Digital Shelf: Achieving Profitability in eCommerce

Aug 3, 2021 11:00 am12:00 PM EST

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Key Discussion Takeaways

Every eCommerce brand wants to know how to turn a bigger profit. While higher sales volume is essential, businesses are either made or broken by their profitability. With tight margins and fierce competition, even established names struggle. Many brands do their own internal research and investigation to find the problem but sometimes miss the bigger picture. The best resource is an unbiased, knowledgeable group looking into digital sales as a whole. This is where Kiri Masters comes in.

Kiri performed a study with the Digital Shelf Institute to find the key profitability drivers. She is also the CEO of her own digital agency, Bobsled Marketing, which helps eCommerce brands grow and reach peak performance. Through her research, her podcast, and her experiences in the digital landscape, Kiri knows what it takes to be more lucrative. Want to hear more about her findings?

Aaron Conant hosts Kiri Masters, Founder and CEO of Bobsled Marketing, to learn about the digital shelf and where brands are going wrong in growing their profitability. Kiri goes over the four main drivers of profit and how to approach each of them. She then dives deeper into topics like margin dilution, profitability goals, and what should make up your brand’s bottom line. They even take time to discuss current trends in the field and where the future of digital sales is headed.

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

  • Kiri Masters of Bobsled Marketing talks about the recent digital sales boom
  • How do you make eCommerce less margin-diluted?
  • Organizational design and current trends in consumer brands
  • Setting up realistic profitability goals for mid-level brands
  • The growing need for content generation
  • How to know if you’re mature in your vertical
  • What do you include in your bottom line?
  • Kiri’s key takeaways from the Digital Shelf Institute study
  • The four main drivers of retail profitability
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Event Partners

Guest Speakers

Kiri Masters

Founder at Bobsled Marketing

Kiri Masters is an experienced guide for consumer brands on Amazon, Walmart, and Instacart. She is the Founder and CEO of Bobsled Marketing, a digital agency created to help consumer product brands grow and protect their marketplace channels. Their team is fully remote, consisting of 25 experts that serve over 60 brands.

Kiri also applies herself to other ventures outside of Bobsled Marketing. She is a contributor on Forbes.com, writing on retail companies and online markets, and has authored or co-authored at least three books. Kiri has a podcast of her own entitled the ECommerce BrainTrust. Each week she has some of the top leaders in consumer brands on to share their knowledge. Kiri is also featured on the RetailWire panel of retail experts and the winner of a Silver Stevie® Award for Young Female Entrepreneur of the Year.

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

Kiri Masters

Founder at Bobsled Marketing

Kiri Masters is an experienced guide for consumer brands on Amazon, Walmart, and Instacart. She is the Founder and CEO of Bobsled Marketing, a digital agency created to help consumer product brands grow and protect their marketplace channels. Their team is fully remote, consisting of 25 experts that serve over 60 brands.

Kiri also applies herself to other ventures outside of Bobsled Marketing. She is a contributor on Forbes.com, writing on retail companies and online markets, and has authored or co-authored at least three books. Kiri has a podcast of her own entitled the ECommerce BrainTrust. Each week she has some of the top leaders in consumer brands on to share their knowledge. Kiri is also featured on the RetailWire panel of retail experts and the winner of a Silver Stevie® Award for Young Female Entrepreneur of the Year.

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. I'm the Co-Founder and Managing Director here at BWG Connect. We're a networking and knowledge sharing group to 1000s of brands to do exactly that we just network and knowledge share together to stay on top, the newest trends, strategies, pain points, whatever it is shaping digital. And that's everything from Amazon to direct to consumer to retail media, which is taking off obviously, the digital shelf, international expansion, a lot of people looking at that expand to you right now. And then of course, you know, everything that goes along with it from payments to fraud, to hiring to, you know, digital age three deals that can dropship for you. So if anybody ever wants to have a conversation, and then those pain points, I connect with 30 to 40 brands a week to stay on top of them and kind of network and knowledge share. I'd love to have a conversation with anybody on the phone today. At any point, just shoot me an email Aaron aaron@bwgconnect.com. And a couple of things as we get started. We want this to be as educational and informational as possible. At any point in time you have a question you have commentary is star five a handle go up on the screen here. We can unmute you and bring you into the conversation we want to get as many questions answered today as possible. Also, if it's easier though, if you can't unmute you're in the car, or you know background noise you're working from home, always feel free to email me questions Aaron aaron@bwgconnect.com. And that includes, you know, during the call an hour after the call tomorrow next week, anytime you need a conversation or help in the digital space, never hesitate to reach out more than happy to jump on the phone with anybody. The last thing here is we're starting three to four minutes after the hour. And we're going to wrap up with three to four minutes to go give everybody a chance to get on their next meeting without being late. So let's go ahead and kick it off. The idea of digital shelf now, I would say a year and a half ago was kind of something topical and fun and we'd randomly hit on now with the huge, you know, push to digital over the past 18 months, nobody's surprised by that digital shelf has come up over and over again. What does it mean to win there? What does it actually mean? How do different people look at it? How are you viewing winning in that space? And so we came up with this topic, digital shelf achieving profitability and eCommerce discussion. And we've got a great friend, great partner of the network, helping brands, you know, throughout the network out on multiple different fronts than just, you know, all around leader in the space. Kiri Masters from Bobsled Marketing, we asked she jumped on the line today and you know, kind of give us an overview. You know, hey, how does she view it? Does a lot with the what is it the Digital Shelf Institute The thing with? Yeah, you know, we're still a lot with them is on their board over there. And so great to jump on the phone today. And, you know, answer a bunch of questions. Give us some ideas and some thoughts and thought leadership but you know, here I'll kick it over to you if you want to do a, you know, brief intro on yourself and Bobsled. That's awesome. Yeah, we kind of jumped into the conversation. Okay.

Kiri Masters  3:23

Sounds great. Well, thanks for having me. For those of you who don't know me, I'm Kiri. I started a company called Bobsled Marketing back in 2015. We primarily work with with brands on Amazon, recently also extended out service capabilities to Instacart and Walmart as well. And we typically work with mid mid market brands on those platforms across operations, marketing and advertising functions, promoting managed services for them. Since since starting that company in 2015, I've written a few books about Amazon and recently Instacart. So Amazon for CMOS, which came out in 2019 and Instacart for CMOS, which came out in earlier earlier this year. And also right before retail about online marketplaces. And now we're just talking about podcasting. And I have a couple podcasts that I started back in 2009 17 called ECommerce Brain Trust. So it's pretty safe to say, spend a lot of time talking with brands, and talking with our team at Bobsled, about what they're seeing. Coming up in accounts, from very technical things like inventory restrictions in the last few months then resolving those through to more that have The high level trends around retail media platforms and where brands are wanting to go there. So that is sort of who I am. And and what I do. And projects that I was really fortunate to be involved with recently was this the Digital Shelf Institute, which is another Think Tank organization out there and looking at the concerns of, of e commerce and digital leaders and practitioners within brands navigating navigating the digital shelf. And a topic that came up from this group of particular interest was around profitability in e commerce. And these folks are digital eCommerce leaders of their companies and under under pretty constant pressure to improve profitability within the division. And in 2020, that pressure to call a whole new meaning for a lot of these people, because eCommerce suddenly jumped from low single digits of, of the company revenue to, to much more than that 15 20% plus of company revenue in the e commerce division, so profitability. While it was it was always kind of important, but under the, under the radar for a lot of companies suddenly came into focus, since it was suddenly a much larger percentage of sales. But unfortunately, at the same time, profitability didn't catch up to that interest.

Aaron Conant  6:50

Oh, no, I completely agree. I mean, what I've heard, you know, over and over again, is, you know, eCommerce is a whole lower profit margin. Now, this isn't for everybody. If you're a newer, you know, digital age, and you've, you've grown up over the past, you know, five to six years and you're able to, you know, get maybe third party on Amazon has some price control and or originally price that correctly, you can have a little bit margin, but for a mainstay, you know, companies, you know, e commerce to lower profit margin across the board. And you're right, it's three to 5% of the overall CMOS, you know, CFOs. Everybody was kind of like, it's nice over the corner. Yeah, but you know, COVID hits, and now it's 20 to 30%. In I think one of the major questions that I get a lot is how do I make eCommerce less margin dilutive? So, no, I completely, completely agree. It's, it's nice to see that the two ideas are overlapping. So anyways, I didn't mean to interrupt you there. But it's just it's the it's the same thing over again. Yeah, so Yeah, exactly. Yeah. So are there differences in what large enterprise brands are seeing versus mid size or smaller brands? Like, what's what's, here's some thoughts there. Just reminder, if others if you have questions, hit star five in the handle up in the screen here and we can bring you in, or you can email them to me, Aaron aaron@bwgconnect.com.

Kiri Masters  8:20

Yes, so what what I did with the digital show, executive group, which is all sort of 250 million plus in annual revenue, so larger and larger in the town, mostly enterprise brands, I did some qualitative research with, with that group and interviewed 10 executives from those companies to uncover some of the themes from their, their their thinking and an experience of the current and previous companies, the West, how are they thinking about profitability? What's been the drivers of profitability for their companies? And what what are some of the leverage points? So for the purpose of this, this research that I'm referring to? It was primarily it was it was actually only with enterprise level brands. But I will, I will say that a lot of the things the differences between larger and smaller companies, it's not necessarily a question of size. It's a question of maturity on the e commerce spectrum. So if you think about a digitally native startup branch, they're going to have built the quirks of eCommerce into their business model right from the beginning. The challenge from with more traditional brands, the incumbents who are kind of retrofitting an eCommerce model Under their existing p&l structure, that's that's a particular pain point for a lot of these companies. And and existing pre existing organizational structure where you have the sales team, the sales department, managing the relationships with key retailer accounts, and responsible for inventory and that relationship. And then you've got an e commerce depart e commerce team or econ marketing team who has some level of crossover there and helping to drive demand that the incentives that both of those teams have don't really align together. And while the out, you know, the outcome that they're looking for is not necessarily the same, either. So I think that that is the question is less? What is the size of the company? and more of where are they in their eCommerce journey if their native, different story to if you're sort of retrofitting a eecom? strategy on to it to a pretty traditional organization?

Aaron Conant  11:17

Yeah, so a quick question comes in is around organizational design? What have you seen take place over the past few years as to where an account like Amazon would fall? And then, you know, is there any, is there any trends? I mean, it seems like it's been it, it's been everywhere, right? This chunk that actually got kicked over to it, which is where I got moved to the CPT category. So it wasn't disruptive to their traditional, you know, you know, sales teams and traditional customers like Walmart and Target. You know, they wanted this plausible deniability wall that would go up because I was in it is resided in marketing and sales. What does that evolution kind of look like that you've seen? And where do you see like, from a profitability perspective, because I like where this conversation is going on. I do want to get into, okay, the content, the advertising, you know, low hanging fruit with everything else. But a lot of when you're looking at overall profitability is these are now become business units, right as the e commerce business unit, and there's a p&l owner and, you know, profitability now shifts, right, and there's more eyeballs on it. So anyways, I'd love to hear like if you know, what you're seeing from, you know, brands that you're dealing with? where it is, yeah. All now. And I know, there's no like clear cut answer.

Kiri Masters  12:36

Sure, yeah, there, there really isn't? No, I'll talk about some of the research that we actually did for instacart for CMOS book that came out in early earlier this year. And my co author, Stephen, and I spoke with a number of friends out how they looking at instacart from an old system in the organization, because the quest with instacart, whether you're a CPG brand or not that that sells there, it's interesting to note, the the inventory sort of sits with the retailer, rather than the inventory decisions made by the retailer rather than the brand. And so that that presents some interesting challenges around who's accountable for that in the relationship. So in there's there's three typical or structures that we found specifically around when when talking to brands about instacart. So one is that eCommerce, or marketing owns the full relationship. So one, one brand that we spoke with simple Mills. The e commerce team owns a relationship with instacart. And the e commerce team is a subset of the marketing team. And so the benefit there is that eCommerce team is knowledgeable about performance marketing and search advertising. They can transfer knowledge and data from other e commerce platforms that they advertise on. And so that's, that's quite helpful. The downside of that set up is that the e commerce team if the e commerce team is primarily driven by immediate ROI, it could mean that longer term branding opportunities and neglected the e commerce team may not have the same depth of relationship with the retail partners. And there can be a disjointed feedback loop between running campaigns but not actually receiving back the total sales outcomes from from the retailer. The second model is where the sales team owns the relationship with with instacart for example, and that is quite logical because they're very familiar with the supply chain side of it. Business product availability, cost structures and time, things like that. They have the relationships already, they can lean on that to drive results. But but the opposite is true around ability, this digital digital capabilities and transferability of knowledge of other advertising platforms and things like that. The and then there's a third model, hybrid model, where there are some shared KPIs. And, you know, ideally reporting up to the same same executives, but at least aligning on accountabilities, that was the setup of a couple of companies that we that we spoke with this is quite challenging. It's quite new, that we not meet. It's more of a matrix model. But it means that there's, there's sort of ideally the best the best of both worlds.

Aaron Conant  16:05

Awesome. So another question that comes in. Can we can you ask Kiri, how to set up realistic profitability goals for e commerce for the traditionally set up businesses, right? So skipping over new newer digitally native brands, and going to, you know, the more enterprise level, I would say, I shouldn't say or just, you know, mid level, you know, to enterprise, and pay is a traditionally set up business. It's been around for a while. So it was in brick and mortar, it had brick and mortar pricing strategies, content, strategy, staffing, you know, how to set realistic profitability goals for e commerce for traditionally set up? That's the question.

Kiri Masters  16:46

Yeah. So this is, it's all very, so very contextual. And I'll just call out a couple of OCR a few bullet points from the from the profitability and e commerce report, which might be helpful. So one is that line items, that factor into the profit metric really matter. So some one, one company I spoke with, the customer care team rolls up to the e commerce department. And the rationale for one of them was that the call centers number phone number is on the company's website. So that's a digital channel in a digital expense. And some companies have more sort of detailed explanations of why customer care is within eCommerce. But that is, that's the case for a lot of companies. And that's obviously can can be a large expense. So customers call help this customer care line for all sorts of questions and purchases from every channel, including brick and mortar. So that's, that's one example of how line items really not off. One. Another another bullet point I'll share is around accounting best practices. One respondent that I spoke with, had a lot of successes, bringing, bringing, and advocating, essentially, for the needs of the e commerce team, with the accounting department, the global finance, lead the digital commerce, division, change is issued a formal set of changes to that global accounting policy as a result of an investigation that they did into profitability, to make sure that there was consistency across the markets that they served. Because within this company, they weren't looking sort of apples to apples at different lines of business for a while. Another example was a company from investigating profitability at a different company, there was certain items like coupons that will being charged back to all channels, including Amazon, which doesn't accept manufacturer coupons. So that actually going through the line by line. inquiries are one way to clawback profitability. So this is this is sort of talking about improving profitability from an accounting sense. There's still a lot of other things that can be done with packaging, and, for example, packaging. To improve profitability. There's there's sort of a whole laundry list there. But I want to I want to my point of bringing that up is I think it really starts with understanding what goes into that number And how that compares to other channels in the organization. And whether that is whether the way that you're being measured is really fair from that, from that perspective.

Aaron Conant  20:11

Awesome. Was it? How are you people tackling? Next question comes in how are people tackett tackling the content generation needs? So it's kind of the digital shelf piece? And how important is this becoming for? So I'll expand on that question just a little bit. The content piece and digital shelf, how important is this coming, becoming for brands as a whole to stay on top of, you know, new content consistently? I mean, I'm hearing, it's one of the biggest demands that's out there, how do I keep up with it? And there's two sides to look at it, right. There's the actual digital shopper, what's showing up? You know, on, you know, by search term, right, if you think of like the digital shelf and your share of shelf, it's, it's all dependent on what, what the search term was, right. But then at the same time, you also have, you know, where your product showing up off in the digital shelf, when it's showing up in, you know, Facebook, you know, Instagram, wherever it might be showing up from a paid media standpoint. What do you seen about, you know, content as a whole, and the emphasis on on generating the cost around it? Those are big things.

Kiri Masters  21:26

Yeah. It's interesting content, the cost of content, the cost of developing and deploying content was not something that came up in my conversations with brands specifically around profitability. So I'll just point that out. I think content is incredibly important. But it wasn't really translate in the context of profitability, it didn't really come up, I think one reason for that is the payoff, the payoff for for developing great content is is, is is a homerun and that's something that we find at Bobsled is, we can have the best ad campaign set up the smartest targeting, perfect in stock rate. And if the content is if there's not been an investment in content, then everything's just gonna fall flat on its face, the ad campaigns are not going to be as efficient, you're going to be paying, it's going to be wasted ad spend, shoppers aren't going to convert on your product pages. So those those ad campaigns are going to be more costly, because the content isn't isn't, isn't right. And there's, there's the discoverability aspect of it, if your content is correctly keyword optimized, and research and you're actually targeting the right keywords in that category, if content is actually ticking all the boxes for the retailer. So I'm thinking specifically that Amazon, if you've actually optimized the content, then you you're going to rank better just in general, if you've actually added dynamic, dynamic content, and you're investing there, then if you're not, so, from that, I think that that's the tie in to profitability there is, if your products are correctly optimized, they're going to perform much better in organic search and much better in paid paid search as well, because they're going to convert and you're going to be getting getting the right, the right eyes on the product pages, because you're actually using the correct SEO terms.

Aaron Conant  23:44

Now, it makes complete sense. No, I can't I just just come up enough that we'll probably host three or four calls specifically around content content generation, you know, over the next, you know, four to five weeks, how do I do it profitably, you know, what are the you know, the new players in the space that can help you produce mass amounts of it? And then you know, it would be able to tie in everything else from you know, the paid media side, the influencer side the brand ambassadors and affiliates and everything else. But So another question that comes in and, and I'd like it from the standpoint of, you know, everybody's trying to gauge where they're at profitability wise, by vertical, right. So they want to know, hey, you know, I met you know, 24% in every other channel, I met 40% or all my competitors there. So, just, you know, do some product categories or verticals have, like innate advantages or disadvantages with profitability, like what did you see in the research? So, just a quick recap, we're halfway to the hour here. For those that are joining. I'm having an awesome conversation with Kiri Masters around the profitability in e commerce. You know, she did a massive study with the Digital Shelf Institute and kind of sharing a lot The data that they found within that study is a whole around profitability. So if you have questions in this space whatsoever, don't hesitate to keep emailing me questions, Aaron aaron@bwgconnect.com, or feel free to just hit star five and 100 go up on the screen here. And we can unmute you. And you can you can ask them directly. So anyway, so getting back to, you know, is that kind of, Hey, I'm in this category, and then this vertical. Is everybody else, like the only pressure or is everybody else here doing pretty well?

Kiri Masters  25:30

Yeah. So it's really interesting. This is one topic that I've watched with the digital shelf Institute on where, when they're presenting the findings back to the back to the executive group, there was very little discussion because no one is really prepared to put their hand up and say, we're really struggling with profitability, or, you know, this is what this is how my company's doing, because this is highly confidential information, obviously. And so actually, this is the source of a lot of interest in this topic is, how are we doing as a company? And, uh, we we on the right track, what's the benchmark here. So unfortunately, the thinking was 1010 brands, I'll be like, pretty, pretty in depth conversations. But benchmarking wasn't really possible with with this pace of research, there was some really great research that McKinsey did and last year and publish earlier this year, that that we, that we link back to, which is around category of channel profitability, varying by product category, and it being correlated with each categories, e commerce maturity. So how it goes is like this eCommerce maturity, in general, categories like toys, and pet food have had a little bit longer to adapt to eCommerce paradigm, and a generally more profitable across different online channels and omni channel channels, perishable food, that the lowest end of eCommerce maturity and the lowest sort of profit margin, there is a nice range that's provided in this this McKinsey study. So with with toys, for example, the margin on Amazon and elsewhere can be north of 50%. And that the margin that they're selling, the metric that they're looking at is the cost margin, which is a whole other topic is how do you measure margin and that that was a that was an issue that came up in my research was, everyone's looking at the profitability metrics, slightly different Lee, one company is looking at net income from operations, and a lot of looking at contribution margin. That's the most common one.

Aaron Conant  28:18

Yeah, gets really I mean, another thought that comes up regularly as well is what about paid media. So if you look at Amazon, specifically, if we look at not eCommerce as a whole, but Amazon specifically, you know, with, with the CO ops that they're taking with a transportation, the damage allowance, and then with paid media as a whole, they have some brands that are just pulling out the paid media and say, hey, look at our profitability, and then you have other brands that are looking at it and saying, Hey, I'm actually pushing in my paid media to consider overall profitability. And I'm thinking that paid media on Amazon like a tradesman, or as an additional Co Op that I'm spending with them. And all of a sudden profitability goes way down. So I mean, I think the other part of this discussion is, you know, how realistic are brands been, even with the day of their sharing in these reports, right, is if you have a brand jumping in there, the holistic view of Amazon, right and saying, Hey, you know, I put plug that in, then, you know, any of my PPC spend, then that takes down the overall profitability, but maybe on the DSP side and is treated as out of the brand budgets, you know, this idea of profitability is is really unique and so I don't need to have thoughts on that. And then I want to go back to the maturity piece as well.

Kiri Masters  29:38

Yeah, there's there's lots of arms and legs to that because what's also recently been established is this halo effect of retail media adspend. And the fact that you can spend $1 on Amazon, retail, Amazon media, and actually see a big ticking tick up in sales in store, and on your day to see sights, not the phenomenon that's been casually observed by a lot of brands independently. And only recently being some real mixed media mix modeling to track that back to online digital media spend as well. So that further complicates things in looking at this digital ads been that since that's allocated other costs to the e commerce department or digital team, but the other channels are seeing the benefit of that. increased sales in store. So the more the more you get into this, the more you see how muddy the water is. And I guess that that's sort of one of the one of the one of the take home, things from this report is that hey, if you do you haven't figured this out at your company. And there's still some turf wars going on around budget and resources and who's responsible for which KPI? You are not alone? And just health thorny topic this is because there's, there's a lot of muddy waters between channels. And between. Yeah, between channels and between departments internally.

Aaron Conant  31:25

Oh, 100% 100%. I, you know, I did a funny post on LinkedIn just a couple weeks ago, when we're bringing up maturity in how it seems like COVID, you know, kicked us all these he caught everybody in e commerce into the state of puberty, right, where they realize they can't ever go back to where they were. They're not necessarily at the mature stage yet. And they're trying to figure everything out, like, Oh, you know, why is this happening? Why is that happening? I never had to be concerned about this before. Now, this is top of mind for me to never was before. And at the same time, you're looking around at all your peers, trying to gauge, you know, you know, who's the tallest, right, or who's maturing the quickest, and you're kind of comparing, and yet, there's no real indication of how mature they really are. Right? And so it's this weird stage that people are trying to figure out, and I think will come, you know, a year from now, and two years from now, we're going to be lightyears ahead of where we're at from a maturity standpoint. What do you see from a maturity standpoint for brands? Is it all accelerated? In, you know, you talked to a bunch of brands, too, we'd love to hear your thoughts around around that.

Kiri Masters  32:40

But by default, they've had to discern the level of attention that has been placed on econ. econ channels that have larger brands, particularly as, as that channel has grown in importance. From a revenue standpoint, just sort of going back to the question of myth of categories that the advantage or disadvantage, a couple of observations, this is my own. Speaking with these brands, I see CPG. And this, this foot within McKinsey great that says, well, the CPG brands, typically they'll have some of the biggest, biggest challenges within that subset, beauty, things to be an exception, they're given higher profit margins, generally, like fairly small and small and large items. So beauty seems to sort of have a unique carve carve out in that CPG category. Otherwise, it can be fairly challenging with dims and weights and pricing not being in, in in the favor of CPG manufacturers. And then the other category that seems to have an advantage here is products with an average selling price over $200. That seems, from from my discussions to be a an inflection point for a lot of a lot of friends, when they're looking at product pricing as well. So all that to say, can you change your product category? Or can you change your average selling price overnight? Not? Not, not usually. There's ways with bundles and multi packs and things like that, obviously to make that happen. But I think what it what it tells you is if if you're in one of those categories, then Godspeed, get to it. You've got no excuse. And if you're not in one of those categories, just understanding that your P is in that category or at that at that sale price. They're likely going to have the same challenges as you. And while you're not going to be able to sit down with one of your competitors and trade notes on what your net, what your contribution margin is, by, you know, by by product, at least getting us getting a sense of what's what's working for other companies in your space is really important. So that's where this kind of information and and, you know, BWG Connect, as well, these sort of opportunities to trade, what's working, what have been leveraged points and, and trying, trying not on society, then you're in company. That's, that's,that's the starting point.

Aaron Conant  35:42

Awesome. Love it. So another another question that comes in when we talk about eCommerce profitability. What's the list of accounts or broader types of costs? you're applying to the e commerce bottom line? You know, is it across all channels across the town channels? You know, is there in the in kind of piecemealing? Is, is there a question you'd ask yourself before including those costs in the E Comm. P&L?

Kiri Masters  36:13

So so there's, there's a couple of different approaches here. I'll just call out like some of the P&L inclusions that would generally included in a cone department's budget or factored into their profitability, KPIs. So that's salaries and wages of all those econ dedicated employees, the retailer.com. Employees who might also support brick and mortar retail accounts to which is problematic. So if you've got someone who's leaving Walmart that but might be walmart.com, and Walmart, brick and mortar, digital or e commerce Center of Excellence team, eCommerce, P&L usually includes freight returns and shipping, often the customer care or call center team, software costs and warehousing costs that are attributed goal to sales in that channel. So a couple of observations from brands have spoken with one is around when you when you own your own supply chain and production. Your company needs to keep those factories busy, right. So you that those from a supply chain standpoint, they're incentivized to keep manufacturing, specific products that are able to sort of run through the system quite quickly and efficiently, they may not necessarily be your highest margin products. And so to a certain degree, as a eCommerce leader, your your ability to sell is limited to what the production side of the house is telling you what's available. So that can that can be a challenge. Another tip that I that I got was in trying to carve out as much sort of human costs as as possible, which is something that we're all we're all trying to do if we can get a machine to do something faster and better, more more effectively, that we want to do that. But also try it, you know, with those big, large scale software deployments, they can be categorized as Catholics rather than OPEX in your p&l, and so that can actually alleviate some of the pressure on on the p&l as well if you're able to put a big sort of remediation project or a Shopify integration or something like that into capital expenditure rather than operational expenditure, which is your p&l so that's I thought that that was that was a pretty neat idea.

Aaron Conant  39:17

Also Are there other like key you know, another questions other other key findings that you're that that came out of the report I know that we've got you know, maybe eight minutes to nine minutes left here, I'm just reminded others you have questions you know, hit star five or shoot me an email Aaron aaron@bwgconnect.com. But other key things that you didn't get to?

Kiri Masters  39:41

This one interesting idea, which is to create a, an item when trying to move towards item level, p&l, as opposed to channel level, p&l, and this kind of recognize the few things that we've picked up in this discussion. So far. Which is this halo effect of retail media, and the shopper having multiple different touchpoints across various channels, picking something up in the store and then transacting online or vice versa. And so understanding all this murkiness between channels, and just between the, the sort of historical setup of the company is not where we're trying to, we're striving for a level of accuracy, that is never going to be possible in the way that we're we're shopping and transacting nowadays. So can we move to an item level p&l rather than a channel level? p&l? And that's a, that's an interesting concept to think about, as a thought experiment, what would happen? What would change in your company, if that was the case, if if everyone was working together to make a product successful, regardless of where it was sold, as opposed to the turf wars that are happening between channels in between retailers?

Aaron Conant  41:14

The next question that comes in is around the retail media portion of this, which directly affects profitability. It can drive sales, right? It could just be brand, you know, brand awareness, but now, Target's jumped in, I mean, Target's a full blown push instacart to full blown push Walmart, maybe they get it figured out. Maybe they don't I don't know, Amazon, obviously, is a massive piece of it. We'd love to hear your thoughts on that. I love the question that comes in is like, how are you seeing this play out as a whole as a share of of media dollars and profitability?

Kiri Masters  41:54

Yeah, this, I think this is one of the most legible and potentially low hanging fruit opportunities with with profitability. So the sort of the takeaways here were around rationalizing branch and performance media. And this kind of comes from that concept of the the halo effect of retail media, and that there's those, what really is the difference between above the line below the line, retail media spend when we're talking about digitally influenced sales? That that can be an important question when you're above the line media spend, fits with a different team, and budget to blow the wind media spend. Another question is how much to spend? So looking, there's all kinds of of benchmarks and baselines that you can use to look at this. And there's the you know, Amazon tells you to spend 4%, of, of revenue on on media, and you might have some different baselines from other from other categories, specific reporting and things like that. But I think that that's really a question that each brand needs to one on by themselves. And it often comes down to the down to the skew the answer asen as well, what is how far can you push that? that's been done now amounts before, before performance sort of starts to drop off. And that's going to change over time as well. So these benchmarks are just guidelines, but for that reason, and and let landing on what is what's the what's the optimal spend level for an aces is the more important question. Let me say, what else? Oh reallocating Co Op. This is a big one. So if you're still being asked to pay Co Op fees, some brands have been successful in actually reallocating Co Op into into PPC ad spend and, and getting that requirements waived by Amazon during that vendor negotiations, but it's actually a much more legible way of of investing in in the growth of in marketing.

Aaron Conant  44:40

Awesome, love it. So, you know, are their key takeaway. So we've got about three minutes left. And I want to kind of kick it over to you for you know, key takeaways as a whole and things may have this last couple minute things that you thought, you know, we should cover, but I do want to say a quick thank you to everybody who doubted and thanks for all the great questions. You know, look for a follow up email from us, I'd love to have a conversation with you, we don't sell anything here at BWG Connect we're a giant networking group but love to network and knowledge share across the board with other digital professionals and more than happy to share what we're seeing across the digital landscape from the you know, 1000s of brands and the network as a whole. So look for a follow up email from us and or if you proactively just shoot me an email if you'd like to put timely on my calendar Aaron aaron@bwgconnect.com And then obviously, if you need any help connecting with if you're doing any RFPs, you're looking for any, you know, different service providers across the digital landscape, you know, don't hesitate to shoot us an email more than happy to connect you with those that come recommended from within the network as a whole, obviously, Kiri and the team of Bobsled that are part of that group. So if you're looking for additional information, or you need help on, you know, Walmart, Instacart, Amazon, just, you know, paying us more than happy to connect you with them. But you know, Kiri, as we kind of wrap up here are key takeaways in the next couple of minutes here and we can get people onto the next meeting without being late.

Kiri Masters  46:04

Yeah, absolutely. Yeah. So I would really recommend if this has been an interesting topic for you, I'd definitely recommend checking out this. This report called eCommerce profitability in e commerce. The four there's four drivers of profitability that I found speaking with enterprise brands, about this topic. So one, the actual definition of profitability and how profitability is measured in your company. The second is product category and price point. Some of these are immovable factors, but it's worthwhile knowing where where you're sort of where you're sitting in the e commerce maturity curve and what's going to be what's going to be possible for you their profitability driver. Number three is media spend and attribution. So how much does spend improving performance and efficiency? Number four, profitability driver number four, the Amazon relationship? What kind of model should you be looking for there? What have been some quick wins that other brands have had in improving the profitability of their Amazon relationship?

Aaron Conant  47:20

Awesome. No, love it, love it. And, again, Kiri things. Number one, being such a great friend and partner, supporter of the network as a whole. Always love our conversations. And, you know, thanks for your time today in everything you're able to share. And, you know, being able to put you on you know, the hot seat there and throw a bunch of random questions that you as a whole once again, you know, thanks to everybody who dialed in, thanks for the great questions. Look for a follow up email from us. Love to have a conversation with you and we'll put you in touch with Kiri as well. And with that, we're gonna wrap up right on time here. I hope everybody has a fantastic Tuesday. Everybody, take care, stay safe and look forward to having you at a future event. Thanks again, everybody. Thanks, Kiri. Already with us. Absolutely. Anytime my friend. All right with you, bye.

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