The news cycle is pretty bleak lately, but as Mr. Rogers famously reminded us,it’s important to take time tolook for the helpers. Medical professionals, personal protective equipment producers, emergency workers, grocery store workers, utilities workers, and more have all continued providing essential services to keep our day-to-day lives running as smoothly as possible, even as the world takes historic measures to slow the spread of the coronavirus. Without their efforts, things would be even more difficult.
In this post, we are celebrating more helpers: Kaspien partners that have gone beyond their normal operations to support their communities locally and across the nation.
SRAM, QBP, and HLC Provide DTC Shipping to Help Keep Local Bike Shops in Business
SRAM, a brand that produces bike components and accessories, is working with Quality Bike Products (QBP), and Hawley-Lambert Company (HLC) to provide direct-to-consumer (DTC) shipping for local bike shops. Bikes sales tend to rise in spring and summer, and these shops depend on these seasonal sales to continue operating. SRAM’s, QBP’s, and HLC’s efforts will allow shoppers to still patronize local bike shops during quarantines without having to physically visit the store, helping these local businesses stay in business even as more people practice social distancing.
Combat Wipes Donates Sanitary Wipes to Local Police Department
Combat Wipes, a brand that produces sanitary wipes for use in the outdoors,made a large donation of their sanitary wipes to the Voorhees Police Department, to help officers stay safe as they continue working through quarantines. The biodegradable wipes can be taken with officers in their patrol vehicles and kept in the office, helping maintain sanitization policies.
BrilliantPad Helps Produce Surgical Masks
BrilliantPad, a brand that normallyproducesan automated indoor dog potty, has worked with one of their suppliers to repurpose their factory from creating BrilliantPad puppy pads to producing surgical face masks. These face masks are FDA and CE approved, complying with GB/T 32610-2016 and GB 15979 standards. The BrilliantPad team set up a new company, Chicago PPE and has already produced and shipped over 2 million masks.
They were recently featured on NPR and CNN for their great work. You can listen here.
Surgical masks can be purchased in bulk quantities by hospitals, governmental agencies, first responders, and critical care teams here.
Scotch Porter Provides Free Resources for Grooming, Fitness, Meditation, and Cooking
Scotch Porteris a brand that makes men’s grooming products. Practicing isolation and social distancing can take a toll on the mind and body, so Scotch Porter has begun creating a series of content via Instagram Live, articles, and videos to help people through the stressful climate. So far, they’ve produced content for the following:
Grooming: How to groom and take care of yourself when you can’t visit the barbershop
Fitness: Ab Circuit Workout w/ Blane Fitness @Blanefitand other fitness sessions
Meditation: Live meditation/holistic healing sessions
Uncertainty can be frightening, buttaking action can be empowering. Not everyone or every business is in a position to take extra actions right now, but those that can, should, no matter small it may seem. The more we can help our communities and country, the easier this hardship will be.
For our part, Kaspien hasleveraged our supply network to send hundreds of thousands of personal protective equipment to hospitals in several states. This effort could not have been done without our General Manager of Sourcing, Denise Abraham.
We’re alsotemporarily offeringfree access to ourAmazon ad management software for 45 days to brands who could benefit from automating their marketing campaigns and increasing efficiency when there are so many things demanding our attention. We also temporarily reduced our commission rate for ourFBA cost recovery software, so brands can get even more back from reimbursement cases during this time when brands have to tighten their belts.
Thank you to all the Helpers out there. Let’s get through this together.
Here’s How We Can Help
As a major Amazon 3P retailer, we recognize the importance of Amazon’s recent decision to restrict shipments on certain categories and prioritize shipments for high-demand products. The US economy and many businesses are experiencing an unprecedented impact, and we feel it is our duty to support brands experiencing the volatile nature of the retail industry, however we can. If your business is impacted, here are three ways to increase efficiencies and revenue during these tumultuous times:
1. Consider launching or expanding your brand’s presence on the online marketplaces
There is an entirely new market of online shoppers being formed as a result of COVID-19’s influence. If your brand is new to the online marketplaces or looking to capture more of this market, our agency can help you get there, fast.
Temporary reductions in agency retainer & commission fees
To help brands affected by COVID-19, we are temporarily reducing our agency retainer & commission fees for select companies. The agency approach is ideal for brands that are looking for a hands-on, collaborative approach to selling on Amazon, Walmart, and/or eBay. To get a customized quote, submit our form and we’ll be in touch.
2. Explore software solutions to maximize efficiencies and effectiveness of Amazon ad campaigns
Most businesses are needing to focus on the day-to-day operations, and implementing an ad software can free up time for higher-level strategy work while ensuring you’re maximizing your ROAS targets and increasing revenue.
Free Access to AdManager for 30 Days
Kaspien is providing free access to our self-service Amazon ad management software, Kaspien AdManager, for 30 days to any brand. No strings attached
Our hope is that you can focus on the day-to-day while AdManager automates your marketing and keeps the revenue coming (Currently only available for Seller Central).
To get free access for your brand, complete this form, and we’ll call you within 2 business days to begin the onboarding process.
3. Leverage software solutions to put more cash in hand
Regardless of if brands are impacted by Amazon’s temporary inbound suspension, leveraging Amazon case management automation tech that recoups dollars from Amazon can have a significant impact on brands’ bottom line during these uncertain and potential volatile times.
Free FBA Cost Recovery Software
With the coronavirus threatening financial stability, every dollar counts. If you use Amazon’s fulfillment centers, then Amazon likely owes you money for mishandled inventory, overcharged fees, or incorrect reimbursements. We can help you recoup those funds.
You can see how much Channel Auditor could return to you before you decide to use it. To do so, just complete this form.
For brands running out of stock and unable to ship new products into Amazon, this can ensure consumers are still able to purchase your products on Amazon. One way is to consider partnering with a 3P who can accommodate 3PL shipping outside of FBA.
Partner With Kaspien to Diversify Shipping Solutions
We have spent years building up an extensive network of third-party logistics (3PL) partners and can help you continue to ship directly to your customers during these times, despite Amazon’s recent restrictions.
These are strange and distressing times, but they’ll be better if we help each other. Please let us know if we can assist your brand if any way as we navigate the coming months.
Thanks and be well,
The Kaspien team
COVID-19 is continuing to cause unforeseen impacts globally. On March 17th, Amazon announced that they have temporarily disabled the ability to create shipments for products outside of the following categories:
Baby Products
Health & Household
Beauty & Personal Care
Grocery
Industrial & Scientific
Pet Supplies
As of today, this decision will be in effect through April 5, 2020. This new policy applies to all US and EU sellers, including both third-party sellers (3P) and Amazon Retail (1P).
Why is Amazon Restricting Product Categories?
According to Amazon, this decision was made due to the sudden and dramatic increased demand for medical and household products caused by the COVID-19 outbreak. To reduce out-of-stocks and shipping delays for these high-demand products, Amazon will prioritize the above categories and will no longer accept new shipments to its fulfillment centers from other categories.
How are Products Already at Amazon Impacted?
According to Amazon, shipments created before March 17th, 2020 will still be accepted at Amazon fulfillment centers. Additionally, products not in the above categories will still be processed as normal if they are already in an Amazon fulfillment center.
How Can Brands Fulfill Non-Exempted Products?
Amazon’s new, temporary policy could have a severe impact for many businesses. To mitigate these risks, brands in impacted categories may need to seek out third-party logistic providers (3PLs) to ensure product reaches their customers. For example, Kaspien partners with Deliverr, a multi-channel fulfillment provider, for non-FBA channels, and we will be able to adjust our Amazon fulfillment strategy to support impacted brands during this time.
What Can Brands do During this Restriction?
Being unable to send inventory to Amazon for two weeks may range from a potential risk to a near-certain sales loss. Depending on the urgency of your situation, here are a few steps Kaspien is taking that you or your sellers may take while this policy is active:
Diligently monitor your stock levels to determine if replenishment is necessary before this policy lifts. Continue constant monitoring throughout the next two weeks.
If you can and are willing to ship direct to consumer, begin setting up the proper communication for that scenario. Kaspien will be assisting our partners with this effort.
If you do not have direct to consumer capabilities, youmay need to work with third-party logistics (3PL) network to store and ship your products directly to consumers.
If you have your own Amazon Seller Central account that is affected, set up dropship capabilities to fulfill customer orders throughout this restriction period. Kaspien will be assisting our partners with this effort too.
Ongoing Turbulence Caused by COVID-19
We recognize the severe impact this could have on your online business, and we are here to support you every way we can. If Amazon’s policies and procedures continue to change during this time, please note that Kaspien has strategically built our business with key diversification, leveraging our tools and business partners to provide you with continued support during changing times. If there is anything else we can do to support you or any questions we can answer, don’t hesitate to reach out.
Today, Amazon publicly launched its Netherlands marketplace, Amazon.nl. Amazon Netherlands has functioned as a marketplace for digital content since November 2014. Dutch consumers could purchase physical items from other Amazon marketplaces in the PAN-EU program, which meant that Dutch shoppers had to browse for physical products in other languages. Amazon reported that in 2018, 29% of Dutch shoppers purchased from other countries.
As of today, Dutch shoppers can purchase physical products from Amazon.nl, with listings written in Dutch. Inventorysold on Amazon Netherlands will be stored in Amazon warehouses in Germany. Read more in Amazon’s press release.
The Rich Potential of Amazon Netherlands
Kaspien was invited to be one of the early FBA sellers on Amazon Netherlands. Brands interested in expanding to the Netherlands can reach out through our contact form.
The launch of the Netherlands physical product marketplace is incredibly exciting, as the Netherlands is rapidly growing into one of the most important European countries for ecommerce.
According to Amazon, 96% of Dutch consumers have internet access, and more than 9MM of the 17MM Dutch residents use ecommerce. Amazon also reported that online turnover in the Netherlands was 23.7B in 2018. Despite a considerably smaller population, the Netherland’s online expense per capita is 273% higher than Italy and 138% higher than Spain.
The Netherlands represents a great opportunity to reach a wider audience with high engagement rates.
Amazon is Gradually Expanding Netherlands Catalog
Amazon is incrementally migrating ASINs from their other EU marketplaces to the new marketplace. The selection process is determined by Amazon, which is presumably prioritizing the best sellers from EU marketplaces. Sellers who own the ASINs selected for migration can choose to opt them out, but at this time, they cannot request specific ASINs be added to the migration list.
The migrated ASINs are “localized,” meaning that Amazon’s translation team runs them through software to change the language to Dutch. Localization does not incur a fee.
Sell Across Europe
With the addition of Amazon Netherlands, the PAN-EU program now includes six countries: the UK, Germany, Spain, France, Italy, and the Netherlands. If you’d like to sell in the Netherlands or any of Amazon’s European marketplaces, get in touch with Kaspien.
Amazon’s Q4 performance in 2019 significantly exceeded predictions, with Amazon netting more than $1B over what Wall Street forecasted. There were some impressive growth drivers behind Amazon’s exceptional performance, including AWS, which grew 34% year-over-year (YOY), and advertising revenue, which grew 41% YOY.
Amazon also saw strong results in its one-day shipping program, which had lower than expected expenses, despite more than quadrupling one-day shipping product selection in Q4. Consumers seemed to appreciate Amazon’s continued efforts to maximize convenience, as Amazon also surpassed 150M Prime members globally.The platform’s success was shared by third-party sellers, who continued to increase their global market share of Amazon sales, reaching 53% for the first time.
To put it shortly, Amazon proved yet again that it’s an enduring leader in ecommerce. But what does Amazon’s Q4 performance mean for brands selling on Amazon?
TRANSLATING AMAZON’S Q4 RESULTS
Amazon is Setting Consumer Expectations
Amazon reaching over 150M Prime members globally reinforces a message Kaspien has been sharing for years: Brands need to have an Amazon presence.
Why? Two reasons:
The number of shoppers reachable through Amazon is growing, providing greater sales potential for brands.
Amazon is setting the bar for consumer expectations, and brands that cannot meet those expectations risk losing customers to competitors who can.
Two-day shipping was once a rare luxury. Now, it’s expected, leading other major marketplaces like Walmart to invest in comparable service through 3PL partnerships. As Amazon continues to scale one-day shipping, same-day shipping, and free two-hour grocery delivery for Prime members (which is now available in over 2,000 US cities), luxuries will continue to shift into expectations.
As the Q4 performance shows, Amazon is not going anywhere. In fact, Amazon is forecasting to grow about 20% YOY in Q1 2020.
If your brand is not on Amazon, it’s time to change that.
Amazon Will Continue to Improve its Ad Platform
Amazon’s advertising revenue grew by 41% YOY. That means that more sellers and agencies are advertising on Amazon, which has become a necessity to stand out on the saturated marketplace. As one of Amazon’s most profitable business segments, we expect that Amazon will continue to invest heavily in its ad platform. Amazon has a long history of investing in its most promising (and sometimes not promising) ventures. The greater investment will drive better tools, making the platform even more attractive.
Of course, when everyone wants a piece of the pie, every slice gets a little smaller. That’s why brands should also make investments in their advertising, leveraging the best software and services available so they can get the biggest slice possible.
Third-Party Sellers will Offer Better Services
Third-party market share is growing, as is the percentage of third-party sellers offering FBA. This is excellent news for brands: As competition among third-party sellers grow, they are forced to innovate to continue to attract brand partners. As the saying goes, iron sharpens iron, and services available to brands will improve overall.
ARE YOU EVOLVING WITH AMAZON?
Amazon has led a relentless march of innovation, literally reshaping how we seek, assess, and purchase products. And it’s proven incredibly successful for them. Now the question becomes, are you growing with Amazon? Are you staying current with advancements in technology and strategies?
If you want fresh eyes to evaluate your Amazon channel, you can request a free listing evaluation with an Kaspien specialist.
As of publication, the coronavirusoutbreak has infected over 75,000 individuals and claimed over 2,000 lives. China has quarantined at least 16 cities, 19 countries have confirmed cases of the coronavirus, and governments around the world have restricted travel and transportation to curb the outbreak.
Thecoronavirus has also had an economic impact, disruptingproduction and supply lines.On February 24th, the Dow Jones was down over 1,000 points, contributing to fears that the coronavirus, if it continues to grow and strain global economies, could trigger a recession.
Listen to our podcast episode discussing how the coronavirus affects the retail world.
Factory Production Significantly Slowed
Quarantines across China have resulted in reduced operations at most factories as laborers stay home to mitigate the risk of infection. In a normal year, January and February see slowed production for Chinese New Year. As such, many brands were prepared for delays. However, the coronavirus has lengthened the pause in manufacturing beyond the normal holiday period.
Delays in production were originally forecasted to be minimal, but China has extended the forecasted delays from two weeks to four weeks, and some factories have alerted brands to expect 6 to 8 weeks before operations are back to 100%. If the delays continue much longer, small and large brands alike will face cascading challenges, from out-of-stock issues to serious revenue losses. There are also concerns that as factories work to meet demand with a limited workforce and heightened time pressure, quality control may be lost.
Transportation Rerouted and Restricted
In addition to factories working at low capacities, transportation has also been heavily impacted. Ships have been blocked from ports, required to anchor offshore in quarantine. Airports are shutdown, and those that remain operational receive minimal use as brands and suppliers opt to avoid airports in China and neighboring countries. Air cargo out of China is practically non-existent, presenting a significant threat to lean supply chains and retailers who maintain low stock levels.Truck transportation too is affected, as vehicles must pass through multiple checkpoints and reroute around quarantine zones. All of these changes further delay deliveries.
Unfortunately, the danger to business won’t end with the coronavirus being contained. As companies restart production and play catch up with shipping, there’s a serious risk that transportation could be over-taxed, leading to a shortage as everyone tries to move their goods out of China at the same time.
Most Vulnerable Amazon Categories: Furniture, Footwear, and Consumer Electronics
Experts say that the furniture and footwear categories are at the highest risk to be impacted, as many of their products are seasonal. If they cannot receive goods from China in time, they’ll lose peak season sales. Consumer electronics are also an at-risk category, as they source components from numerous countries, largely in Asia. If one component is delayed, the entire production is delayed.
Amazon Extends Coverage
In response to the coronavirus outbreak, Amazon has ordered an additional three to four weeks of coverage in key categories. Other major retailers like Walmart and Target have not done the same, and they are expected to be hit harder by the coronavirus outbreak because they source such a high percentage of goods from China and they have not adjusted their inventory schedule since the outbreak.
Back to School Sales are At-Risk
The back to school shopping season is a major concern for many brands, as shipments usually ship by end of April. If production is slowed and cannot meet volume in time for the shipment, brands will lose sales.
Amazon is positioned to benefit from this situation, as they typically see the greatest back to school sales in August and September, when brick and mortar competitors are running low and consumers are short on time. If Walmart’s and Target’s run empty this summer, Amazon’s back to school sales may very well occur earlier.
WHAT TO DO NEXT
The coronavirus will have an economic impact. The question is, to what degree? Brands affected by the coronavirus or those that wish to protect themselves from future outbreaks or natural disasters should look into alternate manufacturing partners. Sourcing from a single partner is always a risky tactic, and the coronavirus has made that risk all the more evident.
Brands can and should also look into shipping directly to Amazon, instead of a US warehouse first. This cuts out an unnecessary middleman and shortens lead times.
Finally, brands seeking to mitigate future risk should maintain enough inventory on-hand to survive future slow-downs or other inventory complications. It may tie up more cash, but the protective measure serves as an insurance or safeguard against unforeseen challenges.
Listen to our podcast episode discussing how the coronavirus affects the retail world.
On January 15th, Amazon announced that it is expanding itsNetherlands marketplace, allowing brands to start selling physical products on Amazon.nl for the first time.
In the announcement, Amazon stated that the marketplace will be automatically added to EU seller accounts, becoming the sixth country in theprogram. The subscription fee for the Professional Seller plan will not change.
According to Amazon’s press release, Amazon first came to the Netherlands in 2013, when they opened an AWS development center in The Hague. In 2014, they launched Amazon.nl as an ebook store. 2020 will mark the first time that physical products can be sold on the marketplace.
Sellers with an EU seller account do not need to take any action at this time. Brands that do not have a EU seller account yet can register to sell in the Netherlands here:https://services.amazon.nl/.
This week, I complete my first 90 days at Kaspien. I wanted to write you a quick update on the progress we’ve made in the company so far, as well as go through some of my plans going into fiscal year 2020.
Let’s get straight to it. Over the last 90 days, we’ve achieved the following:
1. Reenergized Mission Statement
Kaspien’s mission is “To be a Brand’s Ultimate Online Growth Partner.” At Kaspien, we’ve always been all about the brand. We empower brands to achieve their online growth goals on marketplaces such as Amazon, Walmart, and eBay, among others, through our proprietary technology and data, tailored strategies, and mutually beneficial partnerships.
2. Kaspien as a Platform of Software as Services and New Partnership Models
Strategically, we have positioned the company as a platform of software and services – a Marketplace Growth platform. Kaspien is no longer “only” a third-party retailer. We offer a lot more than that. We offer a complete platform of software and services to help brands build their marketplace businesses. Our expertise started on Amazon and now has expanded to a lot more. The platform is available to brands through 3 partnership models:
Software as a Service – For self-serve brands who want to run their own operation, but also want access to technology that is built and used by a top 5 Amazon third-party retailer.
Agency as a Service – For brands who want to keep control of their inventory, Kaspien can serve as an extension of your eCommerce business unit, using our platform to operate your account on your behalf.
Retail as a Service – For brands who are interested in wholesaling their inventory to a top third-party seller to sell on 3rd party marketplaces.
On the software as a service front, we have productized two of our software apps to enhance our software suite that already included our Brand Monitoring app, Perispect. We have been using these tools internally for several years to support brand’s growth, and we are now allowing brands to access these apps as SaaS.
AdManager Beta: Our Amazon advertising management application that uses data science and intelligence to automatically optimize ads to achieve a specified objective.
Channel Auditor: Our cost recovery application that identifies money that Amazon owes to you.
On the services front, we’ve streamlined our service offerings into different categories – Brand Protection, Digital Marketing, Creative Services, and Inventory Management – all of these using our proprietary technology. By doing so, we’ve made it easier to communicate and understand Kaspien’s offerings, removing barriers that could inhibit productive conversations and planning strategy.
We have a strong roadmap of product and service launches in 2020 as we continue to scale our platform, including launching new apps and new service integrations, which will provide our partners with more and better resources for their online strategy. I’m feeling good about a very comprehensive value proposition that we’ve put in place to help brands grow.
We’re also close to launching our first white labeled service on our platform. We will be partnering with various companies to continue building out our portfolio of offerings to ensure brands have the most robust solutions.
3. New Value Chain and Aligned Sales, Customer Success, and Marketing Operations a.k.a. Customer Experience
With a new strategy comes the need to realign our sales and marketing operations. We’ve created a completely new value chain for how we deliver our value proposition to our partners, designed to ensure that our partners always know all of the solutions available to them. We have a clean organization structure that helps us create and build lifetime relationships with our partners. This is the first step towards the underpinning of a truly excellent customer experience.
4. New Kaspien Website
We launched a completely new website to better showcase our offerings. We’ve amped our content publishing game through more organic content using different formats – video, audio, short form, long form, etc ., so that our partners are fully up to speed with industry and Kaspien updates.
5. Diversification Across Different Marketplaces
Although Amazon will and always be our primary expertise, we’ve strengthened our relationship with Walmart. Walmart, we believe, is a key player in the marketplace space. We would like to give our brands this additional growing distribution channel, while at the same time achieve Walmart distribution goals. Going into 2020, we will continue to build upon this relationship by launching additional services and support across our software platform for Walmart.
6. An Aligned Organization
Internally, a lot of change has happened over the past 90 days. Kaspien is now an aligned organization. In addition to clarifying our strategy and the delivery mechanism of our value proposition to our partners, we’ve:
Created a new cross functional organization structure that separates out core business units from support business units and have established leadership and accountability in every unit. We’ve introduced a new “General Manager” role, single threaded leaders responsible for the P&L of a business. We introduced a new role called the “Head of Strategic Initiatives” to drive through all projects across the company.
Introduced top down goals that cascade down to individual businesses, aligned bottom up operating plans, quarterly OKRs, an aligned KPI framework, and many other operational processes to keep us humming like a machine. All these borrowed from some of the top organizations of the world. Every individual has clear goals and accountability, and we’ve put together a recognition program to reward top performing individuals and culture carriers.
7. New Values a.k.a. Leadership Principles
We’ve introduced new leadership principles that embody who Kaspien is, and we use them as the foundation for how we operate. They are:
Principle # 1 – We are Partner Obsessed
Our customers are our partners. Every decision we make is centered around building and investing in mutually beneficial partnerships.
Principle # 2 – We are Insights Driven
Nothing matters more than insights. We use data to glean insights and to make strong business decisions. Insights are the ultimate decision maker.
Principle # 3 – We are Simple in our Approach
We take the complicated and simplify it. Simplification keeps us aligned and focused.
Principle # 4 – We Innovate on behalf of our Partners
We are ahead of the innovation curve at every stage. We are our partners’ incubator.
Principle # 5 – We Deliver Results for our Partners
We set goals, we define targets and measures of success, we launch initiatives, we measure our progress, we mitigate risk, and we deliver results for our partners.
Principle # 6 – We are Owners
We are entrepreneurial minded. We make things happen. We know what’s needed to build our business and we execute. We operate with agility and urgency.
From making decisions both internally and for our stakeholders to our rewards and recognition process, everything is based on our leadership principles.
8. New Operational Processes and Business Rigor
We’ve built upon the processes that Kaspien already had in place to operate the organization even more efficiently. Here are a few examples of new processes put in place over the last 90 days.
Weekly, Monthly, and Quarterly Business Reviews for every business across the organization.
Monthly and Quarterly Business Reviews with our key partners, and marketplaces – Amazon and Walmart.
Twice-a-year strategic and operating planning, quarterly OKR planning, and monthly OKR reviews.
Improvements to our merchandising operations through Open to Buys (OTB) and better Cash Flow Management.
9. Automation
We’ve automated many more of our retail operations, making our team much more intelligent in running our day to day. From buying to pricing to optimization, we continue to find areas where we can automate and we’ve set a high goal in terms of percentage of operational automation. In short, we’re allocating our most valuable resources to focus on strategic initiatives that will help build brands on marketplaces.
As we build, test, and refine these tools for automation, we’re also making them available to our partners as managed services and self-service software. Our tools are created and proven by sellers, for sellers.
10. Innovation Strategy
We’ve introduced new processes for us to consistently innovate across the organization. We’ve borrowed from Amazon’s “6 Pager” Working Backwards document for employees to use to put forth their ideas. We’ve empowered employees to invest in company sponsored hackathons to get projects done quickly.
Overall, I feel good about the progress so far, and I strongly believe that we’ve positioned the company for growth in fiscal year 2020 . 2020 will be a strong growth year for us as we continue to build out our platform and foster more partnerships with brands.
A Look into the Future
As already mentioned, 2020 will be a year of growth. We’ve created an operational infrastructure that can facilitate scale. In 2020, I envision a future as follows:
1. Platform Scale
We will continue to build out our platform of software and services with new added apps and new services all brought together into a consistent experience for our partners. We’re currently developing a partner portal where our partners can monitor performance of their brands across different marketplaces. We will also be opening our platform to the developer community for developers to build apps on top of our platform, further enhancing the services available to our partners.
2. Retail Growth
Our retail service will continue to grow. We will continue to relentlessly focus on our retail partnerships, ensuring growth for our brands and distributing them on multiple marketplaces. Our goal is to outperform for all of our brands. Our international footprint will grow as we continue to help brands go international.
3. Agency and SaaS Growth
We will be growing our Agency and Software partnership models. As the marketplace jungle continues to get saturated and competition increases, more brands are looking to take more direct control of their online presence. Our agency partnership model and self-service software empower our partners to pursue their goals, while retaining access to best-in-class tools and services.
4. Intelligent Automation and Operational Rigor
Our platform will become increasingly automated with data science and artificial intelligence, saving time and freeing us to focus more on our partners and big picture strategies to drive greater growth and a better partner experience. We will build upon the momentum over the last 90 days to create a world class organization.
5. Customer Experience Funnel
The Kaspien brand will be synonymous with marketplace growth. We will continue to invest in brand building, content, and inbound marketing. We will have a solid outbound operation backed by an optimized sales funnel using data, insights, and intelligent automation that is working day in and day out with current and potential partners to find them the right solution in the Kaspien portfolio. We will support our partners effectively and provide consistently superb service.
6. New People Focus
We will continue to invest in our employees, who are the life blood of our future. We will be re-imagining our HR function through new leadership and create new programs for employee engagement, onboarding, development, etc. Every Kaspien employee will have a long-standing career at Kaspien.
So that’s it. Hopefully this gives you all a sense of where we’ve been and where we want to go. I hope you are as excited about our future as I am.
Please do not hesitate to reach out if you have any questions, thoughts, or just want to chat. I’m always available.
Kunal Chopra, CEO,Kaspien
| 425-281-3566
Managing a supply chain that is halfway around the world is a challenge. It takes experience, courage, cultural sensitivity, and the guts and know-how to manage the complexities of production and quality. There is significant investment in inventory, and it must all be paid for up front (at least in the beginning). Learning to navigate the potential pitfalls is the only way to protect your investment and have some measure of success.
10 Key Considerations for Sourcing Product Internationally
1.Work on products you know well.
You must know what the correct cost is, understand what level of quality you can afford, and what you will need to pay to get the quality that you want.
It’s a fine balance. You get what you pay for, but will your customer appreciate what you’ve built? In a digital world, will an Amazon customer appreciate better quality, or are they looking for a bargain? It’s very easy for a vendor halfway around the world to take advantage of you by cheapening materials or shortchanging you on specifications.
To safeguard against this, you must know your product inside and out. Know the fibers, the material thickness and weights, and the required testing standards.
2. Document everything.
Document all elements and expectations for your product in a tech pack. Dimensions and tolerance (if any), materials, color standards, care and content labels, trims and packaging requirements, instruction booklets, registration cards, testing standards – all should be documented in a technical specification package. Be sure you understand what governmental regulations are required for compliance for sale in the USA. That relates to labeling.
Understand and know that vendors will take shortcuts to save money and increase their own margins. This is a given, so it is important that you know your product well enough to catch these things. Some shortcuts won’t affect the salability, quality, or use and could be good ways to make a compromise with manufacturers in order to hit your required target. Other shortcuts matter. It’s up to you know the difference and to identify shortcuts.
4. Relationships are everything.
Develop good relationships with factories. Only then can there be mutual trust and your business can then thrive. If you are changing factories every season or for each new order, you will not have consistency of product quality. The learning curve is steep and the lead times are long. The longer you work with a vendor, the more they understand your needs, and vice versa. They will know what to recommend in order to improve lead time and prices, without sacrificing quality. This only happens after working with vendors for some time.
5. Get multiple quotes and samples.
Finding vendors can be tricky. Depending on what you are looking for and the volume, you can start on Alibaba. RFQ’s help to get multiple quotes at one time, then you can request samples and have conversation to discern which vendor suits you best. Working with vendors who speak English as a second language often leads to much misunderstanding. Providing tech packs and samples for vendors to follow helps minimize this communication gap.
6. Sourcing agents can help.
Another way to find vendors is to go through a sourcing agent, of which there are many. Agents can either represent the factory (selling agent) or the customer (buying agent). The difference is whose interest they are looking out for, and that is, of course, dependent on who is paying them. Agency fees vary by volume and how much you can negotiate. In general, expect to pay 6-9% of FOB value to the buying agent. Agency fees are not dutiable (in the USA) if you are using a “buying” agent. If the factory has a “selling” agent, that cost is built into the FOB and it is dutiable.
Why Use an Agent?
They can help you negotiate cost
They can do product inspection on your behalf to ensure quality
They protect your investment by staying in touch with the factories and keeping you informed
They can push to keep product ex-factory on time which can be critically important with seasonal product
Volume. An agent like Li Fung will require a minimum FOB value per year to dedicate staff to your account. Small sellers will never be able to work with an agent.
7. Know how to purchase.
There are several options for purchasing, and it’s up to you to know the differences between each. Below are brief overviews of the three main options:
EXW (meaning ex-works): You are purchasing directly from the factory and the cost of transportation from factory to port is born by you (not the factory). Export docs are usually not done by the factory in this case. You will need to find a freight forwarding agent to help with the export. You are the importer of record at US Customs. You are liable for all duty and freight.
FOB port (freight on board): The vendor (factory or trading company) pays to get the product from the factory to the freight forwarders consolidation point. You are the importer of record at US Customs. You are liable for all duty and freight.
DDP or LDP (Landed duty paid or delivery duty paid): The vendor (factory or trading company) is the importer of record for US Customs, and they pay all duty and freight. DDP is delivered to your door. LDP is delivered to the port you select and you pick it up at the port.
Beware – if you purchase DDP or LDP, you are still liable for any mistakes, accidental or otherwise, on import entry docs. One way that vendors shipping DDP get more margin is to undervalue shipments for US Customs purposes. This means that less tariff is paid. This is fraud, it is illegal, and if you purchase DDP or LDP from a vendor who does this, you as the buyer, remain liable. It is up to you to check documents and confirm the value declared for each shipment.
8. Weigh your options.
Should you work with a trading company or directly with a factory? You will find that working with a trading company is often easier. Their English tends to be much better for one. You might also find that they can do “everything.” They are not specialists and they work with many different factories. They may not have in-depth understanding of the product that you want to make. They will have to rely on the factories to know those details, which can be hit or miss. They will have a variety of factories in their portfolio and the pricing and quality can vary greatly. They also are not in the factories often, which can allow mistakes to persist and quality to suffer. However, it is an easier way to start from scratch.
Keep in mind that in both trading companies and factories, the merchandisers get year-end bonuses based on the volume of orders they bring in and the margins they can get for the trading company or factory. In other words, you have opposing interests from the outset. The merchandiser is looking out for him or herself and for the factory first, and for you second. You will find that your negotiation skills will be tested. They don’t want to lose the order, but they want to get the highest price they can. This is where and when shortcuts are taken on the factory side to get more margin for themselves. We said it earlier, but we’ll say it again: Relationships are everything. The longer they work with you, the more reorders and new projects, the better you will be able to negotiate, and a more consistent quality will be forthcoming.
9. Get product samples.
Product samples are essential. It is key to document what you are getting every step of the way. You need first samples to confirm that you’re getting what you think you are expecting.
Next are Pre-production samples, which document all labeling, colors, trims, packaging, and product quality. Without this pre-production approval step, you cannot be sure that there is a genuine understanding between you and the factory. You should request 2 such samples, one to keep for your records and one to sign and send back to the vendor as their reference of exactly what you are purchasing. Remember, you will be paying in full for product before it leaves their factory. If it’s wrong, it is very difficult to get the factory to compensate you.
Last are TOP (top of production) samples. These will document every color and size, and they should be the same as the production sample in every way, but with a larger selection. Product should not ex-factory without approval of TOP samples.
Testing. It’s important to work with a 3rd party lab who can help you navigate the ever-changing testing regulations for your market and product. Note that regulations differ by state. A 3rd party lab will be your best resource for all regulations related to your product.
To name a few reliable sources: Bureau Veritas, SGS, and Interek. These third-party labs can do more than just test product. They can also perform final quality inspections and run human rights compliance checks on the factory itself.
10. Testing is essential.
Testing is expensive, but it’s indispensable. If you choose to use a third-party inspection company – whether one of the labs or another third-party inspection – you will have the peace of mind knowing that when you make a final payment for the goods, you have relative assurance of the quality. Inspection companies will want to know your inspection standards. Most go by AQL (Acceptable Quality Limit) standards and will need to know which level of AQL your company adheres to. You can find AQL tables online and determine which suits you best from there.
To Summarize
Know your product.
Get multiple quotes and samples from the vendors.
Get to know your supplier – look for long term players.
Document everything – leave nothing to chance.
Research all labeling and testing requirements – ignorance is costly and there are no allowances for this in the law.
Purchase FOB and engage a freight forwarder for clearance and brokerage.
Document everything with actual samples.
Testing is required – never take a shortcut here.
3rd party inspections keep vendors honest and protects your investment.
Check all import docs – you are the importer of record. You are liable for “mistakes.”
Be sure that you understand ALL costs. FOB is just the beginning. Freight and duty, inspection and testing, trucking to your warehouse, clearance, and marketing costs all add up.
Recently, I’ve been getting several questions on how Kaspien partners with brands. In this post, I’d like to address these questions and define the various products and services that Kaspien offers.
At Kaspien, our mission is to be the ultimate online growth partner. We empower brands to achieve their online retail goals through innovative, proprietary technology, tailored strategies, and mutually beneficial partnerships.
To get a little more tactical today, I’d like to focus on the suite of products and services that we offer to our partners.
Kaspien Partnership Models
We partner with our brands in 3 primary ways:
1 – Software In this model, you own inventory, and you sell it.
We equip your own team to work smarter and faster with our suite of self-service software. We offer solutions for automated inventory management, marketing, and brand protection. We have built our tools on cutting edge data science and artificial intelligence, prescriptive analytics, and managed data to support sales >$800M.
2 – Agency Services In this model, you own inventory, and we sell it.
We use our proprietary technology to serve as an extension of your brand while you maintain inventory control. We can manage your entire online sales channel or provide software and services on an a la carte basis.
3 – Retail Partnership In this model, we own inventory, and we sell it.
Brands can partner with us to represent their products across marketplaces. As your retailer, we’ll purchase inventory through consistent POs and fuel sustainable growth through our proven software and services. This is similar to how Amazon operates its 1P business. As they raise the requirements for brands to work with the traditional 1P model, companies like ours step in to fill in that market gap.
These are three primary partnership models, but brands aren’t confined to them. We can deploy any combination of our software and services in the manner that best serves your brand.
As you can see, our approach to working with brands aligns directly to our mission of helping brands succeed on various marketplaces.
Next, I’d like to go deeper into some of the specifics we offer through these different partnership models.
Software
At Kaspien, we have the following software available to brands to help them build their marketplace businesses.
Ad Management with AdManager
With Kaspien AdManager, you can increase your CPC marketing impact. Powered by optimization algorithms to manage your Amazon ad campaigns, AdManager automates bid setting and search term mining to maximize profitability. AdManager is currently in Beta and we’re accepting applicants. Apply here.
Seller & Price Tracking with Perispect
Using Perispect, our proprietary brand watch software, you can monitor pricing, identify and track sellers, enforce your MAP, and combat unauthorized sellers. You can start a 30 day free trial of Perispect today.
Cost Recovery
Identify cases in which Amazon owes you money for lost or damaged product, overcharged fees, or other mismanaged inventory and recoup what’s owed to you. We will be publishing a SaaS product for Cost Recovery soon. In the meantime, this is available as an agency service and can be accessed here.
Sales & Inventory Forecasting
Empower your brand with our sales prediction model to accurately forecast sales at a product-specific level. Keep your supply chain tuned to position inventory in FBA for both existing and new-to-market products without out-of-stocking or overstocking. We will be publishing a SaaS product in 2020. In the meantime, you can access his service through our Retail Partnership.
Reporting & Data Insights
Gain access to your data and generate actionable insights. Our marketplace intelligence platform simplifies your reporting by generating a single, digestible report on finances, inventory health, catalog representation, marketing, and logistics.
Cross-Marketplace Dropship
Extend your products’ reach and protect against out-of-stock issues by using our dropship order management system to ship inventory out of your own warehouse solutions. We will be publishing a SaaS product in 2020. In the meantime, you can access this service through our Retail Partnership.
Agency Services
Here is a list of agency services we provide:
Consultancy
Complete Amazon Channel Management Work with a dedicated account manager who is committed to your success. We’ll manage your online business from start to finish or anywhere in between and establish a regular call cadence to review account metrics, completed projects, and key initiatives.
Brand Analysis Our experts can provide a thorough competitive analysis, audit your Seller Central account for improvement opportunities, and conduct keyword research for your brand and products.
Review Management Product reviews are a key step in the purchase cycle of marketplaces, and our review management solutions make sure your customers are singing your brand’s praises.
Digital Marketing
Paid Search Campaign Management Our expert search marketing team utilizes our proprietary software, AdManager, to automate bid management and keyword optimization to increase your on-marketplace exposure and drive revenue.
Inbound Marketing Introduce your brand to entirely new audiences and build brand loyalty through our paid social campaigns, influencer network, and social media management service.
Listing Optimization We prime your listings for success through comprehensive optimization. Our SEO team will create and optimize listings with keyword-rich, compelling content to maximize your products’ visibility on the SERP and increase conversion rates.
Photography & Video Turn browsers into buyers through professional, high-quality studio & lifestyle images and video. Our talented creators will produce content that showcases your products and tells your brand’s story.
Amazon Promotions We’ll work with your marketing calendar to create a targeted blend of Amazon-specific promotions to increase conversions of shoppers visiting your listings. Accelerate the adoption of your products with flash sales, deals, coupons, BOGOs, and sampling.
Brand Protection
Marketplace Compliance Our compliance team ensures listings stay compliant with ever-evolving Amazon policies and navigates category-specific regulations, importing & exporting of goods, IPR violations, and brand registry enrollment for your brand.
Seller & Price Tracking We’ll utilize our proprietary brand monitoring software, Perispect, to monitor pricing violations, identify unauthorized sellers, and escalate case management to clean up your channel.
Inventory Management
Inventory Planning We’ll help you master marketplace policies and develop effective inventory management to avoid surplus product and long-term storage fees.
Marketplace Expansion We have dedicated teams to help you expand your reach internationally and across all major marketplaces, including Walmart, eBay, and Amazon’s international marketplaces.
Cost Recovery Amazon owes you money. Are you recouping what they owe you for lost and damaged inventory? Our Channel Auditor software allows you to automatically identify claims with Amazon and seek reimbursement.
Mutually Beneficial Partnerships We start all partnerships by aligning our goals and developing actionable strategies to help us reach them. You’ll work with a dedicated account manager who is committed to your success and strives to understand your brand and products so we can best represent them on marketplaces.
New Product Launches We’ve launched thousands of new products on online marketplaces. We offer a comprehensive First-to-Market solution for brands launching their latest products, which includes inventory management, listing creation, paid ads, and social media marketing.
Marketplace Expansion We have dedicated teams to help you expand your reach internationally and across all major marketplaces, including Walmart, eBay, and Amazon’s international marketplaces.
Inventory Management
Inventory Planning We utilize our proprietary sales forecasting algorithm to place consistent purchase orders and protect against out-of-stocks. We keep inventory turning regularly through FBA, dropship, and third-party channels.
Pricing Control We partner with you on your strategy, whether that means upholding a standardized price or helping you stay competitive on Amazon through our predictive repricing models that ensure you can consistently move product.
Opportunity Identification We can partner with you to strategically identify new product or bundle opportunities to introduce on the marketplaces.
Digital Marketing
Paid Search Campaign Management Our expert search marketing team utilizes our proprietary software, AdManager, to automate bid management and keyword optimization, increasing your on-marketplace exposure and revenue.
Inbound Marketing Introduce your brand to entirely new audiences and build brand loyalty through our paid social campaigns, influencer network, and social media management service.
Listing Optimization We prime your listings for success through comprehensive optimization. Our SEO team will create and optimize listings with keyword-rich, compelling content to maximize your products’ visibility on the SERP and increase conversion rates.
Amazon Promotions We can build a marketing calendar for your brand utilizing a targeted blend of Amazon-specific promotions to increase conversions. Accelerate the adoption of your products with flash sales, deals, coupons, BOGOs, and sampling.
Photography & Video People buy what looks good. We can help your products sell quicker by utilizing our in-house team of photographers to create stunning listing photos, product demonstration videos, and brand videos.
Brand Protection
Marketplace Compliance Our compliance team ensures listings stay compliant with ever-evolving Amazon policies and navigates category-specific regulations, importing & exporting of goods, IPR violations, and brand registry enrollment for your brand.
Seller & Price Tracking We can provide you our proprietary brand monitoring software, Perispect, allowing you to monitor the sellers in your listings and track their current and historical pricing.
Review Management Product reviews are a key step in the purchase cycle of marketplaces, and our review management solutions make sure your customers are singing your brand’s praises.
Kaspien Solutions: Bundled Software & Services for Specific Goals
Finally, at Kaspien, we offer several solutions bundles to support different goals. Each solution is designed with a package of select software and services to help you achieve your goal.
Here are a few bundles we support:
Brands looking to scale their marketplace business
Brands looking to protect their brand presence
Brands looking to grow beyond Amazon
Brands looking to expand globally
Brands looking to sell on marketplaces for the first time
If you’d like to discuss opportunities with our team, please use our contact form or email me directly at
Till next time,
Kunal Chopra, CEO,Kaspien
For the third installment of our costs of Amazon series, we’re examining the Amazon business expenses associated with direct selling. In the previous posts in this series, we looked at the costs of Amazon third-party sellers and the costs of Amazon Retail.
WHAT IS DIRECT SELLING & HOW DOES IT WORK ON AMAZON?
Direct selling is the business model where a brand operates as both the manufacturer and seller of a product. Amazon’s private label brand, Amazon Basics, is one example of this. Costco’s Kirkland Signature brand is another. If you want to own the supply chain, retail, and marketing portions of your Amazon business, you’re interested in direct selling.
Benefits of Direct Selling
Direct selling has many benefits, not least of which is maximum control over your brand’s online representation. Rather than relying on third-party sellers or Amazon Retail to present your products accurately and entice customers, you control your listings.
You also have control over your supply chain, potentially all the way from manufacturer to customer. Controlling your supply chain helps mitigate the risk of counterfeits entering your distribution network or unauthorized sellers undercutting your pricing.
And while we’re on the topic of price, you control that too; no one can cut your pricing when you are the exclusive seller of your product.
Challenges of Direct Selling
The first and foremost obstacle is resources. Handling production, supply chain, marketing, creative services, compliance, customer service, taxes, etc. requires a great deal of research, time, and effort.
Managing these elements is easier for brands that only have a few products because the workload grows exponentially with the addition of more product lines or marketplace expansion. To scale successfully and sustainably, you need to either expand your team (preferably with experienced personnel) and/or use software to automate processes.
WHAT ARE THE COSTS?
As the manufacturer and seller of your products, you’re responsible for nearly every expense. This is not inherently a bad thing, but it’s a major factor for determining your business strategy.
Personnel
Running anAmazon seller account at scale requires employees. That means paying wages, salaries, and benefits. These investments quickly add up. If you wish to pursue direct selling, how many employees do you need, what experience and skills do they need, and can you afford them?
Supply Chain
Logistics and supply chain will account for a significant portion of your annual expenses, with fees coming from sourcing,compliance, manufacturing, packaging, freight, taxes, warehousing, processing, shipping, demand planning, liquidation, and battling counterfeiters, to name a few.
Do you have the knowledge, tools, and personnel necessary for managing your business’s supply chain from start to finish? If not, which portions can you acquire and which can you outsource?
Amazon’s fulfillment centers take care of the final leg of the supply chain (although FBA comes with its own fees). Brands can also work with services like Deliverr to offer two-day shipping for other online marketplaces, including Walmart, eBay, Shopify, and more.
Supply chain is one of the most extensive and significant obstacles to direct selling, which is why many manufacturers turn to third-party sellers, first-party sellers (aka Amazon Retail), or agencies to outsource that segment of their business.
Digital Marketing
Marketplaces are increasingly crowded. To ensure your products can be found, digital marketing is a must.
Fortunately, not all marketing has an expense. Listing optimizations are among the most important efforts a seller can make, and they require nothing more than time, research, and effort.
Here’s a brief overviewofhow to create great listings:
To optimize a listing, start with keyword research. Which search terms have the greatest relevancy to your product and what’s the competition like for those search terms? A mixture of high search volume and low competition keywords can help your product establish a foothold.
Use short–tail and long–tail keywords. Short-tail keywords can help listings populate for more general queries (boosting visibility) while long-tail keywords are more likely to lead to conversions (shopper has specific interest and therefore stronger intent). Plug keywords into the listing title, bullets, and product description.
Last but not least, review and revise the listing to achieve a balance of discoverability with buyability. The listing must be keyword-rich to be discoverable by Amazon’s algorithm, but it must also be persuasive to a human being. If the listing is just a string of keywords, shoppers won’t convert, and then it doesn’t matter that your listing was discovered.
Product images and videos are also incredibly important for improving sales velocity. Keywords make a listing appear on the search results page, but it’s the image on that entices a shopper to click into the listing itself. You can read more on that and what goes into creating quality photos and videos for Amazon here.
Another free marketing service is Amazon Live, which allows brands to livestream product videos directly on Amazon. The service launched early in 2019 and has proven to drive excellent visibility.
As with everything else, each of these services require time and effort, and they greatly benefit from being driven by someone with experience in search marketing or social media marketing.
Brand owners interested in selling their products themselves can research best practices, guides, and tutorials so they can take on these services themselves, expand their teams internally, or outsource marketing to freelancers or agencies.
Brand Protection
Online brand protection is a necessity. The reality is that there are unscrupulous individuals and companies who will steal intellectual property, make counterfeits, undercut pricing, or make false allegations to get your seller account shut down.
To defend against these threats, brands need to proactively protect their IPR by filing for trademarks, copyright, and trade secrets whenever appropriate. This includes domestically and internationally.
Defending against counterfeiters means working with trustworthy manufacturers who won’t sell your designs or products to other parties, closely monitoring your supply chain to prevent counterfeits from entering your inventory, monitoring listings, and periodically making test buys to verify product authenticity.
Another element of brand protection is product pricing. Price consistency is important because it reflects brand integrity. When a product is offered for far less than the MSRP, shoppers question if its legitimate and why the MSRP is higher. If you are your products’ exclusive seller, controlling pricing is easy. If you also partner with other retailers to sell your product, you need to be able to monitor and enforce your pricing policies. This can be done manually, as detailed here, butit’s a time–consuming process that is difficult to scale without automation.
Finally, if your account is suspended due to false allegations, the quickest way to get it restored is to provide the necessary paperwork showing that you own the product you sell and that it’s not counterfeit.
You can read11 more tips for protecting your brand online here.
THE MIDDLE GROUND – OUTSOURCING PARTS OF YOUR BUSINESS
The benefits of direct selling make it extraordinarily appealing to many brands, but many discover through experience that they’re not yet equipped to handle it. For those brands, there’s a middle ground: partner with an agency and/or utilize software.
By outsourcing to an agency, a brand gains a team of experts to run their marketing, supply chain, brand protection, or any combination of the three for a fraction of what it would cost to hire a team in-house. It’s a cost-effective approach that can drive profitability and sustainable growth, giving brands time to develop and pursue their short-term and long-term goals.
In addition or as an alternative, brands who wish to sell their product themselves can pay for software that automates and/or simplifies various services, reducing the time and personnel required to successfully run an online business. This option has the greatest profitability potential, but it again depends on who’s running the tools. If the tools are excellent, but the person using them is inexperienced, the tools will yield only a fraction of their full potential. Working with an agency or software provider who can train your team on the software is a great bridge to independent direct selling.
THE TAKEAWAY – WHICH BUSINESS MODEL IS THE BEST?
After reviewing the business expenses associated withAmazon third-party sellers (3P),Amazon Retail (1P), and direct selling, there’s no clear answer to which is the perfect solution. The best Amazon business model for your brand depends entirely on your business’s goals, needs, limitations, and priorities.
Kaspien offers services for third-party retail, direct selling with an agency, and direct selling independently. If you’d like to learn more about any of these services, reach out through our contact form.
In a continuation of our series on the costs of the primary Amazon business models, today we explore the costs of Amazon Retail and the Vendor Central platform. You can read about the costs associated with Amazon third-party sellers in our previous blog post here.
In our next post, we’ll explore the costs associated with direct selling, where a brand operates as both manufacturer and B2C seller.
WHAT IS AMAZON RETAIL & HOW DOES IT WORK?
Amazon Retail is the name of Amazon’s first-party(1P) platform. In this model, Amazon itself serves as the middleman, buying product wholesale from manufacturers and reselling it on Amazon.com.
When working with Amazon Retail, manufacturers operate in Vendor Central (as opposed to Seller Central). In Vendor Central, manufacturers can monitor purchase orders and inventory levels, view reports, and, depending on the manufacturer’s size and budget, dictate some marketing control. Overall, Vendor Central provides much less control and customization than Seller Central since Amazon assumes near absolute control once they acquire inventory.
Amazon Retail is an enticing option for those starting an Amazon business or brands who wish to focus on being a manufacturer and take a hands-off approach to customer engagement. Another benefit is that Amazon Retail will often place larger purchase orders than many third-party sellers, although those orders will be placed less frequently since they are larger.
Will Amazon Retail Remove Smaller Vendors?
Amazon Retail has contributed less and less to Amazon’s total revenue over the years. In 2015, third-party seller sales surpassed Amazon Retail sales for the first time, tipping the scales to account for 51% of all sales on Amazon. That trend has continued ever since.
As first party market share wanes (even while total sales grow), advertising has become one of Amazon’s most profitable revenue streams, leading industry experts to predict that Amazon will eventually limit its first-party platform to only the highest-revenue brands and force all other brands to work with third-party sellers or enter direct selling, allowing Amazon to focus its attention and resources on only the most lucrative divisions.
This prediction was seemingly substantiated in early 2019, when Amazon Retail abruptly stopped placing purchase orders with thousands of vendors and notified some that Amazon would no longer purchase inventory. Some saw this as the first step towards the fabled “One Vendor” system, that would merge Seller Central and Vendor Central.A week later, Amazon redacted the move and quietly resumed business as usual, largely ignoring questions about vendor stability and any harm caused by the disruption.
The concerns resurfaced less than three months later when Bloomberg reported that Amazon was preparing to slow walk the vendor removal, letting contracts expire and not renewing them.
Since then, no new concerns have been raised, and as Amazon undergoes heightened federal scrutiny, it may exercise extra caution towards acts that could lead to widespread outcry.
WHAT ARE THE COSTS?
While the top-level overview of third-party sellers and Amazon Retail seem very similar, they have some important differences in their pricing structures.
Percentage-Based Fees
Amazon Retail charges a handful of percentage-based fees for marketing co-op, damage allowance, early payment, chargebacks and shipping. In contrast, the third-party seller business model makes the 3P seller responsible for paying Amazon fees instead of the brand.
We’ve included two examples of how Amazon’s fee structure differs from a third-party seller fee structure, using Kaspien data as an example.
Digital Marketing
Like third-party sellers, Amazon Retail offers marketing services to brands. Brands fund these services, and they can choose to manage them themselves or pay Amazon to manage them.
*Brand Registry is required to access this service.
Amazon’s service fees vary. In many cases, Amazon will negotiate a PO discount in lieu of charging fees for their marketing services. Vendors can run these services themselves or hire Amazon to run them, which would be written into the contact. If Amazon runs marketing through Vendor Central, visibility into performance through reporting is very limited.
Brand Protection
Amazon’s brand protection services, with the exception of the Transparency program, are free. These programs include Brand Registry, Brand Gating, and Project Zero.
Each of these programs is available to any brand on Amazon; they are not restricted to Amazon Retail partners. You can read more about each of these services in our blog post on online brand protection.
COMING UP: THE COST OF DIRECT SELLING ON AMAZON
To summarize, Amazon Retail charges a handful of percentage-based fees, but otherwise, there are no automatic costs for working with Amazon Retail. Like third-party sellers, Amazon Retail offers a variety of opt-in services for Amazon marketing.
In our next post, we’ll detail the costs associated with direct selling on Amazon, where a brand serves as both the manufacturer and seller.
$99/month | $99 one-time setup fee | +$75 for each additional marketplace
