EP120 - Negotiating with Amazon with Andrea Leigh
Andrea Leigh is the Vice President of Client Services at Ideoclick, Inc., an Amazon managed services agency. Andrea enjoyed a 10 year career at Amazon where she served in a number of Buying and Category Leadership roles.
We caught up with Andrea at the PathtoPurchase Summit, where she gave a key-note on selling on Amazon. We covered a variety of topics including:
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Episode 120 of the Jason & Scot show was recorded on Monday, March 12, 2018.
Join your hosts Jason "Retailgeek" Goldberg, SVP Commerce & Content at SapientRazorfish, and Scot Wingo, Founder and Executive Chairman of Channel Advisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
New beta feature, Google Transcription:
Jason: [0:25] Welcome to the Jason and Scott show this is episode 120 being recorded on Monday March 12th 2018 I'm your host Jason retailgeek Goldberg and as usual I'm here cuz Scot Wingo.
Scot: [0:39] Hey Jason and welcome back Jason Scott show listeners this is continuous are segments here Live From the Path to purchase Summit where we have some beautiful background music from Grouplove one of my favorite bands.
Jason: [0:52] Great now I have to pay a royalty.
Scot: [0:53] Is there a Panda sounds like. And anyway so we're really excited to have back on the show one of our most popular guest Andrea life Welcome Back.
Andrea: [1:07] Thanks for having me glad to be here.
Scot: [1:09] It is a quick reminder to fix your ex Amazonian and you are an expert on negotiating with Amazon cuz you were on the other side of the table I'm so this is why it's always such a Hot Topic you know what all the secrets car cards are the Amazon has.
Andrea: [1:23] Exactly or at least some of them.
Jason: [1:26] Does that mean they don't like you.
Andrea: [1:27] Well I mean I like to think that we help clients find a win-win I mean that's the goal right it's defined areas where the brands can Excel and Amazon can continue growing the business.
Scot: [1:39] It's been about a year since you're on the show so give us an update on what's new with you career-wise.
Andrea: [1:43] Wow it was that long ago it feels like it was yesterday well.
Scot: [1:47] Yeah these podcast it's like dog your stress me.
Andrea: [1:51] So I think when we last met I was working with Melissa and Lambert Eric and Andre Kaylee Consulting. Working with brands on their Amazon strategy in September actually joined up with my husband that I do click and I'm the vice president of Client Services there. And I do click is a managed services provider so we offer software data analytics reporting Consulting and advisory Services item data management marketing AMS management. And I have been there for about 6 months now and we work with clients across all categories but tend to be a little more focused in the cpg space so Grocery and health and personal care.
Scot: [2:31] How's it work with your husband.
Andrea: [2:32] It's so much fun we went to grad school together and have sort of had been in the same space for a long time so it's actually like one of the best things about.
Scot: [2:40] Does he ever do that joke raise like talk about sleeping with his coworker it's classical today's world is great.
Andrea: [2:43] You know he does he really enjoys finding inappropriate jokes and he hasn't thought of.
Scot: [2:50] I need to I've got like yeah okay.
Jason: [2:52] Why I'm presuming the regular Wisner so now he has.
Scot: [2:54] Yeah actually it just that one of our interns just ran up and told me that you were last on the show May 11th last year so it has been about a year.
Andrea: [3:01] Wow well thanks for having me.
Jason: [3:05] Thanks for being here. You mentioned cpgm grocery in a feels like groceries one of those areas where there's been a lot of progress in the last year and the groceries are thinking a lot more digitally.
[3:19] Obviously the Whole Foods announcement amongst others have you seen the grocery space what's going on in grocery.
Andrea: [3:25] I think the biggest thing we're seeing is that you know where a few years ago Amazon in particular and the lot of e-commerce players were really just trying to grab customers and growth and sell a lot of grocery products. The focus is really shifted to more about being profitable profitable and sustainable growth which means that for a lot of our clients in a lot of Brands out there. Selling on Amazon has become really difficult because there are a lot of product categories that just aren't super sustainable online you know given delivery economics. So we're starting to see a lot of Science and and then seeing folks in the space really starts in Sebastian capabilities Direction, to Consumer on their own using 3pl focusing on. And so I mean I just seen kind of the most I think the pace of innovation is really set up the last couple of years. As Amazon in other e-commerce players start to push some of those profit concerns back on the brands.
Jason: [4:24] Yeah I think I've seen all that as well and I keep beating this drum that everyone seems to think I'm wrong on so I'm going to.
Andrea: [4:33] Try me out.
Jason: [4:35] Amazon can't be hugely successful in grocery but because of the delivery economics I actually think that the dominant model for digital grocery is actually grocery pickup.
Andrea: [4:46] Totally totally agree with you you know I think is going to be is huge. And for a lot of these brands that I think God on the Amazon bandwagon early you know I hope they haven't abandoned some of their wine Amanda live in Bandon but I hope they haven't deprioritized some of their initiatives, with brick-and-mortar because the brick-and-mortar space is heating up around click-and-collect and grocery pick-up and so you know I think that I totally agree with you I do think that sustainable model for e-commerce is something that looks more like Amazon's Pantry model, where you try to get the average ring up. And you're able to spread those delivery and shipping economics across the larger number of items and send it kind of the slowest ship method, not only does it help with the delivery economics but it helps with forecasting when you have more time to be sort of more of a just-in-time inventory model.
Jason: [5:38] Yeah yeah and speaking of pantry did you see the news that they've decided we change that model of this month so. Country used to be a paper drink thing so. 599 per box and then you you put as much stuff as you can in the box so they're doing away with the 599 ft and it's now in new service you have to subscribe to for five bucks a month and then you can use Pantry as much as.
Andrea: [6:03] That makes sense.
Jason: [6:04] Yeah into the theory is as as opposed to having that big friction of taking $6 out of your wallet every time you want to use it that it just gets tacked onto your your Prime membership and you stop thinking about.
[6:18] Casper drinking you're more likely to use it more often.
Andrea: [6:21] Yeah I mean I think that makes sense Amazon has had like wild success with all of the subscription models you know for fresh and for. Obviously Prime and you know there if they have all these Prime add-ons now across their portfolio so it does really increase the stickiness I think we've all seen the metrics around Prime and how much stickier, those customers are, but I think that's really interesting and I do believe that in the next couple of years we're going to see a really big shift at Amazon from you know the traditional amazon.com grocery category over to Pantry more push to Whole Foods more precious to pick up. To help really help the profitability it's a sizable enough category at Amazon now that it's extraordinarily painful for them. You know to be to be unprofitable on.
Jason: [7:06] I wanted to make changes this month is Dave there they're not doing a bunch of pilot cities where they're delivering literally from the Whole Foods until there's even was a funny article about like the instacart guys getting like. Moved out of their office into the hallway to make room for the Amazon employee setting up setting up shop to do delivery they haven't announced it yet but I think it's it's inevitable. The dab. Logistics infrastructure get used for pick up as well and then ultimately a bunch of Whole Foods end up being pick up Depot Amazon Fresh pick up locations.
Andrea: [7:39] Yeah I spent a number of years working in the grocery category at Amazon and also working on Amazon Fresh and delivery economics for fresh food are really really challenging. You know density of supercritical you know being able to hit multiple orders in an hour. It's a really it's an extraordinary Lee challenging business and so I think you know it makes sense to focus on a limited sort of version of that I maybe there's an opportunity for Amazon to get scale and then as they are able to grow that they can kind of. Encourage customers to do more pick up.
Scot: [8:14] We surprised by the Whole Foods acquisition.
Andrea: [8:16] I was actually you know a lot of people ask me about. About it and if I'd heard any Rumblings and no like it was completely silent and and I was really surprised although it makes sense right I mean. That's if you in order to really be I remember Jeff or maybe it was. Jeff Bezos Demetrius Jeff will he saying something in the earlier days about if we really want to be like a true, you know everything store we absolutely have to have strong penetration in grocery and in fashion does R22 normous Industries groceries like the biggest industry so. They've really got to figure out how to get that right and I think they were I mean frankly based on sort of the. At the public sees like all of the projects that are launched in our successful in a scale but there's so many Pilots that happened in Seattle that, where is interesting to everyone and if you look at all the fits and starts of this thing over the years it doesn't surprise me that they went and purchased someone who is doing really well.
Scot: [9:17] Then you think so I can sleep at the store footprint one of the things I was surprised how quickly they worked on was getting the private label that was called whole 365 getting that into the other platforms very quickly that seems like almost. Day one that that got you know I saw it in my Prime now and it was featured and then obviously they done a lot in the stores with the lockers and selling Echoes everything.
Andrea: [9:38] I mean I'm sure that was one of the I think that was one of the probably if you were list out like 5 or 10 main reasons Amazon bought them access to their private label is a huge one, you know they really dislike private label its assortment they can't usually have on their site, they can use sometimes get it through resellers near we were able to get some of the Costco stuff through resellers on the third-party platform bed.
Scot: [9:59] Amazon is the largest seller of Kirkland.
Andrea: [10:02] Now there.
Scot: [10:05] Costco doesn't sell it.
[10:08] It's a little bar but they they jump over it seems like as they integrate Whole Foods lb you know it seems Amazon's very efficient. Right now there's finally a different buyers and things do you think they'll consolidate that what are you hear anything about that.
Andrea: [10:23] You know I think it'll be interesting to see what they do with the went looking back at some prior Acquisitions like diapers and Zappos they were really slow to integrate some of those teams, you know what I think I think they're probably a lot of reasons for that I expect this will happen quicker mainly because it's a category they have got to get, you know they've got to get more profitable on. So focusing on those classes and getting transparency there quickly is going to be important I just said something this morning about how. They've reached out to some Brands and I've invited them to some kind of like Summit or meeting next week. Whole Foods has to talk about I think it was to address some of the concerns that have been popping up in the vendor Community probably specifically around cost. But the article is also speculating that. Amazon was going to try to do away with traditional grocery Brokers which I think is a really that's really interesting and potentially like try to recoup some of those that funding for themselves. Desert of cutting out the middle intermediary.
Scot: [11:25] Give me the NADA grocery what's the for dummies on grocery brokers.
Andrea: [11:29] So it's a lot of Brands work with traditional brick-and-mortar through what are called Brokers so third parties in negotiating, negotiating for Shell space the brands are often like really involved in that process but the broker actually. Stop managers that relationship and for Amazon they work within. You know worked with more grocers in the earlier more brokers in the earlier days but have had really tried to kind of do away with a lot of that, I mean in some ways you could look at it as an aunt pretty Antiquated model like brands are pretty sufficient self-sufficient in their ability to negotiate now and you know and negotiate for shelf space and figure out how to navigate, a brick-and-mortar store it's not like a novelty anymore they know how to get into Costco so. I think that's a model that's kind of ripe for disruption anyway it'll be interesting to see if this encourages it more quickly across the other brick-and-mortar channel.
Jason: [12:25] What one.
[12:28] I've been trying to figure out we have this overlaps but like so if your craft you know how to sell to grocery stores and you have all those infrastructures and you you probably are already aren't using a broker or you're not getting on a value for the broke his heart. Carried a lot of much smaller nascent Brands often at the local level right and so you can imagine your Amy's Bakery. When you make baked goods in your kitchen and you're selling on through just the Austin Whole Foods a broker could be helpful in an opening that relationship because you don't know the kind of perms you should be doing all those hearts.
Andrea: [13:02] Bright.
Jason: [13:04] So part of me goes oh that's where they're taking the broker out but I actually think Amazon has already taken a lot of that local buying Authority away from the Whole Food store.
Andrea: [13:13] Yeah I mean I think it's a model of those sort of deteriorating anyway and then I mean there's so there's Brokers which sort of like managed the deal but then there's also Distributors which actually procurar the product and then resell it. And that's another Avenue that a lot of those smaller Brands used to kind of get into some of the channels where they couldn't it was in make sense for them. Feels team setup for all of those different channels and so working through like a distributor broker. But you know it's more cost but and it's more profit that can be had by Amazon so I can see why they would want to get rid of that third party.
Scot: [13:48] Go to this is Switching gears out of grocery this is the time of year when vendors get their their kind of notice from Amazon that it's time to negotiate which seems like it's probably a. Not exciting notice to get so imagine you get you get a lot of calls on this kind of time and you're giving a talk here today on this and you talk about it on the last show. What to do in in the world of negotiating with Amazon.
Andrea: [14:13] Yeah I don't know if it's really new but growing is the concept will obviously always more automation every year there's more automation more and more of our clients even some of the larger ones now or getting through these automated email ask. So more busherts Automation and then the other more recent it all in his hands always had for some categories sort of. Professional negotiating teams and that's that. Arm of Amazon is growing so we have more more clients who are being asked to negotiate with like essentially it's a third party with an Amazon so not the retail buyer. They've traditionally worked with but instead like a professional negotiator which I think is interesting for Brands and some ways they lose.
Scot: [14:56] Is it William Shatner.
Andrea: [15:00] I think it's really interesting for Brands because in some ways it's a complete disadvantage for them cuz they're dealing with someone who like. Highly skilled highly skilled negotiator but in other ways it's to their advantage because they possess a lot more category knowledge than The Negotiator does and so. Thanks figuring out how to work with that team as that team grows and starts interacting with more Brands is going to be critical.
Jason: [15:28] It's I don't know this is a fair amount or not but I in my mind I imagine it's a little like the. The car dealership model where essentially the they they make you negotiate with the individual sales person who very intentionally doesn't have any Authority artonomy inside there intentionally.
[15:46] Aggregating you disarm mediating you from the decision maker who's the the the dealership manager in in the same way.
[15:56] Professional negotiators are just intermediating the brand from the the merch.
Andrea: [16:00] I would imagine that the unprofessional negotiators at least what I know of them from our clients have a very very narrow window of what they can actually approve. And you know agree to and then everything after that Pastor go is probably escalated like is far as we know the category leader is still the ultimate decision-maker so it's important to make sure like your social your large man you got access to that person, but smaller brands that we work with are typically doing a hundred percent of the negotiation over email.
Scot: [16:31] How does this go so your Brand X on the go she ate or I start off and I say Brand X you've been a great partner of the Amazons we love you you're awesome we need you to come down 20% does that sound like how it starts just.
Andrea: [16:43] Yeah you'll get an algorithm to the brands are given algorithmically Drive-In email that is looking at basically a day to file and saying in order for us to. Be profit positive on frayed for example we need extra sent and Afraid allowance and sometimes the figures I don't make sense to our clients of gotten messages like asking for you know 15 and 20% rate allowances which is not tenable obviously. So it's it it's an algorithmic Lee Drive in email me look like it's coming from your buyer it's probably not. Probably coming from a machine or up and it's in there some machine learning in it so if you're if you send back some responses we kind of had tested and learned on this with some of our clients you know some some responses generated, some responses back in some responses get kicked out into an exception and then typically at that point especially if you're small brand your Kik to an offshore team. But all that will conclude the negotiation.
Scot: [17:35] What's the best way to like mess with a I would have your like that's too we would like to offer a bigger discount or can you just like start cussing at it.
Andrea: [17:43] So we have found that for some of the critical negotiation components like Freight and marketing accruals continuing to just say no over and over again may result in the brand. Amazon not ordering from the brand anymore so we've seen a couple instances of that happening where the brand took a pretty from line there were like no and then the person wrote back you know it's the auto thing it's like. That is not an acceptable. Like term for us and then no and then that's not expensive and then there was a threat so read the email carefully if there's a threat in there that Amazon will stop ordering it's important to dress like an CERN. The address be asked but you certainly don't have to give Amazon everything they're asking. You don't have to agree to like that exact term you can agree to something more than what you're doing and typically make it through the process.
Scot: [18:29] Does it start like real macro like we want 12% and then is it a good strategy to kind of start to just try to get it to be more like at least category askew or down the street level cuz it seems like on the other side you have all these different.
Andrea: [18:40] Yeah and we'll talk about this today see you but I think the two things that I would really keep in mind when negotiating with Amazon are. First of all focus on win-win so you want to see if you have to give Amazon more money you want to figure out how to do it in a way that grows the business not in a way that just helps their bottom line so an example of that might be, you know coming forward with investment in a program. If crosstalk is great for you cuz it saves you money should be in if you were for some in centers it might make sense to invest in that program with Amazon because it also helps their economic so it's like a win-win or. Bringing forward a plan for an increase in marketing spending specifically Roi driven marketing like I am a story. You know helps you grow your business also helps Amazon's bottom line by giving more for things like marketing accruals or giving Amazon money for you know merchandising placements on the site that are sort of ended us. Isn't always necessarily a win-win so making sure to choose those battles really carefully and she's those spot. And then I think the other thing I would keep in mind is you know you don't you don't have to give them everything that they're asking for and if they're asking for increases in terms like free or damaged allowances ask for the supporting data that shows why the costume. Right you might not get it but at least it shows that you're your auditing and you're and you and you may be able to drive as a stalemate through that. By saying oh you want an increase in the damage Lance tell me what about my products or what specific products are showing higher damage so I can actually go fix the problem.
[20:16] Instead of just giving you a higher approval for that.
Scot: [20:19] Is this one Amazon will ask for different packaging or you know just like frustration-free or or or like do a bundle of 2 or any.
Andrea: [20:29] This is something that is very frustrating to me in earlier years Amazon would certainly do that and as as when I started in 05 as a senior buyer that was certainly a part of the annual negotiation you would say, these items are profitable let's talk about how we can make a more profitable can we get this to a cheap Pack and change the packet me we would it would be more of a. A coaching exercise but now it's just so much easier for Amazon to ask the brands for money and especially when the negotiation is either automated or handled by a third party there's no vested interest in. And no knowledge really like expertise to help a brandy that so we have more and more clients that we work with it we're doing that with. Playing that role that the buyer used to play in helping them figure some of that out.
Scot: [21:12] Doesn't Amazon use so you should be you have your Warehouse pricing and I was over here kind of separate and then I know. This may not be part of negotiation but no Amazon's now looking at that kind of thing while you're selling it on in Costco at you're the equivalent of this many dollars per ounce we want you can either bring that to you over here. Or the turn ski we have we would like to see it at the same dollars per ounce is that is that these negotiations or that's more of just price parody.
Andrea: [21:38] Yeah I mean if you're that kind of comes up in like a crap situation or Amazon stream free can't realize any profit where they say William Walmart selling it for this price how are they that look that's below our cost so how are they doing that and I would advise Brands whatever you do do not share, your cost that you have with other retailers with Amazon I mean that's like a big that's a big No-No because you can't ever roll that back right. Amazon's aware of your cost structure to other brands it also makes it so that you can't throw to move the beans around when you need to it's just a level of transparency you don't ever want to go.
Jason: [22:13] And I think I mean Scott might be willing to there's like a specific version of the dynamic pricing the brands are really afraid of you know you sell a can of Campbell's soup on on Amazon it's a 12 oz cans to the price per ounce is whatever.
Andrea: [22:26] Yes right so.
Jason: [22:27] Salad case pack to Costco.
Andrea: [22:30] Amazon is getting so much smarter about that I mean it used to be when we watch I went through many Revolutions of Brands divots doesn't like spending a lot of R&D on designing different pack sizes I think the K-Cup Industries a great example of this, where they you know sold at this packsize to Costco in this tax ID Amazon this one to Target and they will never know that it's like all the wrong the same different prices. They will price match each other but Amazon figured that out real quick and started matching perk up and then they started matching per diaper per White. Per ounce a lot of categories have the / something rolled out by now and if they don't have it. You know they will so trying to circumvent price-matching through different pack sizes may buy us some time. But it isn't a long-term solution.
Jason: [23:19] You mentioned a couple of terms when we were just talking about the certain negotiating strategies like Freight allowance for example it feels like there's a hole. Different vernacular at Amazon and I know they they said these are. Metrics and they really Drive everything to those metrics can you kind of educated so like what are the high-level Brands need to learn about to work.
Andrea: [23:44] Well I think he's kind of two questions like what are the terms you're going to negotiate about and then what are the kpi is to manage your business but the terms are and actually don't I mean I don't know if these are really different from other retailers that don't have knowledge about, you know about brick-and-mortar as much but you know they're typically looking at some kind of marketing. Come up is a high-level term that refers to any money you give Amazon so often Play Straight payments accruals whatever it is all Co-op. I'm better at least that's how Amazon Defiance Co-op it's typically a marketing accrual. Or some kind of basic rule for base allowance there's a damaged allowance and Afraid allowance if Amazon is paying the freight sometimes the client for the vendors paying the freight.
Scot: [24:26] These are all expressed as some so if I'm spending.
Andrea: [24:29] They're all rappers.
Scot: [24:30] Amazon to buy a million and I'm going to do co-op dollars at 10% is 300000 in addition to that and these are all that's kind of how they're all measured.
Andrea: [24:38] All percentage of cost of goods sold all off invoice and then there are definitely get subscribe and save allowance depending on the category you're in there may be a mark. There could be like volume incentive rebate. There might be like straight payments you agreed to you throughout the year you might be paying for your talking about your SVS of your strategic vendor services. Representative during this time of year that's like a headcount you can buy at Amazon that just works on your brand. So all of these things going to come together to be the annual terms negotiations and son is when the automated tasks include everything that you're actually doing with Amazon so it's important to use a Tracker like Bill. So that you got it all up you.
Scot: [25:25] You have a free one that I've heard you.
Andrea: [25:26] I do yeah it's on my website yeah it's on my website Andre Kaylee consulting.com will be adding it to be I do click sites soon too but it just allows you to swear to fill in. Your sales and the last year's turns this year's terms and then it auto calculates all the actual dollars spent printed look at the actual dollars, it's one thing to know that you're giving Amazon a point more this year and it's another thing to actually understand based on your gross right how many more dollars are actually giving Amazon anyway. Because a lot of brands are going really quickly on Amazon and they're doubling their spend with Amazon without actually even changing their coop.
Jason: [26:03] And then you mentioned so those are some of the terms you mention like their specific API.
Andrea: [26:07] Yeah so some of the key so it's important to speak Amazon when working with them especially if you're sort of pushed one of these automated channels.
Jason: [26:15] Side note I was thinking the way to work around that way I haven't tried this myself so you're on your own but is only negotiate in a language that their natural language processor doesn't understand something like Klingon or Jeff Bezos it probably doesn't.
[26:30] So I might be Swahili.
Andrea: [26:32] About you know if I can get if I can get a willing client with a sense of humor that might be somebody that might be something to try. But there are a set of Casey eyes that are important for understanding and running your business on Amazon if you can get a good command of them and understand them and have some benchmarking available to you, you can run a really successful business on Amazon without ever interacting with a human but it's important to know the kti's sales sales growth obviously, it's really important to look at a lot of clients who work with even big ones tend to look almost exclusively at, orders Amazon places from the brand you really need to be looking at point-of-sale data that is the true indicator of Simeon, that helps you understand how effective your marketing and promotional activities are so that POS state is really critical so shift cogs. Gross gross and units gross revenue again really surprised how a lot of clients will only look at Revenue which you lose a lot of the transactional nature of the Metra. Understanding like how customers are transaction with your units looking at the in stock and inventory rates I think. Time and time again we work with clients where they're like why is my business not growing very fast Amazon you luck in the products are good and they are, getting pretty good search ranking but they're only the brand is only feeling like half of the purchase orders like they're not willing to come and see you, you have to have product in order to sell it so keeping track of some of those metrics getting your handle on your own metrics around this is important Amazon reports on a metric in Vendor Central called Fast Track in stock.
[28:02] Its sales waited and glance product may be going to eat there but it's Lance he waited you should just really know of all your items available how many. Haven't been trying have any doubt it's a much simpler metric it gives you a much bigger picture and more complete picture.
Scot: [28:17] So the sales rate is it is it does some indexing to get tire sales rank items and how fast are field.
Andrea: [28:22] You get a bigger good guy if you're in stock on the top seller and you don't get a bad guy at all if you're out of stuff done something that is like a really low seller.
Scot: [28:30] When does so when they come in sizes brands are frustrated Amazon's not buying their buying less and less of their swetman when does that come up in this negotiation or it sounds like it really doesn't sounds like the buyers know if I was going to buy these are the terms.
Andrea: [28:45] If you're in a position where you're negotiating with a machine you've got to find another way to sell this product on Amazon through third-party so so it'll be really hard for you to get like. Automated system or the team in Indiana to like respond to a request like that but if you are in a position where you got a live person you certainly should bring that into the negotiation. Why aren't you buying all my products I'll give you this Co-op if you commit sore during my whole assortment and you know a lot of times you can talk to them about how. That is certainly may not be performing very well because it hasn't been in stock it performs very well at other retailers like giving all of that data and information and can help Amazon make decision.
Scot: [29:23] But not your custody with other retailers.
Andrea: [29:25] But I think everyone knows that but that is important to mention I was surprised when I was a buyer how many Brands would be transparent about that.
Scot: [29:34] I've never been offender son learning a ton.
Jason: [29:38] You're lucky man last time you went to show we talked a little bit and you wouldn't do it earlier they have this. Unhappy status can't realize a profit.
[29:51] AKA crap which great great back back story and all that about how that all came into being. Scot mention vendors that are frustrated that they won't carry the whole line my perception is almost always that at the beginning of the relationship and tell me if I have this wrong. They actually do carry the whole line and then products get crapped out and they start curating what they carry it is that largely true or or is it the case that they might only.
Andrea: [30:21] So yeah usually am is it is depends generally speaking Amazon Lori thinks that customers look at so customers don't look at it they probably won't order it. But if you if you just cover your whole assortment isn't available on Amazon there could be a myriad of reasons why that is it could go back to like item setup issues maybe Amazon tried to order from you and you didn't fill it. You know maybe it's just not getting enough product gland to use. Or maybe it's crap and we seen a lot of movement and interesting developments in Amazon's crap program over the last year. The biggest one being that now they're showing the crap out products that are just little margin not negative margin used to be the zero was the floor. Now if they're not hitting some Morgan emergent targets are requirements for the category they're essentially not ordering those products from. Client there from the brands anymore or crapping the products out. And I think that's a new development another new development is Amazon's kind of shifted the conversation from profitability to Pure product margin their PPM. And I think the reason they're doing that is when they start crapping out products and communicating what products does our it allows clients and Brands and their parties to reconstruct Amazon's cost structure. And so focusing on here product margin which is just the different at Pier product margin which is the difference between the cost of the product Celeste any marketing accruals or any Co-op. And the retail selling price really helps them focus on products where they're having to do a lot of price matching and where they want the brand to take some ownership over that issue.
[31:55] Which might mean you know going to your other Retail Partners and saying stop selling at these price I mean that's what they want you to do right by you to go back to Walmart and say stop selling online at this price. Which actually some of our clients who died and it has her mixed results with that which is been interesting.
Scot: [32:12] Meaning Walmart said no and then there are stuck between a rock and a hard place.
Andrea: [32:16] The biggest thing for noticing is that why maricon in Walmart stores have different prices and it's lower online cuz they're trying to drive Amazon low and then get them to Walmart online. Walmart.com in brick and mortar from what we learn from our clients are like completely separate entities so if you go back to the econ team and you say and in typical answering very little business on an walmart.com so we had a few clients go back to Walmart and say. Don't sell it at this price anymore or I will stop shipping it to you and Walmart income. Raise the price so it actually has been effective for a few client that hasn't been effective for everyone but for a few of the players that we've worked with they had sex.
Scot: [32:56] I think they're trying to normalize that have one buyer for both but.
Andrea: [33:00] Right now there's still a gap you take advantage of it.
Jason: [33:02] Yeah and I would imagine there's some flexibility about what you sell to them for online if it when it comes down to having to go to Walmart and raise the price in store I suspect that's not going to go well.
Andrea: [33:15] Oh absolutely and I don't I mean clients wouldn't really it wouldn't be in their best interest to do that they're doing so much volume there, but only time it's a different story we've also heard he, walmart.com will take whatever product I can get. I'm there less selective about it and so potentially you know suggesting different products versus what you're selling on Amazon might be a good strategy.
Jason: [33:35] Going back to that kind of picking the line that Amazon curious though why. I guess the model and I had is that you're selling apparel right then you go calling Macy's and you bring a bunch of mannequins and you show me all the dresses and some Merchant at Macy's goes. That one's pretty that one's pretty I don't like that one right and it's their subjective expertise around the category.
[33:57] My son says there's no Merchant in Amazon is going to subjectively try to pick winners and losers.
Andrea: [34:03] I think there's some exceptions to that the biggest ones being the pantry program where they are choosing products you can just put anything in pantry it goes through an approval process now, the people making those decisions might not know might not be as educated as maybe like a a Walmart in-store brick-and-mortar buyer, but they are making assortment decisions and so Brands record making some recommendations there can really help move that process along the other space were seeing that is in fashion, I think Amazon started trying to carry all the assortment and quickly realized I mean first we have a couple, fashion clients that sell Alberta 10,000 skews and you certainly can't carry all that ass for me have to build Smooth Sailing Center so they did they have invested internally in. What they're calling more tastemakers to actually choose assortment and and make those types of decisions.
Scot: [34:53] Well I know we're running up against a lunch here so why don't we go ahead and wrap so that you can have some lunch before you have to talk.
Jason: [35:01] Yeah so if people do have further questions or welcome to jump on her Facebook page and will continue the conversation if yeah if you enjoy the show we'd love to see you jump on the iTunes and give us that 5-star review but thanks very much for making time for us and the listeners today.
Andrea: [35:16] Yeah thanks for having me guys.
Jason: [35:18] Until next time happy commencing!