Parag Mamnani: Hi, everyone, I’m Parag with Webgility. This video is being recorded as part of the series called Beat It. I’m talking to experts in retail and e-commerce on the impact of Coronavirus and how to beat the crisis. Today, it’s my pleasure to chat with James Thomson. By the way, James, should I be calling you Dr. Thompson? I don’t think I’ve ever heard you called that because I know you’ve got a PhD.
James Thomson: I am just James.
Parag: Okay, welcome James. He’s an expert on all things Amazon. He was the business head of selling on Amazon in his past life. As I mentioned, he’s got a PhD in marketing is his company Buy Box Experts advises retailers on how to grow their Amazon business. He also runs the largest educational conference for Amazon sellers called the Prosper Show, which we’re very proud to be part of.
He’s worked with thousands of brands and online sellers. He’s an author, he’s a contributor to major media publications. I could keep going, but safe to say, this is going to be a very insightful and fun discussion. Welcome, James, I hope I didn’t miss anything.
James: Thanks for having me on today, Parag. I’m a little embarrassed to be here on video. I’m like many people right now, desperately needing a haircut. Very happy to be working safely from home.
Parag: I’m happy to give you, following this interview, my advice on how to use trimmers on yourself. Happy to oblige there. Again, thank you for taking the time to chat with me today. We’ll dive right in, really with your expertise in the Amazon space. I would love to hear first off, what you’re seeing as some of the big impacts of the Coronavirus. One, on Amazon itself, but most importantly, on sellers in the e-commerce space and how they’re reacting to all the changes that are happening.
James: There’s a lot going on in your question there. Let’s look at some of the main effects in place right now. Consumers are not able to do foot traffic into stores, and so they’re moving online. Amazon is one of the best-positioned players right now when it comes to e-commerce both because of the breadth, the selection they have, the depth of selection, but also their ability to get most products reasonably quickly to anyone’s home.
Obviously, Amazon has experienced some shipping delays recently because of the unbelievable growth in demand for their services, but Amazon has responded by hiring 100,000 people and now has announced another 75,000 people soon to be added. The bottleneck right now in Amazon is Amazon can’t get products quickly enough to consumers. They can’t fulfill that last-mile delivery.
With all the changes we’ve seen with Amazon, defining products as essential and nonessential, determining what they will and won’t deliver quickly to consumers, all of that has been focused around how does Amazon reduce this massive amount of order. The huge increase in orders that have come through that they can’t fulfill themselves through their own fulfillment centers.
How do you decrease the size of the pipe with all this water flowing through the pipe? Well, one thing you do is you decrease the number of non-essential orders that you’re willing to fulfill anytime soon. That’s sort of one major obvious set of assumptions that’s happening. The other issue that’s happening is you have a lot of net new customers to e-commerce, people who haven’t in the past used e-commerce or have used e-commerce in one very specific way, and not necessarily to buy across all parts of their wallet.
We’re seeing consumers buying groceries online, something that many consumers have never done but quite frankly, there aren’t a lot of good alternatives. Likewise, if you’re buying home decor products or coloring books for your kids, things that you’ve never bought before on Amazon, you’re now looking at Amazon as a– In many ways the only place to buy some of this stuff.
If I’m a retailer like Amazon, the most important thing for me is I get to have a huge amount of consumer trial. Consumers are trying out my channel, they’re discovering selection, they’re discovering brands they may never have seen before. They may if they’re seeing Amazon for the first time, they’re experiencing what Amazon fresh is like, what Amazon Prime now is like.
These are incredible opportunities for Amazon to be able to put as much as they want, their best foot forward. Obviously, they are massively constrained from a capacity perspective because of the overwhelming levels of demand but the market is responding well, I think people understand that even if, darn it, I’d like to have my box of cereal delivered tomorrow there is a practicality that there are 10,000 people ahead of you in the same neighborhood.
Very interesting to see Amazon growing this quickly. What is fascinating to me is what retention is Amazon going to get when we get to our new normal state? For all those people who are buying, for example, Amazon groceries for the first time, some of them are going to say, “You know what? This is pretty darn convenient. I think I’m going to stick around and keep using the service long beyond when I have the opportunity to go back to my normal grocery store.”
Likewise, if you’ve been buying certain types of other products on Amazon that you haven’t historically bought, you’ll say, “You know what? There’s a lot of selection, there’s a lot of availability and quite frankly, I’m willing to take a couple of days and have that product delivered to my home rather than having to truck down to the retail store, which may or may not have the selection, may or may not have the color or flavor or size that I want.”
Lot’s of interesting things happening for Amazon. Certainly, Wall Street is responding very well to Amazon stock, saying they’re incredibly well-positioned to be able to keep growing. Imagine you and I both as former Amazon employees, if we’ve still got retirement dollars tied up in Amazon stock, that part’s good. The challenge here though is, there are so many people in this country who don’t have a lot of savings and they don’t have a lot of disposable income right now as paychecks have either been halted or they’re waiting for unemployment benefits.
While the prime customer favors higher-end households, the reality is pretty much everybody is a prime customer at this point. People are going to be more cautious about how they spend their money, which means we’re going to focus much more on the needs versus the wants. That’s why we’re seeing certain categories like apparel, for example, taking an absolute nosedive because I don’t need another pair of designer jeans right now.
I need coloring books to keep my kids busy so I can work at home. I’ll be interested to see over the next three or four weeks, people will have loaded up on the needs. If they have disposable income, how are they going to shift towards the wants? Because in our culture, we buy stuff to make ourselves happy. If I’ve got my kids ready, I’ve got my household ready, I’ve got my fridge ready maybe I will buy the designer pair of jeans because, gosh darn it, I don’t get to leave my house but if I put these jeans on, it’s going to make me happy for a few minutes.
Parag: Sure. Consumer behavior, I definitely think has accelerated. We already saw e-commerce is what? About 15, 16% of overall retail. This pandemic is only going to accelerate that. To your point, in terms of the macro picture, I would argue that some of this is not temporary. It’s actually going to be a permanent change or perhaps in certain categories, more so than others.
You talked about the driver’s seat that Amazon is in and really how they’re able to dictate the adapting, and rightfully so, certainly focusing on what’s right for the consumers. Getting all those essential goods and fulfilling the volume but there’s an aspect here of pretty much control that Amazon has over their marketplace and the repercussions for sellers who are potentially to your point like an apparel or non-essential categories or even those in essential categories, and how Amazon may be treating them versus their own supplies.
Do you think this changes the mindset of the Amazon seller and especially for those that may be considering jumping on the Amazon bandwagon, given the amount of traffic that they’re getting, is this change in behavior impacting long term mindset for Amazon sellers or do you think that everything just comes back to the normal once things– The curve gets flattened, so to speak?
James: Let me give you a little bit of a long-winded response here. Last year, China’s tariffs kicked in and then we got to, two months ago, when Amazon started making changes with regards to FBA, what they would take into the warehouse, what they would fulfill short-term, where they would fill with long delays. You have a whole class of seller on Amazon that is basically a born-on Amazon brand. They’re all in on this channel. They get everything made in China. They sell everything through FBA.
Well, those types of sellers have been knocked down so many different ways in the last year and a half that at some point, you have to ask the question, when are you going to start to diversify? Here’s the problem with diversifying. If you diversify into other channels, you probably won’t make as much money on walmart.com, on ebay.com, on trying to sell into brick and mortar. But even if you don’t make as much money, there’s likely to be more likelihood that you’re actually going to sell something in those channels.
By diversifying your time and your inventory, you may not make as much money, but the likelihood of you being all up or all down like some sellers are today, that risk gets reduced. You’ve got also a lot of these private label sellers on Amazon, they have specifically decided to participate in categories where there may be very few barriers to entry.
They’re having to operate extremely efficiently, which means they’re looking at the lowest cost production, which means they may have been attracted to putting all of their production into China. That results in the situation where yes, if there’s disturbance in one location it impacts their whole supply chain. If we fast forward six months, eight months, 10 months, hopefully things are back to some level of stability.
For those private label sellers to continue to compete against the Chinese manufacturers, who are operating now as Amazon sellers, it’s going to be very hard for those sellers to compete against the Chinese sellers unless they too have low-cost production. Not to say the absolute lowest cost but low cost. In some categories, China is so much more affordable for sourcing products than basically any other country out there.
Unfortunately, I fear that many of these companies will continue the source basically exclusively out of China. Whether they decide to diversify where they sell the products into channels beyond Amazon, I think that’s going to come down to a question of how much working capital do they have, while they say, “I still want to grow and make certain amounts of money on the Amazon but I’m going to hold 10% out and put it in this channel or another 10% in this channel.”
That’s hard when you have this constant mentality on Amazon that sellers are doubling down every time they buy a shipment of product. I’ve got to turn this as quickly as I can. I got to make as much money as I can in the next two years, in the next three years versus the long-term brand perspective of, I want to build a brand, I want to continue to build it and I want to be here in five years, I want to be here in 10 years.
If I’ve got a long term view and I’m prepared to do more than just make a bunch of money in two to three years and then sell my business, but rather I want to build a brand and over time it’ll continue to grow, those are very different mentalities. I think every seller on Amazon has to ask themselves the question, what is the role of Amazon in my overall decision to be a seller?
Parag: I think you hit the nail on the head in terms of companies with longevity versus a short-term mindset of making a quick buck because when the dust settles to your comment, certainly the tariffs had of impact last year but If you fast forward, who knows what the outcome of all of the political fallout from all of this and the implications for manufacturing?
We could probably spend an hour just talking about all of the implications in the supply chain and how sellers need to really diversify, not just channels of sales but also channels of procurement. To your comment, how is all of that going to shake up? When you think about sellers, coming back to the question around the changes that are now happening, are you already starting to see sellers change their pricing, their catalog, their sourcing strategies or are they just right now soaking it all in and trying to plan for the future?
James: It’s pretty hard to make changes right now. Either because you don’t have a lot of capital, you can’t travel to other countries to find other manufacturers and quite frankly, cash is king and I need to hold on to all of it that I possibly can because none of us know how long this is going to last. At the same time, it’s easy for a seller to say “Gosh, look what I should have done in the past.”
What you should have done in the past, you can’t fix at this very moment because of some of these travel constraints these cash constraints and so on and so forth. Unfortunately it’s like, riding a bull and at some point you’re going to get thrown off the bull but darn it, you want to hold on as long as you possibly can because as long as you hold on, others will fail and maybe you can last a little bit longer because you have less competition.
What I think is going to happen here in the next probably six to eight weeks is we’re going to start to see a bunch of Amazon sellers fail. The challenge in these sellers failing is they’re silently failing in the sense that if a seller disappears with its products, there are 50 sellers standing behind that seller ready to back fill that demand. For most private label sellers, the brand name doesn’t have much recognition right now anyways.
As consumer, I go on the page, I look at the first page of search results for an unbranded search a query that I’ve done, I’m going to see a bunch of brands. It’s not like I’m actually looking for a particular private label brand that I’ve seen in the past. I’m still going to be presented with lots of options. While it’s unfortunate a lot of these sellers are going to fail, from an Amazon consumer perspective, consumers aren’t going to see a lot of things being different except for things like, hand soap and toilet paper where there might actually be shortages. For most products, there’s still so much selection on Amazon that you’ll still find some solution for whatever your needs are.
Parag: When you talk about businesses that are going to fail James, are you specifically thinking about those sellers that had primarily Chinese sourcing and also relied entirely on FBA for fulfillment? Because folks that are doing their own fulfillment or may be relying on a different 3PL, hopefully even if they’re in the non-essential categories, I imagine some diversification at least of the fulfillment process should help them.
James: Absolutely. It absolutely should help. Let’s talk about the first part of what you asked. Even if I’m not sourcing everything out of China, so many of our raw materials come out of China. While something might be assembled in another country or might even be manufactured in another country, the raw materials come out of China. If I’m sourcing in a Vietnam or Mexico, there were delays in my ability to replenish product because these factories couldn’t get adequate products or raw materials themselves to be able to manufacturer or assemble my products.
In many ways, we have a worldwide problem here where there’s so much dependence on one country. Whether China is making your product or supplying portions of the product that we ultimately end up consuming, there’s a lack of diversification away from a particular country. If I’m a seller where either my products or the ingredients that go into my products are all coming from China, I think it’s a good opportunity for me to ask the question, are there other categories of products that I might want to expand into?
I sell stuff that today maybe one country specific but can I start developing products? Maybe I make them here in the US. I may not be quite as competitive on price but I’m willing to take a second, third ranking on a product rather than taking the first or the top ranking because top ranking takes absolute lowest prices, absolute levels of competitiveness that make me very susceptible that even small variances in external factors I can’t control.
Parag: Sure. Speaking of the diversification, today when you think about where we are, we’re a couple of months now into the pandemic we’re– Certainly here where I am in California for over five weeks now into the shutdown. There’s also this interesting ripple effect across different parts of the globe and different parts of the country. China was obviously the first to go on lockdown and things have started to open up there.
From your standpoint today, are you seeing the bottleneck being the supply side or are you seeing the supply side open up and you’re starting to see the bottleneck on the fulfillment side given Amazon’s bottleneck or are you seeing another place where the bottleneck exists?
James: We still have a bottleneck in last mile delivery. It’s still the bottleneck where Amazon can only rely on UPS and USPS so much. Amazon is building its own last mile delivery. They’ve hired 100,000 people. Huge numbers of those people are folks that are actually either driving Amazon trucks or driving their own personal cars to deliver packages to consumers all over the country.
When you have to hire 100,000 people, what Amazon is literally doing is saying, we need to hire 2,000 people in Seattle. We need to hire 2,000 people in LA. We need to hire 3,000 people in New York. You end up with these strange situations where depending on where you live in the country and depending on how well Amazon’s been able to recruit locally, you may still have long shipping times in a particular city because there’s still not enough capacity to do that last mile delivery.
Amazon made these changes a few days ago around the grocery, the Amazon Fresh space where they’re not taking on any new customers. Again, a matter of they can’t– They’re not able to manage the capacity adequately and balance it with the demand. They’re having to make choices about who gets priority, who doesn’t get priority? Obviously, Amazon wants people to serve everybody as quickly as possible but that has major logistics constraints that need to be addressed first to be able to make that happen.
Parag: As you think about non-essential categories because those I imagine are the worst hurt right now, especially those that have been locked into FBA. FBA’s got long delays. You mentioned of course that now is a very difficult time for folks to react. Are you seeing a wait and watch sort of attitude or do you feel like, they’re certain non-essentials and aggressive brands that can use this opportunity to do their own fulfillment and of course, with the lockdown it’s more and more challenging but are you seeing any creative strategies from those non-essential sellers?
James: We definitely have clients that sell non-essentials and they have moved to an MFN option where whether they’re fulfilling out of their own warehouse or they’re using a 3PL. The problem is, even if they find a way to fulfill those products quickly if consumer demand or consumer preferences have shifted such that consumers aren’t actually buying non-essentials, it doesn’t matter whether I have FBA fulfillment or non FBA fulfillment.
We have a basic problem of consumers aren’t buying apparel, they’re not buying luggage, they’re not buying car seats. There are categories where it doesn’t matter if I can get it to you in the next five minutes, you’re still not going to buy it. Until we get back to a place where we have good reasons to leave our homes feeling safe and good reasons to engage in community activities again, consumers aren’t going to be spending money on things that quite frankly are completely irrelevant right now.
Some of my clients sell types suspects that would fall nicely into these long term desirability but it’s completely irrelevant right now type products. Yes, there are companies that sell non-essentials by Amazon’s definition but quite frankly, we’re still buying those items, but there are lots of non-essentials that simply don’t want. It doesn’t matter how you fulfill it to me today.
Parag: Certainly, I don’t want to– Folks can contact you and will put up your information so they can reach out directly but for some of those brands and retailers that might be listing in the non-essential categories, how should they best make use of this time? Of course, we don’t know when things are going to open up but is there some advice you can give them on how to make the most of this opportunity?
James: Let me answer a little bit different question. For anybody that doesn’t have an Amazon channel strategy today, it’s time to be saying, “I need to think about where is Amazon going to help me. Do I sell on Amazon? Do I advertise on Amazon? Do I have Amazon do fulfillment of my own shipments? Where is Amazon going to be part of the equation?” For manufacturers and brands or retailers that control their own brands, many of these companies have historically said, “We have no interest in Amazon because we have our own distribution avenues.”
Unfortunately, consumers have shown in the last four to six weeks that they will go where the supply is available, where the distribution is available. If consumers are moving to Amazon, I think every brand needs to say, “To some degree, I need to have a backdoor, a side door into Amazon so that if I needed to turn on that pipe, the pipe is already built.” Most of these companies don’t have the pipes built at all. For them to say, “My gosh. Not only am I suffering with no foot traffic and I have no sales because there’s no physical foot traffic.”
If they’ve furloughed employees, or they don’t have cash coming in to make the types of investments to build those pipes into Amazon, as much as I want to say, “Well you should probably have an Amazon channel strategy.” There’s no money to make that happen. For companies like ours that’s an agency that works with brands to get them onto Amazon, yes, we have some companies calling us but there’s a lot of companies that we would love to have call us, but they’re not in a position to spend money to get somebody to say, “Help me get into this channel that I should have been in a long time ago.”
Again, you may not make Amazon your primary distribution channel, but if you have even the smallest pipe into the channel, and you know, “I want to sell first-party or I want to sell third-party or hey, I’ve got my digital assets already in place so that if I want to create Amazon listings, it’s not going to take six months and a bunch of investment to make that happen.”
Here’s the reality, 10 years ago, online marketplaces started to become reasonably big. Six months ago Amazon was already huge online, and yet there are so many brands that don’t have a digital asset catalog. If I said, “You need to be on Amazon.” They’d say, “Well that’s great. I don’t have a photographer to take photos or what does this mean to take a spec sheet and turn it into product listing content?”
Those are conversations that have never happened. They’re not going to happen in the next two to three months because teams are being split apart. Either people being furloughed or people all working from home and not being able to have a strategic discussion together that says, “You know what? We should’ve done this before but right now with limited resources let’s move forward and figure out how to make an Amazon Channel strategy happen.” That’s really, really hard to do.
Parag: Yes. I think one thing that’s proven to be more true now than perhaps ever in the last decade is that Amazon is essential. We’re as a society relying so heavily on the Amazon fulfilling all those essential goods and to your point for all of those brands and retailers that have been thinking twice about whether they should be having Amazon, whether it becomes their primary or just another channel for diversification, just having that ready is crucial. I know you obviously– Yes.
James: Can I just add one point, though?
James: We’re talking about Amazon as being equivalent to online, but there are a lot of brands that have said, “We will exclusively distribute through brick and mortar retailers. We don’t even have a Shopify or a big commerce site.” Well, if ever there was a time for a brand to say, “You know what? We probably should have at least an online presence and the ability to turn on a shopping cart online.”
I have a client that’s selling non-essentials, their sales on Amazon are way down, but on their own website they’re actually doing okay because they have a shopping cart, they’ve been doing some marketing for a long time, they’ve recognized that Amazon can never be their only online channel, but it took time and investment and a desire to say, “We know we’re going to sell less on our own channel, but we need to have that as a backup plan and that backup plan is there.”
When there is no backup plan online, then the reality is these brands have basically given all distribution responsibility to physical brick and mortar retailers. This type of pandemic situation is not likely to repeat anytime soon in our lifetime, but it does beg the question if online channels are here to stay, whether it’s Amazon, or whether it’s your own Shopify or a big commerce site, what are we doing as brands to make sure that we recognize that consumers have already moved?
Some of them have already moved to online and if we don’t want to be online, whether more and more consumers shop online today or tomorrow, they will still be there and we’re choosing to ignore them completely today by way of having no online strategy.
Parag: I would go as far as to say if retailers right now are still asking the question, “Should I be online?” They’ve got bigger problems. I think that question has already been answered. You’ve got to be online. The question then becomes, what are the channels you should be online with and how much of that destiny or control? To your point, are we going to see another pandemic? I don’t know, but we still have a long way to go with this one and we’re finding that if you don’t have your own online store, you practically have no control over your destiny because marketplaces and even brick and mortar in this current environment really what decisions, what policies are going to be set those particular retailers, the big box retailers or by Amazon, you’re at their mercy and to a large extent.
Hopefully, it’s beneficial for folks in certain categories. We’re seeing that trend as well, but to your comment in terms of those that are in the brick and mortar that are now thinking about e-commerce and online, I absolutely hope and this is why our Beat It Initiative’s key because I really hope that retailers, especially those in non-essential categories for whatever cash they have saved up, whatever resources they have available, that they can actually put those to work right now in building the future business by getting online and diversifying across channels. It’s a great segue to just talking about brick and mortar companies. Do work with a lot of retailers that have a brick and mortar presence as well James?
James: We work with brands. Some of the brands have a brick and mortar presence. We don’t work with retailers that sell other people’s brands. If you’re a retailer selling other people’s brands right now, talk about a difficult situation you’re in.
Parag: Yes, indeed.
James: You’re furloughing your employees, you have no foot traffic which means you have no cash coming in. When the time comes that we can go back to stores, these companies are going to have to hire back enough employees to be able to man the stores. The problem is, even if the stores are properly staffed, will enough consumers have enough disposable income to go back in to buy from these stores?
If tomorrow is the day we can all go back to doing this, we’re looking at four to six weeks at least before the foot traffic in some of these stores starts to look like meaningful foot traffic. That’s really hard.
James: I was talking to a journalist recently and said, “In many ways, what’s happened right now with the slow decay of retail stores closing at an increasing pace over the last three years, for a lot of retailers, this will be a situation where they can no longer pretend that somehow they’re going to make their way out of this in a good way.” Today JC Penney announced that they may well be going under.
There will be other big retailers that will also likely very soon follow and be able to use this situation essentially as an acceptable excuse for, “We have to shut down our stores. We’ve already let go of our employees. We can’t pay rent. We don’t really have access to product that is somehow differentiated or available in places that we can deliver it to them.” A lot of these retailers, unfortunately, are never going to come back from this situation.
Parag: Yes, it’s really brutal out there and personally, like I said, this is the opportunity for retailers especially those that were stuck in the old world of brick and mortar to really start to think about both getting online, diversifying online, finding channels that they can have more control over. If I’m a brick and motor retailer today James, and I’m really thinking about getting started, is Amazon still my first choice?
James: If I’m a retailer of other people’s brands, I would not go onto Amazon because chances are all those brands are already on Amazon being sold by somebody including unauthorized sellers who will take lower prices to be able to win the sale on Amazon. If I am a retailer of my own brand, chances are I probably have some online shopping site already and so it’s important for me to continue to invest in my online channel because right now, my online channel is the only channel that has any chance of generating any sales today.
If that site doesn’t look particularly good or you don’t have enough margin to be able to take part of your sales revenue and put it back into advertising to drive traffic back to your site, you’re going to get left behind by the big online marketplaces that continue to spend heavily on making sure they win on Google and Facebook and all the other social media sites. I don’t have a lot of good news when it comes to being a retailer that doesn’t have an online presence today.
Parag: Yes, it’s tough. If I were to think also then about the fulfillment side, does this sound like an opportunity for those brands to also think about diversifying their fulfillment to other 3PLs? I know obviously FBA is still king but is this an opportunity for other 3PLs to of course step up and for retailers to start engaging in diversification of that fulfillment strategy?
James: A couple thoughts. If you’re a standalone 3PL, it’s pretty hard to compete right now. You need to be part of a network of 3PLs that’s got an East Coast, a Central, a West Coast location so that you can do some of the inventory balancing the same way that Amazon does inventory balancing across the country. I’ve talked to some retailers– Excuse me, some brands that have their own retail stores who have a single fulfillment facility on the East Coast and they’re finding that it’s really expensive to ship that product quickly to a California customer. Yes, it is.
If you’re using a single 3PL, whether that’s your own warehouse or whether that’s an external 3PL system, these stand-alone 3PLs need to figure out how to create alliances with each other or get bought out by each other so they now become a network.Some of the bigger 3PL companies right now do have a whole network of facilities across the country and they have the software to support inventory balancing. That’s step one.
Step two, even if I do have 3PLs in place, I have to ask myself, “Who am I trying to compete with? Am I trying to compete with a private label brand on Amazon that’s prime eligible that will get to the customer in the next day or am I actually building brand equity in my brand and trying to create differentiation that allows me to get consumers excited about buying my brand and hence potentially being prepared to wait two days or three days to get it ground shipped to the customer?”
These are the types of questions that– These are big questions for brands to be asking. Amazon brought all the selection, they brought all this low price, they brought all this convenience for shipping but they also brought essentially the death of brands. There are so many products on Amazon where the brand is either nominal or completely irrelevant to the purchase decision.
It’s really, “Hey, does my widget figure out how to get onto page one of organic search or can they spend enough to be able to get top placement in paid search?” Those types of questions are more important to a brand selling on Amazon than a brand that’s trying to sell through its own online site that says, “We’re a real brand and we expect a premium.”
Parag: One macro I guess, challenge based on our discussion here is the small sellers. The small sellers that are selling other brands and don’t have their own brand. They’re in a very tough spot and their challenges have only become bigger and accelerated due to this pandemic. Brands that are small and rising that haven’t thought through their fulfillment strategy, that have not thought through their entire sourcing and diversification strategy, they’re also in a tough spot but, I guess, what that really means is does it mean it’s the end of small sellers?
Is it the end of really small e-commerce sellers and is this going to just make this– Is the marketplace just going to consolidate more and more to the right with bigger and bigger brands and retailers surviving and all the small ones being left in the dust?
James: We go through these cycles where a channel becomes big and everybody rides the wave and they may not necessarily have thoroughly thought through for strategy and there are companies that have been able to continue to grow by selling other people’s products and not particularly differentiating anything that they do. A situation like this basically reinforces that you have to have a real strategy, you have to follow that strategy.
A strategy is meant to be a series of choices. When you make the choice to do nothing particularly well, then guess what happens when things get tough, you don’t do anything particularly well. There’s a lot of companies that grew up on Amazon where they didn’t have to do anything particularly well other than show up and have a decent price. It turns out you need to do more than that.
If the channel becomes so completely different overnight and you’re not flexible enough because you don’t have enough cash to be able to make sudden changes or you can’t make big bets as well, then you end up in the situation where yes, a bunch of companies will fail but new companies will follow and say, “We have a very focused niche approach that differentiates us from everybody whose come before us and we’re going to follow that niche approach and we’re going to be really good at it and we’re going to be able to differentiate because we continue to be focused on a particular approach.”
When you don’t have a particular approach then as the waves go in and the waves go out, you just get washed in and out with everybody else.
Parag: That’s right. I think the keyword that really resonates with me here to your point is really having a good strategy. If you’ve not thought through exactly how you’re going to build your business long-term and you’re just thinking short-term about the quick wins no matter what marketplace, no matter what channel you’re selling in, you’re going to go with tides and you’ll have very little control over the outcome.
I’ve taken up a lot of your time, James and I would love to hear any parting thoughts. Anything else you’d like to share. I know we’ve talked a lot. A little bit of doom and gloom here for a lot of companies that might be struggling with the crisis here but any parting thoughts James, that you can impart on those retailers that need a little bit more positivity and want to think about how they can really make an impact right now and try to beat this crisis.
James: If you have inventory and you have something differentiated to sell and you’ve got at least some margin to invest in building traffic, I don’t care as much about overall margins that you bring home today, this is an opportunity right now to build brands. As long as you’re breaking even, as long as you can keep the lights on, this is a great opportunity to start making yourself known online.
Unfortunately, on the one hand, we want to make money to pay our bills but on the other hand, there are companies that are failing which opens up opportunities for other companies that do have the opportunity to invest a little bit in building traffic to get some of the visibility. This is a good time to do that.
Parag: Excellent. Thank you so much, James and before I end, I do want to do a shameless plug here for your Prosper Show. We look forward to exhibiting, we hope everything’s back up and running in time for the show and we’re really excited to be part of your show coming up in September, I believe.
James: Yes, September first and second. Thanks, Parag thanks for having me on today.
Parag: Thanks so much, James. Thank you for being part of our show.
James: Take care.
Parag: You too.