Aaron Conant  0:18

Happy Thursday everybody. 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 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 today. I talk with 30 to 40 brands a week to stay on top of those trends, we don't sell anything here, we're just a great big networking group, we leverage each other's knowledge to tackle those pain points. But also find the right service providers as well as we help people that on a regular basis, we're gonna do close to 600 events this year, a big chunk of those virtual but also close to 100, in person small format dinners across the US. So if you're on any major shows, or if you're in a tier one, tier two city, just let us know, we'd be great to meet you in person around a you know, 15 to 25, person dinner. A couple housekeeping items as we get started. The first one is we're starting here at three to four minutes after the hour. And we're going to wrap up with three to four minutes to go in the hour as well, we're going to give you plenty of time to get on to your next meeting without being late. The other thing is we want this to be as educational and informational as possible. So at any point in time, if you have any questions, you can drop them into the chat. You can drop them into the q&a section there, you can always email them to me Aaron@BWGconnect.com or you can just you know, raise your hand and we can bring you into the conversation as well. We're gonna try and get people involved across the board. I know a lot of people have questions just from the conversations I'm having. So I want to kind of kick off this. The reason for this and what's been coming up routinely international expansion and brand control, you know, so COVID hits for almost a couple years into it now, tons of people jump on to Amazon and other marketplaces. It's a great way to increase sales. Over the past two years though, what we're one smaller brands on a on marketplaces on Amazon is now going up into larger brands. And now where they have a lot of trouble with unauthorized, resellers brand control as a whole. And you throw on top of that a major trend is people going international. And so we just had a ton of questions and these two that coincide and overlap quite a bit. And we have some great friends, partners and supporters of the network for I think, basically four years now since we kick this off, and for Vorys eControl. And so Daren and the team is here to answer it, you know, kind of give us some guidance and as well as answer as many questions as we can throw at him over the next 15 minutes or so. So Daren, I'll kick it over to you if you want to do a brief intro on yourself and Vorys we can kick it around the horn here so everybody can do an intro and and we'll we'll jump into the content sound good?

Daren Garcia  2:58

Yeah, absolutely. Thanks. Thanks for having us. So I'm Daren Garcia, I'm a partner at Vorys eControl. And joined here by colleagues, Jessica Cunning, and Sarah Long, who is one of the leaders of the eControl global coalition in Europe. And I'll let them formally introduce themselves in a second. But Vorys eControl is a team within a law firm that really works with more brands than anybody in the world of which we're aware at helping them to control their online sales and leveraging that control to drive healthy Revenue Online and ultimately offline as well. So we work with about 600 branded manufacturers in this area, both domestically in the US and internationally. Sarah and I are in London. Now we do a service based here. I'm here visiting, but we do a ton of work helping brands implement eControl strategies in in Europe in addition to the US. So that's what we focused on today. Really, how do you how are your European control programs Similar? How are they similar and different to the what the path forward is in Europe? So I'll let my colleagues say hi quickly.

Jessica Cunning  4:15

Hi everyone, my name is Jessica Cunning, and I'm a partner at Vorys eControl with Daren and like Daren mentioned, I'm very excited to be talking with all of you today about the similarities and differences between a US and Europe eControl program. So Sarah, did you want to do a brief intro?

Sarah Long  4:35

Yes thank you very much, Jessica and Daren. Good morning. Good afternoon. I'm Sarah Long. I'm a partner at Euclid Law. I've been working with them for quite a few years now and the eControl team so what we do is we provide the expertise the competition or expertise that required in Europe in order to set up a system which enables you to control your sales online. In a legally compliant way. So we are probably the firm doing the most work in this area, I would say in Europe at the moment. We are a boutique competition law firm. So we do competition law. And that's all we do. And that enables us to be highly specialized in the field. And my colleague are back at the golf. He's also kind of a co leader of the control Europe team is one of the foremost thinkers in this area as well. So we have a lot of experience. We have worked with brands, but we've also worked with platforms and retailers over the years. So we have a really good understanding of the entire ecosystem, which is fundamental in order to to understand how the competition law intersects with

Jessica Cunning  5:47

this. Great, thanks Sarah and Daren, can you just briefly touch on for the listeners today about how Vorys eControl and Euclid work together as part of our eControl Global Coalition?

Daren Garcia  5:59

Yeah, absolutely. I mean, Vorys eControl we many of you on the phone may or may work with us. You know, we specialize in helping brands to assert control over online market marketplace, ecosystems, Amazon, Walmart, eBay, and other marketplaces around the world. And we manage that from a legal perspective in the US, as well as a monitoring tech and global management process around the world. And as we go into different jurisdictions, certainly like Europe, like Canada, like Mexico, like Australia, China, etc, we partner with local experts, who understand brands, strategic objectives in the relevant markets. And it can help to implement the strategies necessary to maintain control. And just to, to be very clear, when we say control, really, how do you ensure that your online go to market strategy can be executed, so many brands say, Oh, I have a one piece strategy with Amazon, or a three piece strategy with Amazon, or we saw on Amazon ourselves, and you look, and whether it's Amazon one P, there are three P storefront, whatever you're winning, you know, 40% of BuyBox, Amazon, one piece winning 80% of Buy Box, you're leaving significant revenue on the table and your brand from an equity and value standpoint is being is being massively eroded, poor, poor consumer experience all sorts of things happening. And so how do you as a brand, execute the strategy that you want, and drive the vast majority of sales through your authorized sellers in a manner consistent with your, with your brand equity and control your own destiny on these platforms. And so that's really, you know, when we talk about E control, typically the use case that brands are leveraging us for and so in Europe, we looked long and hard for the right team and found them in Euclid, which is a member of the eControl global coalition here. And that's that's how we all work together. It's from a brand perspective, it's essentially a one stop shop.

Jessica Cunning  8:00

Right, so that that segues nicely, then into just kind of taking a temperature from the attendees today about the disruption that they're experiencing and the control or lack thereof that they have on those online marketplaces. So Aaron, can you pass the poll here? Question number one just wanted to get a sense about which of these images more accurately depicts how your products appear on American online marketplaces. So Amazon US, Walmart, marketplace, eBay, which one better describes you A or B.

Aaron Conant  8:31

Just if you get a chance, we just launched it, we'll probably give it another 30 seconds or so. But if you get that chance, it'll go ahead and drop an answer in there. Most kind of have it split right now. 7525. It's gonna be interesting. We'll give it 15 more seconds here. People want to jump in. And just a reminder, anybody have questions, just, you know, raise your hand there or drop into the chat or the q&a, and we'll get an answer. We're going to give it five more seconds here, if anybody wants to vote. All right. I'm going to end the poll now. And then I will share it.

Jessica Cunning  9:09

So it's 50/50. Okay. All right. So same question. But now Europe.

Aaron Conant  9:17

I wonder now, so stop sharing. Let's see if I can relaunch the poll. Here we go. Oh, so everybody, I just, uh, just relaunch it. So let's take it now. European online marketplaces.

Daren Garcia  9:36

Those 50% pick B for the US or goodboys plans.

Aaron Conant  9:41

So it's 5050 in the US, and then this one is European. Yeah, interesting. So I'm gonna end the poll here. In about five seconds for. So different story on the side here, and I'll share these results as well right now. So switches from 5050. Right to basically 1/3 to two thirds. This is really common is that what you guys see yourself being a ton of brands out here is this is this fairly common?

Daren Garcia  10:25

I mean, I think what you're seeing is really consistent with what Jessica's showing here, I mean, in the US brands competitive bit more time to get their house in order to implement the programs necessary. And they're experiencing the same phenomena here in Europe, as they did in the states several years ago and working to try to get that under control.

Jessica Cunning  10:49

So it's actually really consistent with a lot of the feedback that we've received from clients about getting their control strategy up in the US and running and then having the bandwidth to actually look across Europe, look at the disruption that's taking place there and start thinking about what they can do there, and what pieces and parts might be applicable from their US strategy.

Aaron Conant  11:09

So a quick question that comes in is or it is around, does the US strategy have to be in place before going international? Was it recommended? Or is it a requirement?

Daren Garcia  11:19

It's not necessary or required. We work with a lot of European native brands that start in Europe, because that's what I think, you know, it's not a natural for us brands to get their US house in order and then migrate over. But fundamentally, you can really start anywhere in the world. And frankly, even Europe is a market that is probably the most strict in the world. And so when you get it right in Europe, you can essentially get it right anywhere else. So you know, some brands start in Europe and then sort of bootstrap that to every other market. Because if you're compliant here, you're basically compliant everywhere.

Aaron Conant  11:58

Awesome. But then everybody keep dropping questions in the chat the question or emailing them to?

Jessica Cunning  12:07

Daren, I think we have a lot of people attending today there are on the eCommerce team. So can you touch upon and Sarah as well, what you've observed with econ teams in the US and in Europe, but they're experiencing the disruption on online marketplaces. What are they seeing and what are they trying to do to combat it? Besides eating corporate grammes?

Daren Garcia  12:27

Yeah, and then Sarah, please, you know, chime in with anything that I miss. You know, I think that the market in eCommerce leaders will understand this better than anybody in their organizations that on any given day on marketplace platforms, you can have any number of factors that can disrupt your sales and your brand. It could be unauthorized sellers, so people selling genuine genuine product in an unauthorized manner that disrupts your marketplace. strategy could certainly be counterfeit products, diversion and parallel imports, meaning stuff leaking out of your channel, your authorized channels in in country, or stuff coming from overseas, like, for example, from the US into Europe or vice versa. Authorized seller policy violations or cycle distribution violations, meeting retailers that you've authorized and other channels turning around and selling on marketplaces in the US where you can do things like MAP policies, you'll have map violators that can screw up your sales and your pricing, you have brick and mortar challenges, and everybody's scraping everybody else. And so on any given day, any of these issues can creep up and causing problems. And I think what a lot of eCommerce teams struggle with is they take very fragmented approaches that may have some software that can look for counterfeit, so they may be doing brand registry takedowns. Or they may be, you know, trying to get their law firm to do something about it. And the challenge becomes that really no providers able to offer the integrated solutions necessary to flex to any one of these issues at any given time, you know, nor can they tailor their or your nor teams really appropriately tailoring their activity to driving revenue. Okay, and then it's you need to get away from sort of a whack a mole type approach, oh my gosh, there's a counterfeit over here. You know, I have a map violation over here in the US, there's some authorized seller, you know, over here, whatever it is, they're sort of playing a whack a mole strategy, rather than saying what is actually disrupting my my sales, and and, you know, targeting that. And so this is really the, the landscape and what we're sort of what we're seeing on any given day.

Jessica Cunning  14:37

And we joked that this is our our iceberg slide, but we've done a really good job, I think of educating manufacturers in the US that a lot of the the the product ultimately starts with that and flows from them and the product is making its way oftentimes on to online marketplaces, is because the brand has lost control of its downstream distribution. So Sarah, curious about your thoughts on whether this kind of reckoning is recognized yet in Europe, or is this still?

Sarah Long  15:05

Well, I think, as a as a sort of general statement, and I can say this now of having done this for a couple of years, I mean, in all honesty that I, the majority of the brands we speak to, when looking at Europe, are really only seeing kind of the tip of the iceberg. And that's slightly the problem that we have, which is that econ teams will be tasked with fixing Amazon and fixing the problem, as if it can be done by one person through kind of one decision or by a piece of software. And, you know, what we what we see is that, really, there needs to be a holistic solution, which will be kind of talking through, but what is very clear in Europe is that you scratched the surface. And suddenly, you realize that the company hasn't really been thinking about this at all, because they've not really focused on their online sales. And this is particularly, I would say, a problem, because of the way Europe works. We have, you know, a lot of brands who choose to have distributors in different European countries, and they don't have a view as to what everyone is doing, necessarily, or where any of these sales are coming from. So it is much harder to play the whack a mole game, because it could be from anywhere across Europe. So the starting point over here is is really trying to understand you what are they where are they trying to get to, but then also trying to ensure they understand that there's, it's got to be a holistic approach.

Jessica Cunning  16:49

So if a brand's interested in quantifying the disruption that they're experiencing on Amazon France, Amazon Germany, Daren, what are some of the metrics that the eCommerce team should be looking for? And why do they matter? So I think that

Daren Garcia  17:09

we talk to a lot of companies and say, Well, why, you know, why are you giving me this disruption report? Or why are we talking about Amazon? It's my best channel. And and, you know, it's my channel that's growing the fastest. And, you know, we say, well, you know, well, obviously, it is, I mean, it's the fastest growing, you know, channel in the world. I mean, it's an all boats rise environment, what you need to understand, relative to Amazon is, how effective is your actual performance relative to your stated strategy? Meaning, if you're selling one piece to Amazon, what is the percentage of Buy Box that Amazon owns across your portfolio? If you're selling three P, what's the percentage of buy box that you or your chosen PP seller own, across your portfolio, and you're going to find that in many instances, it's a fraction of the available size, surprise, and certainly when, when that happens, all of a sudden, your your marketing campaigns aren't optimized. Inventory management becomes very hard, you know, essentially, your, your your traffic tends conversion times, times your sales price, equation begins to be disrupted. And so I think brands, you know, from a disruption standpoint, in Europe, where you're not tracking things like pricing and those sorts of things, given the way the legal regimes work, you need to fundamentally understand how much control do I have over my BuyBox. And so essentially, this slide is showing, you know, we have the ability to run these, these data reports on a on an asin level to be able to show brands, you know, what is the level of revenue or by box being captured by your authorized seller relative to other sellers on a on an Eastern basis. And this will give you a clearer sense as to the true success of your strategy relative to what the overall size of prizes

Jessica Cunning  19:02

in the channel. So, with that, I'm sure a lot of the people on the webinar today are really wondering, you know, what does the control programme in Europe look like? How does that compare to the US program, so when a stress here today that you can get to the same state from a control perspective, but the path is just a little different in terms of how we approach that. So wanted to take some time now to dive into how they're similar and how they're different with Daren leading on the US side and then Sarah drilling down more on the Europe side. So Sarah, can you help help us understand at a high level you what you need to be putting in place when you're looking to execute on your European control program strategy, and then we'll dive a little bit more into the weeds? Yeah, of course, thanks

Sarah Long  19:54

just because so you'll see the slide there. We've got a reference to selective distribution system which sounds a little a bit technical. So the way I always describe this is like a private member's club. So what you're looking to do in Europe, is control the sales of your products by setting up a group of invested, distributors, wholesalers, retailers, sellers, effectively, who are allowed to sell your product to you have permitted to sell your product in order to sell your product, and they need to meet certain criteria. And so this is why it's a bit like a private member's club with a, a pretty strict sort of dress code. So if you're not wearing your sort of suit, and shirt and tie and nice shoes you're not going to get in. And the reason that this is important is it enables brands to effectively kind of curate who is selling their product, and bring them into the cloud. Once those resellers are in the club, then they need to be able to sell across to each other. So you do have a resale requirement within that club. But importantly, they are not allowed to sell to anyone outside of the club. So you ring fence who is selling your products to a limited if that's what you want to do, you can have as many or as few as you want. Does that make sense? So but you ring fence, who sells your products to a limited number of invested distributors, retailers, and wholesalers. And that's important because actually many brands don't really understand sometimes we meet brands who don't realize that they can put this sort of control in place at all. So there's a sense that actually, you've just got to let free distribution happen in Europe. But you are as a brand, allowed within the sort of legal framework to impose quite a lot of rules and restrictions effectively on how your product is sold. And that is what you need to do in order to make sure that the right people are selling your product. And what that means is that those people outside of the sector distribution system or also the private club, are not allowed to sell your products. And then if they are found to be selling your products, you would then take some form of appropriate action against them, which we can sort of talk about a bit more detail. So it is a mechanism which is slightly different to the way in which the process works in the US, but ultimately, does enable brands to have a lot more control over the entities that are selling their product.

Aaron Conant  22:47

A question comes in are in under selective distribution, are you able to limit the countries that can sell it? So I'll give you a perfect example before this, I met Perego launching, you know, the Amazon business in the EU, and we've got distributors in every country over there. And it's all across border sales into you know, different platforms are you able to restrict?

Sarah Long  23:08

So this is a this is a really great question, actually. Because it ties into the move from a traditional exclusive distribution concept, which is where you would normally have Well, traditionally, you would have a brand that sells to say a wholesaler, but is appointed for France, the wholesalers pointed to Germany wholesalers in Spain, they would then sell downstream to their retailers. But that wholesaler would be appointed that territory, that sort of territorial exclusivity falls away with selective distribution, because you then must be allowed to sell across the European network effectively, the thing or the sorry, the point I would make here. And it's a little bit techie, but bear with me because it is important. Although you have territorial protection under an exclusive model, ie you are the sole appointed distributor for that territory. Under European competition law, you cannot prohibit passive sales passive sales is me getting online and saying, oh, I want to buy a product from France because actually it's cheaper and I'm going to have it delivered to my address. And active sale would be that company in France direct marketing to me through say, you know, emails, things like that. under EU competition law, you can't prohibit passive sales. So the point is that the EU consumer, the consumer sitting in any country in Europe can buy from anywhere else in Europe. So that's why the exclusive distribution model isn't really fit for service anymore because in an online world, people are procuring their goods from all around Europe because they know how to shop around. The exclusive model was set up for a brick and mortar world where you went down the road and you bought In your local brick and mortar store, and that was it. So it doesn't, although sometimes brands get a bit nervous about moving away from this very traditional sort of setting and losing this territorial protection in practice in a world where everyone and consumers are buying online that that territorial protection is more apparent than real.

Jessica Cunning  25:22

Awesome, love it. So, contrasting this, then to the US side, Daren, can you just touch on from a controlling distribution aspect, how the authorized seller program in some ways mirrors, this left a distribution in Europe. But a key element that's different is obviously the grey market or an authorized seller legal foundation. So can you just touch on how those two pieces are a little different than the control solution

Daren Garcia  25:53

for Europe? Yeah, I mean, I think that that brands operating globally can take comfort in the fact that the controls relative to your authorized sellers, so distributors, brick and mortar retailers, and things like that are fairly similar in both markets, there are certain core concepts you need to cover each of your channels with an appropriate policy, you need to have appropriate rules and, and things that those customers need to meet to be an authorized customer. Those need to be passed down through your channels. So you can't have totally uncovered channels that aren't governed by any of your of your policies or your terms. You know, from a, from a technical standpoint, they become a bit they become a bit different insofar as in the States, you're not stating specific criteria. And Sarah analogized, to, to the rules of the Private Member's club, but, and things like that, and you don't have to be as as precise, perhaps in the US, as you do in Europe. But the fundamental framework is the same. So if you're sitting there, and you're a brand in the US that's looking to do something similar in Europe, and you've gotten comfortable with the notion of an authorized reseller program, it's really, you know, a fairly small jump from that type of model into one of selective distribution in Europe. And so I think that they're more similar than they are different in that in that respect, an authorized reseller program against the selective distribution system

Aaron Conant  27:27

must have been really clear question comes in, in relation to the last question. In regards to active and passive sales. How does taxation and import duties within the EU have an impact?

Sarah Long  27:41

Not being a tax lawyer, I am not able to answer that question. So I would say is, in four years of doing this, it's not something that has affected our approach or our analysis. So I think that ends up being a wholesale pricing issue maybe but yeah, we haven't thought about we have not had to think about it for what we do

Daren Garcia  28:10

at all. I think if you see if if and again, we are not tax or or customs import type type people were distribution and online sales control people helping brands to power Amazon strategies. But if you're in a situation where if you look on Amazon, UK, and you see people offering your product that are based in France, Germany, Italy, Spain, wherever you under you can bet that there is margin to be made, not withstanding whatever tax or import duties there are from country to country, okay, from UK into the whole of Europe or, or whatever the economics are, such that there's still money to be made. And so that's, I think the key point, if your service point, your wholesale pricing, all those sorts of things, net net of any additional costs, allow for profit to be made, somebody will be out there making it if it's the opposite, then you'll likely have sort of more natural geographic silos of your product that they'll stay within a particular market because the economic incentives are to move them around boredom of moving them around. Awesome, love it.

Aaron Conant  29:26

Just a reminder, just you have questions drop into the chat the q&a, or you can keep emailing them to me Aaron@BWGconnect.com. But awesome, keep sending them in love it.

Jessica Cunning  29:35

So Sarah, one of the ways that we've heard us brands describing their US authorized seller program against their Europe selective distribution system is that in the United States, you're more so out or you're in until you're out. So you distribute your policies down through your channels. And essentially, you know, as long as The channel partners get your policies continue buying your products, and you're not putting that seller on a do not sell list and circulating that through your two step distribution channels. You've essentially framed out your authorized seller network in the US. So can you explain a little bit more about the you're out until you're in concept as it relates to selective distribution? Yeah,

Sarah Long  30:21

the I think, also, there are sort of different ways to do this. And much of it will depend on how much the brand wants to do. So there are lots of different options, I suppose, you we've done selective distribution systems with a brand is pointing to complete control. And that means that before anyone sells their product, they vet them, they look at their website, they interview them, they go into a training session with them, you know, those sorts of things are perfectly fine. If that is the brand's what you want to do. Alternatively, though, you can have a bit more of a hands off approach, which is more realistic, I would say, for those brands who've got, say, a couple of distributors, or maybe one distributor, or wholesaler in a, in a jurisdiction traditionally, and then lots and lots and lots of downstream retailers. And the brands are saying, well, well, I mean, I do I have to add all of these to the sector distribution system. I mean, how does it work, I don't want to contract with like 40,000 shops across Europe. And the answer to that is that there are ways in which that can be done. So that it's not, the head sort of brand doesn't need to do all the heavy lifting. Now, it's important to say that the selected distribution system will extend to all of those 40,000 retailers, the point is, they all need to they all need to be in it. But the ways in which you can ensure that they are in it of various you can have a flow down where the wholesalers are required to only sell to distributors or retailers that meet criteria, you can have a sort of a signup function whereby any retailers that want to sell the product and have been approved, tick a box to sort of say that they will continue to comply with criteria. So there are lots of different ways to do it. I mean, the important thing is that that that group remains sort of sacrosanct in the sense that once you're in, then you can't sell to any of them that is out. But the way in which the brands do it, you may have brands that have four or five resellers in Europe, you may have brands that have 40,000. And therefore a lot of it comes down to commercially, how the brand wants to manage it, and how much they want to do.

Daren Garcia  32:42

And I just think I mean, just real quick before we, as you feel free to move on just I just want to sort of make the point to everybody, just to sort of level set. You know, all of the things we're talking about here, you know, as we get through this ladder up to how do you execute a particular online go to market strategy? How do you curate who's able to sell, you know, in our experience, and just about every thought leader experience in space, smaller number of sellers a marketplace, good, big number bad. And in Europe and the US, if you just leave things B, you have no basis to get to a protected viable strategy. And so what we're talking about is how do we position our brands to be able to protect our one p or a three P strategy, leverage that for success and growth online and then have everybody else in our ecosystem being happy to look at our situation on Amazon and not feel like they need to stop doing business with us or stop giving us shelf space? Because it's so out of whack on those channels.

Jessica Cunning  33:52

So actually, that's a great segue. Daren, so you mean, why can't a brand in Europe Sarah just simply tell its downstream channel partners? You can't sell an online marketplaces you can't sell on your own websites? Why can't they just exercise those types of online sales restrictions outright?

Sarah Long  34:06

Well, um, so there's two sort of separate things. You there is a a mandate from the European Commission. So there's a clear focus on online selling, and the ability for brands, retailers, distributors to reach the European market. And if you think about it as part of the single market imperative, as it were, so think of Europe as a single market. It is a combination of different countries, but there is a sense of it being a single market and online sales are a fundamental part of that, because they do allow, for example, a consumer in France to buy from a company based in Germany, and that is the way online sales ensure that there is this sort of single market. So just banning online sales is is a big no, no, you cannot do it. But what you can do through those distribution system is ensure that you have quality control in place and a list of criteria that says you must sell our product in this particular way. And that can be tailored to how you wanted to be sold in an online setting. And that can be as specific as you know, use this these pictures use this language, what you have to be careful about is that you're not using that as a kind of front to prevent online sales. But the reality is, the reality is certain with all the brands that we've spoken to and worked with. But they do want people selling their products online, of course, but they just want it done in the right way. And that's what the distribution enables you to do, which is say, Yes, of course, everyone should be selling online, that's great. But you just shouldn't be selling it like it's, you know, Pirate high and sell cheap. We want it to be curated in a way that reflects the way it's, for example, sold in a brick and mortar store. And actually, that's a really important point to make. Because, again, what we have seen in practice, with a lot of brands is that they've spent years and years and years investing in the brick and mortar stores investing in the type of sales, training that goes with a particular product, they might invest in training and invest in various other things. And then when we kind of talked to them about their online sales, it's a total mess. And that's either because they haven't prioritized it, or sometimes because they not understood and say, Oh, well, we know we can't put any restrictions on online sales. So obviously, we just allow them to do whatever we want to do, because we know that that's what you need to do. But that's not right at all. Because if you are allowed to put in place, a restrictions or order or some form of guidance and rules in a brick and mortar store, it's perfectly acceptable that a brand says Oh, and when you sell it online, we want your online sales channel to reflect the high quality service that you provide in a brick and mortar store, for example. And that sometimes can mean that, you know, retailers need to get their act in order in order to make sure that they're selling in the right way.

Aaron Conant  37:21

Perfect, just really quick, because we have a question that comes in, I see says, Great presentation. Thank you. I see that for Europe, everything turns around selective distribution. Can you just spend a few words in regard to this exercising in the case of open distribution? Many thanks. And I think that's kind of what you're getting at a little bit, Sarah?

Sarah Long  37:39

Yeah, I mean, what we there are sort of three types of distribution that you would normally see across Europe. And you have open distribution, which is just anyone selling to anybody, you've got exclusive distribution, which is where you would say you have appointed exclusive distributors for certain territories. And then you've got the selective distribution. I mean, the problem with open distribution, which is something that we do see quite commonly is, is that you're just not in any way, there's no way to control what is going on there. You've got people saying left, right and center, and you've not got the ability to say those people can't sell my products because they're outside of the group. And, and the purpose of the state distribution system. Again, if we come back to the idea of a closed network, what that enables you to do is say anybody who is outside of the closed network cannot sell the product. If you have open distribution, you can't then say like, well, you brand, a you retailer over there, you can't sell my product because it's in free distribution in Europe. So that's what you're trying to do

Daren Garcia  38:51

that I mean, just to bring it forward. I mean, you know, me mean, as it relates to eCommerce and marketplaces, you have no control over Amazon or other marketplaces. I mean, assuming that product isn't counterfeit, or there isn't an Amazon policy violation, you know, which which may happen in a in a small handful of scenarios, but you will have no mechanism or viable strategy to optimize your marketplace sales and profitability. And that's not a viable strategy for the vast majority of brands in any market in the world. It may be very good in brick and mortar but you will not you will underperform online

Aaron Conant  39:28

There’s another question that comes in. But it's something that I was thinking about on the back end. So in the in the US, right, we can take it and we can say, hey, now it's illegal for you to sell these you don't you know, you don't line up with all these things that we're doing and therefore it's now illegal. I can go in and I can remove you as an authorized reseller. You're off the platform, but it doesn't sound quite the same. The EU. This question says, Is there any possibility in Europe to stop unauthorized Amazon sellers?

Daren Garcia  39:58

The answer fundamentally is yes and That's really why we're talking about everything that we're talking about. The you know, if you've heard us talk in the US, there are various things to do around your trademarks and material differences. And those sorts of things. We've written a lot about that you can easily see that I think the high level takeaway from that is you need a legal foundation to be able to remove those unauthorized sellers because, as it is in the US, it's the same in Europe, there's fundamentally nothing wrong with buying and reselling product. And so you need a legal agent to be able to wade in and have any basis to stop that, in Europe, the selective distribution framework, the creation of this effective Private Member's club, and all of the benefits that that entails, gives you that foundation such that when there is an unauthorized seller selling outside of your network in violation of your distribution setup, there are claims under various national laws that then become available to you typically arising from some form of interference with your contractual setup. And that in Europe is the legal hook that will allow you to enforce against an authorized seller. So when you don't have this type of distribution setup, you have an exclusive model or you have you know, even worse yet an open model, not only can you not dictate what happens with downstream sales, so people buy into distributors, etc. You have no basis for enforcement against unauthorized online sellers, and you're stuck. There's no there's nothing to do. When you have the right foundation in place, you can have appropriate levels of control of your authorized customers be to be your policies that flow down through and a basis to enforce against unauthorized. And that's just a very critical point in either market. That there is a way to do it, but it's very precise and you and you there's there's no box to check in brand registry or anything like that you need the respective legal foundations be able to do it.

Aaron Conant  42:00

You can't just get that market track track street price biter, whatever it is. Right, and just might expect them to get removed. It's they don't have they don't have to really

Daren Garcia  42:09

Yeah, I mean, without you know, committing any particular company. There's there's no monitoring technology that that has anything to do with any of this. Okay, and yeah, you might try to scare somebody away or whatever. But fundamentally, you will not have control of your revenue if you can't stop on authorized sellers with a legal basis. And the only way to have that legal basis in Europe is through a distribution setup like this, just like in the US, it's through the legal foundation that we talk about all the time, and anybody can look up online.

Jessica Cunning  42:44

Awesome, love it. So it means very, you kind of touched on this about how open distribution and exclusive distribution are really distribution models of the past and how a selective distribution model is really not the future. But here and now. So can you just shed some insight on if you're seeing an uptick in brands transitioning over to selective distribution, some of the observations that you've had, of those brands that have made that transition, and what their experience has been like living in the SDS model, as opposed to that opener, exclusive model,

Sarah Long  43:17

just a little bit of background on without going through sort of ancient history of selective distribution, which no one were interested in. But the high level point is that there was a sense for many years, that selective distribution, and having a curated member's club of retailers was only something that was appropriate for certain types of luxury or high end brands. So what we saw for decades in Europe was French perfume houses, luxury, fashion houses, these are things they've had to select a distribution in place since the 70s. You know, this is not new, nothing new. None of this is new for them. But what we see so much more now, and certainly in the last sort of three or four years are brands who would not traditionally have thought themselves as wanting to do selective distribution, because they erroneously thought it was only for brands of a certain type for luxury brands, which is not the case very clearly the commissioner said that's not the case, realizing that actually this is something that's very attractive, and it makes sense to move to. Because ultimately, if they already have some particular I think, well, when you have sort of exclusive distribution models in place, they realize that actually it's not something that is too difficult to do. It just requires a change of mindset. And once companies have aligned so the fact that it is a switch over from what they have traditionally been doing, then the move over is unclear. be relatively straightforward. So we do see lots more brands who I suppose actually, this is really as a result of Amazon, I'm thinking, it's gonna sound a bit silly. But brands that produce over we work, a lot of nutritional supplement brands, for example, the products are light, they can be posted all over Europe, when you've got a light product like that, that can be packaged up easily. But it's a high value product. And it's a product that needs an element of guidance and how it needs to be sold. You know, those are the sorts of things where suddenly you have brands coming to us and saying, Oh, actually, well, we wouldn't have necessarily thought that, you know, nutritional supplements would want to lead to distribution. But we realized that it's really important because people are selling our products in a way that is not how to how we want it to be sold. And because they are very easy to sell and very easy to ship. They are and they're and they're quite can be quite expensive. It means that divers and other resellers who don't want to make any investment in how the brand is presented on their Amazon page will just sell them all over the place. So that's why we see this real shift in the mentality of brands who 10 years ago wouldn't have considered selective distribution, because it just wasn't relevant to their business. They just didn't think it was something they needed to do. Now sort of going Oh, right. Yeah, this is something that we absolutely have to do, because it is integral to the way we want to build our business going forward, because we are focused on an online model. So I think, you know, we definitely do see more brands that would not have traditionally thought about sector distribution, deciding to go down that route, because it gives them an element of control, which they can't get from anywhere else. There's a question.

Aaron Conant  47:04

Yeah, but it says, great one, it says we already have an SDS in place, already have SDS in place. We'll still have we still have a problem with unauthorized sellers who joined listings created by us. Amazon does not require any verification of the authorization from the sellers. Is there any legal way to get Amazon to restrict access to the listings within us? Yeah,

Daren Garcia  47:26

I mean, the answer to that is generally no. In France is the only market in Europe where there is a box to check and brand registry that, that the seller is selling in contravention of, of your selective distribution system. And that can be effective. But in any other market, Europe, Amazon is not going to help you to enforce that, you're going to have to enforce that directly against the resellers themselves. And we run full enforcement programs in that in that respect. And that's really the short answer to the question and the direct answer to the question.

Aaron Conant  48:02

So there is a way to address it, but just not Amazon's not going to get

Daren Garcia  48:06

involved. Yeah, no, there's no, there's no, there's no way to do it on Amazon, other than in France.

Aaron Conant  48:12

Doing brand registry in the US, click the box doesn't mean nobody's gonna sell. Yeah,

Daren Garcia  48:17

I mean, there's no box to check for this issue in the US just just like there is in the whole of Europe, other than if you have selective distribution, you can do it in France. And then somebody asked what limitations and enforcement measures are associated with exclusive distribution in Europe? And the answer is there are no bases for online seller enforcement under selective distribution. I'm sorry, we're an exclusive distribution model. Again, assuming that we're not talking, we're just talking about unauthorized otherwise genuine product.

Aaron Conant  48:48

Awesome. See, we've got about four minutes left here.

Jessica Cunning  48:54

That's So real quickly. Just wanted to cover Sarah, what you've observed about brands that have transitioned from exclusive or open over to selective? How do they tackle that? What do they need? What's general timing to make that change?

Sarah Long  49:11

So I know this, this, I think is, you know, one of the key questions and it sort of touches on the holistic solutions we were sort of talking about. So you know, we've had a variety of brands, some come to us, and they actually already have a slated distribution system in place, but it's just not fit for purpose, and actually is what we would kind of call selected distribution lights, so it doesn't really have the teeth that it needs. But then we have some who just haven't thought about this at all. And really, it doesn't matter what sort of state the brand is in when they come. What matters is that the right people within the company are invested in understand why this move needs to be made. That's the most important thing so we can turn Around the documented documentation is relatively straightforward. I mean, not to, not to suggest that I don't have incredibly difficult legal thinking to do about this. But actually, we've done a lot of the legal thinking. And in terms of actually setting this in, play in in train, you know, there will be a process that needs to go through to understand how the distribution model works, and how we want brands to do things. But that is all just sort of processing documentation, which is what lawyers live for. So this is very, very straightforward. What is important is that before that happens, the right people within the company, understand so the right people being obviously the Econ things, but you also need any lawyers that you have, you need area sales managers from the key jurisdictions potentially are in for just to give an example. You know, some of the things that stop things running smoothly is where you have a team who are pushing this forward, but they haven't actually got on board, whoever it is in Germany, and then they get there, they have a call, and they say we're moving straight to distribution. And then the kind of head to Germany said, who knows, absolutely no way we can do that. Because of this, that and the other and, and actually, it's about making sure that the right people who are responsible for the distribution across Europe know what's going on, understand why this is important. And that there was a clear shift from the senior leadership effectively to say, this is important for the business. And this needs to be done. For those brands who've come to us ready to go. I mean, the documentation can be done in a matter of weeks, frankly. So it really does, it does depend a lot on the brand being in the right place. The other thing I would just mentioned, because it is relevant is existing distribution contracts. So if you have a distribution contract in place that runs for a number of years, then that is what it is, you know you that that will be a contractual obligation. But at the same time, the other thing that we've seen in juristic, in markets where some of the retailers distributors are quite keen themselves to move to select a distribution is that actually, they may have an exclusive distribution contract that runs till 2025. But they're chomping at the bit to have a selective distribution system because that means that they can sell across the whole of Europe. So you can transition them out of their exclusive distribution contract or selective distribution contract. That's a contractual issue, which, you know, then becomes a bit of an assessment of everyone being happy with that. But that can be done. And it just again, also, there's a yeah, there's a point about bringing along your distributors and retailers so that they understand the benefits of this as well.

Daren Garcia  52:58

Let me just add something real quick. And Aaron, I know you want to wrap up in a minute. I just want to say this, you know, we've thrown a lot at you. And I think what's very important for any brand looking to just even at a high level, how do I stop an authorized seller screwing me up in Europe? How do I protect my go to market in Europe or the states for that matter, you have to cut through all of this noise, oh my gosh, these knee jerk really frankly, unsubstantiated reactions, this is too hard, this is too difficult, there's no way to do it, this is illegal. And just at least bring your teams forward to be educated, like, for example, that all of this in Europe is not about cutting off relationships with your good customers about, you know, making things difficult about about any of that, that may be some knee jerk somebody internally, it's about bringing your good customers in and keeping the bad people out. And fundamentally, you just need a structure in today's market to be able to do that. And what we've sort of laid out here are some of the parameters around that. So I would just encourage everybody, just to force your teams to get educated about this and understand what is real and what isn't. And that will allow you then to make the strategic decision for your company relative to what your goals are, in terms of if you just want to flash up those KPIs real quick, just your marketplace performance, as well as your brick and mortar performance and how your brick and mortar and core customers are reacting to the realities of the online channel. And so and just leave leaving the last thing I'll say Aaron, if you go to the KPIs Jess, the in either market whether we're talking about Europe or the states if you do not have a program and a structure in place that allows you to measure an impact unauthorized seller revenue and enforcing that way down, and authorized seller revenue and pulling that way up. You are not doing anything commercially or Your control strategy, you can send all the map violations you want in the US, you can try all the takedowns you want, you can high five that we did 1000 takedowns last week. But unless you've moved those numbers, you haven't done anything to protect your strategy offline, and that will boomerang and bite you offline as well. So we'll let you all hold your promise here.

Aaron Conant  55:23

Awesome. Jessica, Daren, and Sarah, thanks so much for your time today. Thanks for everybody sending in the awesome questions. You want more information on this. They're the leaders in the space, they come recommended by more brands that we're talking to then then anybody else out there I really don't know anybody else is doing at the scale, you are the quality you're doing it. So I'd say worth putting a follow up time on the calendar with the team over at Vorys eControl. US and international. They're all around leaders. They've also been great friends, partner support is the network. And so you know, thanks to you and your team Daren, and I know we'll do a lot of in person events this year with you guys as well. And with that, we're going to wrap it up if you need any other advice you ever want to chat more than happy to connect with anybody on the line today. Again, we don't sell anything here at BWG Connect. But we do pick your brain to get the biggest topics and the things you're trying to tackle so we can get the most highly relevant educational sessions out there. Hope everybody has a fantastic Thursday. Have a great rest of the week. Everybody take care stay safe, look forward hanging out a future event.