If you are a thriving vendor with products on Walmart, Staples, other mass retailers’ shelves, or you are selling online through Amazon, Alibaba, or any other big e-Commerce platform, be warned: the days of vendor loyalty are long gone, which is why it is essential for you to secure your products and customer base before launching your products. As experienced product designers, innovators and entrepreneurs, we have learned from first hand experience as well as vicariously how big companies can take advantage of entrepreneurs who offer private-label products or services. Take Amazon for example– if you have an unpatented original product that you get from another manufacturer and the e-Commerce giant sees that your product is selling like hotcakes through their platform, it could go two ways– they can either source any number of variations of your products’ Stock Keeping Units (SKU’s) from your manufacturer and persuade them to make your products for them for reselling, or your manufacturer may negotiate with Amazon to achieve the same goal, resulting in an increase in their profit margins and a decrease in yours. At the end of the day, everything is a business decision done in the name of more revenue. This is an issue that a lot of small business owners in the private-labeling industry are experiencing, and something you must take heed of especially if you are just starting out in the same field. Get informed perspectives, tips and useful information on what to do when this happens to you, how to be proactive about it, and many more from business, marketing, and manufacturing industry pros.
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Our subject is going to be When Amazon Becomes Your Competition. It definitely happens. It’s something that we’ve also experienced even before the days of Amazon when your customer becomes your competitor. That’s why we’re going to start the conversation. There’s an article we posted in the feed; you’ll be able to see that. It’s an article that is talking about the idea that Amazon is going to build its own private label empire. They’re waiting for the private labelers to find a niche that works, and then they are going to go and direct source and buy those products themselves. This happens all the time in regular retail. This happens all the time with Target and Walmart, not as much in Costco but Staples and other. It was in The Motley Fool where it was posted. It’s about how they’re quietly doing it.
I’ve heard this from a couple of people. I haven’t gotten anyone who confirmed that their whole entire SKU was taken over, but I have heard rumors from some private labelers, secondhand, that they were having their SKUs deteriorated by a price for. When Amazon drove them out, then they brought in their own direct brand. I had heard that a couple of them just got shut down. I don’t know if that one’s true or not, but I have heard of it happening. We’ve invited Steve Crimi on the podcast from AMZ Alliance. He’s going to join us soon and maybe he has some more perspective on that particular section of it. Why don’t we talk a little bit about our history and what’s happened with us in terms of direct stores.
We’ve had a long history in mass market retail, bringing products to market. We developed unique products. As long as you develop very unique products that are protected by copyright or patent formally, then you can fend off the trend that’s been happening lately. The trends that happen at mass market retail in the US has been for retailers to actually not want to work with vendors, what we would call value-added resellers or importers of products in the US. They didn’t want to buy from them because they know they’re paying quite a margin. They would rather go and get a cheaper price going directly to the factory overseas. They want to go direct. If you don’t have a proprietary product, if you don’t have something unique, even if you have something unique, they can go around you. They can knock it off, find the same thing from the factory and buy it direct.
Amazon Becomes Your Competitor: As long as you develop very unique products that are protected by copyright or patent formally, you can fend off the trend that’s been happening lately.
We’ve had some situations where even when we’ve developed unique proprietary products, the vendor, in this case for us it was Staples, we designed several products for our clients that was selling to Staples directly, very unique products, original designs and had some patents, but we actually had advised our client to file design patents on some key elements of the product and they didn’t have the money. In this case, the design patents, we’re talking about a couple thousand dollars for each design. We were talking about spending $6,000 maybe $8,000 at most. They decided not to do it. Staples became very unhappy with the margin to the domestic company. They felt like they weren’t making enough money on this successful product. What they ended up doing, long story short, was they went and solicited other factories in China.
Actually, it’s one of the same factories that we had rejected for making that quality. We’ve done a test with them. We’ve done a twenty-store test with that factory and then we moved it after that testing. Although the product was successful, we wanted a better quality. The foam was terribly uncomfortable and there was a bunch of other things wrong with the way that they were producing it. These were office chairs and there’s a particular region of China where it’s a pretty tight network. All factories know each other and word gets around real quick. Anyway, they knocked off two of our designs that were successful and they stopped buying from our client, which meant we were out of royalty too so we’ve got screwed in the process.
What happens though is that the client can’t say anything. That’s what Amazon is going to count on. It’s the same thing that Staples count on. They count on the fact that that client or the private labeler has other SKUs that they’re worried about losing if they start complaining. That’s what they do. They leverage them and push them into saying nothing and doing nothing. It’s why we advised our client with the patent strategy and that’s why we’ve always used it, but we can’t force a client to take it on. I wish we could, but we can’t. In the end, they learn the hard lesson that way.
We’re out of luck. That product is still being sold by Staples for a couple of years now which is not right. In reality, even if we tried to sue them, we would probably win that battle but it would cost us more money than we would recover so we’ve just moved on. That’s the real unfortunate part of it. It goes straight to the point why not only is having a unique product critical, especially when your customer becomes your competitor, which is what all these retailers are doing and in reality is what Amazon does as well. They see products that are selling on their store and they’re like, “Can I make more money?” The same thing happens even with Apple and the App Store. When they see apps that work for an iPhone that are going really well, if there’s nothing proprietary or there’s no patent preventing them from doing it, they’ll just go and build it into their operating system as a new feature of their operating system.
This has been going on forever. This is exactly we ended up with our infringement lawsuit with Palm Computing and IDEO early on. It’s that exact thing. When something was going to successful and doing well in the marketplace, they just decided to knock it off. In their case, they took the knock off too far, counted on the fact that we were too small and wouldn’t sue and didn’t really have a patent issued because it issued after they launched. This is why we have what we call an Intentional Invention Process. There are some times where we intentionally develop IP even though it may not be the strongest or the most enforceable patent out there. We do it because it’s a deterrent. It allows our client to say, “You can’t direct source that. You have to stay with me.” It just gives you a little bit of leverage and a little bit of an opportunity. The reality is this, in the consumer retail world, your patents are never going to issue before then. The pending part is enough of a threat at that time that you filed it. It may be published, but it hasn’t issued yet. That doesn’t matter because they’re still going to be afraid of it.
We’ve experienced many retailers including Costco, Staples, and Walmart that when they know that there’s a patent pending or there’s an existing patent, they actually take that seriously and they don’t want to get in the middle of that fight so they’ll go and avoid it. This happened with Staples and the office chairs I was talking about. We had actually a patent on the design of one of those faces. Because it has been used on another chair, everyone said our client couldn’t get a patent, that was on other parts of the chair, but the face had one. When Staples went and knocked off our item and knocked off everything about that chair down to a T, except they switched it a bit. They do respect that. We’ve even seen Costco even worry about it when somebody even incorrectly informs them or threatens that, “We have a patent on that.” They try to stay very far away from that so it can be a good defense against some of these problems.
There is a little anecdote that you might like to hear is that when we create a product, we’d go over there to the factory and we sign off on this. Literally taking a silver magic marker and sign the chair itself. What we learned, because I know everybody there and made a lot of contacts, is that in the meeting with Staples when they’re reviewing the chair and all that, the factory owner actually pulled out the original signed off sample that you had signed Tracy to approve that chair and said, “Here’s all the details. This is the original. This is what you want to make.” They said, “Yes, that’s what I want.” They actually used our signed off sample to confirm what the new product needed to be and said, “Yes, use that as a specification and the sample to match when you’re building this product for us.” It was really egregious and blatant that Staples were knocking us off. I was very unhappy with Staples for a long time, even though legally, maybe they have a leg to stand on, there was nothing to prevent them unless we want to go wage a copyright complaint against them if we could for aspects of this chair, it was ethically the wrong thing to do. This is the reality of big business in retail. These things happen. Those retailers or online merchants have the keys to their castle. If you want to sell through them, it’s got to happen in their way. If they don’t want you to sell, they won’t. It’s very unfortunate.
[Tweet “We intentionally develop IP even though it may not be the strongest or the most enforceable patent out there because it’s a deterrent.”]
It’s the reality of what goes on. Private labelers are just starting to burn of that and the reality is that that goes on. It’s worse for private labelers because they are not only in a tighter competition with Amazon and other things as things get successful, but they haven’t probably gotten enough traction either. They’ve made all these significant investments and they’ve worked all the things through and they’ve got all that going on. All of a sudden, they get to the top and they think, “Good. I’m going to coast for a few months and make some real revenue and rebuild this and invest it in a new SKU,” or something like that and that’s when it all goes wrong on you. They haven’t really had the time to build a strong enough business underneath that. That’s really the big concern for them. What they don’t also realize is that there’s some solicitation directly to Amazon from the vendors going on. When the vendors start seeing the orders increasing on something, if you do not have a good relationship with them, they’re straight seeking out through trading parties and going to Amazon direct as well. We get this all the time.
You help show them this is working and it’s starting to get traction. If you do not have something proprietary or you do not have a good relationship with that factory, they’re not going to feel like they owe you anything. They’re going to be all too happy to do whatever it takes to get more business. At the end of the day, they want to keep their doors open. This isn’t even about copying in China. They have a bad reputation worldwide for copying people’s things. They don’t view copying things the same thing we do. They do it and there’s, “Wow. If you can make a really great copy of something, you are really good and even better in some ways than the person who created the original.” That’s something that’s deeply ingrained in China’s cultural history. We’re not going to go into the lesson of why, but just accept that that’s what it is. In the US, they think, “You copied someone. You’re not the original. You’re bad.”
In the case of private labeling and what’s going on there, it’s just sourcing. If you make it in a special color or something like that, but that’s really not proprietary. There’s nothing proprietary about it where they’re not protecting themselves, but I understand why because you just don’t know if it’s going to have market traction before you get started. If you don’t know that it’s going to have market traction and then you go from there and you just start selling, now you get this SKU equity. That’s what happens. You build up your SKU equity, you’ve got all the keywords dialed in, it’s starting to rank, you’re free to change it because if you change it then it’s a different SKU and you have to start all over again. That’s also a problem in the way that it works. If you don’t start out with that specialness with the item to begin with, that specialness costs. It costs in design, it costs in development, and sometimes you have to pay for tooling and other things. That’s where it gets costly.
The thing is when you’re putting something up on Amazon, because there are so many tools people can use to find out how well something is selling even if it’s not their item, the reality is they have the ability to really tell what items are tracking and selling and what are not. Not only Amazon is looking at that. A lot of other competitors are looking at that. If you’re white labeling something, if you’ve sourced something from Alibaba that anyone can source and put their name on it, once you show them there is really great value and sales potential in this particular item or this type of item, they’re going to say, “All right. I have the money. I can go and import a bunch of those and then I’ll do some different keyword optimization and try to get my item ranking ahead of yours in search and I’m going to steal your sales.” You’re showing people a path to success, they’re going to model off of you. Again, you can make a career or business of doing that, but you’ve got to be getting in and out very carefully. If you expect to be able to sustain that same item year after year, you’re not going to have sales growth. You’re going to have sales shrink. That’s why if you can, in any way, have proprietary products, unique bundles of products, things that aren’t going to be as easy for people to go and do as quickly.
We’re product designers and developers, we’re not interested in doing something ourselves unless it’s original, unique, and different. That’s why we research a potential market and figure out what it’s going to make before we ever make anything and before we can see anything. That way, we know our target market and we go and then we go and develop something unique that isn’t going to be me-too. Me-too is a very bad place to be on Amazon or in retail. If you haven’t stacked that next product right on top of the first one while you’re on that upward curve trend, then you’re in trouble.
I know we’ve titled this When Amazon Becomes Your Competitor, but it’s true when Amazon or any of your potential vendors or distribution channels, resellers, whatever, any of them, become your competitor and they all want to become your competitor. There are two different things on Amazon, you can be an Amazon vendor or an Amazon seller. An Amazon seller is someone that sells over at Amazon. An Amazon vendor is someone who’s selling them to Amazon and Amazon selling it themselves. The first one is consignment. The second one is more of a traditional buy and reseller relationship. Amazon can buy what’s sold to them. They’ll buy it from you and they can also go to a factory and buy from them. They don’t care who they buy it from. There’s no loyalty from Amazon or any retailer in terms of vendors. There may have been a time in which a retailer valued the vendor, their performance, their quality, and all those things, and while they still care about quality for safety reasons, the reality is the days of vendor loyalty are long gone. I can’t remember the last time we had enough business. They only let you get so big, and then if you’re too small then there’s absolutely no loyalty at all. There’s not really even a happy medium in there.
This is why we see so many clients. This is the one thing that I say again and again to those who want to get on the retail shelf. It is harder to stay on the shelf than it is to get on the shelf, and it’s incredibly hard to get on the shelf to begin with. That’s saying something. It’s hard to keep your space because there are so many things that go into it. It’s not just innovation and new products and new designs coming in. That has to be fresh all the time. Even if they still go back and buy the same thing, you have to present them quarter after quarter, half a year after half a year, season by season, depending on what category you’re in. There’s also the factor of your delivery and your performance and all of those things that go into giving you ratings and how they pitch you against other vendors in that scenario. There’s so many ways that you can trip up and that’s why we recommend so highly for those that are going to mass retail, not just Amazon, that you have someone who’s guiding you through that process.
Amazon Becomes Your Competitor: Me-too is a very bad place to be on Amazon or in retail.
It’s hard enough to become a new vendor to learn about listings and to get on there. It’s hard enough to become a vendor at any retail. Maybe the only ones that are relatively easy to get into are the dot-coms and brick and mortar retailers. It’s relatively easy to get on Costco.com. It’s relatively easy to get on Target.com. It’s not a bad place to start if you desire someday to end up being on the shelf on those stores, because otherwise, you get a vendor number to get your foot in the door. If you have some unique product that starts to do well, then you can easily jump over where you’re building a trust relationship with the vendor and the buyers and you can jump over when you’re ready and able to sell a product on the shelf in those stores. That’s ultimately easy. In fact, getting an actual product going and sold on Amazon is not all that hard either but it’s a lot of work to get to rank and absolutely succeed. The very hard part is trying to go directly to be on the shelf.
As we’re talking about the problems of Amazon or in distributor or retailer becoming a competitor, the reality is Amazon is a wonderful place to market test a new product idea. Amazon is a wonderful thing with a low barrier to entry. If you get a product up and listed, the best thing you can do is to actually get market proof before you’re going to go and invest heavy dollars in inventory or tools and things that are necessary in order to get a product on the shelf with mass market distribution and brick and mortar retail. Amazon’s a wonderful tool for that. Again, you do the revealing stage in a test. If you don’t have something unique, you’ll be revealing it before you’ve gotten a hold on a shelf. All your competitors are thinking and going by that easily and they’re going to say, “Thank you very much. You just did all the research.” What they’re going to be is Burger King to your McDonald’s except the disadvantage is much bigger than McDonald’s. You’ve done the research and the homework showed them essentially what street corner to put your store on and what price to sell your product and what products to sell. If somebody can operate quicker than you, faster than you, and have more money than you in order to execute, then they go and make more money on it to capitalize on that more than you. It’s very unfortunate. It is important that you have some unique proposition.
It is critically important that you also just be aware of your potential life cycle. When you know you’re heading up there at the top of your rankings, you know that you’re at risk. You need to figure out a way to mitigate that, bring in the next product, whatever it is that you are going to be going for in that process. I hear a lot of paranoia from the product community and from the inventors’ community, not just the ones we have on here, but I hear them when I’m out in the field and everywhere else as well. I know you guys are frustrated and this is stuff that happens. I don’t want to be obsessed about it. It will happen and when it happens it’s because it’s a good thing. It’s because you’re doing well. It doesn’t happen to those who aren’t successful. A lot of inventors cut themselves off with this fear of getting knocked off and don’t get it out there fast enough. The best defense is getting out there faster. If you do have something special, getting it out faster is the best way because you get everybody struggling to figure out what’s next, to figure out how to cost produce it, and you’re going to always be ahead of that curve. That’s the best method I can say. We talk about IP a lot and we talk about this infringing thing that happens, but the reality is that we don’t want you to get hung up on it.
We’ve been out and doing a bunch of events lately. There’s this guy we met at a local event who was going to go tool and make tens of thousands of something. We have in Southern California a lot of pretty big inventors’ forums and investors’ groups that meet twice a month usually. Recently, someone came to that with an idea for some kitchen gadget of some kind. Quite honestly, when I looked at it, I’m like, “That’s been done before.” I didn’t think there was anything unique to it in terms of function. There could have been some unique design done to it. You want a bit of a brand on nicer design kitchen accessories and have a particular style of things you’re going to sell into the kitchen accessory category. He could build a brand around that and then throw on the design, but in terms of function and having it unique, without discussing brand or design or any strategy for business, he handed this to the group and said, “I’m wondering if I should make 10,000 or 20,000 if these and put them out there and try to sell them.” This is not a seasoned inventor that’s got a lot of product online. This is somebody who has this idea on the side. I just said to him, “Please don’t manufacture 10,000 or 20,000 of these.” That fact scared me and I fear for his family and what they’d suffer when he’s wasted all that money. What I said is, “Here’s what I’d recommend. Go make 100 of them, a smaller round, something that you can even make yourself or with relatively small resources. Go and make that and put it on Amazon and see will people appreciate the design and does it work. Then you can get a read on is this worth putting more money into?”
[Tweet “Getting an actual product selling on Amazon is not hard but it’s a lot of work to get to rank and succeed.”]
Honestly, I wouldn’t have put more money into it, but if you’re passionate about it and you want to do it and you think, “It’s functionally unique. I’m going to have my unique designs, patterns, whatever it is that I can copy,” and that’s legit, you can do that. There are plenty of brands out there that haven’t done it. Patents don’t make anything, but they have a certainly quality of look and style. Patterns are copyrightable. If you’re really passionate about something, you can go ahead and do it. Personally, I wouldn’t have put money on this one, but it’s a good example of how you use Amazon to test them anytime. At the same time, you need to think about your unique proposition. What are you offering and why would somebody want your product over lots of others? I don’t think enough people are thinking about that. Still, Amazon is wonderful retailer to use as your testing ground or proving ground because they’ll let you put any product up there as long as you’re not violating their policies and terms of use and copyright infringement use. You can pretty much put anything up there. Even big box retailers, if you have a product that succeeded on Amazon, that gives you credibility. When you go to them and try to convince them to buy and put it on their shelf, most of the time they will say, “How’s it doing on Amazon?” Even if you’re not going to make the exact same thing, they’re going to want to go a little different and unique. If you’re going to make a little flavor of it, so much the better because then that’s unique.
Steve Crimi who is with AMZ Alliance is a good friend of ours and husband of our Product Launch Hazzards Expert Brenda Crimi. He’s an expert on all things Amazon. Steve, can you share with us your words of wisdom regarding Amazon. Our topic is about Amazon becoming your competitor. In the future, we definitely want you to go into the service and benefits your company can offer people. For now, can you help share some words of wisdom regarding working with them?
Absolutely. By the way, I’ve been listening to the conversation. I’ve got a real gist of what you’re talking about in your frustrations, which I totally understand. Coming from the background of inventing a product and taking it to market myself, I recognize the challenges and the struggles that go along with that. The number one challenge for any inventor today is speed to market. It’s actually a challenge for all companies regardless of what size they are because it used to be that you had a product cycle that may have been, let’s say eighteen months. Now, by the time eighteen months comes along, you already have a lot of competitors on the marketplace.
I’ll give you an example. Brenda and I started selling compost pails about six months ago through Amazon. To your point, we saw them for the first time in Costco the other day. Apparently, people are understanding that that’s a hot item right now. There’s just no time to get to build a market or a brand before you have competition out there. That was the point that you’re making. What we do is we’ll look at getting that path to market down to obviously a smaller time frame as possible, and then not investing tons of money in a specific product but basically looking at how can we make sure that we’re keeping enough inventory to continue to grow that marketplace but not take too much risk. That’s where Amazon comes into play. I can’t speak outside of Amazon as far as getting into retail, into brick and mortar, that’s your wheelhouse, but that’s a good starting into making sure that if you want to launch a product, you can launch it through Amazon at least in small quantities and test the market first.
Amazon Becomes Your Competitor: If you want to launch a product, you can launch it through Amazon at least in small quantities and test the market first.
What do you think the biggest holdup for you in the development cycle has been?
I’m coming from a background in electronics. From your standpoint, you may obviously feel that the development cycle is a lot quicker. Certainly, when it comes to consumer goods, it probably is. What’s the development cycle that you’re used to now with a new product?
The development cycle of a product can take anywhere from 90 days to a year. It depends on how complicated the product is. Once you decide you’re going to pull the trigger on a product with the tooling involved, that’s at least a 60-day time period, and then manufacturing it and shipping it, you’re 120 to 180 days between pulling the trigger on new product and having it land in the US.
For consumer goods products it’s a much quicker product cycle. You’re looking at on the outside maybe six months from the time your conceptual design, patent process, and everything. Is that what you’re thinking?
It can. It depends. For instance, we had some customers just recently that we were quoting a job for. They’ve got a product developed to a point, but it needs a little TLC, fine tuning to make it more efficient. It was going to be about a 90-day process to get that out. It’s easier if it’s not your first product in a certain category. We had another customer who’s doing water bottles for some time. They thought of putting out a new version. They have experience in it, they’ve got trust and systems in place with logistics and the factory and all that. In the world of retail, developing a product in 90 to 120 days is not unreasonable. We’ve got the projection that it’s going to sell the way it had.
They’re seasonal, like projections and forecasting and all of those things. We work way ahead in terms of brainstorming and concept anyway. The actual making of things from the time of buyer places an order on something so you have a design that you like, it’s no different than when you guys find a pail that you really like or you dial that in, from that moment on though, for the most part if there’s no hard tooling involved, we can do that in 90 days. For a holiday product, something specifically for Mother’s Day or Halloween or whatever, if you’ve got a seasonal event, how far would it be for that? Those buyers are looking at those products a year ahead, making a decision about what they’re going to buy from twelve to nine months out. How far would it be before receiving a product into Amazon?
The answer to that question is that it all depends on risk and reward. For instance, if you know that you have a product that’s going to sell around the holidays, you definitely need to place that order with the manufacturer probably about four months prior. You’ve got to remember we usually have about a 60-day cycle just to get it here, unless you’re going to have it air-shipped which is very expensive. The other thing is do you know really if that product is going to be hot? That’s the big challenge that you have and it’s very difficult obviously to feel that way.
I want to make a point though, getting back to what you said before which was really critical about what happens when you have product in brick and mortar, you’ve put on the shelf, and you’re investing in tooling and you’re investing in all of these things. You just don’t know what the volume of product is going to be until you get it on the shelves if it’s a really good item as you said before. Unfortunately, there are a lot of people out there who don’t really pay attention like they used to on honor system or patents or anything. You have to have the money to protect those patents and it could be a lot of money. What happens, whether we like it or not, the world that we live in is such that a lot of the manufacturers in China, we get calls from them from time to time. They say, “By the way, this item is really selling well.” That’s probably the items that you guys designed and worked with somebody for a long period of time and they went overseas and they started manufacturing.
[Tweet “Unfortunately, there are a lot of people out there who don’t pay attention like they used to on honor system or patents or anything.”]
Now we do some due diligence with that, but it’s a big world. It could be that maybe they did this with somebody across the country or maybe it’s somebody who’s actually in another country. They are then coming to us because they want to manufacture as much of that product as they possibly can. As you said, they don’t pay attention to patents like we do. Even if there are patents, they find a way around them a little bit. I’m not saying that I think it’s right or wrong, but the fact is that this is the world we live in. As an Amazon seller, we work hard to stay in integrity and do our best to find out if in fact that product has patents on it, if that product is protected.
Most of the time that’s not the case because people have learned that going through that process is very tenuous. Let’s face it, even if they have a United States patent, chances are they don’t have a patent in China. The fact is you hit the nail on the head. At the end of the day, it’s going back to the speed to market. One of the best ways that we have found to launch a product is through going into Amazon and getting a kicking as quickly as possible. Hopefully we have eighteen months to two years before competition comes in. Unless we’re willing to buy a tremendous amount of it, we usually at that point get out of it because it gets too competitive.
What about doing something like, to use Ken Courtright‘s phrase, “Stacking S-Curves”? If you found that it was going really well and know that there’s a SKU value, there’s a value to having gotten it ranked and everything, but if you were to do that as you see it scaling up and to stack the next one on top of it, is that possible to do and the next one be a little more proprietary?
My feeling is that’s the next step for us. We have a silicone ice cube tray. We call them Big Chillers. They’ve actually done really well because we packaged them in a unique way. Bundling and packaging is so critical to the success in any environment, especially on Amazon. To your point though, we’ve really done well with that but there’s always been competition. Interesting point, we’ve got two square ice cube trays, we can’t sell them for nothing. We pretty much give them away. We have wrapped it around in a square together and we’re selling the heck out of it. It’s just that combination. We thought about doing it because we’ve already established that Big Chiller brand, coming in with something more novel, more unique to your point, and investing a little bit in actually designing something that’s the next big thing in silicone ice cube trays or freezing products or whatever. Whatever it looks like, we can use that. Branding will help us.
I want to make this abundantly clear because it’s really difficult with Amazon. When you create a listing, that listing is for that product. That is unlike we see with eBay and some other sites where you’re actually building your store. It doesn’t work like that on Amazon. You’re only building that listing so you have to be really creative. You do get some kudos for your seller account and whatnot, but you have to almost basically close out that listing and start a new listing if you change the product much. There’s some interesting ways that we can look at doing that. It is difficult to build on a new SKU or build on an old SKU and create a new listing like that.
Would that mean that on Amazon, you don’t build a lot of brand equity it sounds like? A future product doesn’t benefit a lot from the brand success of an earlier product. Each listing is unique. Each listing ranks on its own. It sounds like there’s not a lot of benefit there. Are you really starting completely from scratch with a new product?
In many cases you do, but as I said before, there are some tricks that you can use and one of them is bundling, like basically take an older product and bundle it with a newer product. Let me just be clear that your seller account does have clout. The more that you sell on your seller account and the more that you create that, you’ve got the reviews, you’ve got the feedback, that’s important. Now, I do believe that the social media aspect can help with the branding of the product. It’s always important to recognize that if you drive traffic to Amazon, that helps. It can help in a big way even though Amazon doesn’t necessarily recognize that as far as a brand or anything. It’s important that we recognize that most people who go to Amazon for a lot of different products, unfortunately, they’re not really shopping for a brand name. You can work with social media to drive traffic to that and then Amazon looks at that very favorably when you’re driving traffic to them.
The last point I want to make, and it’s very important that we’re starting to recognize this more and more, has to do with how much we believe anyway. We don’t have absolute proof to this, but we’ve launched a couple of products lately for people and we felt that they would have done well and they’re not doing as well as we would like them to. We’re starting to recognize it for basically trial and error that you have to have enough products in Amazon for them to really push it. It’s almost exponential with them. The more products you sell, the more they help you sell and it increases the numbers.
Amazon Becomes Your Competitor: The more products you sell, the more Amazon helps you sell and it increases the numbers.
It doesn’t matter if it’s across SKUs?
I wouldn’t say that so much. It has to be in the same SKU. What’s important is recognizing. In your world, this is peanuts. For a lot of people, if you try launching up only having 200 or 300 units let’s say in Amazon, I don’t think that that’s enough anymore. It used to be, but Amazon is evolving too. Now you have to have 500 to 1000 units to where you really start seeing some movement because now they’ve got the ability to move the product around in their distribution centers. Keep in mind that their shipping costs are a huge part of their business and a huge part of their overhead. We used to send product all to one place, now we’re having to pay a little bit more in shipping and split the cost with them. Here’s the way I look at it and that is that once you prove a product, it’s very difficult to put a whole lot of money into a product.
Let’s say with the compost pails, because that market is still relatively young and still very attracted, where you really get the momentum in it is when you launch a more generic product and then you start working immediately on designing the next generation even though you have to start almost from scratch. Basically you’re starting at twenty miles an hour instead of zero. You’re starting at a smaller point, but you could usually build that much faster in that marketplace because now you’ve got two products that are sold by the same seller. You get that up to the front page and people see the differentiation between that.
Steve, I want to explain to our listeners a little bit about your company and what we do with you without taking it terribly deep. The reality is we design and develop products. We work with inventors. We’re launching our own products. What we do when we encounter someone that has a product and they think that they’re ready to start selling on Amazon, we refer them to Steve and his company is AMZ Alliance. Steve and his business partner, Brenda, are experts in how Amazon works. It’s their job to figure that out. They sell some of their own products and they also offer their services to create listings and manage listings for other people and help them rank on Amazon.
The thing I like most about you guys, Steve and Brenda, is that you are picky. You don’t take people who you don’t think you can get them ranking. I appreciate that because it’s not easy. It’s really hard. It’s got to have the right formula and all the things in place to make it work. That’s why we don’t do it. I can’t tell you how many inventors and product people I come across and I’m like, “Why are you doing this yourself? You’re failing at it and you’ve been doing this for a year now and you’re not even close to ranking. Why haven’t you given this up already and turned it over to somebody?” It’s in and of itself an art and you guys do it well.
[Tweet “Get that product to the marketplace with the most bang for the buck to differentiate yourself from everybody else.”]
Thank you very much for the accolades and I thank you for recognizing that because what we do not have is the ability to rank a product that is just not going to rank. Where you guys come in, if somebody comes to you, you can help them get that product to the marketplace with the most bang for the buck basically to really differentiate themselves from everybody else. That’s why I love working together because I can tell you right off the bat that if they do certain things or they look at that this is the price point they need to be in, so if they do choose to go to Amazon, at least they have a fighting chance. It doesn’t work for everybody but we do our best when we can do it so I appreciate that.
Let’s close out real quick and thank you so much for joining us. We really appreciate it because your insight’s really valuable. You’re the guy on the inside there, doing that all day in and day out, and we’re just casual observers. We have products that are on there but we don’t do anything to make them rank. That’s our clients’ jobs unfortunately so we don’t have the inside track. As current members and future members of the network will look at this and other Hangouts we do, we certainly are all connected and we have access to Steve and you will too. If you think you’re ready for Amazon, we’ll connect you if you need some expert advice and counsel on this. Thanks everybody. We’ll talk to you soon.
Thank you.
About The Authors
Tom Hazzard
An inventor with 37 patents and an unprecedented 86% success rate for consumer product designs, Tom Hazzard has been rethinking brand innovation to design in success for over 25 years. Tom’s patented innovations provide entrepreneurs and businesses of all sizes a system to spread their brand, grow valuable consumers, and diversify into higher converting revenue streams without a lot of time, cost or effort. Tom is co-host of the Forbes-featured fast growth WTFFF?! 3D Printing podcast as well as host of two new podcasts, Feed Your Brand & Product Launch Hazzards borne out of his core business, Hazz Design, where he has designed and developed over 250 products that generate $2 Billion in revenue for retail and e-commerce clients.
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