold, silver, bronze, whatever the right level is.

Peter Beke  22:58  

Exactly and how to get to these levels. So there are so many variables, when you think about setting up yourself as the AI even just one single lesson. And the difference between getting it 100%, right that speak for you versus partially getting it right versus not getting it right. That's there's a significant difference in what benefits you're getting on your profitability and revenue. Because if you set up Di and let's say this example, your evaluation is bronze, I will be worried about is the next tip or kind of calm, it may. But Amazon doesn't guarantee it. So that's where we come in. And that's when we can be helpful to make sure that how the AI is set up is intentionally, to your benefits what you want versus what your VM wants.

Hannah Blackburn  23:55  

I'm always one for a sound bite. So this is I'm gonna get to say one of my favorite things is think about the decisions you make when you're setting up your di, as if you're getting a tattoo, you have to be sure and you have to be willing to live with it. If you think it's hard to negotiate domestic mo Q's domestic prices, di is even harder. So while the benefits are huge, anything that goes wrong, for example, if you put an MOQ that you think will encourage orders thinking will increase it over time. That's one of the biggest pitfalls people can do. Because it it causes Amazon to get a great di but then when you go back to Amazon and say we can't keep up your VM again, we'll just not talk to you. And then you have to decide if you want to keep going with di because it's kind of the end of the road if you can't supply it MOQ is that small. Another one is chargebacks. If you, for example, have a mislabeling issue or a psychic issue. In a domestic chargeback. It's one week so you know maybe 1000 units on a DI PIO, it can easily be 12,000 units. So if each charge is $1, that's $12,000. Right there. And it's gone so quickly. And then last one I'd say to look out for is seasonality. Although Amazon doesn't Amazon, like acknowledges, yes, as a Chinese New Year, yes, those are the holidays, they don't acknowledge that in the DI system in the CDs system. So whether or not the country shut down, and the factory shut down, Amazon still expects you to ship. And the kind of reason I brought that up is because that's also what we do. So when you're going into di, because it's so so much, you have to be set up correctly from the beginning, we make sure that you've got that solid footing, and that you haven't got to deal with it down the line. Because any mistakes you make in di one are amplified to it's incredibly difficult to shake them off.

Aaron Conant  26:00  

Yeah, I think the difficult thing is, you know, so many brands go through this once. Right? And, and that's their only, you know, trial and error on it as a whole. I think that's where all these questions are. It sounds like a good deal. I mean, monetarily, even how Amazon lays it out, it makes sense monetarily. But then like, you're saying, you know, once it's done, it's done. And so it's so final, it's sometimes worth, you know, dealing with the known is better than dealing with the unknown. And so I mean, just the number of questions today. And thanks, everybody who's sending it through questions you continue to send them through, we'll keep getting them answered. But also, if anybody has like, needs to be more in depth conversations, if you're thinking about going down this process, or you're partly in it, or you're already in it, and you want to have a conversation more than happy to connect you with Peter and Hannah, for sure. They're great friends, partner supporters have a tonne of brands of the network and just just heard great things about them as a whole. So worth reaching out to them. Or others also seen delays. Next question that comes in. are others also seen delays in Amazon receiving their di shipments into their inventory? We experienced this in q1 where we shipped from China in November, but it was not received into inventory until February, the said adverse effects center replenishment domestically.

Peter Beke  27:24  

So that's something that Amazon is the bearer of globally, not just in the US. But even European dai they, so their vessels are delayed as well just not as delayed as most non Amazon vessels. And the way most vendors would see Amazon compensate for that, is that because it shows up in the forecast as open PIO and they do have an expected landed date for it in their system. Afterwards, they just place the POS plays the blue space appears. And so ultimately long term the unavailable to go the smoothing groups, but they are aware and and that it's not just you, it's mostly islanders delete time, the shipping lead time has increased.

Hannah Blackburn  28:14  

And that's why Peter does a lot around forecasting for di and learning how to do that. Because back to Peter's point about you need to decide how much percentage of your units go through di Amazon wants about 80% of units to go through di so in the case where you can't fulfill because the stocks on the water. That's often a case when you're sold out elsewhere. And then I would say that that can be smoothed out with forecasting, it's frustrating to have to smooth out Amazon's issues. But unfortunately, that's kind of the way of the world with Amazon.

Aaron Conant  28:50  

Next question, what's the average time for implementing a DI program? So people who are just thinking about it today? And then the next question that comes through is it invite only?

Peter Beke  29:02  

So, just the first question, usually 150 180 days from kicking golf all the way to Amazon receiving your inventory most of that is driven by your production and shipping time. So the bulk of it is just factory producing the product and the product being on the ocean between origin and destination ports. And so to see an entire di cycle 250 180 days is the general estimate. And what was the second question what is

Aaron Conant  29:39  

is the DI program invite only.

Peter Beke  29:46  

Right now you need to get your VM to get your deep dive under code. But actually just earlier this morning, I was on the phone with a person from the European di team and in the next quarter Amazon's gonna release the DI vendor code creation in both Europe and the US as well, which is going to just got out the the VM from that process. So for now, the only thing you need the VM for is to create the right vendor code for you. Afterwards, everything can be done by yourself from the outside. And then hopefully, in the next three months, as Amazon finishes the guy to on both sides of the Atlantic, you want to want me to be up for us.

Aaron Conant  30:29  

Awesome. So a couple more questions. You know, how does it brand get Amazon to order using their di vendor codes?

Peter Beke  30:37  

It's a combination of a few things. Number one, what is the relationship of the minimum order quantity you put in, versus the customer demand versus the DI wholesale price versus the domestic price? Which you have to get right. The second one is, what is the product economics? From Amazon's perspective? Are they making some profit on it? Are they losing money on it? Have it has it got significant ongoing code issues? Has it got significant free replaceable replacements, customer returns issues? So you'd need to take it over? And then when that's all done, it depends on is it bronze, silver, or gold. If it's silver, you should be expecting anywhere between 10 to 20% of the share. If it's called a sunset earlier, you should be expecting around 80% of units to be on the eye and 20% on domestic. And then there are certain mechanisms that you can tweak it a bit so that it gets very close to 100%. Di.

Hannah Blackburn  31:51  

And then the last part is what we can say with certainty is if Amazon is not ordering from any particular vendor code that you want them to, there is 100% a reason behind that. It might seem crazy, it just means that the reasons not immediately obvious, but there is always a reason. So it's root causing that reason and then changing it to however you would like Amazon to be sending you orders. Although Yeah, it seems like Amazon's just going on a tangent sometimes that there's always a metrics reason.

Aaron Conant  32:25  

Awesome, love it. Next question is kind of the opposite. In a way, what's the best way to turn a DI asin off and push all demand domestic, just perm OS, you know, some currently out of stock, or do we need to also increase the DI cost to make the offer and eligible

Peter Beke  32:48  

you may do permanent, that'll stop. But that's basically pressing the red button. And it's difficult to come back from that. So as long as you're comfortable with that you may do that afterwards is going to be very, very difficult to sort of re teach Amazon to order from the eigen. So if if you're gonna shut it off for goods permanently out of stock.

Hannah Blackburn  33:12  

And what I would say is even if you do permanently out of stock, Amazon does keep sending POS for a number of months, we usually say it's three POS cycles on whatever cadence they usually order. They're trying to tempt you into just accepting those orders. So if you do turn it off, you will get the orders it's still working. It just takes little time that Amazon to accept you won't fulfill at that price anymore. Additionally, they I would say they know that they are going to go out of stock in the hope to force you to accept it. So you should account for that and potentially have some something on the seller central side, maybe a dropship offer to mellow it out in the meantime.

Aaron Conant  33:59  

So that it but that's the

that's the red button. It's done. It's not coming back from it. What about the increase in the DI costs just to make it ineligible?

Hannah Blackburn  34:12  

Have you seen that work? It's unlikely that Amazon would accept that cost increase. So so you could try but and it would make it ineligible. So logically it works. However, Amazon is very likely to just reject that cost increase. Or say yes, we'll accept it in 6090 120 days, so it's not an immediate impact action. Yeah, awesome.

Aaron Conant  34:40  

Love it. Everybody continue to send questions over and we'll keep getting them answered. You can drop into the chat the q&a or you can email them to me Aaron Aaron@bwgconnect.com You know, so the next one eco I said what are the typical ws they usually order into in di ASINs verse says DLM. So you can see that in there if you want to, I'm not sure. So is there a difference beyond the lead times when expecting di orders received into their DCS

Peter Beke  35:17  

in terms of general coverage, anything domestic that is not a Bellator doing programme, they'd be looking at four to six weeks, anything that's DirectInput, they'd be looking for 12 to 15 weeks, as a rule of thumb, then seasonality, monitor it a bit and any promotions, stuff like that. But as a general rule of thumb, there's a difference between lead times seven to produces.

Aaron Conant  35:49  

As Is there a difference beyond the lead times when expected direct import orders to be received into their DCS?

And maybe, Nico, you survived more context? That's

Peter Beke  36:03  

fine. Yeah, I think it'd be good.

Aaron Conant  36:06  

I'm more than happy to connect you with anybody after the call. I mean, literally, anybody who wants to have a chat with Peter, and I'm more than happy to, you know, connect you with them. And they can do a deep dive on an individual basis and answer all your questions for sure. Oh, you answered it. Perfect. You know, are there major pitfalls that are out there? I think we've seen the benefits. I mean, clearly, the benefits are, you know, Amazon, if they, you know, they're they're over indexing on a commitment to you on inventory, which is great. Obviously, they're doing that because it benefits them financially. But it can, it's carving out costs that are there that don't need to be paid for anyways. But are there pitfalls that you that you see, there, one of the common things where if the branch should be leery of maybe it's you know, how it's set up, maybe it's how it's executed, maybe it's no negotiation, we'd love to hear if there's any pitfalls that are out there for brands who are looking into it.

Hannah Blackburn  37:11  

I know Pete has got more I kind of just want to reiterate, one of the biggest ones is if you're not set up, in terms of your labeling and all that kind of, I think it's fun, but the boring supply chain side, the charges can rack up really quickly. If you forget to bubble wrap something you'd usually bubble wrap, and Amazon does 10,000 units of that for you, they will charge you and it will be extensive. So that is one thing that you will onboard and then you find out once Amazon's already charged you and that really hurts. What about up to

Peter Beke  37:45  

I think the percentage of the chargeback won't change. But as I said earlier, if you get like 1000 $10,000 domestic PIO, you make a mistake $1,500, whatever, that's like, doesn't matter. But the IPOs are, it's not uncommon for them to be anywhere in the half a million $2 million, Pio ballpark, in certain categories, you make a mistake there, get a chargeback for one and a half percent, that all of a sudden starts hurting. And and that's the big one. Other than that, I think identifying which ASINs or which products are ready to go on to the AI and which aren't yet and why they are not ready to go on to the AI just yet is very important. Because if you rush it, you'll be leaving money on the table that you don't need to be leaving on the table. If it's too late, or not too late, but you wait too long. In that case, you could have pushed it on to the AI earlier and you could have been again getting that profit and revenue benefits earlier. So identifying the right period, and not just in the products overall lifecycle, but within the calendar year as well. So, you know, if you're selling highly seasonal, let's say Christmas decoration and you want to onboard it in February, after the season, that's not gonna go really well because there's not an awful lot of demand forward looking for for those products there. The we touched a bit on the MOQ that's that's another important one in relation to the demand of the product, because you put in the MOQ is too high. And the IPO may never come you've put in too low as a Santa said and it may upset your factories that it won't be a consistent execution and and then you're just bleeding on the back end. The getting the lead times right. Again, as Hannah said, just staying in or retreating again. The Chinese New Year example Amazon is aware of Chinese national holidays existing the Dia ordering system isn't. So you gotta get it right. And then identifying the right Incoterm is very important and the right manufacturing sites, do you use the Vaughn factory operation setup or multiple factory operations setup? How many origin ports? Do you have? One of the previous questions around this topic? How do you consolidate if you need to consolidate your your stock? How do you? How do you forecast what the transport costs would be from factory to origin ports was the factory's production plan for next year. And so all of those would be impacting what Incoterms, you'd want your di structure to be set up as because again, you don't get to try it, and you'll be losing money on the back end as well. So I would say those are the big, the big pitfalls that that are important to pay attention to. But all of those are controllable from your site outside is wonderful.

Aaron Conant  41:06  

So another question that comes in here for Seller Central Amazon global logistics, is there certain are there certain factory requirements?

Hannah Blackburn  41:16  

So that on factor requirements beyond what you usually have for a product, in terms of can the factory do the labeling, can the factory do mail order ready packaging, everything that you'd usually have for FBA is the same as what you'd have for any kind of global import program. So if you're doing a successful FBA, right now, then there, you've already hit all those requirements.

Aaron Conant  41:45  

All right, let's see. Next one, do you think that when di orders come through, the algorithm is heavily weighted on past shipment history from the previous year, we have issues with price matching that peaks demand at the time, but once prices stabilize drops the rate of sale, however, we see them ordering, you know, plus 30 weeks, right, on some items based on you know, try selling right and can't figure it out what's driving their order. Just curious if you have any insight on what drives their orders.

Peter Beke  42:18  

Yes, so if there's been a price, retail price increase on the ice, and it takes Amazon quite a bit of time for the forecast to adjust for it. So so that can be one. Number two, don't forget to consider that they may have problems with the closest substitutes of that asin, let's say it's not yours, it belongs to a different brand. And so if Amazon can't source that product, they know that you want they they'll know that and so they'll overorder on yours, because they will know that your competitor is not going to be able to supply. And so in this case, you should be fine. Supplying that amount, because you're just going to be any marketer.

Hannah Blackburn  43:08  

And what we've seen more now in certain categories, where Amazon sees other marketplaces kind of bleeding or struggling, Amazon are taking in more stock than you'd expect them to than they truly need for the next three months. Because they're seeing that is their opportunity to get that market share. Awesome.

Aaron Conant  43:33  

You know, everybody can keep dropping in questions there are they're like he like takeaways is we don't have any more that are dropping in right now. I mean, one thing I'd like to say the people on his head, Peter are like, I would say, you know, the master electricians or the building inspector, right when you hold your own electrical, and you're getting ready to connect to the box. And you know, once you've flipped that, you want to make sure that you're not going to burn your house down. That's where these guys come in, is just phenomenal to be able to take a look, advise and consult into everything in between if you need them to be there that reassurance factor that you've done everything once because like Hannah said, once you've got it turned on. That's a tattoo. It's not. It's difficult to undo. So I'd encourage everybody, you know, I've had a few people ping me more than happy to connect you with both of them. If you'd like a connection, we can do that afterwards for sure. But I don't have other questions that are coming in right now if people have last minute questions drop into the chat or the q&a. But you know, as we kind of get here to key takeaways, you know, Peter, I'll kick it to you first and then we'll kick it over to Hannah like key takeaways for people who dialed in today.

Peter Beke  44:48  

or so. I think if we have a look at the four scenarios that you have as a vendor right now, if you choose to stay on domestic and you get your price increases, chances are, you're your revenue is not growing as quickly as you'd want. Or you don't get your price increase, and in that case, your profitability is not growing as quickly as you want. Scenario number three is you launch di and then you either leave a bit of money on the table or are going to do some Minco mismatches, efficiency problems here and there. So then you will get the revenue growth, but the profitability may struggle. But ultimately, I, if you get the AI right, and right the first time, then what you'll be doing is, you'll be putting your Amazon business on a sustainably profitable revenue path. And in today's world, I think that's a very, very strong statement to be able to make for your Amazon business.

Aaron Conant  45:59  

Awesome, Hannah, before I kick it to you for key takeaways, call more popped in does Amazon have a standard view of which fulfillment style is more profitable di flex, domestic replenishment, or dropship.

Peter Beke  46:12  

The way it builds up is, as I said earlier, moving from a domestic direct import supply chain model, it doesn't matter which Incoterm is in Amazon's eyes, the natural evolution of a business model. So you may do flex and dropship or direct filament. And so that's basically the starting point afterwards, you go into an Amazon warehouse afterwards, you may start to do floor orders, or pallet ordering. And afterwards, really, the next step is to start doing the AI. Because that's how Amazon sees the efficiency improving the cost coming out of your supply chain and being able to generate more money for you for themselves and a better price for customers. So that would be the order of priority and the and the evolution. So

Aaron Conant  47:06  

I says if we're doing global logistics, what are the biggest things we need to keep in mind? Also, what might we need to do differently? Um,

Hannah Blackburn  47:17  

so when you say global logistics, I'm guessing that's from the three P side I would say kind of it would be great to connect on that one, because that's like a really big question. But the one thing I would take away from it is that always be ready to pivot with global logistics because it makes sense right now. But unlike the Ventus, IDI program, Amazon is more likely to pass on costs a lot quicker. So always think of a backup. So go for your global logistics, it is a great program. But then think, Okay, this is where if it gets past this point, I can't afford to do global logistics anymore. And this is my plan B, because we've seen a lot of people get really deep into it. And they all of a sudden, we'll look back at the past six months and say this isn't as profitable as we thought it was. So always know where your numbers are and

Aaron Conant  48:08  

keep track. Awesome. Love it. And, Hannah, your key takeaways today?

Hannah Blackburn  48:17  

Yeah, so I think kind of Peter covered it really. But my my biggest one is with the AI is that it seems very intimidating, saying we're going to completely change the way we structure that Amazon business. And two things I would say is that one, it's a two way door, in that if you try di and you don't like it, it's not that you have to do it, you can change it back. It's a lot of work, etc. But you can kind of close that door back back up. You know, it's not Pandora's box. The second is, you don't have to go all in if you want to, you can say I want one acent to ASINs. As small as that to go di Amazon looks at everything on a SKU by SKU basis. So if you say to dia, I want to di one product, they're not going to try and force you to do the whole account.

Aaron Conant  49:11  

Awesome, awesome. Well, you know, Peter, Hannah, thanks so much for your time today. As we kind of get here to the end. We told everybody we'd wrap up early and give them plenty of time to get on to the next meeting without being late. But thanks to everybody who dialed in today. Thanks for all the great questions makes this incredibly interactive. And I'm sure a lot of times if you have that question others do as well. So this has been an absolute pleasure. And if anybody would like to have a follow up conversation, I love to network and knowledge share with you. I'd like to figure out what other pain points you have. That's how we get the topics for our calls. If you ever need recommendations on service providers, that's what I spend a lot of my time doing. And so more than happy to connect you with anything from Amazon to direct to consumer to drop shipping to international expansion on authorized resellers never hesitate to reach out in this space In the DI space in particular to Peter and Hannah, they just crushed it. So look for follow up email from us, more than happy to connect you with both of them. And with that, we're going to wrap it up if you are in the New York City area and you want to hang out and just have a day of networking, knowledge sharing, and seven separate panels, and then a cocktail hour afterwards, just let us know. We're more than happy to get you signed up for that and we're that we're going to wrap it up. Hope everybody has a fantastic Tuesday. Have a great rest of the week. Everybody take care, stay safe and look forward to having you to future event. Thanks again, Hannah. Thanks, Peter.

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