Aaron Conant  0:18

Happy Tuesday everybody, my name is Aaron Conant, I'm the Co-founder, Managing Director here at BWG Connect. We're giant networking and knowledge sharing group of 1000s of brands. And that's exactly what we do we network we now share together to stay on top of the newest trends, strategies, pain points, whatever it is that shaping digital. I mean, I get the the privilege of speaking with 30, you know, plus brands a week, that startup fortune 100 It's across every category from CPG to fashion and just kind of, you know, having a strategic conversation with them around Hey, what's going on? What's shaping their digital future? What are the pain points, and then who's helping them solve all those different problems. So if anybody ever wants to have a conversation on any of that, as a favorite part of my job, just shoot me an email Aaron@bwgconnect.com we'll put time on the calendar, especially if you need any help with partner selection or digital strategy. A couple housekeeping items as we get started here. One, restarting three to four minutes after the hour, and just you know, we're gonna wrap up with three to four minutes to go in the hour as well. I'll 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 a question, drop it in the question section there, you can chat it in it, you can always email it to me, Aaron@bwgconnect.com will field as many questions as we can get in today. And for the email address, I mean, that includes you know, an hour after this call, you're like, shoot, I forgot to, you know, ask something tomorrow next week, never hesitate to shoot me an email, always happy to get a response to anybody in the network. With data, we go ahead and kick this off. You know, speaking with 30 Plus brands a week and a lot of questions right now around going 3P right. Going to the marketplace side of Amazon, is it right for me? Can I do it? Is it is it better for me, I'm going to make more money there. And we got some great friends, partners supporters, the network for years now that are instrumental in taking more brands, the 3P and or helping with brand control on the marketplace. Daren from Vorys and John from Pattern. So these guys are industry experts. And I say that because I want as many questions to come in as possible. So feel free to ask along the way. But Daren, I'll kick it over to you if you want to do a brief intro yourself and boys, we can kick it over to John and then kind of kick off the conversation to get some good.

Daren Garcia  2:44

Yeah, thanks, Aaron. And thanks, everybody for for jumping on. Now I'll talk a bit about breweries here in a minute after after John introduces Pattern but thinking about the webinar today, you know, where, where we said Vory's eControl, you know, working with about 600 brands on online sales control solutions, and where John sets, you know, at Pattern is really the leading brand and eCommerce accelerator in the world with particular expertise on the 3P side of things. We see brands all the time coming to us whether they're one P brands or and thinking about going 3P given various pain points, or they're doing 3P of themselves, or they're doing 3P with a partner, and they're really only getting, you know, a piece of the puzzle in place and missing key elements to really a best in class 3P strategy. And so what we thought we would do today was to lay out the various components of a best in class three piece sell strategy that leverages acceleration, as the slide says, for growth and also control so that you can protect the strategy and actually execute it in a way that that surpasses how you've been doing it in the past, whether on the one p or on the three piece. That's that's really the goal for today is to lay all of that out for you. And then you can benchmark what you're doing and what you're seeing against against what we lay out here. So with that, we'll go ahead and jump right in. And And, John, I'll sort of let you talk about Pattern here for a couple minutes. And then I'll talk a bit about boys, then we can jump into how we see things.

John LeBaron  4:21

Yeah, yeah, absolutely. And I would just echo the context. And since definitely not a sales pitch for Pattern. We talk with hundreds of brands every month. And you know, Pattern isn't always the right solution. In fact, it's probably the wrong solution in a lot of different cases. So but I think we by virtue of the position we're in is one of the top sellers on Amazon by revenue as well as by reviews, you know, 18 global locations 800,000 units that were shipping every week, and FBA centers via FBM dropship. You know, I think that we have a very good context and the things that work things that don't work, we've made a lot of mistakes. And it's not just on Amazon, right? There's Walmart to consider. There's eBay, there's Google Shopping domestically. There's also, you know, internationally as we'll get into. So you can probably go to the next slide here. And this gives a handful of different brands that we represent either at a three piece scenario in consulting them on how to go international. And in some of these cases, even helping them on a one piece strategy. So if you go through the next slide as well, this is an important piece to just understand. Normally, I overlay this slide with the GMV by region looks like I might have thrown in an earlier slide here. But regardless, we've got 18 global offices, in many of the major EECOM hotspots around the world, with probably the notable exception on this map of Latin America, we do operate on Amazon, Mexico, and Brazil, as well as Mercado Libre, Mexico and Brazil from a cross border standpoint. And then we also sell in India today, even though we don't have a well, we do actually have an office there for developing team development team. But not like retail operations there. If you go to the next slide, though, as we talked about before, I know you'll get into this about Vorys . But I think again, a high level is we do this for a lot of different brands. And so if you're thinking about going, there are a lot of misconceptions around what it means to go 3P. And so I think you know, the best value that I can add here is to share some of those insights, some of the competencies required to be successful and creepy, whether you're doing it yourself whether using someone like Pattern, and then to be able to feel any other questions in from from folks that are attending here today. Thanks.

Daren Garcia  6:49

So very good thing. So very quickly about Vorys , you know, Vorys . And as in particular Vorys eControl as a part of a long established law firm that does things like a lot of major law firms do, but as it relates to this issue of online sales control, you know, we, as far as we know, work with far more brands than anybody in the world on these issues in a way that combines business and legal strategy, investigation, enforcement, Tech Data, really all to ensure that your revenues are protected, that you're able to execute your selling strategy in the way that you want, without disruption in the form of unauthorized sellers, map violators channel conflict, and those sorts of things. So how do you essentially instill the control necessary to, to drive growth and when you as we go through this today, and particularly as you think about, how will I lay this control piece at top and acceleration strategy, through what John will talk about, it really becomes fundamental, because you have to have the ability to ensure if you're going to run that 3P play that whether it's Pattern selling for you, or another 3P selling for you, or you're selling through your own storefront, they you are able to win the overwhelming majority of sales, you know, homerun to buy box on Amazon sales on whatever it is, otherwise, your strategy ultimately is not going to be successful. And so your control piece becomes a very big part of that. And frankly, something that a lot of brands misses, they're setting this up. And so, you know, you're gonna have tech vendors out there and traditional law firms and then people like us and, and really focus though, along the left hand side of the slide here, because, you know, before we sort of dive too deeply into this, you really need to start thinking about, Do I have each of these components in place, okay, is my legal strategy in line with what I'm trying to execute on marketplaces or eCommerce more broadly, to have the foundations in place necessary to do that, and then all of the ways to do the enforcement not to do a whack a mole type brand protection enforcement, but to go out and drive commercial KPIs in the form of sales by my authorized seller, by my storefront by Pattern store, or whatever it is, in a way that's, that's going to meet your commercial goals. And so that's really what we bring to the table and how we fit in here. But John, I'll let you go ahead and tee this up here. Yeah, so I think this helpful,

John LeBaron  9:18

you know, framework that we've used in the past to, and it's basically a synthesis, that amalgamation of a lot of different conversations we've had with brands over the years. So if you go to the next slide, something called the executive dilemma. And this is just fascinating. I mean, I was at a conference speaking last month around I guess maybe it's in October, just around how big eCommerce actually is. And there was a we're based out of Utah. There's a local company that went public not too long ago, and now they're valued or when they I don't know where they're currently valued, but they're basically valued at 24 billion in size of, you know, Delta Airlines, which is kind of crazy and they do like experience man Well, they're worth $24 billion, but the whole category of experience management is worth like $10 billion. So their their value is like double the not the value of the category, but the annual revenue that the category produces. So then I thought, Okay, well, Delta Airlines, that's pretty big. But what is global travel? How big is that? And, you know, coming out of COVID, this year, I think estimates are around $500 billion is the size of global travel well, you know, the size of global travel is actually the size of online apparel by just global online sales of apparel is also around $500 billion. That doesn't include Pat doesn't include grocery doesn't include electronics, does it include health and household. So it's pretty fascinating you the entire kind of global, you know, digital commerce, envelope. And I think estimates by either this year, next year is sitting around $6 trillion. And so that's just a lot of opportunity. If you're a consumer product manufacturer to go tack on it's it's come to the point, you can't really ignore it, right? Pre COVID A lot of brands, eCommerce, in many ways was even an afterthought. But in a POST call, you know, COVID world, it's just no longer the ability to ignore, especially in certain regions, you know, penetration in the US and eCommerce. Right now, it's probably in the mid 20s, depending on low to mid 20s, depending on what research you look at. In China, though, it's 51%, the first industrialized country to pass, you know, more penetration and digital channels than in brick and mortar. So it's just really, really fascinating. And so this is the conundrum, the conundrum for Nick and executive dilemma standpoint is most brands only staff, their eCommerce to like two, three, maybe four people, if you're lucky, you go to the next slide here, so and what that team of three people is asked to do is appealing on the far right, obviously, first set up a.com. And you've got to choose like a really good CMS to help you get the.com, Shopify Plus or Magento or WooCommerce, or whatever, then you've got to take that.com Global. And again, this I mean, this was just taxed to the core, and they're just under resource. They're very, very talented in the teams that I've met. But they're just perennially under resourced to do the job that they're asked to do. And then you tack on, okay, well, there's all these marketplaces. And truly the bulk of revenue is not going through.com. And so I get it, right. And so if you look at all these marketplaces, it's not just like, can you do Amazon? Or are you on Amazon? You know, Amazon? Is it United Nations, it's like, all these different platforms for Amazon that you have to know that you have to localize for that you have to be distribution strategy for that you have to do currency optimization for hedging for but then there are all these other I mean, Amazon's not even in China, right? So you have to look at Alibaba or Tmall. Or Taobao, which Alibaba owns many of those or JD comm is the number two player and JD comm is almost bigger than Amazon globally, they will eclipse them probably I don't know, next year. So it's just a hot mess of complexity. And so to be very, very good at all of these marketplaces, and dot coms, and he tailors, you kind of have to be good at these, what we've synthesized in about five different competencies. So if you go to the next slide,

Aaron Conant  13:29

and also I want to, I want to jump in just because we had I had a poll that super interesting that I wanted to launch here. And it kind of goes right along with that executive dilemma, which is, I'm going to launch it right now. If people want to kind of jump in. Just do this, you know, quick poll, what's the most important to you when it comes implementing this successful 3pm It says Amazon strategy, but it doesn't have to be an Amazon strategy, a three piece strategy across marketplaces as a whole. But couldn't be for sure. We'd love to have people so I just launched that. Yeah, and people are going in now. Interesting to see how it's changing. We'll just give it another 30 seconds, tons of people are voting right now. Um, but it's just, I think you're spot i It literally is a dilemma and dilemma is it's so huge, right? If I'm extrapolating just a little bit, where do I start? How do I start, you know, what's, what are all the pitfalls and sometimes that gets to analysis paralysis, right. So awesome. I am going to, uh, we'll just give this about 10 more seconds. I mean, is that something is the other person said? Yeah. Also could have, you know, getting merchandise stuck. Yeah. So I'm going to go ahead and close this poll down. Now. We sort of

Daren Garcia  14:57

thing observation may Jamia To your point on the last slide before we sort of dive in the revenue equation and the competencies you know, if you're sitting there and you've got a team of three or four people in the in the States, and they're responsible for, you know, your global company with a decent sized portfolio you know, if you're responsible for driving, you know, sort of traffic generation, on Amazon, you you're sort of tapped out that teams tapped out. And that's just sort of, to your point, one of the five competencies we'll get into, then you still have the whole world out there. And then how do you holistically coordinate all that? I mean, it is just me sitting where we sit, it is a massive, massive thing. So I'll go okay, here, we get into the competencies. Absolutely.

Aaron Conant  15:42

I mean, number one here that popped up, it was 44%. That number one stopping on authorized sellers, and then it was 17 2217. So almost the last three are almost equal. You know, which are they are all 1/3 of the top one. So anyways, awesome. Yeah. Thanks for letting me jump in. Yeah, yeah, you

John LeBaron  16:03

bet. So yeah, a big competency is absolutely kind of brand protection. And we're, you know, we're catering right Vorys  kind of goes in this is probably going to draw a certain amount of people that want to learn about brand control. But regardless, I mean, these are persistent issues that are happening. And so, okay, we'll find whatever, whether it's your.com, whether it's your international.com, whether it's a marketplace, you've got to be good at this eCommerce equation. But then bookended on these eCommerce equation we go to the next slide are really insights, as well as logistics. And so you know, we have to be good at this, we manage more than 100 brands across multiple cost comm across marketplaces. So we a Pattern also has to be very good at these competencies. As brands try to do this, someone internally or with one P, or even with an agency, they, you know, naturally try to level up on these competencies by hiring or outsourcing, or investing in platforms and tools. And and again, just trying to level up these competencies. What we've chosen to do is, you know, some level partner to level up on these competencies, but we thought we've also just built a platform, we call the eCommerce acceleration platform internally, we have more than 100 developers, I think our the number will only go up. And we don't sell software, but we do use our own software, and work with our partners and share that software with them to help win across these marketplaces. And we're very, very good. And the software is very, very good on Amazon, and even Walmart, you know, as we were, and we continues working around the clock to build out these platforms, and the same methodology across all these different marketplaces. But regardless that the platform is not just technology is tech and expert services. And we won't have time to kind of go through all of these competencies today. But I think again, regardless if you're going to choose something like Pattern or a Pattern competitor, or you're going to try to do it in house, or even you're going to try to stay one P, I think it's very important to understand, this is what you need, this is what you're signing up for. And if you decide to do this on Walmart, you need to have the same competencies there. If you're going to do it on Alibaba or Tmall, or Taobao, or JD, or Lazada, or, you know, rackets in, or Kupang, you've got to do the same thing over there as well. And so I think it's just really, really important. So I don't know if there's any, you know, additional things to add, I think, you know, Daren will

go through what it takes to have true competency on what I'll call the brand protection kind of competency, you know, for us, and I think this is a very good kind of playbook for anyone trying to do it themselves, or even if they're using someone else, you know, first look at how you're doing across this eCommerce equation. To me, it's, it's very important to objectively look at the data and we run these scorecards for tons of brands all the time, we'll do it for entire categories on Amazon. So if you're listening to this message, you want us to run one for you, there's no commitment, it's free, it's like whatever just it'll help you get a sense of where you are doing. And we'll even run it against several of your competitors. This is a marketplace performance scorecard. And it really starts to show objectively where you're hitting and where you're not hitting. Then beyond that, you start to really double click and I'm just going to show a couple I think it'd be helpful you know, the first one is this this concept of a digital shelf Yeah, if you go to the next slide there, this is kind of on that insights competency truly understanding where you fit on your on Amazon's digital shelf was effectively the a nine algorithm. And the interesting thing is obviously there's no shelf people don't walk down the I sell on amazon.com. They're using search. And so there it truly there are a number of different shelves, quote, unquote, that your products can appear on with it. I think the important part here is understanding truly who is next to you? What brands are really competing for the same keywords that you are competing for? And how do you learn from what they're doing. And so, you know, we have patent patent pending technology that goes into this, and really starts to show, you know, how do you win, we have machine learning that basically looks at all your competitors, looks at what keywords you're truly ranking on, or trying to rank on. And where you have discrete visibility or win ability, based on your price, your relevance to the search term, and ultimately, your reviews and ratings. And we have demonstrably shown incredible efficiency for all the brands in our portfolio. The end of the day, like this works, if the machine spits out, you have ability to win on certain term that you're either not advertising on today or not paying enough attention to, this is how we stack right, this is our secret sauce. This is how we're able to grow brands 40% year over year, you know, you start on this far left, and start to rank on areas where you have high win ability, and then continue to climb this, what we call a ladder of destiny, up until you start to rank on things that you didn't have high availability for originally, but you've built enough domain. And so you go to the next slide, you know, we're all about we don't advertise to get revenue, right, we do not advertise for our brands to generate revenue for them. That's kind of weird. What we do is we or just to get clicks, I should say what we do is we do we advertise for brands, to help them win organically on keywords that were previously ignored. And as they start to win, and that is really what this red line represents in this graph. As you start to win on keywords, you were you were not winning before and as your rank starts to improve, it creates almost like a little annuity, a keyword annuity, that starts to pay you money. And then you will no longer invest in that keyword and you move to the next keyword where you have very high win ability. And this is very hard to do by yourself. So again, I would just say like, this is the value that you get, not by trying to insource it by what by working with someone like Pattern is incredibly gifted on the data science perspective, that you're able to drive massive efficiency nor most partners spend about half of in terms of advertising of what they were spending before through us because of this technology. And it's all automated and it just makes it so much easier from a data framework to start moving along. And then you go to the next slide.

Daren Garcia  22:58

Next actually gets into distribution.

John LeBaron  23:00

Yeah, yeah, so So but I guess I just wanted to kind of end out on that point in terms of traffic is like, you know, if you get that traffic keys kind of dialed and you get into a space where you can truly start using data to inform your decision about your competitors about your digital shelf. You know, things can start to turn around. However, as you just shot shown in the the little poll that you did earlier, like if you have unauthorized sellers, that are truly hurting your chances and kind of like investing as infestation of sellers that are that are hurting your ability to win the buy box. Many of those tactics, it just creates a lot of friction on those tactics, because you actually can't advertise because you don't win the buy box. And so the you know, it's just stunts, the kind of ability for you to progress and make a lot of movement there. So I know we can change gears and start talking about, you know how to diagnose and fix that issue. But wanted to make make sure we spend some time helping people understand what what that competency really means in practice.

Aaron Conant  24:12

And I want to jump in really quick because I think it is important, you know, this isn't two or three years ago, it's, you know, COVID now is accelerated not only the number of brands that are selling online, but the tools that are available in the sophistication that's required. Right. You need tech. But wouldn't you agree there's there's no way you can just jump over and not not have some kind of tech on the back end either powering inventory, supply chain management, you know, paid media, right? Any of this study is identifying, you know, third party resellers, all that stuff that has to be tech driven. You can't throw people at it anymore. Would you agree?

John LeBaron  24:58

No, absolutely. Yeah, I agree. 100 percent. So for sure, and then I would just say like, okay, when it comes to like, hey, I want that growth, but I'm not truly in control. I think a really important aspect. And this is really what this slide is showing is like, a lot of awesome brands have built their businesses on the back of what I would call scale distribution, you look on the left side, it's like, get into as many doors as possible, get into convenience channel, get into, you know, club channel, get into, you know, specialty, retail, whatever it looks like, Miss and build your own retail stores, whatever. But that that strategy is just absolutely backfiring on people and brands in today's world. And I think the brands that truly get it that say, Okay, I'm going to firewall I guess what, there's those bricks, this brick icon is in the middle, that brick wall, you can firewall and really contain your distribution strategy online. You were absolutely setting yourself up for success. But but obviously easier said than done. But you know, if you go to the next slide, this is a very, this is what we call the profitability death spiral. And it's very common if you're, you know, I'm guessing because the attendees on this call and where you mark on the poll, most people get this right eCommerce starts booming, all these 3P sellers flocked to the marketplace. And now Amazon has 3 million sellers on the marketplace. Well, now, you know, this competition drives down the online prices, you lose the buy box, then brick and mortar starts to match those prices. So then your retail profits erode or you're getting kicked off shelves, or you're losing shelf space, or you're, you know, people are demanding, you know, compensation, your retailers are saying you need to do price matches and stuff. So then your your profits are running on retail, and then your stuff gets crapped out on on Amazon or other marketplaces, because you know, the price is just eroded. And then ultimately, everything is less profitable. So we work with a ton of brands that are at some level of this stages of grief or of profitability. And the good news is, it's all reversible, right? I mean, I have yet to work with a brand. That's just past hope. But they're also you know, it takes time to go unravel what you've kind of put here together. And so maybe, you know, I've just got two more slides, I think here that illustrate this. But back to the notion of firewalling, your brick and mortar and your your eCommerce if you can get to a point and there's nobody better in the business, the mores at this, you get to a point where you set up your distribution agreements and your policies in a way that protects your eCommerce channel and limits distribution there, a lot of good things start to happen. And this is what I call, you know, selective distribution, but it's like, you start in the middle of a move to the right, you first get price stability online, because you cleaned it and make no mistake, like it's always gonna be whack a mole, it's always gonna be crazy. But you can absolutely triage in a way that takes care of 90% of the problem. And we do this right, we monitor our software monitors by box for hundreds of different brands we represent. And we have gotten to 8090 98% by box, you know, control in this model. So it's a great way to get control of your brand by by going 3P, then you get more leverage with your retailers, because your prices stable online, there's no incentive for them drop prices, or do price matching or whatever. So you get better brick and mortar performance. And then you move on to these, really, let's get the flywheel going and let's crank up growth across these marketplaces, you get better by box, you get better consistency performance, you get better investments, especially if you're using someone like us that you'll have all this incentive to improve your listings to improve conversion. And so good things really start to happen. And so the last thing that I kind of want to just mention on this whole front, is if you go to the next slide, like there are a ton of friction points if you're trying to get acceleration on a bike on a car on a scooter or whatever. It's like if there's friction there because there's something stuck in the tire or the steering wheel is not working like I don't know, whatever. Like there's all these friction points that we see. And it's around imagery, it's around control. It's around listing management and reviews. It's around, you know, the way the managing that digital shelf that I talked about in a way you're managing your ad spend, if that's out of control, if you're out of stock, if you've got unauthorized sellers, you got crapped out products if you got to suppress BuyBox like all these things are limiting and hampering your ability to just set that flywheel in motion. And as I said before, it just it starts with control. So the brands that do the best job of controlling their destiny and controlling their distribution are the ones that ultimately start to steal share from the competitors and it's a it's a very holy matrimony.

Daren Garcia  29:55

So it's awesome. Just to kind of pick up on that, John, I mean just sitting where where we sit, you know, brands will come to us and say, Oh, we're out of control, or we're trying to do we're trying to do one p but you know, we've got a battle between Amazon and chewy and it's killing everything or we're trying to do 3P but we can't get the sales because we have a bunch of resellers and, and I just think that this, this slide of viewers here just hits home that if you're going to go down the 3P route, okay and and even so on the one p but particularly the 3P because you don't have, you know, sort of the natural Amazon one P BuyBox. preference for itself, you have to square wave both your growth and control side, me, I've seen brands that have the tightest distribution in the world, they have their own three piece storefront and then that growing because they don't have, you know, the massive capabilities needed to drive growth, certainly, you know, domestically, much less, you know, internationally. And then and then on the flip side, you know, you know, partnered with, with Pattern haven't put these things yet in place, or looking to do it on their own, or whatnot, and having all of the great intentions around how they want to grow the three piece, but they'd have no control. And so you have to, and then they just get crushed by another CEO of resellers. And so having both of these, you know, thinking of two sides of the same coin, you've got to have this operating very much in in unison. So, you know, picking up on, on, you know, we have all of the growth competencies in place, you know, the eCommerce revenue equation, and how do we stabilize all of that, and, and ward off these, these accelerators. And now we can speak about

you know, how to deal with those unauthorized sellers in a way that's going to I'm not just enforcement for enforcement sake, or kicking off sellers for the sake of doing that, but really, how do you leverage control strategies to power and make successful your your 3P strategy? And so, you know, I think that as you as brands, you know, really, wade into this, I think, you know, just given all of the noise in the market, just have to be very clear on what is the problem that you're trying to solve, okay, because back in the day, you know, internet, starts gaining steam, eCommerce starts to take off and you have a whole world of vendors out there saying, Oh, I'm gonna go scrape the internet and look for violations, whether it's math violations, or copyright violations or trademark violation, I'm gonna bring you these reports and they tell you all the bad things that are happening to you on the internet, and then you can go and try to whack those moles, hence the name whack a mole, right? And, and that was, you know, fine for a while and a brand protection, you know, Team something to get excited about, or legal teams and whatnot. But today, when you when you you're talking about $6 trillion, okay, you can't Whack a Mole your way out of that. Out of problems in that you have to think about how am I protecting and driving my revenue? How am I protecting and driving my sales? How am I controlling all of it in a way that's going to empower my chosen strategy? Okay, so brands, I mean, you know, in the in the whole scale distribution versus limited distribution in the in the control and growth flywheel that John looked at, and they have real business problems in this space that are inhibiting their ability to be successful on an Amazon or a Walmart or, you know, domestically International, whatever it is. And and so you really have to reframe the issue to how do we take control of our brand rather than how do we go out and get reports around people doing things to us because you know, if you're going to run that three piece strategy, it's it's left to its own devices without a strong control piece in place. Okay, it's going to be disrupted on an on a daily basis by ever changing types of violations that you're going to have to be able to flex to it could be unauthorized sellers you may have counterfeit people coming in, you may have parallel imports, people sending stuff in from other countries and disrupting your sales, you may have dealers that are authorized and other channels turning around and selling obviously map violations off channel pricing issues, you know, getting into things like suppression and things like that. And you as a brand have to be able to flex to all of these in a way that's going to continue to drive the KPIs around your 3P strategy of what is the percentage of overall sales being captured by your 3P seller, okay? And if you dig behind the curtain, you know, you start to realize that it's a very complicated world Okay, so you have your national retail business every distribution business you've got your Amazon business on the creepy side and you know, all of a sudden start start flying out of distribution flying out of retail arbitrage you know, theft, you have stuff coming from overseas, you have you know, having to you know consider potentially you know dropping price on the three piece side because you have otherwise you're not going to get any buy box if you if you don't and then pretty soon people start complaining to us. We're not getting the sales that we did on the one piece side and we're this isn't working what's not working because you have not unwound this This mess, okay. And so to realize the full benefits of that exclusive three piece strategy and maximize growth brands today have to quickly take the steps for control. Okay, well, what does that mean? How do you do that? Well, first and foremost, you have to get very clear about your channel map, okay, you have to commit to this three piece strategy, whether it's your storefront, whether it's selling through a Pattern or Pattern, competitor, whatever it is, you can't really have anybody else there, the minute you start having others there, I'd like to authorize this other distributor of mine, or this, this person does a pretty good job on eCommerce, I'll let them in. And now all of a sudden, you're so diluted in terms of who's actually making the investments around, you know, to John's point around the algorithmic keyword, bidding and, and all of your content and all of your trade, you know, all of that stuff, who is incentivized to do that for you? Okay, because I, somebody sitting there saying, I, maybe I have a one in 10 chance of getting the sale, why would I do that. And so, getting very clear about our channels, and keeping people in their lanes and telling them right, in particular, we're not going to have intra brand competition on a marketplace channel, okay, because we're going to sell 3P there, that's how we're going to succeed. And we're not going to dilute the efficacy of the strategy by having a bunch of people all competing over the same piece of meat on the on the channel. Okay, and so getting this in place, getting your reseller programs in place, is very important, then you need to start thinking about, well, how do I pull all of this together, okay, because we have that distribution control, we were legal foundation and our channel management, but then we also need to be able to do our enforcement in a very precise way that looks to see who is actually disrupting my intended 3P strategy. And then applying the precise tactic that is going to be most effective at removing them a but be doing so in a way that's going to drive your KPIs ie who's actually taking sales, who is causing me to be suppressed, who is doing the things to me that are actually hurting my commercial strategy? Okay. And so combining that that foundational distribution control with your precision enforcement is how you're going to be able to drive that that 3P strategy forward, and until you can do both of these things, you won't have the success that you otherwise could, I mean, it's just that black and white. And so, you know, when brands are really, you know, looking at this and how it shakes out in real life, yeah, you know, you're always gonna have to look up here and do your enforcement up here and, and keep things clean up here. But the, the genesis of all of this, okay, lies very much below your waterline, okay, so you're selling down here into distribution over to retail, we've got diversion going on, we have people parking their trucks up to distributors and taking product out and all of these sorts of things and putting it up here and then ultimately disrupting your strategy. So the solution and and it really holds true on the one piece side, but but on the three piece side, in particular, as well, we have to get that Buy Box way up. Otherwise, you really don't

win the benefits of that flywheel that John was talking about. And you have to look at this very holistically as as the slideshows and then ultimately, you know, just kind of getting here to the secret sauce to use John's praise for a minute ago, this is the solution that you will need to implement if you want to stop unauthorized sellers from from disrupting your 3P strategy. Okay, there's, there's really no other path. Um, we've done this, you know, many hundreds of times, we have the leading court decisions on all of this, and have this doubt in in the most efficient, effective, commercially compliant, legally compliant way. But basically, we know that we want to sell 3P, we know that our KPIs are going to be is our 3P seller regardless of whatever the platform is Amazon, Walmart, etc, able to capture the overwhelming majority of BuyBox are sales, it can they hold that revenue? Or can they hold that volume, those sales volumes in a manner consistent with my map, my MSRP, etc, that's going to be success. And so now to do that, okay, we have to deal with two very strong legal realities. Number one in a vacuum, it's fine to buy and resell your product and to nobody has to follow your pricing. Okay. And so that's just such a key point. So many people are out there saying, oh, I need a MAP policy to deal with three P sellers on Amazon, it doesn't apply. Okay, so we have to get around those. Those two legal hurdles. So first and foremost, again, we have to get our off platform distribution under control. We need to implement our reseller policies telling our customers where their lanes are, and setting up your your marketplace strategy that way, okay. And you can deal with a MAP policy and With your authorized customers as well, but we still need to deal with these unauthorized sellers, gray market sellers, whatever they are, okay, these are people that are buying and reselling your product in a way that you don't want. And in a marketplace sense in a way that's disruptive to your sales or to your brand value. There's only two ways really to deal with them. Okay. And I'm not going to go too deep into legal weeds today. But they're as follows. One is called the material differences exception, and two is called the quality control exception. So under the material differences exception, you as a brand are going to have to position your brand such that the products sold by your authorized sellers, including your three piece storefront are materially different than those sold by unauthorized sellers. Okay, now, those differences importantly, don't need to be physical. And so what you'll see brands doing a lot is doing things like limiting their warranties or their guarantees of their return policies or post sales support or different types of benefits that come with their product to products purchased from their authorized sellers. So now when you do that, these unauthorized sellers come flooding product in Legally speaking, it's not the same product anymore, and you have a basis for enforcement against against those guys. There's other things that you can do around quality controls and setting up quality control programs. You might say, for example, we need to be involved in eCommerce, we need to be involved in marketplaces like Amazon or Walmart or others. The problem is there's so much poor quality product damaged product expired product leaking, counterfeit, you name it, we get blamed for it and product reviews, we can't have that we only sell on Amazon through our storefront or through Pattern all of the inventory comes from us we have full access to our seller central data, we can see ratings reviews, and so all of these sorts of things. Now when some random people come selling, you don't even know who they are much less have them in your QC program and working your way through the law. You know, those types of programs can give you a basis again to deal with unauthorized sellers making it such that they are not able to trade under your products without exposing themselves to legal risk. But without those two things in place you really don't have a leg to stand on. And so I'm happy to talk at length about that with anybody who lakes but hopefully conceptually today you understand that if you don't have that in place, you don't have a way to enforce brand registry doesn't do it for you. Okay, there's no box to check on brand registry for unauthorized sales. Yes on counterfeit if somebody started to click duplicate a sins or if it's you know, foreign product coming in and things like that maybe but simply unauthorized product do not go looking to brand registry, other marketplace platforms that deal with that for you because it doesn't exist and you can get tagged for for abusing that. Um, so once you have these foundational things in place, now you can go out and do your actual enforcement in a way that's going to allow you to drive your KPIs. Okay, which again, my authorized sales percentages relative to total volume being traded in the channel, am I able to do that in a manner consistent with my brand value, you have both sides of the house, covered your authorized customers, basically your policies, your unauthorized sellers, BCB, your legal foundation. And now you can go out and do your precision enforcement in a way that's going to drive your 3P sales. Okay, it's all

Aaron Conant  43:20

really, really quick. I just want to jump to a question comes in. And it's right on topic kind of right where you're at right now, if you've created authorize an authorized Sellers list, how do you deal with overseas unauthorized sellers causing disruption? And Matt violations?

Daren Garcia  43:36

Yes. So well, maps not going to apply unless it's a you know, because maps illegal in, in most other jurisdictions besides Canada, outside the US. And so what you're going to have to do is either enforce against that that reseller here, okay? Or enforce against them in their home jurisdiction. So the problem that a lot of brands face is they may have a distributor in Europe that says, I'm going to continue putting product into the US marketplace, and screwing everything up. And, you know, maybe the brand's European team doesn't want to deal with that particular distributor, but the brand, if they're positioned the right way, here they have, they absolutely have the ability to deal with it here. I mean, that has to be maybe sorted out politically, internally, but you have the tools to be able to deal with that if you follow sort of what I'm talking about here. Because you can always, I mean, most brands don't ever do this, but But you have to always think about, you know, begin with the end in mind, if you're positioned the right way, the end is that you have the tools in your tool belt, able to win a federal court decision against a reseller, okay, and then you can take that to the marketplace and have that shut down. So when resellers see that and they know that they typically don't want to push it that far, because it's a losing proposition for them, but you have to have that foundational setup to be able to do that. So just

Aaron Conant  44:57

provided others who have questions, drop them in the question into the chat. We have answered us with

Daren Garcia  45:01

you. Yeah. And so really, when you think about enforcement, again, everybody, I really want to just sort of reframe your thinking on this because there's so much noise and just junk, really the equivalent of junk mail out there in the enforcement world. And so, if you're not understanding your KPIs you're trying to drive then understanding precisely what's disrupting them, and then understanding exactly everything you need to know about the seller to tell you do I need to have legal enforcement? Is it a diversion issue? Should I leverage my reseller policies? Is there a marketplace tool that might be applicable? Okay, you have to be able to line all of those things up to say with any budget. Okay, how do I drive my KPIs? What's disrupting me? What's the precise tactic that I should use? Okay, that's, that's fundamentally important than going different than going out and playing whack a mole, because you're never going to drive these things. Okay? Just because somebody is out there selling your stuff below map doesn't mean that the world's on fire? Are they actually taking sales? Are they actually disrupting your performance? Who are they? Is it a customer of yours? Is it not? Are they coming from overseas? Are they not? Okay, what is the precise tactic that you need to be able to use, and that's, that's key. I mean, if you look at the world to amaze, everybody begins sort of going out and going more broadly, and you work with Pattern to do, you know, a marketplace distribution and acceleration for you all over the world, whatever it is, okay, this is just a summary of the different types of tactics, you have to be able to apply. So the notion that you can do this internally, or with some software company, or whatever really becomes a fallacy in today's market, the revenues are too massive, the world is too big, the legal regimes too tight, that, regardless of where you are, you have to understand where you are, what's the law of the land, what's the law of the marketplace, what's what's the realities for the brand, and line all of that up in a way that's going to be most effective. And it's very much not one size fits all, it's incredibly complex. But you have to be able to do all of this in a way, again, that's going to drive those KPIs as your monthly unauthorized seller revenue going way down, is your monthly authorized seller revenue going way up? Are you able to hold those sales in a manner consistent with your map, get away from all of this over here, this whack amole reporting is meaningless today. Again, the revenues are too big, you have to be profitable. And the number of listings you remove your actions taken or images, remove your map violations addressed or whatever is is just vanity metrics. In today's in today's market, if you're not moving these things, particularly in the three piece side, on the business, KPIs, you're not winning, and you need the tools to be able to do that. So again, we can allow all of our growth tactics to kick in and realize the full benefit of the strategy. So lining those business KPIs. What's disrupting them? Who are the sellers, exactly. What are they doing exactly? What is the precise tactic, and that's what's going to drive that revenue and profit on on the three piece side. So I think, you know, we'll, we'll leave some time for questions and still let people go early. But again, committing to that exclusivity, committing to compliance, getting your right stakeholders involved, being able to project managers effectively on all of the growth competencies, and the acceleration competencies, as well as the control competencies. is really when you think about a best in class three piece strategy, how that has to happen. Yeah, we'll go ahead and get right.

Aaron Conant  48:26

How so what is an implementation of implementation strategy look like? You know, timeframe execution? And then usually what happens is, you know, another question that comes in as around, you know, internal staffing required to make it work.

Daren Garcia  48:42

Well, I'll sort of answer that in the context of like, a 3P play, you know, if the brand is selling through through Pattern or an accelerator, even through its own storefront, I mean, you want to be, you know, obviously, if you're already there, and it's a mess, you just, you know, we kind of have to wade into that, but you want to time all this if you're thinking about going3P and in the context of the conversation today, saying, okay, like when do I realistically want to be live with product on Amazon, or whatever, wherever it is that you're selling, and maybe backing up 60 days from then and saying, Okay, now strategically, what do we need to put in place to protect all of that, all the while we're getting product into the warehouse, and we're getting all of our content and video and all of that together. So that, you know, when those products go live, you're sitting there ready with your control strategy to protect, protect your sales and your revenue. So, so I would say, you know, we're usually on a build of about 60 to 90 days, for brands on on the control infrastructure, you know, all the while, I mean, John, you could chime in, you know, if you guys are working with a brand, you're sort of working on your piece alongside that and that in that timeframe, but again, if you're already 3P and and, you know, then it's just a matter of jumping in and kind of that same 60 to 90 day piece. holds for the control piece.

Aaron Conant  50:01

So two more questions that popped in just kind of right along that path. The first one is, what is your success rate on removing unauthorized 3P sellers on industrial and scientific, health and personal care, and then tools in Home Improvement categories?

Daren Garcia  50:19

Yeah, I would say that the personal care home, you know, kind of weaving in nutritional supplements, and, you know, cosmetics, and all of those sorts of things all under that big umbrella is probably the biggest vertical that we work in. And we've had, you know, huge levels of success with that, you know, in terms of success rates. You know, these programs are designed to allow you the tools necessary to win a case against a reseller. And so we believe that if you do what we tell you, that you're going to be well positioned for such an outcome, and we can't guarantee outcomes or anything, so then it just becomes how aggressive do you want to be with all of this? Because, you know, there's certainly the enforcement side directly against the resellers. There's also treating the root cause of this, you know, how is it that you yourself are fueling it through promotions, through noncompliant distributors through international pricing corridors, you know, all of those sorts of things that are fueling the ability to people to get your products. And so if brands do what I tell them to do that I'm not afraid of any reseller, I'll put it up, put it that way. Um, and I would say that the tool hardware type vertical is probably the second largest vertical that we work in, it's in the top three or four. And so, you know, those products, you know, both of those categories, you know, relatively small sizes, many times relatively high margins and are attractive to resellers. On the scientific side, we've worked with a few major, you know, brands in that space that are very well known. But I wouldn't say that that's a but one of our biggest categories, though, that we work.

Aaron Conant  52:03

Alright, so the next one, I'm going to kick over to John, if we're currently doing several million dollars in one P business, how would I determine the cost? First one p of switching to a Pattern, Paul, ours would drop? Would I anticipate volume wise in the year of the change from one P to exclusive 3P? And in your experience? Would it take time to make up the volume to begin driving revenue again, using a Pattern? And then along with that, John, is if selecting some 3P retail partners to sell your brand? What is the optimum number of resellers?

John LeBaron  52:39

Yeah, a awesome question. I don't know if I can remember every single piece of that, but maybe just start with a couple. And then if I miss

Aaron Conant  52:46

Oh, yeah. So somebody switches do you? Is there gonna be a drop in sales? And how big and how long does it take to recover it? And the the other one is, like how many an author essentially, how many resell partners should people have? Yeah,

John LeBaron  53:02

the ideal is one, from my perspective, right? Like either you're the only seller, Amazon's the only seller, or someone like Pattern is the only seller, because it's the fastest way to control them brands the best way to get maximum efficiency. Now, there are some risks there. So you know, maybe it's a handful, but you just got to think you know, every way you're slicing the pie, like we have a lot of brands where they're like, oh, I have to keep Zappos in the mix. And I'm like, Okay, well, Zappos is taking half the sales, you just have the efficiency of your ad spend, basically. So I know it's a it's a crazy, maybe, maybe irrational, but I mean, that's to answer the question. The other one dropping sales. I mean, oh, there are a lot of brands we work with, I have no drop in sales. And they actually have more sales in the year that they switch over to three P than they did otherwise. The biggest thing that you have to look at well, the two factors, I look at like a river going into a dam, which is how much is this? How much of the channel is truly kind of stuffed? Meaning is Amazon sitting on six weeks of inventory? Are they sitting on 60 weeks of inventory? I've seen everything in between. The other one is How clean is your distribution and how long it's going to take to clean up on authorized sellers and how are they getting access. And we model that for brands really easily which is like we can predict how much is you know sell through is happening in the channel how much inventory is in the channel that again, it could be as little as five or six weeks it could be over a year. But if you don't shut up the tap on the other end and we're especially when we come in we're almost always holding map or some higher price point for the brand. And if other people are getting access to the product and selling it could be a year before we sell anything and so quote unquote you could you know you're not gonna you're not the demand won't change on the platform. But you know, some brands think of distribution sales as losing sales. So your demand is going to stay the same hopefully improve when you start working with someone like us. It usually invariably does. But your ability to see ongoing POS as you switch over are largely dependent on how much inventory is in the channel. So hopefully that answers the question.

Aaron Conant  55:11

Yeah, it does and I think that gets us right at that time here. I do want to say a quick thank you obviously Pattern you guys are you know, John Timo, they're awesome great friends and partners to the network. Daren over at Vorys you control as well you know, encourage anybody you know, have a follow up conversation with them. These are the leaders in the space they come highly recommended from tons of brands and network across the board more than happy to put you in touch with anybody over there. If you need help in any other space of eCommerce from direct consumer side to performance marketing to drop shipping international expansion you know Amazon whatever it might be never hesitate to reach out if you're looking for partners in the area, we've got a shortlist don't use a Google search, it'll lead you astray we've got 1000s of brands that recommend the top people out there obviously Pattern Vorys The reason we invited them on here is that they're the they're the top people in this space and people just want to shoot me an email I can get you copies of other things you know any key takeaways Daren's we kind of wrap it up here try to get out right to lack

Daren Garcia  56:14

God just the at risk of being repetitive. The 3P play is phenomenal from a control and growth standpoint, if done correctly, and and I think brands just need to look themselves in the mirror and say, you know, do we have the tools internally to try to pull this off? How do we compare to best in class? Or would we be better served by looking outside of our own internal competencies particularly as we look to expand internationally and things? And then and then how are we going to control all of this and just working with optically through that I think is really what's key to success and we've seen brands you know time and again knock it out of the park, um, you know, with this type of model and so just wish everybody good luck and everything and John or I are happy to talk at any time. No pressure or anything. Just happy to educate. Yeah, awesome.

Aaron Conant  57:01

All right, my friends. We're gonna wrap it up here. Hopefully we're not going to make anybody late for two o'clock. Everybody take care, stay safe, look forward to having you at a future event. We do have a Thursday half day form. Be great to have people if you want to sign up for that. Again, just educational informational. With that. We're gonna wrap it up everybody take care of report him in a future event. We'll be in touch already. Thanks, Steve.