Budget Planning for All things Amazon Marketplace

Jan 25, 2022 12:00 pm1:00 PM EST

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Key Discussion Takeaways

As 2022 looms ahead, potential new eCommerce opportunities may be on the horizon. What are experts predicting for advertising costs? How about the supply chain logistics? How should you budget these costs?

It depends on your strategy. Budgeting for a hybrid strategy is much different than budgeting for a vendor or an exclusive seller strategy. What are the differences that you should consider? If you’re in the middle of switching to hybrid, what needs to be on your radar?

In this virtual event, Aaron Conant is joined by Nicole Reich, Co-founder and VP of Sales and Marketing at Retail Bloom, to discuss budgeting your online strategy for success. Nicole shares insights into Amazon advertising trends in 2022, how to determine if a hybrid strategy is right for your business, and advice for navigating today’s hiring challenges.

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

 

  • Nicole Reich shares how Retail Bloom helps clients navigate online marketplaces
  • 2022 insights for selling on Amazon
  • Tips for negotiating price increases on Amazon
  • Amazon’s three levels of fee adjustments
  • Getting the most out of your Walmart and Target advertising
  • Are you losing money to Amazon?
  • Hybrid strategy: transitioning from vendor to seller
  • Will a 3P strategy be more profitable?
  • Finding a balance between internal staff, SaaS, and external staff
  • Challenges of finding the right talent
  • Responding to rising advertising costs
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Event Partners

Guest Speakers

Nicole Reich

Co-founder and VP of Sales and Marketing at Retail Bloom

Nicole Reich is the Co-founder and VP of Sales and Marketing at Retail Bloom. Retail Bloom is a third-party, all-inclusive marketplace service provider that helps brands, retailers, and distributors drive sales on eCommerce marketplaces like Amazon, Walmart, and eBay. Nicole was a National Account Manager for the Retail Bloom Division at Aleva Stores before taking on her current role. Retail Bloom was initially launched in 2015 as a division of Aleva Stores and successfully spun off in 2020.

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.

Event Moderator

Nicole Reich

Co-founder and VP of Sales and Marketing at Retail Bloom

Nicole Reich is the Co-founder and VP of Sales and Marketing at Retail Bloom. Retail Bloom is a third-party, all-inclusive marketplace service provider that helps brands, retailers, and distributors drive sales on eCommerce marketplaces like Amazon, Walmart, and eBay. Nicole was a National Account Manager for the Retail Bloom Division at Aleva Stores before taking on her current role. Retail Bloom was initially launched in 2015 as a division of Aleva Stores and successfully spun off in 2020.

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.

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Discussion Transcription

Aaron Conant 0:18

Happy Tuesday everybody. My name is Aaron Conant, the Co-founder and Managing Director at BWG Connect, where networking and knowledge sharing group of 1000s of brands who do exactly that we network and knowledge share together to stay on top of the newest trends, strategies, pain points, whatever it is that shaping digital as a whole will host close to 500 of these virtual events that we're also going to be doing a ton of in person small format dinners as well. We're not quite back to our 300 person event we do in Midtown, we do about three or four of those a year, just not quite the right time yet. But if you're in a tier one city around the US, feel free to reach out and more than happy to share where we're going to be. And the topics we're going to be discussing. I talked to 30 brands a week to stay on top of the newest Digital Trends. And when the same topics come up over and over again. That's how we get the topics for these. And it's also where we get the the rest of experts that we bring out I'm asking everybody, you know who's the best for you in every, in every different provider level. And when the same people come up over and over again, we invite them on to kind of share what they're doing in the space and answer as many questions as we can throw at them. So a couple housekeeping items. As we get started, we're kicking off about four to five minutes after the hour, we're going to wrap up with four to five minutes to go as well. The other things we want it to be is educational and informational as possible. So at any point in time, if you have questions, drop into the chat, drop into the q&a, or email them to me, Aaron@bwgconnect.com And we'll try to get as many of those answered as possible. And so with that, I'm going to kind of kick it off, you know, increased scrutiny this year on Amazon. And what's the best way to handle it? I've had more conversations on one p three P hybrid budgeting, how much should advertising be, then I can recall as people are getting more pressure to make Amazon more profitable. And so we got some great friends, partners, supporters of the network over at Retail Bloom. They're working with a ton of brands in the network all around, you know, just great people and friends as a whole. So we asked them to jump on the line today. So Nicole, kind of kick it over to you, if you want to do a quick background on yourself and Retail Bloom. That'd be awesome. And then we can kind of jump into a little bit of the information you have here today. Sound good?

 

Nicole Reich 2:27

Awesome. Thanks, Aaron. As you mentioned, I'm Nicole Reich, Co-founder at Retail Bloom. Just quick background, before we get into the agenda, we specialize in helping our brands with whichever Amazon Walmart or marketplace strategy is best for them. We have two core business models related to the marketplaces and then supplement that with our brand protection on the right side. So on the Manage services side, right brand protection, content management, customer service expansion. So what happens after amazon.com? Today, we're just going to focus on the.com space, but may have different sessions later in the year on expansion. How do we drive traffic from advertising and marketing opportunities? How do we increase conversion, and then a big one for us this year is on the reporting insights and analytics. So it is no longer good enough to just be ahead, what you think conceptually, of being ahead of the curve on Amazon, everyone is getting into the space, the cost per click is getting more expensive. Everyone else is designing their own assets, their own imagery. So we're getting really, we're putting a lot of focus this year into our competitor insights, digital shelf share shelf, partnering with some great software companies in the space, to give our partners an understanding of how they benchmark versus their competitors. And then truly the value we provide from an ROI perspective. So I'll get into that a little bit later. But I think that's one of the things I'm I'm hearing right behind the hybrid strategy here. And as you mentioned, the next one is okay, how do we keep going from here? How do we take share from other competitors versus just growing on our own? On the flip side of our business is the wholesale model. So basically everything above but we also stand in many scenarios as a preferred or exclusive seller for our wholesale. The wholesale brands we work with in those scenarios, we basically place orders replan orders, instead of them selling to Amazon or a number of third party sellers. They have a turnkey solution through us. On the right side. This was the focus for one of our calls in late 2021. The brand protection so the reason that we have that is because we know without BuyBox without pricing, some type of price control. It's hard for us to drive the business forward. So we have some in house experience as it relates to policy development, monitoring, enforcement, seller removal, and then also connecting the dots between how that that drives the business on not just Amazon but Walmart and other websites. So that would be background on us for agenda today. We're going to start with a poll I logged are asking me anything called last at the end of I think it was end of November last year, Aaron. So I want to get a sense of who was in our audience today, because that'll help me shape some of the things I'm going to provide to you as it as it relates to prepping a budget. After that, we'll get into 2022 insights we we get asked often, what are we expecting? What are we expecting from advertising? How about logistics supply chain? How does that all relate back to Amazon. So there's a couple of slides that are going to be more text heavy of just reports that we have in this space to help us make decisions for this year. After that, we're gonna do budget budget considerations by selling strategies. So the way that you budget for a hybrid strategy is much different than the way that you made budget for a vendor or exclusive seller strategy. So I want to give you some differences of things to be thinking about, especially if you're in the middle of Amazon butter negotiations. Or if you're in the middle of analyzing your three piece strategy. If you were to split or if you were to switch, you may need to consider some other things that aren't in your scope today. And then lastly, regardless of the selling strategy, other considerations for Amazon, what does it look like for content and advertising cost per click? Things in that mix? So basically, regardless of how many you sell on Amazon, what are some things as a brand that you need to prep for? So with that, I actually

want to flip it over, Pat, I think you're in the background, I think right now would be the best time to pop off the pool. So here it is. So first question, how do you sell on Amazon today? So we have about six options listed. The first one, one P, you sell directly to vendor Central, second one to P, your brand sells the or you sell to a distributor who then sells the vendor Central? Maybe you're just your own seller account? Maybe you work through a three P partner? Or maybe you have some type of hybrid strategy. So I can't see the answers yet. But once we have those, and we'll we'll share them just to give you a sense of who's in the audience.

Aaron Conant 7:14

Yeah, you just want to take, you know, a quick, you know, five seconds and take a look at that. Yeah, I mean, the the two P the three PB apart are this are somewhat similar, but one is retailer versus distributor. You know, the two P bottle we've seen with a couple of more in the industrial space as a whole? Yes, um, but definitely is one that's out there. And so we'll give this poll I don't know, another, you know, 15 seconds or so.

Nicole Reich 7:36

Aaron, I'm seeing still the electronics big, maybe through Ingram, right, that I'm seeing some brands still sell through a distributor? Or maybe they're not allowed to sell to a retailer. So that's still happening a bit. And the poll here.

Aaron Conant 7:51

And a quick note, you know, just you know, well, somebody writes in well, we get a copy of the recording and the slides are able to share the

the deck afterwards. Yes. Yep,

Nicole Reich 8:05

deck will come out almost probably tomorrow. And then the recording will come out next week, once we have it ready and edited.

Aaron Conant 8:16

Okay, so I just did share on it. So it looks like you know, roughly a third or one P selling directly to Amazon roughly a third or a hybrid. And, you know, the next biggest category is going to be, you know, selling via vendor Central. And the last one is, you know, companies using, I'll say an authorized reseller, either a retailer or a distributor. So it's kind of an even mix almost, right? For 17 Selling vendor Central, five out of 17. You know, hybrid six doing one p and then the rest doing a partner the other to do. So.

Nicole Reich 9:02

Awesome. Well, that actually works out well. When we get into the selling strategies, like I said, definitely different ways to prep for the year or even into next year, based on the way that you plan on selling through Amazon. So getting into the 2022 insights, a clicking through here, just one moment. Okay, so what I will start with is that the next couple of slides are very text heavy. I don't usually do this. But when we think about insights, our data comes from some of our providers in the space who pull consumers who pull Amazon brands or vendors. And there isn't an easy way to do that except for putting the information on the slide. So one thing I will note is that the if you are just listening in, when you get the deck again, it'll be text heavy. And then one other thing that we will follow up with is just a probably a two pager of all the resources of where we got this information from. So just wanted to call that ahead of time, if you if you don't want that, let you know, we'll we'll take you off the email list. So you don't you don't get that information. So, um, 2022 insights, dropping it into a couple of different buckets, the first one being price increases. This is a huge one all over not only on the three P's side, but also on one p, this balance between hair expenses have gone up, which our supply chain costs have increased, our labor has increased, and that hasn't only increased for the brand, but it's also increased for the marketplaces for the retailers. So this whole piece of how do we make sure Amazon is profitable, or it's becoming less profitable is definitely being driven by these price increases across the board. So first data point 93% of the brands polled over the past year from one of our partners Cleveland research company, found that they have either implemented or already successfully imposed a new price increase on Amazon one p. So only less than 7% of the brands who sell on Amazon don't plan on doing a price increase. So the first the first note, I would say if you sell directly to Amazon, this is a very normal thing. They're anticipating it on top.

Aaron Conant 11:18

Yeah, really quick, just, you know, a couple thoughts. And just a reminder, you know, if people have questions, drop into the chat or drop them into the q&a Ross aboard we'll get them answered. Something that comes up all the time in conversations I'm having as sometimes Amazon is accepting them, sometimes they aren't, there doesn't seem to be a rhyme or reason, you know, on a brand level? I don't know if you have a more holistic viewpoint. Maybe it's category, maybe it's margin, maybe, you know, warehouse space, I don't know. But we'd love to hear your thoughts. And are there any, like tips for people to put price increases through everybody's gonna be doing it in Amazon, it's been furiously hard, right to get to accept price increases. Love to have any thoughts there.

Nicole Reich 12:03

Yeah, so I actually have a Amazon vendor and negotiation tips slide that I of course, don't have in this deck, but I'll include it in the follow up or maybe even in the background, we can add it. But what I would say if you're not getting prices increase, get start to understand why that might happen first. So there's two big pieces that I would look at. One is the net PPM within your vendor Central account, that'll get give you a sense of their profitability or what their goals are for at the SKU level. So let's say that you have 100 skews, and 50 of them got accepted and 50 of them didn't, on those 50, that didn't look at the other third parties in this space, look at the pricing on other retail sites. And the first thing I would do is understand if Amazon is basically stuck, because they're always going to have the lowest price, but they aren't seeing the rest of the market increase their retail to offset the increase in price at wholesale. That is probably the number one reason that we're finding that Amazon is not getting those not accepting those pricing increases. So to the second bullet, they are definitely showing greater resistance than your other retailers. And they're playing this, I'm going to follow role. So if I know that from a retail perspective, I'm not going to be able to offset this price increase at the retail level, because I'm going to be fighting against BestBuy, Costco, WalMart, whatever big box retailer it is, they're less likely to accept that price increase. That's the number one reason or that's the number one reason we're seeing those not go through. I have another for reasons that if we have enough time, I'll pull up that one slide to give you tips. And no matter what we'll include that that into this deck before we send it out. But again, it's just another asterik or point to the importance of brand protection. Again, it doesn't just protect you and your margins, but it also protects your retailers. Okay, next bullet. Thank you.

Nicole Reich 14:09

Yep. So other things on the price increase that this is, again in the tips I'll share, but they're not only focusing on price increases, but they're also focusing on other pieces of the partnership. So maybe they want to negotiate terms, they want to negotiate you adding the SDS program, or supply chain programs or promotions and advertising. So circling again, back to I guess the tips, if you think that the map is going to offset the price increase and you feel comfortable about the ASP across all channels, the next step would be focused on other things that might be beneficial for them. So for example, Hey, you know, we're going to impose this price increase, but we're also going to start doing the pilot program or we're going to explore our full truckload partnership or maybe direct import those Help them decrease their costs on their end, and then they have a better appetite to take your price increase. So those are very much in the works of yes, we know prices are going to the cost is going to increase at the product level. What are what are other things that we may have savings on on both ends, both the brand and on Amazon.

Nicole Reich 15:20

From a logistics perspective, ocean and air are expected to remain constrained through 2022. In the document, I'm going to follow up in the next couple of weeks, there's a two pages on what our expectations are, what we think that the cost of containers are going to be, and why those are probably still going to be constrained throughout the year. So I know Aaron, you and I talked, you know, late 2020 into 2021. It was a this this supply chain is is going to go crazy. Hey, it might get better for q4. It's gotten a little better. But it definitely is not going away. And I don't anticipate it to go away throughout the throughout the year.

Aaron Conant 15:58

No, we do a ton in the logistic side. And we're seeing the same thing now that maybe q4 of 2022. But most likely, just because of q4, you know shipments coming in, it's probably going to push into 2023 before it starts to get straightened out. We're seeing the same thing. That's awesome. Awesome.

Nicole Reich 16:19

So then on the one one P side, what does that mean for them. So inventory levels are still challenge, I would say that they've done a little bit better of getting more consistent in their POS. But you'll still have times where maybe you don't get POS maybe you get bulk orders instead. So I would just continuously talk to your vendor manager if you can and stay on top of that, it's going to just the only thing is constant is change, right and just expect that this is going to go back and forth. A bunch through 2022. On the three P side, similar Tony here, at the end of December, Amazon released on the seller central side that they wouldn't be improving their restock limit. So that was a big constraint last year for most sellers. It basically required the seller to only put in products into FBA that had history or that had a pretty significant sell through that was a challenge going into q4 with with holiday items or gift items where they didn't have the history in q1, q2, q3. So they were limited in their restock limits in q4, which then caused three P sellers to basically take the one one sending or shipment into Amazon, which had a ton of pallets down to maybe four shipments a month, which obviously increased costs on the inbound freight, side or even groaned. So at the end of December, they had announced, hey, we're going to get rid of these or they're going to get a lot better. Um, I have not seen that I've seen that a little bit on our account where they'll allocate more space to us than they had in the past. But I haven't seen these completely go away. So I would say stay tuned on that one as well. And then the other thing is, is that there are three levels of fee adjustments this year, at least in the first half of the year. So they just released one on January 18, they're going to be doing another one on February 1, and then they'll have another one in on the 15th in May. So just keep your eyes out for those that have significantly changed the FBA fees that'll adjust or it'll adjust the monthly storage fees. And if you want to have more information on how to calculate those adjustments, we have a couple of blogs to help you understand how to do a margin analysis of what these new fees mean for your bottom line. Okay, um, labor side, so prepping right this isn't this doesn't talk a ton to wages as it as it relates to inflation. But overall, what we're seeing from our partners at CRC is that teams are still prioritizing incremental resources for Amazon first, and then after that they're allocating resources to Walmart to their website, maybe target Lowe's. So they are a lot of the brands in this space are adding bodies, whether that be internally or externally or software to help them scale. But it's getting obviously more extensive and it requires more resources to run the business from a profitability perspective. Advertising side, most

brands anticipate expanding to other platforms, not just Amazon, but Walmart, Target Instacart. Home Depot, I have some notes when we get to the advertising piece of how to allocate the right budget to that platform based on what you think the sales are going to be. And then on Amazon, specifically, a year over a year from 2020 to 2021. Overall, we're seeing cost per clicks increase eight to 15%. If we compare just q4 2021 to q4 2020. That is even higher, I think it was, you know, 21% cost per click increase over the previous year's quarter. So definitely getting more expensive there as it's getting more, I guess saturated with other sellers, other brands allocating ad spend to the platform

Aaron Conant 20:20

is really quick on the advertising piece is what?This Amazon's still the most effective. But there's this, like, tug of war going on. Like,

everybody wants an alternative to Amazon. But Walmart, you know, keeps fumbling the ball. Target is really exclusive. Instacart is tough to actually, you know, get data out of it. And so money ends up going back to Amazon, are you? Are you seeing the same thing, even though I have tons of brands rooting, you know, for there to be a competitor to jump in? And yes, we could not be in there. I see that CPCs are up again, in there. That's, that's up 15% On a already enormous number.

Nicole Reich 21:06

Yes, absolutely. I thought 2021 would be the testing budget for Walmart, right? Like we do our budgets, we do our advertising. And then we're going to allocate, you know, a percentage of our own our own advertising, budget to Walmart, just to test it out. Right, no expectations, let's just see what happens. Let's set some KPIs for ROI or a cost. And I think what I would say is either certain categories are doing well, for sure, especially if they have a one key relationship. Working at Walmart is the one owning the inventory. But others are saying, okay, maybe this wasn't long enough for the test, I still have hope, or, Hey, this just isn't our time right now. If I have a very limited budget, I'm going to allocate it to where I know the return is going to be and where the history is, which then ends up going to Amazon or even back to the the b2c website side.

Aaron Conant 21:59

Yeah, it seems like if you're in a normal grocery run, you're doing okay on walmart.com. But if you're outside of the, you know, going into a typical

grocery cart like that, the returns aren't there. And no, people are taking a step back. And if you've got the money to spend any to dry sales, that's going back to Amazon. And I mean, what their DSP. You know, if you meteorites in you know, what about Lowe's, I just conversation I have Lowe's has been consistently, I don't want to say a decade behind Home Depot, but consistently behind Home Depot. I don't know if you have any other insights to the sales you're doing, Nicole. But

Nicole Reich 22:46

yeah, I don't have a ton of data on Lowe's or Home Depot today. We don't play in those two marketplace, or I guess sites, retailers that are even really marketplaces a ton. So our exposure to those two sites are only related to advertising, which is fairly limited. But I could look into what we're expecting from a cost per click maybe on those. One other thing to add on Walmart, I think is that maybe it's not a shift completely from Walmart, back to advertising. But maybe it's a shift in the way that you're spending that those dollars on Walmart. So for example, maybe your product detail pages aren't ready to be advertised. And that's why they're not getting served in your campaign. So instead of for example, spending, you know, 2% of your Amazon advertising on Walmart, maybe you want to repurpose that, to dedicate resources or to do a project to optimize your product detail pages, so that when the customer is there, when the advertising is is becoming a little bit easier to navigate where you're seeing the return, you at least have the conversion in a good place. So just a quick tip on that one. If you aren't doing if you're not expecting you're not seeing the results you'd expect on Walmart advertising, consider repurposing that for content enhancements to improve conversion before you start driving traffic. Awesome. No. Okay. So this next

Nicole Reich 24:16

piece would be considering selling strategy when when budgeting so I flipped these a little bit between one p and three P. So just for sake of this conversation, Erin in the way that you're defining it, right, think of three P as you either have your own seller account, or you're working with third party sellers. So the first thing I would know is that like I said earlier, the skill set and the operation requirements differ by one p versus three P or vendor central versus Seller Central, so just not so much from $1 amount, but just when you're thinking about the number of resources that I need to run my business for Amazon, start to think about on the one piece side, it's very b2b, right? It's pallets. You're communicating with a buyer on the three P, side Seller Central or retablo calls it up. That's why we have it there. But in for the sake of this conversation on the seller central side, it's obviously more b2c Focus. So you ship similarly to maybe your website where its fulfillment by merchant in some cases, or you're leveraging FBA as a as a three PL provider so that communication with internal efforts with the consumers is much different. from a software perspective, right? On the vendor central side, you have to do EDI or API integration for streamlined order processing, maybe you already have that in house. But if you really want to build out your own Seller Central account, they don't have an EDI connection, that most of the time is through API. So being able to sync your seller account to your ERP to push pricing to push Qh, right? That is not super complex. But again, the resources that you have internally to run maybe your vendor central business, aren't going to have the experience to then push it over to Seller Central. Accounting,

Nicole Reich 26:06

this is I guess, I would summarize this. So whether you do vendor Central or seller, Central, Amazon is going to lose inventory, whether they short receive your shipments on the vendor central side, or they short receive your inbound shipments to FBA, they lose inventory, they find it the inventory is never going to reconcile at the end of month that so two big things, especially when I when we talk about profitability, if you are not opening up tickets to chase down those discrepancies, you would be very surprised to see how much how many, how much money you can recoup from Amazon. So if the first thing we talk about with our brands is debt data analytics, the second thing is, hey, let's find out what your failure rate is with Amazon, meaning how much do you send in versus how much do you receive? And then how much do we think we're going to get back for you? So there are certain partners out there some do vendor Central, some new seller. If you aren't doing it already, I would highly, highly, highly look into that, because this will be one of the number one reasons that you can increase profitability for 2022.

Nicole Reich 27:15

Aaron, I know you are you talked about that. We talked about that actually at retail acts in late 2021. Any additional thoughts on your end up from that perspective?

Aaron Conant 27:26

No, I think this focus of how do I make Amazon less margin diluted?

Aaron Conant 27:33

That that No, I completely agree. I think we probably this year, I think last year on that topic for recovery, we did probably two calls, I think this year, it's come up enough and there's so many brands engaging, the tough part is to try to chase it down on your own. We just have a lot of people going you know with a refund sniper or a TITO or somebody to go round up the cash and just go get the phone button. Yeah, it's just time, effort money, just, you know, put some people after it. I mean, if anybody needs connections to those, I'm in the same boat as you I'm just incredibly surprised how much how much lost money there is. And you know, you can go get a big chunk of that back, almost, you know, immediately. So that's one p and three P there's different providers for both, you know, just you know, send me a chat or email me Aaron Aaro N E WG connect calm and I can make some connections after the call, but we'll have upcoming calls on that topic as well. But it's, it's a way to get money back and then, you know, hold Amazon accountable because the, they're not gonna let you know, it's gonna,

Aaron Conant 28:48

it's gonna end up on warehouse deals, you'll be scratching your head, how it got there.

Nicole Reich 28:51

And yeah, this is the easiest topic that I would say, to outsource for an opportunity for outsourcing. It is very tedious. There is not a shiny button that you get to you get to go into a vendor seller and say, Hey, Amazon, give me back my money. It is a lot of opening up tickets submitting bill of ladings providing to Amazon that you have proof of delivery. And those providers do a really, really good job. So as Aaron mentioned, we partner with both of the ones that he said depending on the brand selling strategy. But I would first start with if you don't know what this shortages are the chargebacks are the cost of that start by getting an understanding of probably what you're losing out on. And then what they will do either provider will present to you and say hey, if we go back six months, this is what we can anticipate recovering for you. And they only take a percentage of what they recover. So this one out of all the things that we're going to talk about today is a is a no brainer. It goes right to the bottom line.

Aaron Conant 29:53

Cool. Me we're gonna get to this the hybrid strategy. Oh, they're right there. I was just thinking I saw You know, the one p the vendor and the seller central, this was perfect. Let's keep rolling. Cool.

Nicole Reich 30:08

So if you have both right, if you are one team right now, and you are considering going three P either through sellers, or through your own seller account, and most of this is because brands on the vendor central side are thinking of backups, right? What if I can't get these price increases accepted? What if I lose communication with my buyer, what's my backup plan. So I already mentioned it on the on the brand protection side being the first one. But again, before you consider opening up your seller account, make sure you understand how many other sellers are out there. Because it is going to be a little bit of a eye opening experience when you transition from vendor to seller. And you just assume you're going to pick up those sales. So not if you caught up one P for example, or you do both and you have it in FBA, and it's prime and you have the right pricing. Well, if you have 20 sellers out there, your business is going to be a 20th of what it is on the one piece side. So just the second bullet is really, really important. If you don't have control over distribution, that is going to lead to no Buy Box and that is going to lead to inconsistent sales trends. So the first question you want to ask yourself in trying to understand if you want to open up your seller account is how do we make sure we can we can win by box with our pricing that we're expecting to sell at retail. Because on the one piece side, you don't have to worry about that a whole ton because Amazon wins the buy box, they drop price increase price, they basically win 90% of the time in most cases. Again, with talent, you know, on the on the seller central side, your customer service team might be used to providing b2b pallet orders shipments, you know, big orders with a ton of line items. And that might work well on the b2b side. But on the b2c side, it's up to you to inventory plan. And that inventory planning is based on what sells through to the end consumer, not what Amazon buys from you. So your shipping product and FBA. As it sells, it's up to you to replan to make sure it doesn't go out of stock. And it's also up to you for the most part to answer any consumer questions that may be the Amazon staff doesn't carry Seller Central is more self service than vendor Central. I talked to a lot of brands that are on the vendor side. And you know, they a lot of the complaints are Hey, I can't have any communication. It's totally up to me to go in to the portal to make decisions. Yes, that is correct. And it's even more correct on the seller side. Very rarely, on day one, are you going to get a team to support you to troubleshoot what it means to have a seller central account? Inventory, right, it's your job to recoup lost FBA inventory, it is not up to Amazon. And then content controls. So this is a really big one as a consideration. If you're if you're thinking about Seller Central, just from a budget perspective, you're content content contributions are still going to be in that one PII account. So if you plan on hiring internal efforts, or an agency to run content, make sure that they have access still to that one PII account and that seller central account, because if they don't, they're going to spend a ton of time trying to update content in Seller Central, and they're not going to get anywhere because of this thing called retail contribution. So even if you have brand registry on both the vendor Central and seller central account, you still want to be using that vendor Central, a lot of the times to make updates at the asin level.Cool, um,

Nicole Reich 33:42

so profitability. Oh, sorry. You know, I think

Aaron Conant 33:46

it may be you're gonna get into it on this, the question that I get a lot is, I mean, it's right around profitability. So maybe you're gonna jump into this right here. It is this notion that, hey, if I'm a third party, I'm going to make more money. Right? And do you find that to be true? There's a lot of cases I have people do it and it comes out of a wash because of the increased resources or, but anyways, we'd love to hear your thoughts there. And maybe you're gonna get into it. But people are often tempted by the three piece side. And, you know, you do get to control price. But do you actually make more money? Yeah, so

Nicole Reich 34:27

we can ignore the image on the right for just a second, we'll get into the cost of stockouts. But actually, to that point, Aaron, what I would suggest is that if you are running a hybrid if you're considering a hybrid strategy, you first, you first start by writing a profile profitability analysis of your one P account. What is my profitability before I go into vendor negotiations? What do I expect expect my profitability to be after vendor negotiations? I'm going to step forward just to answer that question. Then we'll come back to those two. But then on the three pizza Again, before opening up a seller account, let's say, you know we've gotten over the mat piece, we know we're going to have consistent Buy Box, we're all good there. But then to your point, I would still then run analysis on the three P side. So on one P, you're running, here's what Amazon's buying it for. And here's all the chargebacks. Here's the cost of doing business. On the three P's side, okay, I'm going to sell it at retail, but then I also have to pay a referral, and I have to pay an FBA fee. And I have to increase my cost in my warehouse, because now I'm shipping more b2c than I am b2b. And there's probably an increase in your overhead expenses to support what is necessary on Seller Central. So and I wouldn't say it depends does a complete it, it depends. What I find is is that for sub ao V 15, to $10, most of the time, it makes sense to keep those products still one key, um, anything above that, it really depends on the weight of the product, it depends on how the brand is set up internally already, if they're able to support that seller central business. But I would say a lot of the work we're doing right now, in the beginning stages is this analysis to say, Okay, you are vendor central today. This is what it looks like if you say, and here's what it looks like if you switch for a bit of both. And then we're also setting up profitability dashboards to monitor in real time. And that actually top speaks to the third bullet on the one piece side is that it is no longer beneficial all the time to just advertise on every Asin. So at the SKU level, we want to know, retail, less FBA, or cogs, less Co Op, whatever it might be, what is our profitability at the SKU level once we add in advertising, and that helps us make decisions. So I would anticipate from our end, both on us as a third party seller, and for the brands we work with that certain skews just may not work to focus on for advertising anymore, because once you add 5% in for advertising, the SKU isn't profitable anymore. So just some things to keep in mind and the the bigger your catalog and the different types of products that you have in cash in your catalog. The more important is to do at the SKU level versus just the channel level. We already started, we already discussed the plan to start monitoring and reducing write offs. I talked on the crap out skews. Um, the other thing I would say on a three piece side or even on one p if you are paying for shipping, a lot of times on vendor Central, they have a freight allowance. So Amazon pays for phrase, you don't have to worry about it. But in other any scenario if you are paying for the freight into Amazon FC is I would consider running an inbound shipping analysis by carrier. So Amazon has their carriers, maybe you have carriers on your own. It differs by pallet versus Grom, full truckload half, you know, FTL, whatever it might be, I would plan early on this year to do an analysis. So you understand if I have to pay for shipping. Here's the carrier, I want to pick no matter what. Or maybe I want to change my carriers based on speed so that I stay in stock. So that's another set. That's another report that we're running for the brands we work with quarterly now, because we know that shipping rates are obviously going through the roof. And then this last bullet actually speaks to the get graphic on the right, I bring this up because with 2021 in supply chain and not having enough inventory or not having the inventory in the right place at the right time, going out of stock on Amazon is harder than other channels to recoup what that that was in ranking for sales would be so that first bucket there on the left. So over about a three month time period, our partner profit harrow monitored, I think it was like 30,000 skews and they basically track for those skews that went from 90% in stock to less than 30% in stock over that timeframe. What was the estimated loss in sales and it was about 42% loss in sales by just being out of stock. More importantly, they found that once they got back in stock, it takes three to four days for each one day out of stock to regain that organic position. So I say this because if you have to think about where you want to allocate inventory or shipments, you know, let's say that you have a ton of back orders or you're trying to understand if you want to ship to a retailer brick and mortar or shipped to Amazon, I would consider this when making that decision because it's going to cost you more not just the the days out of stock, but it's also going to cost you more in advertising and More work to maybe do promotions to get you to back to that original organic or ranking that you have at the category level. Okay, other budget considerations, so this is just overall on Amazon doesn't matter one p or three P, I wanted to give you an idea of best practices. So that chart below is again, from our partner CRC out of 100 vendors vendor central only, based on the business size on Amazon, it gives you some estimates on how many full time employees they plan on having. So the blue, the dark blue, blue represents full time employees that spend at least 90% of their time on Amazon, the light blue represents employees in house or externally that spend 50% of their time on Amazon. And then the orange is what they plan on hiring. So really good. Again, quick benchmark, you know, think about the size of your business. And then when you look at these numbers, think about how many heads you may need to support that business for Amazon, and then maybe where you would be able to repurpose those employees for other channels as well. Aaron, I know that you've done a ton on the recruiting side over the last six months. Do you have any sense of the brands that you're working with and what they're planning on from a headcount perspective?

Aaron Conant 41:30

Well, I think everybody's looking to hire, he issue is people that are constantly bouncing around.You know, I see a lot of people going with an agency in full transparency, because the average tenure now is about 14 months. In the flip side, if you look at the beginning of the pandemic, you know, there was like 1000 people that really understood digital and eCommerce and amazon it a company level and a brand level. And now there's 10,000 open positions, but that number is on the increase to about 1500 or 2000. And so there's this massive actual talent gap. Like these numbers make sense for how many are expected to be hired. But there's actually a talent gap. And it's just incredibly hard to find those people that can they can fit into perform. And so I mean, that brings up a question, you know, the the old SBS program, I mean, I had one when I was, you know, at a big pharma company, and then I would say I SAS program, like we'd love to hear. You know, so one question that comes in the numbers above would be the number of employees full time 40 hours per week is? Yep, so that's

Nicole Reich 42:44

what is represented in that first column, that dark blue would be full time. 40 hours per week.

Aaron Conant 42:49

Yeah. So I mean, it makes sense to me, I think. It's just tough. I mean, that people are looking to hire, let me know, we have a whole division that does that in the digital space. But I'm more than happy to connect you with Fred. But what do you see from an Amazon standpoint? You know, I knew it is the SPS program. Now, I think it's SCS? Or who knows how they change the acronym index? Is that worth it? Or is that not worth it? Yes.

Nicole Reich 43:15

So now I have a second to do. So I have another slide that will add in to say, what is the balance between internal staff, saps and external staff? Whether that be freelancers or an agency work? Um, the short answer is, it depends on what type of work you want to get done. So as works from my, from our end, we partner well with them because they are able to help us with tedious troubleshooting catalog adjustments. Maybe once in a while, they'll say, Hey, this is a good opportunity, you should do a new year new me promotions, for example. And I would say for my opportunity perspective, or strategic thinking that those SAF reps are that is not their main focus, they may say it is but it really depends on the quality of the SS rep that you have. So most of the time, the way we leverage that program is for tedious troubleshooting that we just can't get done through brand registry or on our own. So maybe big apparel catalogs where we need to fix the titles the SS rap has been super beneficial. The biggest complaints I would get is on the flip side is that maybe a brand intends Okay. Well, I'm not going to hire internally are not going to find external resources. I'm just going to pay, you know, high six figures or I guess low six figures to have an Amazon team member just do it all for me where they are the strategy and the execution. That I would say is a very unrealistic expectation. Some brands I talked to they have to sa s wraps one for each vendor code that I don't think is probably the best bet. So what I would first determine is what type of have activities do you need this talent doing and then find the best people or the best teams to support those team members, which actually is the next slide, which I'll give you an idea of where people are allocating talent resources to. So just to close this one out, though, um, when it comes to keeping internal employees, the biggest challenges that we're seeing right now is obviously comp with inflation, right. And also just huge demand for this type of talent, and a limited supply supply, Aaron, as you mentioned, and then the other thing is, is that most of this space is looking for remote opportunities. So for these 100 brands that were polled, they said 60% of them are planning on doing remote ecom employees. And that's not because they necessarily want to do it, but they know they have to do it to be competitive. And then obviously, the number one challenge, like I just mentioned, meeting compensation expectations. So after that would be location, what type of title are they going to have culture fit. And then again, just having a constrained talent pool, and that being a pretty big threat of considering who to bring in internally. So speaking about the type of work that these individuals do, that same sample size basically reported, how they plan on using these full time, part time or or outsource efforts to manage these points of their business. So sales and account management, that really makes sense to have a full time role, whoever needs to be doing Amazon vendor negotiations, whoever needs to be working on a new product launches, that makes sense to have that type of body, internally, they're going to be more of a pm to understand the rest of the business, they're going to say, hey, I need to work with our supply chain to make sure that we're planning accordingly, I need to work with marketing to make sure the right assets. So that point of contact really makes sense to be in house. And then it goes down from there. So some teams are doing Amazon advertising and analytics internally, maybe they have their own software's, but the the actual body is in internally where others are starting to outsource that. And then some other things that, you know, at the bottom of the list for full time, employees, finance and accounting, they don't typically have a body internally that 90% of their time is just allocated to finance and accounting. So hopefully, this is helpful as you think about hey, you know, I know what my Amazon budget is, I know what my sales are, I know what my expenses are going to be. But for this expensive as labor, what is the best use of those Fallens? Do we want to do it internally? Do we want to do it externally? And when we think about our internal efforts, what are the things they should be focusing on? I mean, we're at Digital 3.0. Right? That's,

Aaron Conant 48:00

you can't just be checking boxes at this point in time, you know, everything. You know, from marketing to in stock rates to logistics, supply chain, inventory levels, content has got to be intertwined in operating in sync, and that's all run by, you know, personnel. Yeah. So, you know, quick question comes in, you know, are full time defined as internal, external, or both. So, both, I

Nicole Reich 48:27

believe I'll double check when I send this out, but full time was based on the number of hours dedicated to it. So let's just say that they hired a consultant to work 40 hours, that would be considered a full time employee. Awesome. Got it. Okay, um, advertising is the next big one. I'm going to switch to this one. First, to give you some trends of 2020 versus 2021. On the right side, for sponsored product ads, or for sponsored brands, the two most popular ad types on Amazon, this gives you a sense of the trends year over year and quarter over quarter for click through rate cost per click, conversion row as and the biggest things that I want to call out here is obviously the cost per click. So I mentioned this earlier, but on the sponsored product side, overall, the cost per click has increased 14% year over year. But if you look at just q4 over the prior year, the cost per click went up 21%. So q4, going into December, cost per click up 21% sponsored product ads. And then on the sponsored brand side year over year, clicks are up seven and a half percent, which I think makes a ton of sense because on Amazon, you can't do sponsor brands unless you have brand registry. So from a retailer perspective, if you're a third party seller and you don't have brand registry, the only The ad unit you can do on Amazon is sponsored product ads. So it does make sense that sponsored product ads are more competitive and the cost per click is higher, because there's more retailers or sellers or brands that are all bidding up those keyword prices.

And then going backwards to this slide. So what does this mean for 2022? Well, the other question we always get well, what should be my tacos? And then our responses? Well, what are your goals? Right, so this was one of the slides that I had presented in our advertising call, I think back in October of last year, to help brands get a understanding of understanding where their goal is first, and then billing, building a budget to support those efforts. So 2022, maybe a lot of brands are trying to grow for profitability, not necessarily top line. So in that scenario, they probably want to focus on bottle, bottom of funnel efforts, maybe sponsored product sponsor brands, maybe they're only going after branded, they want to stay protected the whole time. And maybe they'll go a little bit into generic, but that's basically the minimum, that's your base. So if we think about advertising as a percentage of our overall forecast, if you just want to protect your brand name, maybe you find that in order to do that, you have to allocate two and a half percent of your expected sales into Amazon advertising. On the flip side of that, maybe your goal isn't profitability, as much as it is brand awareness and growth and you want to do DSP, and you want to do display ads, well, all of that is going to get more expensive, and you're not going to see the return right away. So as you move up the funnel, you should anticipate adding up, allocating more of the ad spent as a percentage of sales to Amazon advertising efforts. So if the basis two and a half percent, and you know that you want to do this DSP, maybe your total advertising cost of sale, or your tacos needs to be 1015, or 20%. The other thing that I would say is, it's tough to create a budget for advertising, if you don't have a sense of what the cost per click is going to be. So if you have a lot of history, look at your cost per click for your branded terms, look at the cost per click for generic or competitor terms. And then you can start to get an idea of adding a percentage increase overall, right, because it's going to continue to go up. And then you can allocate your budget to those types of terms. So as an example, maybe branded cost you 75 cents a click, and you're going to allocate 50% of your budget for that, you know, go to your clicks for last year, get understanding of how many eyeballs you had through those ad efforts. And you can start to do an equation of what you think your branded budget would be. And then you would do that similar exercise for generic or competitor category and demographic.

Aaron Conant 53:06

Awesome, and I see that we're getting you know, right to time here. And I do want to, you know, kick it over to you for some key takeaways, but also say thanks to everybody who dialed in, and all the great questions that have come in. Again, you need any help or any connections across the board. Anything in the digital space, don't hesitate to reach out we've got a short list shared by brands, the network as a whole, obviously, in the in the space of Amazon, Nicole and the team at Retail Bloom, come highly recommended across the network as a whole. So I would encourage anybody have a follow up conversation, especially if you're exploring any of the different topics we've covered here today. But, you know, Nicole, like is we kind of wrap up in the last few minutes here any key takeaways? Yep.

Nicole Reich 53:47

So this is actually my last call my last slide. And my last key takeaway. If you were exploring external partners and software, this gives you an idea of the types of resources brands in the space are looking to outsource. So the number one being Amazon advertising, followed by digital shelf and ongoing, it's a little bit of everything, but you can see what would make sense to best outsource, I guess key takeaways. Again, I will be sending out this slide deck and the recording next week. And then again, there was a lot of data based on reports that we have. So we'll be creating kind of a two pager for you to go through this so that if you have questions on specifically where we got this information from you can find it there but that would be it and Aaron just like you said if you guys have any other questions happy to connect over the phone.

Aaron Conant 54:38

Yeah 100% Just as we wrap up here, thanks Nicole. You guys are great friends, partners and supporters, the network and really appreciate you jumping on the call today and kind of walking us through what you're seeing as a whole. Again, if anybody needs any help anything in the Amazon space, don't hesitate to reach out to Nicole we get back to you with her. If you're looking to hire like I said, we've got a talent division that taps into the network of you know, a couple 1000 brands so we can help you find people within the network that already in the digital space. Obviously if you have chargebacks or shortages we mentioned earlier shoot me a note we can connect you with a couple different people who work on that front. But you know you need any help in this space across the board reach out to Nicole and her team. With that we're going to wrap it up. Hope everybody has a fantastic Tuesday a great rest of the week. Everybody stay safe, take care and look forward to having you at a future event. Alright everybody, thanks again. Thanks, Nicole.

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