Markets, Markets, Everywhere: Omnichannel and You

"I want to hear what it sounds like... I sound like a dead robot. These are moments that need to be captured and shared with the world. I think we're recording. And so we're just going to have to go and I'm going to pretend I'm a producer… Okay."

 

Beyond the Cart Lightburn Podcast - Ecommerce -

EPISODE 06: Markets, Markets, Everywhere: Omnichannel and You

Last time, we talked about marketing strategy as a whole. Today, in episode six, we're shifting our focus over to marketplaces. How they are a key part of our plan for Bilberry West and why you may want to consider different markets for your direct-to-consumer business.

Hosted by:

Andy Winthieser
Partner
Nora Lahl
Partner

Today’s Topics:

  • Amazon, Target & Etsy
  • Margins & Commissions
  • Market Sharing
  • Integrations & Fees
  • Drop Shipping
  • Other Markets & Retailers

LOOK & LISTEN 

The following is a transcript of the cross-conversation streaming in the above media: 

I want to hear what it sounds like. I sound like a dead robot. All right, I'll put stuff in the chat. Type, please. I can't... These are moments that need to be captured and shared with the world. The inner webs needs this. The best thing that's ever happened to me. I think we're recording. And so we're just going to have to go and I'm going to pretend I'm a producer… Okay. Rolling.

Nora, it's great to see you're happy. I am so happy right now. This brought me much joy. Speaking of happy. You know what makes people happy? Markets? Selling stuff. Selling stuff. Yes. Makes people very happy. So I think this episode is going to be pretty short and to the point. It is a more focused episode than we typically do. Maybe, maybe not. We are talking about all the different marketplaces. Omni-channel.

Yeah. For anyone that's listening, my goal with this conversation is just to hopefully educate people on what is out there. I think there's a lot bigger ocean than a lot of people realize. So, omni-channel, that's a buzz word it's been around quite a while. At the end of the day, omni-channel just means you're selling your stuff in a whole bunch of spots. Not that complicated, really. It's not that complicated. Now, obviously they all have their nuances.

AMAZON, TARGET & ETSY

Amazon is probably the most prolific marketplace, which is just absolutely brilliant. I'm probably wrong, but I'll give them credit for kind of creating this whole. Well, certainly as we know it today, although eBay, I believe was founded not too much longer after Amazon.

Right. But that was really an auction site, but it's become a marketplace. So eBay absolutely is a marketplace. I think the stats on eBay in terms of new products versus used products is in a high 70% range or something crazy like that. So seven out of 10 products that somebody buys on eBay are brand new in the box, never been used, compared to where they started, which was, "Hey, I got this whole thing, this antique I'm going to auction off."

So anyways, marketplaces, I think omni-channel marketplaces is for Bilberry West, our strategy is definitely going to include marketplaces, starting with Amazon. I think that's a great place for any e-commerce brand that isn't on any marketplaces to truly get started. They've made it really easy. Amazon fees are a little high plus you have the complications of, should you do fulfillment by Amazon to get Prime or offer Prime, but different topic. But yeah, at the end of the day, Home Depot is a huge marketplace right now. I mean, you go on target.com and- Selling stuff from other retailers. Yeah. So, Amazon's becoming or Target rather is becoming this huge "drop-shipper". They have 10 times, 20 times, it might even be higher, number of products on target.com than they do in your Target store.

So that's because they're a marketplace and they've really just tapped into that channel. They can put it up on their site and they never ever have to touch the order. Order comes in on target.com. The actual seller in that marketplace gets notified. They have to ship it, fulfill it. So really all they have to do is make sure to maintain that customer experience. But I think it's just awesome. Amazon has made... There's only so much shelf space, right? So back in the day, Target can only have so many skews in a Target store, but online that's unlimited.

Well, so let me ask you from our perspective selling, we are manufacturing a product they were going to sell. What would be the reason to wait to get into other marketplaces? Is there a compelling reason to hold off?  Yeah, so for Bilberry, for the furniture company that we're starting, we're holding off just because of resources, not even financial resources, just manpower. So we have a site to stand up, we're doing product development. Our basket is full of other higher priority things, but it's on our roadmap.

So assuming you're a brand or an e-commerce site that is beyond that already, and I talked to a lot of people that are like, "Well, we already sell on marketplaces." I'm like, "Oh, where?" "Oh, on Amazon." It's like, "Great. That's awesome." That's just one of literally dozens of marketplaces that a company could expand their offering to, just get their product in front of that many more audiences and that many more people.

So one of the challenges is whether or not you're going to ship direct or, Amazon for the Amazon Prime, you can actually have them warehouse your products. Yeah. So if you're like a made order situation, that's not going to be a good fit. If you do any sort of customization, that's going to be harder as well. Monograms, something like that.

Yeah. I mean, ultimately Etsy's a marketplace, right? So there [crosstalk 00:06:13] are a lot of places like that. And there's a bunch of marketplaces. I've been thinking about Etsy for Bilberry West. And I think it would probably be a good fit. A few years ago, I wouldn't have said so, but what are your thoughts on expanding to Etsy, sooner rather than later? I love that. See, somebody who watches the market pretty closely, I've watched Etsy for just about as long as I've been public, they are killing it. COVID just knocked it out of the park. I think that'll continue. I think their growth will slow, but Etsy is a huge freaking marketplace. And I think it's great. I think, obviously you're not going to sell electronics on Etsy. So depending on your product, I think for Bilberry, we could absolutely sell.

Yeah, there's tons of furniture already being sold there. So that's one thing that's a simple thing to do. If you're curious about whether or not you're going to be a fit somewhere like that. It's just to see if the product is already there. Because part of the power of these marketplaces is that you've got customers already going there to do their shopping. And so, if people are already selling chairs there, then we have an opportunity to take some of that share.          

MARGINS & COMMISIONS

Now, the downside. Obviously, every sale that we make on our.com directed to the consumer has the highest margins, in theory, that we can make on the product. So once you pull in a marketplace like Amazon and Amazon commissions run anywhere from, I think at the lowest is like 10% and some product categories are as high as 15%. So it can be an expensive proposition, but one thing I'm excited about for Bilberry, one of our main objectives as a company very early on is volume. Because we have no volume right now. So we have no economies of scale for our product. So my goal is to get volumes up, not as high as we'll ever have them, hopefully, but I want it to be a hockey stick. Which will help lower our costs, which it gets us over a whole bunch of hurdles. Well, there's value in- Paying that commission. Exactly. Yeah.

And that's something that people have a lot of trouble swallowing, which is why you're going to get back to that previous conversation we had about your models that you do. If you have the potential to sell a certain quantity in a market, it could be worth that higher commission rate. Even though it feels painful to be taking that hit, you have to step back and look at what that volume increase can do for you. And that's one of the things I think that's driven away some other clients of ours from expanding into marketplaces like this, is that they don't want to let go of that commission.

Yeah. Yeah. So if you're running on razor thin margins, and we had a client in that same boat, they were running on less than ideal margins. They were getting tons of orders from Amazon because we had put them on that. And they ultimately had us pull them back off because a couple of reasons, one is they just absolutely refused to send, to do fulfillment by Amazon. So the increase in orders strangely taxed their system. Do you remember why they didn't want to do that? Well, they had some supply chain issues. Okay.

So they were running out of inventory constantly. And so it sort of made sense for them to pull back. It's unfortunate. So they didn't want inventory housed where they couldn't get it back for themselves. Essentially. So they kind of looked at Amazon and the marketplace. Yeah, we're getting orders, but there's some, in addition to the commissions, which kind of bothers me, doesn't totally bother me, is if you publish your product, sell through the Amazon marketplace, customer comes in and buys that?

MARKET SHARING

That is not your customer. That is Amazon's customer. So even though you're drop shipping for Amazon or for Target or for a Home Depot through their marketplace, you don't own that customer. Home Depot owns that customer, Target owns that customer. So you can't market to them. So you don't get their email address necessarily, of course you have their shipping information because you're sending it to them, but you're not, technically, in a lot of cases allowed to market to them as... Like, so Bilberry got an order through Home Depot. We can't start email marketing that customer.

But what you can do is look at your packaging and what you can do in the packaging to drive people to your site, to engage with you. And that's what a lot of sellers do in marketplaces like this, which is cool and interesting because not only are you possibly creating a connection so that they can become your direct customer, but you're also impacting their user experience. I think you can do something there that makes them feel a little more taken care of in that end product that they get, which we're going to talk about in next week's episode, I think, is user experience and how that goes into the shipping team.

For us, I'm super excited because Amazon's going to be a no-brainer. We have lots of experience there. So for us to ramp up as Bilberry on Amazon should be relatively painless, but more exciting is that we, as a furniture company have this opportunity to sell through the biggest furniture marketplace the world's ever seen, which is Wayfair. Yeah. So it's pretty cool. I don't have to go knock on doors and be like, "Hey, Wayfair buyers, you guys should list our product." I can just pretty much self-serve. Because we meet all the requirements, and I don't think most people realize Wayfair has absolutely zero warehouses. 100%. Is that true? Yeah. Almost=. Really? I shouldn't say that without look-  Now we're going to have to go back and look this up. That's on their business model. The huge majority of their product is shipped right from the manufacturer or the seller.

And some of that's marketplace, some of that's the drop shipper. So to me, I'm really excited about Wayfair. They're spending... Yeah, we're going to pay commission, but you get a lot of value out of that because Bilberry's not going to run a Super Bowl commercial. Yet. Yeah. Right. Yeah, you want to be where people are. And I would say a lot of these marketplaces are the search engine that people use when they are shopping, that they are going straight to Amazon or Etsy or Wayfair and that's where they're doing their searching and their exploration process. So it's really important to be in front of them where they're at, meet them where they are, but we have experienced with these marketplaces, what does it actually take? What does it mean? How do you get started with these? There's a couple of different ways. eBay, Amazon, they have a pretty robust tool set. You can go on, you can do self-service they have whole programs. And you can automate that as much, or as little as you want, if you want to manually... Bilberry West, it might make sense for us to just build up the products on Amazon's ecosystem, sort of "by hand". Amazon expects... You've got to continually update because Amazon gets really pissed off if you sell something that you don't have in stock, which rightfully so.

There's basically a ranking system, a credit system, credit score system with all these marketplaces, if you get an order and you're supposed to ship it with an X amount of hours, if you're hitting that, you're getting boosted and they're just going to keep giving you more and more orders. But getting started... For us with Bilberry, probably there'll be a hybrid model. Well, it probably won't even be that. We'll probably build out the products, quite honestly, since it's only going to be five or six with a couple of variants on Amazon by hand. Because it'll be quicker, cheaper, faster for us to do that.

INTEGRATIONS & FEES

Now, I know we're talking about potentially using Shopify as our platform and there's ways that we can pass the data between Shopify and Amazon, but either way it's pretty easy to get started. You have to create an account on Amazon.

Yeah. First you create a seller's account and then you can get started either building out or syndicating, I guess you would say, the content. And then, you mentioned Shopify had created some connection there. Shopify also has some integrations with Etsy and a number of other marketplaces, which can make that more seamless, especially if you had more skews than we do it. Definitely worth your time to invest in that. But then if you're a larger... There's also tools and I know Home Depot for a long time, I don't believe they have self-service tools yet I could be mistaken-  We're going to find out.

But there's platforms, CommerceHub is probably the biggest. It's a third party. You're basically building out your product data set in CommerceHub and it is feeding dozens of marketplaces. And then orders come in, they flow through CommerceHub back into whatever you do next, which is probably the way to go if you're going to have dozens of marketplaces, is using that aggregator, that central hub. And like I said, a lot of them, I think Wayfair might too require a platform such as CommerceHub. So it's worth looking into that way.

And then, obviously, you can always control. Even if you do use a platform like CommerceHub, if for whatever reason you don't want your product on X, Y, or Z marketplace, you can opt out of those. But ultimately it's a lot easier than it sounds. And if you're doing fulfillment in house already and you're willing to pay that commission, those fees, it's really a no-brainer.

Yeah. I think one of the sticky points that I've seen in getting started on Amazon, which admittedly I haven't worked on too many of the others, is if you are reselling something that other retailers on Amazon are also selling, then your listing gets aggregated. Which some people do not like. [crosstalk 00:18:22]

You have to have UPCs. So ultimately Amazon creates their own UPC. If you're a distributor of a product, you're not the brand, gets a little bit more challenging. And we dealt with that too for Cooper Safety. When Cooper Safety actually started on eBay back in the day, that was our proving ground to see if anybody would actually buy this stuff. And then we quickly added direct to consumer e-commerce and then we went back and started adding Amazon. But that initial setup was, there's tools that improved dramatically in the last seven years.

But yeah, there's a huge headache of matching our products to other people's products. And then you would find out other people who were listing something on Amazon with your UPC, for that product, had it wrong. So you had to go through this process, clean all that up. That's gotten pretty good now, but that's ultimately what drives, "Hey, on Amazon, this product is available from Amazon, or you might be able to get it cheaper from another."

Might not qualify for Prime. Prime is a huge factor in Amazon. My opinion is, and Bilberry West, is I think going to be willing to do this, if you're going to sell on Amazon, pay for the fees to have it put into their warehouse and let them do all the logistics, you're going to get a much higher commission rate. Absolutely. There's pretty prominent filtering for only searching for products that are Prime. And I wonder what the statistics are. I am not sure. Yeah, me personally, and maybe I'm weird, but on Amazon, I won't buy anything that doesn't ship Prime. I just don't. I want Amazon to actually deliver it.

I think it depends on what the product is. There's a lot of factors. We can have a whole series just on this, but I think the name of the game here is you've got to be willing to seed some of your profit. And you almost look at that as some of your costs, instead of spending a percentage of your profit on marketing, you're spending a percentage of your profit on the cost of being in these marketplaces. Right.

And I think that's the hardest thing for people to get over. I think it's easier for us because we're starting fresh. And so we don't yet have the expectation of what the profit per piece is. So maybe we're willing to lose some of that to get started. For sure. One of the first online orders I ever did, believe it or not, was through Target. What? Yeah. It's weird, right? And it's weird and more weird that I remember it. And I remember it because it was right, as strange as this is, I loved e-commerce from the moment you could sell something online. I've always been-

Hold on, Andy. This is like a revelation for people. I think this is an important conversation that people are about to hear, because I know this about you and this is shocking. So I loved the concept of e-commerce and building e-commerce and running e-commerce since you could basically. Always been involved in it up until about a year, maybe the last two years. Out of the last 21 years, I think I went like 18, 19 of those years and never bought anything online, maybe one or two things.

DROP SHIPPING

Shocking, shocking to me. And Scott used in our office and be like, "Dude, just get it on Amazon. Just get it on Amazon." I was like, [crosstalk 00:22:43] "Oh, I'll stop at Target and get it." I don't know why, it's just weird. But now that's changed. I get everything online. Even when I have to buy something from Menards, it's like, "Oh shit. I'll just order it online." And then it's ready, I just go pick it up and done. So I still have to pick it up, but I love curbside pickup. Did you have that expectation before COVID, of curbside pickup? The same one? okay. Just curious. It was out there. I thought it was really weird. I'm like, "Why would you order from Target and then drive your ass to Target and sit in the stall? Just go in the store, dude."

That's because you weren't doing that shopping with babies. I feel like that's a huge factor, like children in car seats, your kids were older. There is one thing e-commerce and that's some I'm really starting to spend a lot of time thinking about, has nothing to do with marketplaces but it's sort of does is, there's still an experience of going into a store. Merchandising in a store is far easier than merchandising on a website. Especially with clothing.

I'm not shopping at Home Depot in the same way you are probably. Like as that example on Menards. That's interesting. But as someone who wears plus-sized clothing, I've been forced to do so much of my clothing shopping online because I don't have other options. The options for in-person plus-sized shopping is abysmal. And so you have to get really good at... Be willing to return things and eat that cost if you have.

And I'm sure that happens for lots of different, specific reasons. If you have an odd foot size or you're petite, all kinds of different possibilities, but you get used to that, I think. And so, I've been shopping online for stuff I feel very early. I bought my wedding ring, we bought it from Amazon in 2005, which is way before anybody would buy jewelry on Amazon. I feel like I was early to the game or maybe it was even earlier. I got married in 2005. So it might've been 2004. I would say though, even though there was that drought of me ordering online, I have for a hundred years, pretty much made every buying decision online.

So you've made your buying decision online, but then you go in person. That's interesting. A lot of that is just, I don't buy a whole lot, quite frankly. And then when I do decide to buy something, it's like, "I've made a decision. I'm going to get it right now." You want it in your mitts. I don't want to wait for it to ship. Amazon has made that a little bit better because usually what I buy today shows up tomorrow. COVID has changed that for me because I'm a little bit more patient. I still hadn't done groceries online, but anyways, we're getting- We're getting way off topic, and that's okay. [crosstalk 00:26:18]

Going back to my story. One of those few... Cooper was... My oldest son was, I don't know, five or six and we re-did his bedroom and we painted it and we couldn't find the lamp that we liked. We did a baseball theme, we found a baseball, literally looked like a baseball as a lamp. So the base was a baseball ceramic and then nothing special. We bought it off target.com. They shipped it. We get it. I'll never forget it. I think we spent like 14, it wasn't expensive, 14 or 15 bucks on it, but there was still the price tag on it from whoever was in their marketplace. And it was like nine bucks.

I was like, "I just got ripped off." So don't do that, because Home Depot will set their own prices. But on Amazon you can set your prices. So you got to be careful that you understand. And good for them. Target should be able to set the prices that whatever they think is, obviously they're on the hook to pay you what you're charging, but it's essentially like wholesale for some of these marketplaces. Sure. And that goes back to a conversation that we will have is about shipping costs in particular and baking that into prices or not, and pricing in general. But that's funny that... What perception did you have then after you felt ripped off? Probably not great.

I was just... Quite honestly, that was long enough ago where at the time didn't even know of the concept. I was like, "How the hell could Target to have this in their warehouse with a sticker on one price and then sell it for another?" And now that I think about this, I think that's where that light bulb went. I'm like, "Oh, Target is becoming this huge drop shipper." Yeah and I think it's more obvious on Amazon than it is on Target or Wayfair- Well, Amazon's just upfront about it. It's very clear. And I think that's probably because they have less control over the user experience and they want it to be clear to people whether or not they're getting that Amazon Prime that's important to their brand.

OTHER MARKETS & RETAILERS

I also think it's worth pointing out that these marketplaces, we've talked about some of the biggies, there are a lot of smaller ones too. There are quite a few for books. And I was on one recently that was just used books. And I found an old reprint of something. And I bought it from a retailer in Ireland. I never would have found that book if it was just this little shop in Ireland.

They had to go through this marketplace to get to me and I paid a premium for it because it wasn't in print anymore. So, there are quite a few marketplaces in a little more narrow market that are worth looking into, depending on what your product is. Just in the same way that Etsy's a good fit for us because of what we're selling, looking at what it is, what your product is and what the marketplace is, might be for that.

Yeah. And it's amazing. I don't think people realize how many of the retailers that they love Target, Best Buy. Best Buy is a huge marketplace, bestbuy.com. DICK'S Sporting Goods is become a marketplace. It's like the Matrix. Now people are going to see it everywhere. Now that we've told them, if you weren't aware of some of these, you're going to notice the next time you go shopping. On Target for instance.  Well, a lot of times you won't even know.  Yeah. But you can tell now. Like Target, you can tell. One big indicator that it's coming from a drop shipper on Target is that it's not available in store.  Yeah. That's a first. That's a huge- Indicator. We've got to wrap this conversation up. I'll cut this part out but-

Yeah. Long story short, marketplaces are worth looking into. I highly recommend them, regardless of what you're selling. It can fuel significant growth in a relatively minimal investment. It can be a little painful to get set up because you just got to go through the headache of getting setup and creating a catalog with certain data that you may or may not have to appease all the retailers. But once you get over that and get it going- I think keep an open mind about the cost and actually run the numbers, if it makes sense to you. Really highly consider, especially with Amazon, paying to have them hold the inventory is very likely worth it.

Yeah. I mean, Facebook is becoming a huge marketplace. Well, yeah, it's called the Facebook Marketplace. I know. Well, right. They're telling you. But again, they were like eBay. Where they started, it was like, "Hey, I got this dresser. I know, I'm going to put it on the marketplace." Which is still huge for that. But what people don't realize is more and more people, every single day are just buying brand new products on the marketplace in Facebook. It's all drop your purse, which is bizarre to me. But it's huge.

Meet the people where they are. That is the name. The people who are on Facebook. The people you want to sell to. They will find a way. Instagram, look at where they moved that shopping button. And if you don't know, look it up because people got pissed. They replaced the little heart, like button with a shopping link. So they're in it now. And that's going to be more and more what a social media platform like Instagram is about.

For Bilberry, it's a no-brainer. We're absolutely doing it. I knew that right away that that would be part of our digital marketing strategy. And to your point earlier, we're looking at the cost of selling through marketplaces as a marketing cost. It's worth the investment for us and it very likely may be worth the investment for you.

- - - - - - 

We’re so glad that you’ve joined us for this episode of Beyond the Cart. So, we’ve explored our selling strategy, now it’s time to look at the website itself, in the next episode we’ll be joined by our first guest to talk about all thing’s user experience. 

Beyond the Cart is produced by Lightburn. Our episode today was edited by Ryan Dembroski. Our music is the song, Let's Go Go Go by Tigerblood Jewel.

Be sure to subscribe on Apple Podcasts or wherever you consume your audio. You can always learn more about e-commerce at lightburn.co.

We'll see you next time on Beyond the Cart. 

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