Growing on Amazon While Protecting Your D2C

Webinar Recap

Is a strong direct to consumer (D2C) business incompatible with Amazon? Not at all!

In fact, with the right strategy, Amazon can co-exist with, and even bolster, a brand’s D2C presence. Check out this webinar to hear how to effectively build an Amazon sales channel while protecting your D2C retail business. You’ll also learn about opportunities to utilize D2C momentum to grow on Amazon and drive additional D2C site traffic using Amazon Advertising.

Amazon vs. D2C Customers

If you’re a D2C business, is it worth making the leap to Amazon? After all, the margins are worse on Amazon and you’ll have to pay significant fees. According to John Ghiorso, Founder and CEO of Orca Pacific, the benefit is from the “...significant amount of incremental traffic and customers on the Amazon platform that will never go to your direct to consumer site.”

A huge portion of the market is going to go to Amazon. In fact, studies show that 60 percent of customers start their product research journey, with a lot of purchase intent, on Amazon. There's a huge cross-section of customers that are bouncing between channels, but some shoppers will only buy from Amazon. The question is, can you afford to miss out?

“If your brand is not on Amazon, you will never sell your product to that customer. That's reason number one,” said Ghiorso. “My belief here and what we've seen play out is that, if you execute an Amazon strategy in the right way, there's a tremendous amount of incremental opportunity in terms of just pure sales. There's a lot of synergy between direct to consumer and Amazon that is self-reinforcing.”

Your Brand on Amazon and D2C

Some business owners may believe that selling on Amazon will cheapen their brand — both figuratively and literally (by driving down price points). Can luxury brands, for example, still offer a high-end experience for customers on the marketplace?

While you’ll have less control on Amazon than on your own website, Ghiorso explained that Amazon has “gotten a lot more sophisticated over the last few years...it's very possible to set things up in a way that ensures pricing integrity on the Amazon platform.”

You also have options in terms of brand reputation. “They've set up ways to create a very strong branded experience,” Ghiorso noted. “You have Brand Stores, you have much more robust, detailed pages, content opportunities. In addition to a variety of media and live video opportunities, sellers can also use a new program called Amazon Posts, which is a bit like Instagram.”

Is Amazon Worth It?

Before making the leap to the marketplace, it’s important to understand that the platform can be tricky to navigate. Many businesses rely on experts and agencies that specialize in marketing and selling on Amazon. “Five years ago you… could sort it out,” said Ghiorso. “You could grind through it and figure it out, [but] Amazon is a lot more technical than it used to be.”

When moving from D2C to Amazon, many business owners may feel lost. It's an entirely different experience, which is why having in-house help can dramatically improve your chances of success. An agency will know how to create the best product titles, bullet points, and product pages to attract customers and build your brand.

During the webinar, one viewer asked: “How can a micro-business afford an agency?” You may be asking yourself the same question. The truth is, as Ghiorso pointed out, many agencies offer services for small businesses and those that are just getting started. That being said, if you truly don’t have the budget, it’s still possible to try selling on Amazon.

“The good thing about Amazon is it's fairly low risk. If you're just going to start, upload a few items and see how it goes and upload some content,” advised Ghiorso. His biggest warning? “Don't get your account suspended.” If you can’t hire an Amazon specialist, the first thing you need to do is get familiar with Amazon's policies. Try new things and experiment, but always make sure you are staying compliant with Amazon’s guidelines.

Hear the Entire Conversation

Check out the recording above or read the transcript below. In addition to the topics mentioned in this recap, eComEngine Director of Marketing Paul Rice and Ghiorso also discussed fulfillment options (and challenges), developing an Amazon strategy, and much more.

Paul: Hello everyone. Thank you for joining. My name is Paul Rice. I'm the head of marketing here at eComEngine. I still see some participants rolling in. Thank you so much. See some good names on there that I am familiar with, some great customers of eComEngine. We have a great webinar planned for you today. A lot of people believe that a successful direct to consumer business is not compatible with also selling on Amazon, and that's just not true. With the right strategy Amazon can co-exist with and even improve your brands direct to consumer presence.

Paul: I'm here today with John Ghiorso. He's the founder and CEO of Orca Pacific. John's going to share how to effectively build an Amazon sales channel while protecting your direct to consumer retail business. We'll dig into opportunities to utilize direct to consumer momentum, to drive ... sorry to help your growth on Amazon, and also how to drive additional direct to consumer website traffic with Amazon advertising. John, welcome to the webinar. Thank you for joining. Please give us a quick overview of you and your company.

John: Yeah, thanks Paul. Appreciate it. I am the founder and CEO of Orca Pacific. We are now part of S4Capital and MightyHive. Orca Pacific is a full service agency with an exclusive focus on Amazon. Basically our goal is to curate and offer services in every facet of the platform, as it relates to growing and scaling, protecting a consumer product brand. We do a lot on the front end advertising, content marketing, merchandising, et cetera, SEO. We do a lot on the backend, so operational elements, the less sexy but really critical elements of running a retail or marketplace business.

John: Then we do a lot in the high level strategic side of things. We have over 50 people. We're here in Seattle, hundreds of clients, hundreds and hundreds of brands across those clients across categories on the platform. We work with Amazon across North America and all the other global subsidiaries. That's who we are and what we do. I've been doing this about 10 years and yeah, happy to get into the discussion here.

Paul: Awesome. Thank you for that. Again, thank you for joining. Quick agenda for everyone, just a couple of high level bullet points that we'll probably cover. This is going to be a pretty free ranging conversation. We might get into some other things, who knows. But, talking about audiences Amazon versus your direct to consumer website, we're going to cover taking advantage of Amazon content, how you can do that with your retail website, some best practices for promotions, utilizing the fulfillment network or yours versus Amazons and operationalizing your business strategy on Amazon.

Paul: All good points. I know these all very important topics. We have a lot of customers that do both. I think the majority of our customers have a website or website presence or retail presence while selling on Amazon. It's important for a lot of people and I can see our list is full here. I am going to pull up some questions for you, John, that I've prepared. Hold on, give me one second here.

John: Sure.

Paul: All right. I apologize because I lost my window. All right. Let's start with the basics and a lot of you might already know this, but why Amazon? A lot of sellers complain about the margins on Amazon being lower with all the fees, but if your margins are better on your direct to consumer website, what motivation do brands have to be involved on Amazon at all?

John: Yeah. Your margins will be worse on Amazon and any marketplace or retailer compared to direct to consumer, probably for obvious reasons, right? Amazon has to make money, so they charge fees, there's other associated fees, et cetera. In my experience, there is a significant amount of incremental traffic and customers on the Amazon platform that will never go to your direct to consumer site. Take, I don't know, any product categories, say sunglasses, you can have a significant scale direct to consumer operation. There is still a huge portion of the market that is going to go to Amazon.

John: They're going to start and they're going to end their journey on Amazon. They're going to start by doing research, typing in sunglasses, looking at different pair's comparison all the way down the funnel to purchase, and they will never leave. If your brand is not on Amazon, you will never sell your product to that customer. That's reason number one. There's just, you can be doing great at scale. There's a big chunk of customers that will only do commerce on the Amazon platform. Now, I think maybe the more interesting reason behind this is, there's your core direct to consumer, your true fans, the folks that read your newsletter, that go back to your site over and over, that will bypass Amazon entirely.

John: There's those folks that are very loyal to Amazon that will never go anywhere else. But then there's a huge cross-section of customers that are bouncing between channels, bouncing between doing research on your website, going to Amazon, going to another retail site, maybe looking at something in store. There's no sort of necessarily linear path for them. This concept of a sales funnels, elegant. It's nice to think that they start here and then go here and here and here, but in reality, they go here and sideways and up and back and down and that's just how customers shop and behave.

John: There's a huge amount of research that's being done on Amazon. Six out of 10 customers start their product research journey on Amazon. There's a huge amount of kind of discovery that's been done on the platform. Obviously, a lot of purchase intent. My belief here and what we've seen play out is that, if you execute an Amazon strategy in the right way, there's a tremendous amount of incremental opportunity in terms of just pure sales. There's a lot of synergy between direct to consumer and Amazon that is self-reinforcing.

John: They may get more educated, more comfortable on Amazon and then buy on direct to consumer or vice versa. If you do that in the right way, and we could talk about this later, you can have your cake and eat it too. You can execute a strategy that, where you have a lot to gain without giving much up in terms of pricing integrity, image in the marketplace, et cetera.

Paul: John, I know a lot of people do exactly what you say. They start at Amazon, they end on Amazon. Do you see any demographic differences? Is it a majority of an older crowd that always does that or a younger crowd or is it a mix? Where are some trends there that people could potentially use?

John: Yeah. We don't see a huge demographic differentiation. You're going to get all demographic mix in both cases. There tends to be more trust in Amazon than in other direct to consumer sites. I think the core Amazon fans are going to skew a little bit older versus your core direct to consumer audience that you're able to capture. Then generally by far the biggest users of Amazon are Prime members. Now, Prime membership has such a massive household penetration at this point. You could almost say that basically all Americans are Prime members.

John: That's not literally true, but when you look at 70, 80% of American households have Prime memberships that basically is aligned with the 70 or 80% of American households that have credit cards. There's an unbanked, mostly cash segment of the US, but they're not going to your direct to consumer site most likely anyway. There's pretty much a perfect overlap in terms of folks that regularly shopping on Amazon and folks that you'd be trying to capture with a D2C strategy. I wish I had a better answer to this. I wish it was like, "Oh, there's this really perfect alignment demographically, and these folks are here and these are here," but the reality is like, it's messy.

John: It just, there's a lot of activity between different groups bouncing between direct consumer, if you want to call that a channel and Amazon.

Paul: Makes sense. Makes sense. Personally myself, I vary. Sometimes I go straight to Amazon and I can't really say why, but sometimes I do and sometimes I start elsewhere. Sometimes I love to buy from the little stores and sometimes I just don't.

John: Yeah. Yeah.

Paul: I agree. No clear delineation there to say one or the other. What misconceptions do brands have ... Brands that have a strong direct to consumer presence, what misconceptions do they have about Amazon itself?

John: I think the biggest misconception they have ... Well, there's a couple and these aren't even necessarily misconceptions, because you don't do things the right way they can happen, but if you do things in the right way, you can avoid them. The first misconception is that Amazon cheapens your brand, either literally as in they drive the price point down in the marketplace or figuratively, as in, we're kind of a more luxury brand, higher end, we have a certain image we're trying to curate and Amazon's this big mall, white background, just bunch of stuff thrown across the site and we don't want to be in that experience.

John: We want to have an exclusive, gated style experience. Amazon has gotten a lot better and a lot more sophisticated over the last few years. I'll address the pricing one first. It is very possible if you set things up, and this could be a whole separate hour conversation, so we can dive into it. But I would say it's very possible to set things up in a way that ensures pricing integrity on the Amazon platform. That is an achievable thing, to not have your price point eroded, not have discounting without your permission going on, et cetera. Number two, the brand representation, there are a lot of avenues now that Amazon has created.

John: They won't do it for you. It's a platform, but they've set up ways to really set up a, I would say a very strong branded experience on the platform. You have brand stores, you have much more robust, detailed page, content opportunities. There's a lot of opportunities to put a video up. You have live video options, use a new program called Amazon Posts, which is a ... It's a bit like Instagram clone in terms of being able to put more influencer, user generated content up in a more browsable way. There's a lot of opportunities to create an experience on Amazon that looks quite similar to your direct to consumer site, that lives on the Amazon platform.

John: I'd say, the brand experience stuff can be dealt with now. The other, I think misconception is that Amazon is going to knock you off, that they're going to compete with your product. There is some truth in that. It can happen, but my view on this is, if you have a differentiated product and you have IP, et cetera, you're good. Amazon's not going to break the law to clone your product and create a private label version. The other thing I would say is, if you have a product that's so hot that Amazon wants to create a private label version, they're going to do that whether you're on the site or not.

John: Sure, maybe they have some more pricing data and stuff if you're on the site, but again, I don't want people to think I'm not being realistic here. I think there is some threat, but I think frankly, it's been way overblown in the media in terms of how big of a threat is that actually. I can tell you, I've seen thousands and thousands of examples of D2C brands being successful on Amazon. I can maybe think of one or two where Amazon's actually turned around and competed with them directly, so can happen but I wouldn't lose sleep over.

Paul: It makes sense. It gets a lot of press because it feels scary, but yeah, like you said, it's pretty rare occurrence anyway.

John: Last thing I'll say on that, it really comes down to product category. Amazon's private label strategy is commodity. If you're making wood hangers, if you're making white socks, if you're making baking soda, then yeah, Amazon's coming out with a private label version of that for sure. If you're making, which as a direct to consumer range you should be differentiated in some way, a differentiated product, you have IP, et cetera, that's not where Amazon's focused anyway. It's too hard. It just is. It takes a lot of work.

Paul: Right and the volume is not there.

Paul: They're all about volume.

John: Yep.

Paul: I'm surprised if anyone still makes white socks, just plain white socks. But I'm sure there's-

John: Oh, man, yeah. Still lots and lots of them. I think Amazon probably sells more white socks than any retailer out there. You'd be amazed.

Paul: I wouldn't be surprised to hear that though.

John: Yeah.

Paul: Next question, what are some of the top differences between the shopping experience when someone's shopping for your brand or on your store or your products on Amazon versus your website? I think a lot of people feel like they know these, but maybe you have some thoughts that people haven't thought about.

John: Well, the biggest difference is, every one of your competitors and 1,000 others you've never heard of are competing with you on Amazon, where on your own site, it's your own sites it's just you. That's obviously ... Well, that's obvious. But I think the more interesting topic there is, so what do you do about that? I think first it's important to be realistic that there's organic results and there's paid results. You're going to have competitors seeding their listings above yours with Amazon search advertising, sponsored ads, so you're going to need to have a defensive advertising strategy.

John: Then there are some curated opportunities, I referenced earlier, brand stores. That is yours. You own that. It's your products, you design it however you want. What you really want to do ideally is develop a strategy, where you get customers off of the search results page onto an owned page, either a product detail page, if they're lower funnel or a brand store if they're mid funnel or higher funnel, as quickly as possible. You want to get the customer out of that search results page, knife fight. Then it becomes a more sort of curated, customized experience like you'd see on your website.

John: But yeah, it's a very, very different experience of I think how a customer shops, how they browse. It's much less loyal to a brand. You're trying to encourage brand loyalty through the process to obviously ultimately convert to a purchase.

Paul: Makes sense. Makes total sense to me. Already touched on audiences a little bit when we started, but I know there's not a clear demographic, but what is different about the audiences that shop on Amazon versus those that shop on a direct to consumer site, or maybe those that never shop on Amazon? Why do they do that?

John: Yeah. On Amazon, you're going to get a lot more shopping behavior that is very targeted and impulse and immediate need driven. If someone's going through kind of a, and there's a million different examples, but let's say someone sees your ad on Instagram, they go to your direct consumer site, they bounce around, look at some of your stuff, make a purchase decision, that's shopping, right? That's the natural, digital version of what people have been doing bouncing around in the mall, walking into a store, checking it out, maybe interesting, maybe not, maybe go back.

John: That's shopping. A lot of the commerce still on Amazon is buying. It is just direct, I need this thing, this suits my needs, buy it done, at my house in two days, don't have to think about it anymore. Now, Amazon is getting better and they're doing a lot to encourage what I would say is shopping, i.e. browsing, discovery, et cetera. There's a lot of opportunity there now for brands that want to take advantage of that. But realistically, 90% of the commerce conducted on Amazon is very targeted, just I need this thing, I need to buy it. Now that doesn't mean that they don't want the best option or the most innovative, or they're going to do a bit of research.

John: It's not all just down to the lowest price commodity product, but that is probably the biggest difference. Now how that aligns demographically, it's hard to say. But I think that's the biggest difference is shopping behavior and intent is quite a bit different from a direct to consumer, to Amazon. Again, there's overlap, but ... I think that's something to be realistic about, and just set up a strategy where you either swim with the tide or you say, "We're not a product that's going to ... We're not the cheapest. We're not the easiest. We're more expensive. We're differentiated.

John: People really have to understand our products to be willing to pay more for it." If that's the case, then basically fight the battle you're going to win. Don't worry about the impulse shoppers. They're not your customers anyway. Go after the people that are on Amazon bored on their, while they're eating lunch or whatever, shopping, looking for gifts, and then you can absolutely put a strategy together that goes after that. I don't want to call it demographic, but kind of behavioral set. It just depends on who you think your customer is. Your customer's on Amazon, they're there.

John: They're doing something. They're Prime members. They're doing something. The key is how do you connect with them in a profitable, sustainable way?

Paul: Got it. Makes sense. Now, let's shift gears to fulfillment. It's one of Amazon's strengths, if not its strength. What is better for a brand? A lot of brands have been selling direct or have their own fulfillment network that they've been using for five, 10, 15 years, and along comes Amazon with something that's superior, what's better to use and why? When would you choose one or the other?

John: Yeah. It's all going to come down to the customer experience, and what fulfillment option enables the best customer experience. The bar that Amazon set is Prime delivery. If you're on Amazon and you don't have Prime delivery, you're pretty much hosed unless there's one of two things going on. Either your product is so desirable that people are willing to wait longer to get it, which you need to take a serious look in the mirror and say, "Is that really the case?" No one thinks they're ... Everyone thinks their baby's cute, right? But really they need to really, really ...

John: Is someone genuinely going to wait six days versus two to get your product and say your competitors? Then the other reason is, you're in a category where Prime is just not table-stakes yet. There's furniture, large product. Product that people are just used to waiting longer to get. They don't expect to get a sofa in two days. Those are the exceptions. For 95% of products and product categories, the expectation is two-day Prime. Then you have to ask yourself, "Well, how you get that?" For the vast majority of sellers on the Amazon marketplace, FBA, Fulfilled by Amazon is by far the easiest, most straightforward way to get that Prime offer on your product.

John: There is an option. There are other ways to get Prime badging. You can do Seller Fulfilled Prime which is a very difficult program realistically to be able to get in and keep up with. If you don't have 10, 12 warehouses nationally, you're probably not going to be able to cut it in terms of requirements. You need to really have a scale fulfillment operation already, or to use a 3PL that has that Prime badging basically. They have the 12 warehouses and you're already using them for other things, and they could just plug in and get that Prime badge. That works.

John: But really, unless you're one of those exception cases, I would say, "If you're not going to have a Prime badge on your product, I don't think it's worth being on the platform." Just straight up, I think it's that black and white. The expectation is customer expectation is very, very clear at this point in terms of what they expect in terms of delivery.

Paul: Definitely. Now, is there anything there when we talk about fulfillment related to just the headaches of you ship something and the package gets lost, if you're doing it yourself, you've got to reach out to the carrier, but if it's Amazon, it seems like that could be a lot that's simplified for the seller or for the actual merchant? Is there any truth to that?

John: Yeah, there is. Amazon handles the forward and reverse logistics to the customer on the outbound side when doing FBA. They handle the customer service for the most part if it's damaged in shipping, something like that. If it's an actual, sort of, there's a weird product issue, you're still probably going to have to deal with that yourself as the manufacturer. But if it's a fulfillment related customer service issue, they handle all that. They're obviously very, very good. Yeah, if you run your own fulfillment, if you're a direct to consumer brand, you're used to doing this.

John: It's going to be much closer to what you would do through your own site. You're going to have to deal directly with the customer and with shipping and my product didn't arrive and open a ticket and talk to them, and figure out what's going on, and I want to do a return and now that's on you. You have to do all that just as you would through your own site. That's something to be realistic about. Now, the advantage frankly, that direct to consumer brands have versus traditional manufacturers, is they're already doing that because they're already doing that through their own website.

John: You have a lot of traditional manufacturers that are just really B2B, because they're just selling to retail. They're not selling direct to consumer at all. That's a much bigger hurdle for them to get over typically. But a little bit more straightforward D2C brands, but realistic would be about that. There's a couple of questions that came in. Do we want to address those quickly?

Paul: Sure. We have one here. This is from Kathy. She says, "If I'm not offering Prime shipping are my products not showing up for Prime customers?"

John: They are showing up for Prime customers. They just won't have a Prime offer. They'll say, "Ships and sold by," your company name in three to five days, in five to seven days, in 10 to 15 days, whatever your standard delivery promise is, and Amazon will auto calculate that based on just the actual data. They'll still see it, it'll still show up, but it won't have that Prime badge and it won't have that Prime offer.

John: There's also a very prominent filtering mechanism that is not default, but it's very easy to click that box when looking at search results that said only show Prime offers and lots of customers click that filter. If that happens, then you won't show up at all.

Paul: I often click that myself.

John: Yeah, same.

Paul: If it's something I know I need quickly, I'm not going to search through, I just, "Show me what's Prime," I'll stop there.

John: There's the obvious convenience factor of two-day shipping. There's also a credibility factor. I think customers have gotten used to, if a brand's not Prime, are they a real company? Are they a real brand? Why aren't they Prime? It's multiple big hurdles you're getting over without that Prime badge.

Paul: Yup. Yup. All right. Now let's talk, let's shift gears back to content. You mentioned, A-plus content and you also mentioned Posts. Posts is really cool. We've had a blog post on the eComEngine blog just this week about Posts. I think it has a lot of legs. It could go a lot of different ways as it matures. How can brands take advantage of all their content that they have created, or they're currently creating for their own website and their own products on Amazon?

John: Yeah. On Amazon, you have a couple core elements of content. You've basic and A plus or enhanced content. Basic content is eight images, one or multiple videos and then the very basic stuff, title, bullet points, price, et cetera. Then enhanced content is a little bit more robust, multiple paragraphs, different widgets, graphics. You can in some cases do videos in enhanced content. We recommend really taking advantage of every content opportunity on the platform. There is a significant increase in conversion rates when more robust content is uploaded.

John: My recommendation is to make it product specific, item specific, because a lot of the time what you'll see is, you have an option to put in multiple paragraphs of content. The company, the first paragraph they talk about the company. The second paragraph, they talk about the overall brand. Customers when they're on the detail page, it's the equivalent of picking up the box in the store or being on a detailed page on a direct to consumer site. They want to know about that specific product. That's what they're looking for. There's also all of that content, all the text is SEO indexed.

John: There are some SEO best practices. You want to prioritize the customer experience with the content over SEO. You don't want to do keyword stuffing or anything like that, where it sounds weird, but you do want to input high volume keywords into the content itself. That's the static detail page content. Brand store is a whole separate discussion. Think of brand store as more like your website, like it's a living, breathing, should be regularly updated site within a site. You don't want to just set up a brand store and walk away for 12 months. You should update it with new products, new promotions new creative if you have that seasonality, et cetera.

John: Then Posts yeah, Posts is really interesting. The best thing about Posts ... Well, one of the best things is it's free right now, and it may not be free forever because it may get rolled up under an advertising paid vehicle at some point. But right now it's free. Posts are a great place to put a more user generated or experiential or influencer generated content. The images on the detail page should really just be, this is the product, this is the product open, this is the inside of the product. You need to show people the basics, what are they actually buying?

John: Thinking of a backpack, all the angles, this is zipped open, this is the inside, this is the back. They need to be able to virtually look at it and pick it up. But then on Posts you can do like, "This is this influencer who's camping with the backpack, and this is how it looks while they're hiking or whatever." That type of experience, more of an Instagram type kind of product experiences is really, I think the best use case for Posts. It's further down on the page, so the customer in their journey they're getting into really looking at the product now. They've seen the primary images, they've seen the description, they've gotten past that point.

John: Once they're at Posts, they're really getting into the research, so that's what you want to drive home with that content. But those are basically ... There's other stuff, there's other kind of content elements, but those are the three big ones that every brand should be taken advantage of.

Paul: Got you. I know we're jumping around a little bit. We do have a couple of questions from Bruce, and this could be a whole conversation in itself I think. His first question is what is the key to not losing money on Amazon?

John: The key to not losing money on Amazon is being realistic about all of the associated fees before you set up your product and start selling on the platform. Understanding what the standard platform fee is, but in addition to that what are the FBA fees associated, because you will want FBA, and that was I think the second question, and I can get to that in a second. You really will want FBA. You need to factor that in, make sure that you can afford it. It's part of your margin on the product, and then hopefully you're setting your retail price in line with the marketplace.

John: Your retail price ideally should be the same on your direct to consumer site, other retailers, Amazon; otherwise it's a weird disjointed experience for a customer. Then I would say, ideally if you're willing to do discounting, if you do discounting in other channels, you factor that in so that you can afford a 10, 20% off retail discount. Not all the time, but in certain holidays, et cetera, and then last but not least and very important is, you factor in an advertising budget. You'll definitely need to be doing Amazon at least search advertising, it's a decent range.

John: I would factor at five to 15% usually for an advertising budget. The more you can afford to do upfront, the faster your business is going to grow. Obviously you don't want to ... I don't think there's any reason to lose money. I don't think any brand has to lose money to get to scale on Amazon. That shouldn't be the case. You should be able to drive a sustainable business, and hopefully as you get bigger, pull back on that advertising a bit so you're getting more margin as the ad budget reduces as a proportion of the overall business.

John: But basically that's my advice on just being upfront about all those fees, which by the way, if you run the process the right way, there shouldn't be any hidden fees. There shouldn't be any surprises. You should be able to have a transparent budget before you start. How do you achieve a Prime badge? You need to send product into Fulfill by Amazon. That is a nuanced process. I would start by just going to Amazon. I would just Google Amazon FBA set up. The first link will be their site, and that takes you step-by-step through the process. It's a learning curve.

John: There's nuances there for sure, something that we help a lot of brands, guiding them through. But certainly you can figure it out. It's just, it's a process and a learning curve.

Paul: Right. Like you mentioned advertising. I guess the only time you don't need to advertise is really when you have that unicorn product like you said before, where you don't need Prime, because it's so popular. But-

John: I'll tell you this-

Paul: ... probably not realistic.

John: ... Bose advertises, Apple advertises. When Nike was on Amazon, they advertised. Because here's the thing, you need to defend your brand at minimum. If you're Apple, sure maybe you don't need to advertise, but mere mortals I think it's table stakes. It's a pay to play platform in a lot of ways. If you're not paying, you're not showing up in front of customers. That's not literally true, but to give some real data on this, about five out of 10 of the first product listings on any page are paid. If you're not paying for some of those, even if you're number two, number three in search, you're going to have all these paid listings ahead of you.

John: Unlike Google, I think this is an important thing to understand for folks coming more from the D2C background, paid search on Amazon, so advertising directly influences organic. You can't pay to change your organic ranking, but paid search creates more visibility, more glance views, more research on the product, hopefully more purchases and those triggers factor directly into the organic ranking algorithm. We see this. We've had big ad budget increases. We've had at times clients cut off advertising, usually against our recommendation and you see almost immediate, huge changes in organic rank.

John: If you're not advertising, you'll probably never have the organic rank, and you certainly won't then have the paid rank, so yeah, it's part of the deal really.

Paul: Since we're talking about Amazon and direct to consumer, it feels like one of the other huge benefits of advertising is the data you get, where you get to see the ASINs or the search terms, and you could probably take that back to your own off Amazon advertising efforts as well.

John: Yeah. There's a lot to learn from participating in Amazon advertising and just the Amazon platform overall. You're getting reviews, customer feedback, et cetera. There's other data points to look at, but yeah, on search side, it's all keyword driven. Those learning's from, especially from a keyword perspective can be extremely valuable in using those back in your D2C strategy. The inverse is true as well. We definitely, if we were just getting started on Amazon and someone had at scale Google AdWords, other keyword research they were doing in another channel, we would definitely take that.

John: It's not one-to-one applicable. Amazon has nuanced differences, people search in different ways for different reasons, but it's a good starting point for sure.

Paul: Great. We have a lot of great questions coming in. We'll try to get to all of those. Before answering more questions, John, I wanted to talk about promotions. It's one of the things that retailers focus on, but how do you coordinate between Amazon and your website when you're running promotions, and also you don't want to get in trouble, how do you make sure you don't do that?

John: Yeah. My general recommendation on this is, you should sync up promotional activity. If you're doing 20% off for three days on your website, you should offer that on Amazon. There's a couple reasons for that. One, I think it's just a better customer experience. Two, Amazon ... This is tricky because it's not a black and white thing, but Amazon doesn't like a situation where a brand is selling a product at a price point that Amazon does not feel is competitive. Now, if you're at 39.99 and you do five bucks off on your website for a day, Amazon's probably not going to catch that.

John: But if that becomes more chronic issue and remember, this is just all, this isn't like a person's looking at this, it's all just technology, Amazon scraping it. If that becomes a chronic issue, it can result in suspension of the product or even of your account on the platform, because basically you're violating Amazon's terms. One of the terms is you're going to offer competitive pricing. Now that doesn't mean you have to price under. You don't have to set a retail lower than you otherwise would. Amazon's expectation is basically that they just have what they consider to be a fair retail on the product, which is basically in line with the rest of the marketplace.

John: Both from a customer experience as well as just not getting penalized by Amazon perspective, my recommendation is you sync up promotions. Specific to the channel to Amazon, promotions can be very effective. Our recommendation is always to sync up any promotional activity with an advertising strategy. Basically the majority of the traffic driving is going to be done through advertising, and then the promotion itself creates an additional call to action, which increases conversion rate.

Paul: John, I've never thought about that or looked into it, do you know if there are connectors or software that connects from the most popular, like Shopify or big commerce type stores that would mirror your promotion over to Amazon, to your Amazon store?

John: There's nothing automated because to set up promotions is still a manual process. There's no like API that you can send promotions to Amazon. You could change pricing with an API, but that's different than a promotion, because you can always lower your price, but then the customer doesn't really even know that the product's on promotion, they just see a lower price, which of course maybe there's price elasticity, but when you do a promotion you want it to say deal, coupon. You want that to be obvious to the customer, that they're getting an additional discount for a short period of time.

John: That creates that kind of you know, scarcity mindset to make the purchase right then and there.

Paul: Right. Since we're talking about pricing, we did get another question from Stacy. She says, "What if you are a vendor who doesn't control Amazon pricing, then you can't sync your own website sales with Amazon's price since they're constantly changing it without notifying you?"

John: Correct, yeah. This is probably a macro point I should clarify here. Most of my comments here have been from the perspective of you would be a seller. My approach here was, well, if you're direct to consumer, you're probably going to be setting yourself up as a seller, not a vendor. If you're a vendor, which totally fine we have lots of clients that are vendors. It can be sometimes a better approach to the platform, all things considered, but if you are a vendor, it definitely makes this conversation more complicated. She's right. Vendors do not have control over their retail pricing.

John: Again, my general recommendation would be to try to sync up. If you're doing deals, try to sync up that deal across channels, across other retailers, across your own website. Now that can be tricky if your website's at 39 and Amazon's at 34, because they're matching Wal-Mart who's also at 34 and then you're offering 20% off, but that percentage is different on Amazon versus your website. It gets complicated and I understand that. I would say, on the vendor side, Amazon's going to price match deals, so there's two ways to approach this. You can either run the deal on your own website or another retailer and then just wait for Amazon to price match it and they will.

John: They're just taking the hit out of their own margin, which is good for you in the sense that you don't have to reduce the price and pay for it. The issue with that, and this is a bigger discussion, but that's going to reduce your net PPM, your vendor level profitability at Amazon, and that could circle back to cause other negative outcomes. A lot of it is balancing different outcomes and incentives. There's no right answer to that question. It's just going to depend on a number of different factors.

Paul: Got you. Now, back to advertising, we've danced around this a little bit, and this is two part question because we had something from the audience come in, but what I wanted to ask and I wanted to get your input on was, what are the ways in which Amazon advertising can actually bolster that direct to consumer sales channel or website? Warren commented, or he asked a question just a few minutes ago, he said, "If I'm advertising outside of Amazon, such as in social media or AdWords, should I send people to Amazon to help improve the ranking or to my own website to build customer relationships? I know that's a lot ... two kind of different questions but very related.

John: Yeah, no, that's fine. I'll tackle them one at a time. You can use Amazon DSP, which is Amazon's display advertising option to use Amazon customer data and drive that traffic to a direct to consumer site. Just like you would any other DSP, you can serve ads across Amazon, across other web properties, across hundreds of thousands of sites across the internet. The differentiating factor here is, you can use Amazon's first party data, so you can get very, very sophisticated in terms of targeting, and then you can drive that traffic to a direct to consumer site.

John: What you can't do is, you can't attempt to siphon Amazon customers from the platform to send them off site using DSP. I know like, what I said is like, "Wait, aren't you just directly contradicting yourself?" There's a nuance way to approach this, where you can take higher funnel traffic and targeting, and then drive direct to consumer traffic with Amazon. You just have to be careful that you're not taking a strategic approach that Amazon would see as basically poaching their customers. Yes, you can do that and it can be very effective. The second part of the question, where should you drive traffic?

John: Honestly, there's no right answer to this. It depends on; it just depends on the overall strategy. Obviously driving traffic to a direct to consumer site makes a lot of sense for obvious reasons. Driving traffic from off Amazon to the platform can also make a lot of sense, can absolutely help. If you were just looking at converting a sale, the obvious answer would be direct to consumer, because you're going to make a higher margin. But with Amazon, there's a flywheel effect.

John: Unlike a direct to consumer site, Amazon has real deliberate programmed in widgets, the way they do measuring and the relevancy ranking, the way they determine what products to rank when is a flywheel effect. One of the biggest elements that Amazon looks at in the flywheel is, how many customers are looking at a product, how many customers are going to a product page? Amazon ranks offsite traffic very highly, because it not only improves the fact that people are looking at that product, it's bringing people in the door to the site overall.

John: It can be off, Amazon traffic drivers can be very effective in an overall build your Amazon business, spin the flywheel faster strategy. Again, it's just going to come down to what's best and what budget. What I would say is do both and then beta test it. Do both, compare them, what's the impact on Amazon? What's the impact on D2C? What's the margin difference look like? Then make a strategic decision from there.

Paul: We've seen examples too, where if you run out of inventory yourself, maybe you are sending out emails or advertising off Amazon to get people to that Amazon listing, because there's a short timeframe before a holiday or something like that and you want to get rid of that inventory, and that's the only way you can do it.

John: Sure. Yeah.

Paul: All right. We've got a few minutes left and one question I definitely wanted to get to was, do brands typically have their own team operate their Amazon business strategy, and should they do that? Or what should they do? What's the easiest way for a brand to make sure that they're in sync with promotions and advertising everything else?

John: Here's what you have to do. You have to have an Amazon specialists and you have to have specialized technology for Amazon working in tandem with one another. You can do that internally, or you can do that with an agency. Not doing that at all would not be my recommendation. Having the person that knows some stuff about marketing and maybe does Google AdWords go figure out Amazon, five years ago you could do that and be okay. You could sort it out. You could grind through it and figure it out. Amazon is a lot more sophisticated. It's a lot more technical than it used to be.

John: It's very, very specific. At a high level, we can make these big comparisons, "D2C is this and Amazon system, that's fine." But once you get into the weeds of it, it is a technical practice. As just a sort of maybe a ... We used to hire a lot of generalists and train them up and that was okay in our agency. Today, we're hiring people that have years of experience working in this platform, because there's no way to shortcut it. I would say that to do things right, you really need a focused team and then the technology side as well. Also the last thing is like competitors are getting a lot more sophisticated.

John: The platform is far more competitive and those competitors are far more sophisticated than they used to be as well. You have big private equity groups, venture capital putting tons of money into technology and brand new incubators and all kinds of different structures around this. Yeah, my recommendation is, it's okay to test things and try things and nothing wrong with that. But if you're really going to take a serious shot at a business on the platform or scaling a business, you've got to have pros and there's different ways of doing it. Agency's one of them, in-house teams one of them.

John: Both which is frankly is what a lot of our clients do is they have in-house experts, and then they also use us and we work together. That can be a very effective strategy as well.

Paul: Makes sense. I have several friends and past colleagues who've had a direct to consumer business and they want it to get on Amazon, and they would ask me because I'm in the industry and I had to tell them, "It's not that complicated," but for them, it just is because they go on there and they're immediately lost. It's just different from anything they've done before, and they think, I can just take everything I have and match it over, but you can't. Not even your product titles, they need to be totally different. Your bullet points that you might not even have on your website, you have to have those on Amazon.

John: Yeah.

Paul: Of course, everything else you mentioned, there are a lot of moving parts. Related to that question, Kathy posted, she said, "How can a micro-business afford an agency?"

John: You may be surprised at our rates. We've tried to come up with services for smaller businesses and businesses that are just starting, that we think we can add value in a price competitive way. That's my perspective. Obviously, it's biased. But I think we offer quite a bit of value for rates that may not like, maybe lower than people think to get started.

Paul: John, is it also, how can you afford not to have an agency?

John: Yeah. That's the thing. I'm trying not to turn this into a sales pitch. I think that the problem that brands run into when starting on Amazon, is even if you want to hire somebody, it's going to be pretty spendy. Then you also have to figure out the technology side. That's why I think an agency may be actually a better place to start. But if neither of those are in the budget, then I think what you have to do is basically just go in and start experimenting with stuff. My recommendation is don't put a ton of money on the line without someone to ... or resources without an expert in your corner.

John: The good thing about Amazon is its fairly low risk. If you're just going to start, upload a few items and see how it goes and upload some content, it's fairly low risk. Don't get your account suspended. That's the biggest thing I would ... that's the one kind of risk you don't want to do that because then you're really digging yourself out of a hole if you ever want to take more seriously. But it's fine to experiment as long as the customer isn't having a bad experience, they're getting what you told them they'd get when you told them they'd get it. Then you're pretty much okay to try stuff. But yeah, that's probably the best answer I can give.

Paul: Makes sense. Makes sense. Well, we're wrapping up now. I wanted to thank John, thank you again for coming on and sharing your expertise. I see that all our attendees are still on, so we didn't lose anybody along the way. That's always something that makes my day, and this is an important topic. Almost everyone, like I said at the beginning has a little bit of both and knowing how to navigate this is certainly important. We can keep fielding questions all day, but thank you again to the audience for the questions you sent in. John, thank you and thank you to our teams. Are there any last words you want to say, John?

John: Yeah. Thanks Paul for having me. Thanks everyone for listening. If anyone wants to learn more about what we do, you can go to our website, orcapac, O-R-C-A-P-A-C dot com. We also put out just a lot of content. LinkedIn is a good place to find us and keep track of what we're doing. Our website, of course and then we also have a podcast called eCommerce Deep Dive. Check that out. I think there's a lot to learn. It's an ongoing process, but yeah, this was fun.