A weekly podcast with the latest e-commerce news and events. In episode 273 we interview Alex Kopco Founder and COO of Forum Brands, a roll-up of digitally-native consumer brands selling via Amazon.
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Alex Kopco is the Founder and COO of Forum Brands, a roll-up of digitally-native consumer brands selling via Amazon.
In this interview we discuss Alex’s experiences at Target and Amazon prior to founding Forum Brands. We talk about Forum Brands specific business model and their unique tools and expertise for Amazon sellers, the Amazon FBA Roll-up trend in general, and the future of commerce.
Episode 273 of the Jason & Scot show was recorded on Thursday August 19, 2021.
Transcript
Jason:
[0:24] Welcome to the Jason and Scot show this is episode 273 being recorded on Thursday august 19 20 21 I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host
Scot Wingo.
Scot:
[0:40] Hey Jason and welcome back Jason Scott showed listeners Jason as you and mr. snow two of my favorite topics are Amazon and Entrepreneurship
lately there’s been a lot of exciting intersections in that area as different companies have been started to kind of quote-unquote roll-up Amazon FBA Sellers and explore a.
House of Brands kind of concept leveraging Amazon so we’re going to dig into that topic tonight and joining us on the podcast to help us explore that is Alex kopco he is the CEO and founder of form brands
Alex welcome to the show.
Alex:
[1:18] Thank you so much super excited to be here guys.
Jason:
[1:21] Alex we’re thrilled to have you and Scott,
that Scott wasn’t just giving you lip service these are his two favorite topics so he’s going to be super annoying to talk to,
but before we jump into form Brands which we are excited to get to we always like to give listeners a little bit of a taste about our guest,
backgrounds and how you came in your role and if I have it right I think you have kind of a perfect background for your current role.
Alex:
[1:48] I do yeah it’s true I have spent,
really the last decade in e-commerce I got my start working for Target specifically for target.com at the time when target.com was actually still being powered by Amazon Target,
little known fact was the largest seller on Amazon’s Marketplace back when I was there and I was part of the team,
that was rolling target.com off of the Amazon platform,
which was a great first experience in my career to see what this whole e-commerce thing was about working for especially a big box retailer and one is well respected as Target and is good at merchandising and all the great things that Target does
it really did feel like the wild west despite it being a 50 year old company
and then I transitioned was looking for just a change in life a change in scenery and you know the winters in Minneapolis can be pretty brutal and so
I actually had the opportunity to go work for Amazon and Seattle where
I over a number of years had basically every retail job that you can imagine at the company also did a stint at Amazon as a product manager where I was working on Amazon’s physical retail stores team.
[3:08] The non grocery version which was super super interesting a ton of Technology went into powering the Amazon stores as well and so I oversaw some of the technology aspects there and really,
over my course of my career at Amazon fell in love with the power of data the power of.
[3:26] You know under understanding customers based on what they do as well as what they say
and being able to provide you know surprise and Delight moments for them regardless of whether they were online or in stores and for me you know my passion for entrepreneurship since these are Scott’s two favorite things Amazon entrepreneurship.
[3:45] Sort of nurtured at a very young age and happy to delve into my memory Palace there but,
the the impetus for really leaving Amazon to strike out on my own was predicated on
they just ongoing shift to e-commerce and the adoption and of course you know the covid-19 pandemic has,
greatly sped that up but it was always a fascinating space for me and so really just had that itch and decided that the time was right at my career to make that leap.
Jason:
[4:15] That is awesome and so just just so I’m being perfectly clear that our listeners you loved Amazon so much that when Target stopped working with them you quit and joined Amazon.
Alex:
[4:25] In as many words yeah sure let’s go with that hahaha.
Scot:
[4:32] Jason you are the chief digital officer of Target right do I have that right.
Jason:
[4:35] Yes one of yes.
Alex:
[4:37] Wrong Jason Goldberg goldberger.
Scot:
[4:39] Oh gosh I get that confused.
Alex:
[4:41] I have to confess Jason I did a double take when I first saw your name and was like this can’t possibly be goldberger and then realized that I was adding an ER to your name.
Jason:
[4:50] Alex to make matters more confusing a you should know that the day that Jason joined Target I got three 800 LinkedIn invites from from target employees.
Alex:
[5:01] One of those might have been me Jason.
When Jason joined he and I I forget how this happened but he and I was basically in the first meeting he ever had it Target and.
Then I was in a number of subsequent meetings and so we just sort of kept running into each other and it became a running joke over
the rest of my time at Target which was not that much longer that every time you ran into each other it was just you know one of those moments so it’s been fun to watch Jason’s career evolve.
Jason:
[5:33] Yeah yeah.
Nobody cares but like the overlaps are are super complicated I’ve actually worked with Target for an awfully long time in fact I was in a conference room in Minneapolis on 9/11 with Jeff Bezos.
Doing the Amazon contract the the day that the Twin Towers was hit and did a lot of work with Steve Eastman and Michael Francis and although.
Alex:
[5:59] Yeah yeah.
Jason:
[6:00] So I do have a sort of a Target history and then of course I’m at publicist which owns Sapient which was the big team that helped stand up target.com when you guys moved off of them.
Alex:
[6:12] That’s right project Everest.
Jason:
[6:14] Exactly so lots of overlaps but,
as per usual I just talk about all this stuff well you actually did it so so we’re excited to hear about it from you but I think Scott is undoubtedly going to ask you some Amazon trivia questions first.
Scot:
[6:33] Yeah yes so it must have been interesting you know I haven’t been as deep as you guys have at Target but I have spent a lot of time at Amazon seems like a big culture difference there what was that like.
Alex:
[6:46] Yeah it was a big culture difference I think the biggest difference in my experience was I was.
[6:56] Well there’s two two components to this first and foremost I felt like I had a tremendous amount of responsibility
from the very very first day at Amazon Amazon having built much of its own technology internally
you know there were there were safeguards there were checks and balances you couldn’t really screw anything up but I had a lot of control over,
Mi Piel which
you know when I would interview people or when people would join the team I would sort of like in my business too and I was a better manager and video games for a number of years and I would liken it to my little video games or my little comic book shop on the street corner and
you know we would talk about what is our window front look like today we’ve got to walk our store and make sure that you know some kid didn’t spit gum on our floor and so it was it was very much that feel and I had the power to
keep things clean and sort of do what I thought was in the best interest of customers.
[7:54] Target on the other hand it is a company that has one of the most iconic brands on the planet you see that Bullseye and you just instantaneously know even if you’re not,
from America we pretty much know what Target is and so with that you know with,
with great power comes great responsibility with great branding comes great responsibility and so my experience at Target was a little bit different in that,
a we were big you’re really big when I joined Amazon we weren’t that big at the time and I work for Amazon Canada so we were really not that big.
[8:27] Target was big and so the the conversations with vendors the responsibility that we had two guests You know despite being,
working for the e-commerce arm of Target we took.
Sort of the brand very very very seriously and everything was in the spirit of ensuring that people when they,
interacted with that Bulls I had the best possible experience and so it was it was just a different ethos right it was a different mindset,
and one worked great for one company for the last five decades the other was kind of making it up as they went along and now have become one of Earth’s largest companies and there were no guarantees either way but it certainly was a very interesting,
mindshift and I learned a lot of both to be totally honest with you and a lot of my
reasoning for going to work for Amazon was not because Target rolled off Amazon and then I went to work for Amazon but it was because I felt like I actually wanted both sides of that coin I wanted to both have the big box retail how do you how do you take.
A legacy brand and bring it into the digital world and,
what about that disruption what what about that company that is leading that disruption leading the efforts of bringing retail into the digital world and so.
It was a little bit selfishly I just wanted to be as well as well-balanced as I possibly could be.
Scot:
[9:55] So did you work for Amazon Canada the whole time are you kind of bounce between the u.s. and Canada.
Alex:
[10:00] So I work for Amazon Canada when I was in retail eCommerce retail for the whole time I did work very closely with my US based counterparts I worked on
the initiative which is now known as narf but internally was known as Naf n which was the unification of the North American supply chain
I supported the launch of Amazon Mexico and so you know one of the benefits of working for a smaller,
arm within a big company as you have a lot of resources at your disposal but you also have a lot of latitude to try things I launched which prime
in Canada when we bought which I brought virtual bundling technology to Canada’s a
twenty-five-year-old no nothing in the tech space which was incredibly interesting and again really started to give me that feel for the power of Technology,
and and and Building Technology that can enable anybody in the company to be successful not just the people who know how to wield the technology.
Scot:
[11:03] A lot of people that have worked at Amazon that start companies they bring a lot of the management principles over is that something you plan on doing or you’re just like starting with the clean white board.
Alex:
[11:15] Man yeah Amazon’s culture is it is definitive and we certainly have borrowed,
in many cases inadvertently a lot of the principles you know one of our our core leadership principles is bias for Action we have one that is called act like an owner we have one called the best ideas when which is you know,
hybrid of is write a lot and invented simplify and we did this sort of inadvertently but you have to admit the principles are pretty darn good.
And you know Dave Glick and I
saves over at Flex we often and he does a lot of post on LinkedIn talking about the impact that Amazon’s culture had on him and how he brings that to flex and I a lot of what he talks about resonates very deeply and we kind of joke about you know once an Amazonian always an Amazonian
it always comes back up in some in some fashion.
Scot:
[12:09] Yeah someone that’s an outsider and having interacted with all the different tech companies the other ones have these like little Pro way things like,
yep what does it do no evil or be don’t be evil or something where’s the Amazons when you know and they end up being mocked by all the employees at the end of
the Amazon ones they just seem so much more solid and and you know I’ve seen the document where they give case studies and then what not to do and what you know Jeff Bezos little stories around the principle so it
it just has so much better thought out than any of the anything else I’ve ever seen.
Alex:
[12:46] Yeah yeah you know we.
Even the most resistant employees I think drink at least a little bit of the Kool-Aid when you get there because it’s impossible to avoid you can’t not be in a meeting.
Especially when tensions are high and this is the whole purpose of having strong leadership principles is so that when you can’t be in every meeting and every discussion,
you want people
working for you to behave and make decisions in a way that are consistent with how you would do it that is the Hallmark of that of strong leadership principles and like you can read the everything store which I did when I was interviewing with Amazon
and they say you know.
Jeff has this thing about like oh the customer’s always in the room leave the empty chair like we talked about customers as if they’re actually in a room that’s not that’s not a lie that’s not like a thing that you know has been spawned at like we literally do that we say,
like what would the customer think about this how’s that going to impact the CX like we care very very deeply and that’s just one of the principles and so people use them in their vernacular and actually my wife still works for Amazon,
and our friends sometimes get a little bit annoyed because occasionally she and I will be talking about a hard thing at work and we’ll just default to,
sort of the Amazon lingo and they’re like you guys have to know how you sound to outside people which is.
Not great.
Scot:
[14:14] Amazon Romance.
Jason:
[14:15] I do think the Amazon leadership principles are legit and you know have certainly contributed to their their culture surviving even as its scale,
but just just a counter-argument to Scotts point they did add two new leadership principles this year and one of them basically is don’t be evil.
In parentheses it says two employees.
Alex:
[14:37] Yeah I mean.
Scot:
[14:40] That’s just an overreaction to crying at the dust particle.
Alex:
[14:43] That was yeah I was there during during the infamous New York Times article it got some things right I got some things wrong.
Scot:
[14:55] Were you crying at your desk.
Alex:
[14:56] I was not personally crying at my desk no and I don’t know anyone who did but I also would not say that I knew every single person at Amazon either.
[15:13] Um
It’s fun fun for me not that much fun for probably listeners but I’ll just give you the anecdote,
Jeff is like a rare unicorn around Seattle and anytime you see him it is a Jeff sighting,
and people will like stop what they’re doing and immediately run back to their desks to tell everybody that they had a Jeff sighting and my only judge sightings really came from from the stage,
at the All Hands meetings I was fortunate enough to work on some projects
that one just do it Awards which is one of the awards where Jeff gives out a Nike shoe and there’s a whole story behind that and so my interaction was limited to the.
Jeff announcing a thing on the stage in my face being up on a on a wall that was those are my only sightings.
Scot:
[16:12] Nice to get picture of you and Jeff.
Alex:
[16:14] I did not yeah yeah yeah.
Scot:
[16:15] We can Photoshop at Jason’s of Photoshop Drupal will create one for.
Alex:
[16:21] Yeah you can you can put my face on.
Jason:
[16:22] I’ll put all three of us.
Alex:
[16:24] There you go yeah with chassis so when I was at Amazon actually co-founded an internal employee network called connected Amazon.
And it really sort of started actually it started from Target honestly because one thing that Target does exceptionally well is they have all of these sort of like.
[16:46] Affinity groups isn’t there like employee networks and there’s like an acapella group and there’s you know the women who ride motorcycles group,
and so I was a member of all these different sort of Target networks and I got to meet the global VP of Lego and I got to meet you know higher-ups at LinkedIn and it just was always really fascinating to me and sort of.
[17:09] Made me feel really happy that I work for Target and when I started at Amazon they had a finity networks but they didn’t do a lot.
I mean they were they were sort of identity based and it was not.
The programming just wasn’t as robust as what you got from the Grassroots Target organizations and so a friend of mine and.
A couple of other people got together I must have been there for months at the time,
and started this group connected Amazon to try to provide some some amount of programming for that and Andy Jesse was actually kind enough to be one of our fireside chat speakers,
and we booked the biggest room that they had on campus at the time I think it could fit about 400 people.
And we had 400 people like an hour and a half before the fireside chat even started and so we had all these people live streaming and all the like conference rooms and
one of the buildings there and from there you know it kind of took on a life of its own so I credit Andy for you know really
making connected Amazon as big of a deal as it has become which I think now they’ve got 30 40 thousand
amazonians are like registered members of connected Amazon and they’ve got a nice big budget and full-time people doing programming and that all came out of the grass roots.
Jason:
[18:28] Very cool so truth be told we could probably do Amazon stories all night and be perfectly happy
but I do want to talk about foreign Brands obviously so before we jump into that into much detail Scott kind of alluded to the business model but can you kind of give us the foreign Brands elevator pitch.
Alex:
[18:48] Yeah so you know Scott is right in that there are a number of
groups really around the world now who are looking to acquire Amazon FBA businesses do a sort of brand of Brands roll them together
we
fall into that but we think about ourselves a little bit differently I think the moniker that gets thrown around a lot is is aggregator.
We don’t see ourselves as that and you’ll.
Probably based on my background understand why you know our model is not to do a high volume of deals it’s too it’s to be principled and disciplined.
In the deals that we do do and we are much more focused on building,
a concentrated portfolio and specific categories that we believe we can turn into like household Staples and so actually as much as I love Amazon and again you’re right we could probably spend you know two hours just swapping stories about that.
Our goal is to.
[19:52] Take fledgling brands that we believe have a lot of potential and put them wherever the customers who want to shop for those products are shopping and that maybe on Amazon and we hope that it is but even if it’s not,
we’ll find ways to make sure that our products are available for the customers who want to buy them and so,
what that means is we might review a thousand deals a year and will acquire a handful of them rather than you know.
Does it meet our basic minimum criteria if yes then we’ll proceed and so it’s just a little bit of a different a different mindset for us and it causes our employees to make decisions differently which is.
And literally the document that we have when we due diligence is called the what you have to believe document it’s do we actually believe in this brand can it actually become a consumer household staple.
If yes then there’s a whole bunch of other criteria that we review if no we’re okay passing on a deal and it’s nothing against the brand owner it’s nothing against the seller we’re just very disciplined for what we’re looking for.
Scot:
[20:58] And then so it is a busy space so how would you help
help me kind of have a mental map of how you guys fit in so there’s there’s thrashy oh there’s like one out of Austin whose name I can’t remember there’s a couple others,
how would you kind of feel that you guys differentiate from from the pack.
Alex:
[21:20] Yeah we’re we differentiate in two ways first and foremost like I was describing where operators first.
Right we my two co-founders both come from the investing World they run a very efficient Ma,
process the other kind of oversees the holding company in the structure within I oversee all things related
to Brand growth and I have a team of probably fifty percent X amazonians who have have a similar mindset as me which is
again we build we believe in the power of a brand and we believe in,
brand Equity we believe in the direct-to-consumer space as a way of making sure that were able to reach customers who get genuine value out of our products,
and so that’s us was the most exciting thing so we’re again very selective in our deals secondarily is our Tech and Scott we were kind of,
bantering about this you know before we started recording but we are,
highly highly highly focused on building and integrated omni-channel system,
internal to form Brands and this is not this is not meant to be a knock to any of the software out in the world but my belief is that.
[22:39] Is that there is value to Building Technology that suits the company that we are trying to build rather than having to build a company that suits the technology that’s available to us today.
And again it sounds like a semantic difference but it’s a big mindset shift,
from my team where every single employee regardless of whether you’re in Mna Corporate Finance or marketing
you’re all product managers every single person is tasked with finding ways to automate the automatable use data to make decisions ask for systems that we either don’t have or that are underdeveloped
so that we can build something that works for form Brands and makes each and every one of our employees more efficient.
Scot:
[23:23] Give us an idea of the scale like where are you guys maybe Capital raised or number of Brands kind of in your your pack if you will anything you can share but obviously don’t want anything super confidential.
Alex:
[23:35] Sure sure so we’re not disclosing the number of brands that we have right now but we did recently announced a 27 million dollar series a equity raise led by Norwest Venture partners are seed was done by
and FX
at a Palo Alto and so you know that that 27 million that we recently raised is is being put two purposes one
hiring hiring like crazy building out the team of world-class operators first and foremost and then secondarily is to a focus on technology and that is
you know scaling up our Tech stack hiring a high-performing you know World Class Tech Team,
we’ve got a number of data scientists and we’re already finding ways to optimize our businesses that we do owned by way of machine learning it’s also we actually use machine learning to help identify
high quality Brands to potentially reach out to as well and so again it sort of tech underpins everything that we do and we’re investing very heavily in that space.
Jason:
[24:43] Awesome and you kind of mentioned that you were being selective on Acquisitions like do you have.
Any specific criteria like are most your criteria around Financial metrics to other particular product categories or particular.
Go to market models are things that like sort of play into your your preferred portfolio companies.
Alex:
[25:06] Yeah so we are focused on certain categories categories that we refer to sort of colloquially as.
I thought I was going to put your that word and I totally got it colloquially as consumer durables so we steer clear from food and beverage,
we steer clear from you know fad related items we I mean you could really like an us to sort of,
New Age Procter & Gamble where we’re focused on you no pets and home and kitchen,
patio lawn and garden we have you know we play in the fitness space the outdoor space and so these are really things that are like,
you know you would go,
to your cousin’s house and open up their cabinets or look in their closet and you would find a bunch of our products there that’s what we’re really focused on so we will stay away from like clothing we don’t do fashion brands,
um and from there you know we have what we call the four pillars because as a good Amazonian I love my Frameworks,
but you know it’s are sort of M A decision-making framework which you know we’re very transparent about when we get,
into the conversation with Sellers and it’s something that you know our approaches to be very seller friendly we.
[26:32] Over index in the hand-holding because we want to make the deal as comfortable as possible.
My co-founder Reuben who leads all the MMA efforts he still personally gets on
all the calls with Sellers and so Financial profile matters
category matters but again a lot there are a lot of other considerations that go into that what you have to believe what we have to believe collectively as a team as an investment committee as operators as brand builders,
and so were we are.
We view these deals as puzzle pieces that we look to fit together.
Scot:
[27:13] Is part of your strategy to so you acquire these Brands you get them you know I think there’s probably some consolidation where
you know what we’ve seen with other players is a review of the packaging bringing them over into a Consolidated marketing team usually some consolidation around sourcing and fulfillment,
and then you get your technology platform let me play pause there is that is that you guys do all those things.
Alex:
[27:41] Yep absolutely I mean I think a lot of that is you know and most of the players us included are what at most two two and a half years old so these are like there’s still a lot of table Stakes stuff.
To be done with these with these Brands as we’re fitting them into our process and our portfolio for sure.
Scot:
[28:00] Gonna think I know the answer this one but I’ll ask anyway so then you know one strategy and I’m obviously a big proponent of this is if you can do acts on Amazon you can do
you kind of typically do you know the same amount call it
you know X again over on other channels is part of your your plan to then go across different online channels with the brands or do you really want to just kind of focus on Amazon for a while and DoubleDown based on on the platform Super Bowl.
Alex:
[28:31] My Amazonian this is about to show here so we have what we have the concept of Amazon’s day one we have we have play books which we called a0 and A1,
and the day Zero playbooks are sort of that table Stakes stuff can we consolidate at ports,
can we you know is are there opportunities for us to redo the packaging,
will get deep into the reviews and apply NLP to reviews to make sure that we have a good understanding of what customers like and equally important what they don’t like about the products that were acquiring and so we’ll do all that day 0 stuff,
to sort of get our house in order and that is predominantly Amazon focused right most of these businesses,
do the vast majority of their sales on Amazon and so.
[29:20] For us to be world-class operators like we must be world-class at Amazon that that is core to the strategy.
From there we move into day one because at Amazon it’s always day one,
so really it’s day forever but we call a day one and those are the things that a our technology Powers right and Scott you know the power of optimization of being able to have an integrated platform where,
data from one part of the business marketing.
Informs actions in another part of the business product development and design packaging pricing right and so our ability to tie these things together these sort of disparate data points actually build a mental model and I,
I’m sure that my team is so tired of the phrase mental model because I preach it constantly but that’s really what it’s about for us as building that mental model so.
[30:10] That was a long-winded way of answering your question which is yes we will be opportunistic brand by brand,
um in channels off Amazon and you know we’re operating in eight countries right now we are operating across five or six channels and so our footprint is already,
diverse and you know were a year old at this point.
Jason:
[30:37] Awesome side note you can always tell a tech first company when they start counting at day 0 instead of day one.
Alex:
[30:45] Exactly I’m so glad Jason that you picked up on that.
Jason:
[30:49] I’m tracking and so that reminds me I do want to kind of.
Cook down into your Tech stack for a second but before we do I’m just always curious like it seems obvious like one of the big.
I’m sort of investment theories here would be you acquire these companies and you have.
Unique expertise capabilities and Tech that then causes those companies to be more valuable.
You help them become more efficient on Amazon more successful etc etc and that that accelerates the value of your investment.
Each of those companies probably had some unique skill sets like I’m always curious.
Like does it work out that those companies are able to help each other very much and are using like.
Are you providing most of the value-add or are you acquiring a lot of value-add from these individual companies that then benefits the rest of the portfolio.
Alex:
[31:48] Yeah yeah you know currently it has been.
The former we are providing most of the value-add.
So where we are actually seeing things move is as the space becomes.
More well-known I mean there are so many sellers right so many many many of them do still do not know that an exit.
Is an option for them many still are under the misconception that e-commerce.
I don’t want to do this anymore I guess I’ll just shut my store down I’ll go on Permanent Vacation mode and that is tragic to me.
Because they have loyal customers they’re generating real cash and so it’s a shame for companies to shut it down what we’re seeing more and more in the conversations that we’re having with.
[32:42] Perspective Cellars is.
[32:45] This desire to remain plugged into the brand and frankly this is how we win deals.
In a lot of cases is because we care very deeply you know Simon sinek has one of the most viewed,
TED Talks ever right we should start with why and that is how we start we start with why did the entrepreneur start this business,
and sometimes it was like I don’t know I was in college and needed some extra beer money or I had to pay rent or whatever other times it was you know my
mother had this malady that caused her not to be able to do a certain thing and so I found this product and decided that maybe it could help other people right and every single story is different
and so we learn a lot in the stories but we also do learn a lot from the sellers and we’re super flexible with our pricing structure we don’t have sort of a.
We don’t really have like a take-it-or-leave-it style we want a suit.
[33:44] Sellers in the ways that that works the best for them and so some are willing to take a little less up front but they want to benefit and participate in the upside over the next year we’re happy to do that and the extent that they want to be plugged in and.
Launch more products and use our Tech and you know get support from our team,
we’re happy to do that as well and so it really is a case-by-case basis there’s no sort of one sweeping,
you know this is how we do it forever flexibility is kind of the name of the game for us in a lot of ways.
Jason:
[34:16] Got it and so let’s talk about that that Tech stack for a second I’m always curious what people.
Decided to build and find the most value and building like are you mostly building tools around.
Catalog management and digital shelf for you doing like magic pricing logic are you doing like ad.
Buying and placement and all that like what what sort of problems are you trying to solve with the tax debt with your Tech stack for to the sellers.
Alex:
[34:46] I’d be curious to hear what your next two items would be Jason because everything you just said and more
actually where we started was we started with an engine that I alluded to earlier that helps us identify high quality assets that meet our criteria that’s where we began,
and so we you know started plugging into a variety of datasets from a variety of companies,
tying it together you know applying our own modeling on top of it and now use that to identify brands,
the tertiary benefit from that is when you have a lot of data at a category level.
[35:30] You can start to also Benchmark yourself,
and so we’ve been able to you know build benchmarks and say what should what should this company be doing what could this company look like what what if scenario A through Z happened where would we fall,
in this space and from there it’s kind of grown organically and so catalog management I mean you can’t run a direct-to-consumer business.
On one channel let alone many channels let alone in multiple GEOS if you don’t have a strong sort of item master so we certainly,
started their focused very heavily there in the early days to make sure that we had,
a sound way of tying all of these data points together across customers across orders across products and brands.
[36:17] And from there yeah I mean there are natural extensions in all facets right pricing drives forecast,
and our forecast drives our inventory Buys in our inventory buys Drive how much warehousing space we need or our consolidation at various ports are ordering Cadence and.
Guys let me know if you want to talk about the state of the supply chain right now around the world but that is a huge problem in and of itself and so we’ve invested heavily in,
Tech in Building Technology that gives our people visibility to every single step of the supply chain so that we know,
day by day minute by minute where goods are.
Because as I’m sure you guys know if you fall out of stock like falling out of stock especially on Amazon as a really really really really big deal,
because not only is there the Miss sales from that but you also have to then reinvest to you know get your advertising spun back up and to reclaim potentially your spot in Search and that’s really expensive to do and so,
The Economic Opportunity there is not just well we have you know Air Freight.
For extra holding costs or Miss sales but it’s also advertising its also customer experience it’s also,
bundles which also fall out of stock if a component is out of stock and so the blast radius is wider but we have a way to tie that all together and be able to make smarter economic decisions based on that.
Jason:
[37:46] Yeah that’s a super important point and I’m still shocked how many people don’t don’t get that but if you’re out of stock for three days out of a month at Target and you was three days worth of sales.
Um but you’re out of stock at Amazon and what happens is you fall to what’s called page 2 of search which is equivalent to being delisted.
And then you’ve got to earn your way back and so that’s funny like my,
question about your text deck I’m always curious how people answer because well in the old world those were all separate tools and you could kind of buy best-in-class tools from all these different vendors and each one did a point thing but my hypothesis in like,
Dynamic digital shelf world is.
All those tools have to be integrated because they’re all totally dependent on each other like you like I’m shocked how many Amazon sellers are buying ads on out of stock.
Alex:
[38:43] Oh my gosh.
Jason:
[38:44] And like you know I mean it like just all these things are so so interrelated in a in a way that,
that is a very different model than traditional brick-and-mortar retail.
Alex:
[38:56] That’s right you know we were opening up our office and one of the.
Super lame ideas that I had for a decoration was to build a physical value chain of paper chain and.
I thought it’d be really fun to you know first and foremost has have everybody’s names on it because Dan the day you don’t have a company if you’re only as good as the people that work for you that is.
That is true without exception.
Over the long run at least but but you’re absolutely right right like the interrelationship between every single.
[39:33] Touchpoint of a company whether you’re again MMA marketing for and growth supply chain.
Every single decision that you make has a ripple effect on every other person and so you know when we think about our organizational structure we try to be as flat as we can be we purposefully encourage people to meet,
their counterparts in other organizations so that they’re not just sitting in a silo and saying well I’m on the marketing team,
and that is a supply chain problem not my problem actually it is because you’re about to blow your budget getting that thing back on page 1 off the page of Doom because this thing went out of stock
so you need to be in lockstep so you can pull back on the spend so that you’re not buying spending 40 percent of your budget on out-of-stock,
right especially if it had a sin God forbid falls out of stock it’s a big deal and people need to be talking about it but my biggest thing and I beat this drum constantly is the problem with having.
You know 25 Point Solutions is then you have 25 dashboards you have to look at you have 25 systems you have to log into and you have to make the connections yourself and sorry but like human brain it gets tired
people have a bad night people have a bad day and you make mistakes but by being able to pull it all together visualize it in one space.
[40:55] And see.
How pulling lever a effects object Z like that that is what we constantly push ourselves for and constantly drive toward.
Jason:
[41:07] Yeah yeah and so you kind of answered you ask me like what would the next things on my list be for your road map and you kind of the name them right its supply chain and analytics for those,
for those very reasons you just covered sidenote are you hosting your Tech stack on Azure did you did you go Google Cloud platform or azure.
Alex:
[41:26] Wow I think you’re kidding but no Amazon Amazon web services all the way.
Jason:
[41:33] I’m shocked that makes a lot of sense now but as soon as you try to expand off of Amazon to those other platforms your that’s going to become a.
Alex:
[41:41] Yeah I know we use some gcp products we use looker we use five Tran for some API connection so we’re you know we started on AWS because frankly.
They gave us free credits and so why are they sticky with that.
Jason:
[41:57] Yeah yeah that I hear that’s a decent business.
Um the you open the door to a super interesting topic right now which is like supply chain and product liability particularly around holiday this point.
Um earlier this week Target and Walmart both had earnings calls and they both assured investors that they were well positioned for holiday but why.
You hear from any of the suppliers and it sounds a little dicey no one can hire anyone everybody’s Factory workers are on strike.
Um tons of disruptions in Asia right now going the wrong way I’m on pandemic stuff like what what your POV for Holiday are we are we in for some pain or is it overblown.
Alex:
[42:44] I mean by your gifts now is my POV you know it I think it’s going to be tough I think it’s going to be tough I don’t think,
well I don’t know covid is the big.
The big asterisk to everything I’m about to say because we’ve already seen in Ningbo for example the poor shut down for a couple of days because of a couple of covid cases they’re one of our factories got completely flooded by the typhoon I mean,
there are already so many issues beyond the fact that there are at any given time 50 boats trying to get into the port of LA and.
Some of those containers belong to us some of those containers belong to Target and Walmart and so we’re kind of all collectively in.
This for lack of a better term we’re in this boat together the difference is.
[43:40] The Big Box retailers and a lot of the big players have you know a much much larger physical Warehouse footprint where presumably.
They have seen these potential issues coming and have you know,
bought Goods in advance of meeting to get them on store shelves you know we certainly have but as early as we thought we were,
we probably could have even been a month or two earlier because we’re still seeing delays really across the board.
Um and it’s and a lot of it is international a lot of it is domestic right like will get bumped from you know delivery from point A to point B and you know Kentucky to New Jersey and you know UPS won’t show up.
And that’s not a knock on UPS like maybe their truck driver got covid right I mean there’s so many small things that compound the delays.
I think it’s going to be tough.
And I hope I’m wrong like I’m saying this but I really hope I’m wrong I hope we all get to sleep very happily at night because we had,
great holiday season kids are happy and we’re all happy I really hope that’s the case but we’re preparing for the worst.
Jason:
[44:53] I know that it’s possible for both to be true right like Target and Walmart could have enough leverage that they do believe they’re going to be okay from a supply chain and it could be the rest of the world that.
Um struggles but right side note on the demand I think Home Depot also had an earnings call this this week and they mentioned that they got there first.
It’s mid-august they got their first shipment of Halloween goods and they’re already out.
Alex:
[45:22] Oh man oh man.
Jason:
[45:25] Yeah so / your shop early comment I think yet not only is availability a problem but also.
As you know everything’s just getting more expensive because the cost of those containers and shipping and everything just keeps,
keeps going up and that that leads me to part 2 of why I’m not going to sleep this holiday period last holiday Scott coin This this term that got a lot of Attraction ship a get in,
and we talked about you know the fact that like obviously covid drove everyone online and so there was this you know.
[45:58] Outsized demand for for e-commerce fulfillment and you know UPS and FedEx have a finite ability to flex to meet that.
The I’m curious like it seems like it’s going to be an equal or bigger problem,
this year and I’m chuckling because the United States Postal Service just announced that they discovered this new business practice,
the FedEx and UPS have been doing called surcharges so now even even US Postal Service is looking to do holiday surcharges and they’re you know all the quotas for Holiday are already out,
and of course your friends and Amazon are you know largely the one and only,
retailer add scale that owns their own a lot of their own Last Mile so I do you is is that an advantage for being on the Amazon platform are they likely to run out of capacity and constrain fbas like do you.
Worried about fulfillment this year and how that’s going to impact holiday at all.
Alex:
[47:02] I am less worried about outbound fulfillment as I am inbound because of what you just said which is capacity constraints.
And you know any listener who has an Amazon business knows that.
[47:16] There was a change this year we’re while because last year Amazon started imposing,
skew level caps right and so even if you had a portfolio that was concentrated around one or two top selling products that do 85 percent of your sales you know at least you could probably be okay on those even if you
hit caps on sort of your tail selection they moved to a model which is,
it is at the account level now a cat and we were all super happy about that because we said well we have all these new products that we’re launching and because they have no sales history we can only Trickle,
20 units in at a time we followed a stock another 20 units we fall out of stock in the problem with the domestic delays is we could be out of stock for three weeks.
On that right even if our warehouse is next door to the Fulfillment center,
we could still not have our products sellable again for 3 weeks and there is nothing that will kill your cold start product launch faster thinking out of stock,
right and so that that has been an issue throughout the year and they kept saying you know July 1st the Caps will be lifted and they were and some cases and they weren’t and other cases and so my big concern is just that we won’t have the capacity,
available to us at FBA to get all of the goods in that we need to get in and so even if we are have a dozen two dozen.
[48:40] You know,
thousand shipments waiting there’s nothing that you can really do there’s no one that you can pick up and call and say hey can you like you know nudge nudge wink wink get my stuff in faster you just can’t do it and so you just wait.
[48:52] And that’s a really uncomfortable spot to be in so you know and then and so we operate in Canada right we have seen on Amazon Canada where,
the whole fulfillment centers have shut down due to covid and you see promised dates go from 2 days for Prime shipping to seven days for Prime shipping no matter which zip code you put in no matter where you say you are in Canada we’ve had some of our products that.
[49:17] The prime delivery date is a Six-Day window and that has been the case for months.
And so outbound from that perspective it does depressed demand that’s why I’m saying by stuff sooner because you might get a Six-Day promise,
but yeah I’m more concerned about the inbound and being able to keep Goods on the digital shelves through the through the entirety of the holiday season,
because you can’t you can’t remanufacture that demand and if we come out super super heavy like,
maybe it helps us through Lunar New Year which was also pretty tough last year but yeah it’s going to be really interesting and so again we’re doing everything that we can to try to.
You know make sure that all of our ducks are in a row all of our goods are Stateside everything’s ready to go.
On the chance that we can actually get you know Goods moved in but it’ll be a struggle.
Jason:
[50:14] Yeah yeah and as you alluded to the Canadian Supply chains even more fragile because one of those sled dog teams get sick and a whole Province gets cut off namjoo.
Alex:
[50:24] I had I had Xboxes the year Xbox One released idexx boxes on a train.
In the middle in the dead center of the country and we literally sent a helicopter to pick the Xboxes up,
the train and fly them to Toronto so that we could actually meet because we took pre-orders right and we had to meet release date delivery on those Xboxes so we’ve done some crazy stuff to make it work in Canada.
Jason:
[50:52] Yeah that’s a whole new new definition of air air freight geez.
The the drones will hopefully sell help with that I did want to you mentioned that you were seeing kind of the the caps and quotas moving from from skews two categories,
one interesting hypothesis I’ve heard from a bunch of like reasonably high volume Amazon sellers at the moment is.
As the catalog has gotten so huge and there’s like some counts like 800 million skus in the catalog now,
um there’s a hypothesis that Amazon is strongly preferencing new skus and so a lot of people have said that they feel like.
The the caps and quotas that they’re getting on,
mature skews that in the old days like your quota would have just gotten bigger every year based on your sales history that they’re now running into this new problem,
Amazon is reserving a fair amount of space for new stuff instead of the old stuff and I can imagine,
that’s scary and or problematic in in your business model have you seen that at all is that viable.
Alex:
[52:03] I have seen shatter about it that is we have empirically not seen that to be the case for our brands.
We also don’t operate in every category you know I’m sure there are plenty of higher-volume you know on a brand by brand.
Basis sellers out there who are seeing crazy stuff,
for us like I said we’re launching a whole host of new products and it’s 20 units at a time and then you sell out but now your cap is 60,
you’re like awesome I have three times the cap but it’s still 60 it’s not 6,000 which is what we would need to actually you know generate the volume that’s going to get us on page one and so.
While our you know top-selling products we are running up against caps there as well it has not been.
[52:56] The issue really comes from when you have a brand level cap your best selling products are inevitably going to take up most of the calf.
And in order for us to hold a rational level of Safety stock it doesn’t leave a whole lot of extra space for the new products and so you know again we’re not really seeing that that.
You know thought bear out in our businesses doesn’t mean that they aren’t.
But yeah it just we don’t we don’t pun intended we don’t put a lot of stock in that right now.
Scot:
[53:35] The,
one question we’ve been following this kind of Amazon versus Shopify debate and we’ve had some folks on talking about headless Commerce,
have you guys thought about you know another big strategy for anyone selling on Amazon is it open up your own website have you guys chosen a platform there or do you have any opinions about kind of where the e-commerce platform Wars are going.
Alex:
[53:59] I have a lot of opinions we are so the direct to Consumer space,
is is what we firmly believe is like very core to our ability as a company to build long-term value.
To have a website that customers interact with engage with our loyal to no no to find products from we believe that score for some Brands more than others right,
we have inherited.
By way of acquisition most people just spin up a Shopify account and then fulfill the FBA and so we have predominantly leaned into Shopify as a platform for now I think.
[54:51] We are still so focused.
At this time especially at this time in making sure that we’re in stock on Amazon and that we have sort of that nuts and bolts Day Zero operational excellence with Amazon which is core to our portfolio that we haven’t,
we haven’t we haven’t dedicated a tremendous amount of resources and fully kicking the tires on all of the Headless options all of the other platform options we’ve had conversations with all of them
we haven’t actually,
made a concerted effort to say we are 100% doing away with Shopify in favor of X for these reasons we haven’t seen the need quite frankly.
Scot:
[55:35] And then so you’ve been in the retail game for quite a while one of our kind of favorite ending questions is if you kind of think forward let’s say 3 or 5 years kind of take you out of the, the current where do you where do you see e-commerce?
Alex:
[55:52] Wow I asked a flavor of this question when I interview people.
Scot:
[55:56] We’re turning it on you.
Alex:
[55:58] So
What this is bringing up is feelings reactions to a lot of the changes around consumer privacy you know iOS 14 and all of their for the platforms,
that were.
You know I’ll say hoovering up data and applying it and sometimes great ways and in other times may be less great ways I.
[56:29] It hurts me a little bit inside because what I believe is that actually.
[56:36] The the ability for us to build like to use data to build products that Delight customers.
That is core to again building long-term value and I also believe in this is getting back to the question that the ability.
To reach customers where they want to shop with the products that they’re most interested or that that suit them the best I think we’ve taken a step back from that.
And my hope is that we will continue to evolve responsibly.
As a society and as companies as Leaders of sort of this new wave of retail in a way that can still surprising Delight customers that can
deliver product innovations that are meaningful and they’re not just you know we,
wiggle a little here we do a little dongle there and today it’s a new product because it’s actually fundamentally not like I love you.
The next 3 to 5 years as an evolution toward getting even smarter about the products that were building even better at,
reaching consumers who are actually interested in what we’re,
selling so that you’re not just on your endless Scroll of social media and you’re getting hit with ads that are is completely irrelevant and it sort of degrades your experience on that platform and the degrades the brand experience and that’s what we care about we care about the brand experience.
Jason:
[58:02] That would be awesome if it plays out we’ll have to see ox.
Alex:
[58:05] We will see.
Jason:
[58:06] Exactly
well hopefully you’ll be like retired and fabulously wealthy so you’ll just be be watching it from Jeff Bezos jot but that’s gonna have to be where we leave it because it’s happening again we’ve used up an hour of our listeners time.
I know it goes fast we’ve certainly enjoyed chatting with you if listeners have any comments or questions they’re encouraged to,
hit us up on Twitter or leave us a note on our Facebook page and as always if you enjoyed this episode we sure would be grateful if you jump on iTunes and give us that five-star review.
Scot:
[58:41] Alex we really appreciate you taking time out of your busy schedule dominating the Amazon aggregation world and if folks want to find you online what’s kind of the best place to you are you on the
the Twitter box are my spacer where do you hang out online.
Alex:
[58:58] Oh my gosh do I still have a MySpace account that’s kind of scary.
Jason:
[59:02] He has a Twitch account he’s he’s twitch he’s a twitch streamer.
Alex:
[59:06] That’s right yeah no you can find me on Twitch no I am predominantly on LinkedIn you can connect this me follow me on LinkedIn shoot me a message there
feel free to drop me a line Alex at foreign Brands.com otherwise I am on the Twitter box but I am.
Sadly not as much of a contributor as I wish that I that I wish that I could be I’m just not that funny.
Scot:
[59:28] Well I think you did pretty good here on the show you were funnier than Jason which is what’s actually kind of a low bar but.
Jason:
[59:33] Yeah don’t I don’t let that stop me for god sakes.
Scot:
[59:35] Do you think is the most activity out of his grumpy old man tweets.
But that’s a topic for another show but thanks we really appreciate the time and.
Jason:
[59:49] Until next time happy commerceing.
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