In this episode, we have our guest Michael Begg from AMZ Advisers, who brings a unique perspective for manufacturers and e-commerce merchants from his experience of helping customers getting started on Amazon as a revenue channel and grow their e-commerce businesses from the ground up.
He also shares his expertise to plan your marketing budget. If you have been thinking about or are already immersed in the path of D2C, you must listen to this episode.
Mike Begg is an entrepreneur and expert in eCommerce, digital marketing, and operational nearshoring. He co-founded AMZ Advisers with his two partners in 2015 and has grown the business to managing over $10M per year in ad spend and $100M per year in Amazon sales.
Mike and the AMZ team also operate AMZ Courses, educating Amazon sellers on how to maximize sales on the platform.
Mike loves sharing advice and help on anything related to Amazon and building efficient businesses.
I think the research shows now that the average number of impressions that a customer needs with your brand before they actually purchase from you is about 20.
Growing a business requires a holistic approach that extends beyond sales and marketing. This approach needs alignment among people, processes, and technologies.
So if you’re a business owner, operations, or finance leader looking to learn growth strategies from your peers and competitors, you’re tuned into the right podcast.
Welcome to the WBS podcast where scalable growth using business systems is our number one priority.
Now, here is your host, Sam Gupta.
Hey everyone. Welcome back to another episode of The WBS podcast. I’m Sam Gupta, your host, and principal consultant at digital transformation consulting firm, ElevateIQ.
When I was putting together a list of growth topics for this month, that could be valuable for our audience, especially with the changing business environment due to COVID. direct to consumer (D2C) strategies were on the top of our list. We wanted to cover D2C from different perspectives, including operations, finance, and marketing.
In today’s episode, we have our guest Michael Begg from AMZ Advisers, who brings a unique perspective for manufacturers and ecommerce merchants. From his experience of helping customers getting started on Amazon as a revenue channel and grow their ecommerce businesses from the ground up. He also shares his expertise to plan your marketing budget. If you have been thinking about or already immersed in the path of DTC, you must listen to this episode.
Let me introduce Mike to you.
Michael Begg is an entrepreneur and expert in ecommerce, digital marketing, and operational nearshoring. Mike co-founded AMZ advisers with his two partners in 2015. He has grown the business to managing over $10 million per year in ad spend and $100 million dollars per year in Amazon sales.
Mike and the AMZ team also operate AMZ courses, educating Amazon sellers on how to maximize sales on the platform. He loves sharing advice and help on anything related to Amazon and building efficient businesses.
With that, let’s get to the conversation.
Hey, Mike, welcome to the show.
Hi, Sam, thank you for having me here. I really appreciate the opportunity to speak with your audience.
Okay, so to start with, do you want to talk about your company? And what you guys do?
Sure, yeah, I’ll start off talking about us. My company is AMZ advisers. We’ve been around for five and a half years, almost six years at this point. And what we do is help brands and manufacturers maximize their online sales on the Amazon platform.
And our company will handle everything from doing the content creation, the SEO Marketing, the paid advertising, pretty much the entire Amazon sales channel for brands and manufacturers, they’re looking to increase their Amazon sales.
Okay. Do you target any specific manufacturers or specific verticals in manufacturing?
Yeah, for sure. So we just give you a little background on what our typical client is, they’re typically doing about a million dollars to $10 million in sales right now.
And they’re looking to increase that amount of sales. And we’ve worked across a variety of different verticals, from apparel to food and grocery to pet supplies, as well as some more niche categories like child’s educational materials.
So tell me a little bit about your own growth, how you started, how each year was. Did you have to pivot with respect to your business model? Were there any challenges? Can you touch in detail about that?
Of course, yes. Um, my background really wasn’t anything entrepreneurial. I came out of school, I started working in finance jobs, which we kind of already mentioned.
And I just realized that I needed to do something for myself. So I and two other partners that I have right now started looking for new business ideas to make money online.
We actually started selling products on Amazon ourselves, we began importing products from Asia and selling them online on the Amazon platform. And once we realized that we were very good at marketing and the advertising side and actually achieving sales for ourselves.
We looked at a lot of the other brands that were on there, and a lot of the other sellers that were well-known household name brands, and they were really underperforming and they weren’t hitting the sales levels that we would have expected.
So we saw an opportunity there to kind of build a business out, help these brands achieve more sales and the platforms, and then obviously grows business ourselves. You know, originally we started small just taking on stuff on the side while we had our full-time job still in the corporate space.
And then once at a certain point, we realize we have enough revenue to at least survive. And we were like, Alright, let’s go into this, you know, full steam. Let’s burn the ships. Let’s not look back, let’s see what happens.
And yeah now we’re here five and a half years later and we manage about $10 million in ad spend on the Amazon platform per year and help our clients do about $100 million in overall sales.
So, so tell me a little bit from the process perspective as well. Obviously, you have done amazing with respect to your sales and marketing.
But I’m sure you have had some sort of challenges, as you grew, did you have to change your business model just because that was not aligned with your processes, any processes, you know, that you came up with were unique and that manufacturers can learn from?
Yes, I mean, I think we’ve developed our own for our clients, we’ve developed our own playbooks on how to actually achieve the advertising sales they want. And we can talk a little bit more about that later if you want.
But in general, I mean, as a business ourselves and growing on the platform, there are always challenges that that come up, a lot of times the e-commerce space is very, it’s very rewarding, the companies that are flexible, that are agile, and that are able to get into new markets quickly.
So for example, we’ve had many clients that have been wildly successful in a niche product that has taken off one example that sticks out is CBD oil, we had a client that was doing phenomenally they were one of the first ones out there, they took off overnight from pretty much zero, within two months, they were doing $100,000 in sales of just one CBD oil product.
But however, they were not willing to invest in the advertising, and the marketing to help them stay at that number one spot.
And then the other companies that were familiar with the e-commerce space, realized that they needed to advertise that they could steal this market share back, jumped in there, produce the product, put it out almost the exact same product, ran the market, we needed to get the visibility on the platform and essentially put this client’s product out of business because the visibility just wasn’t there, the cost of his advertising became too expensive.
And he just wasn’t able to compete with a lot of these other brands are doing.
So the biggest lesson there, I think to learn is that if you are going to really try to grow on the platform, you need to focus on all aspects of it, it’s not just put the product up there, see if it sells.
You need to focus on your marketing, your reviews, the way that you’re getting social proof for your product, constantly trying to drive more traffic to it through off-platform SEO efforts, there’s a lot of different things that you need to do to make sure that once you start selling a product, well, it’s going to stay there for the long term.
So for the manufacturers, you know, the ones that have never explored Amazon’s path, or might not be familiar with e-commerce as much. Can you describe this to them a bit, and how they can start on the path?
Yeah, of course, well I think one thing that, at least from my perspective that COVID has really opened up a lot of retailers to is that being online is more important.
And if they’re, if people are not physically able to go into their stores, then where are the sales gonna come from that are gonna drive their products. And that becomes even more relevant for manufacturers that follow a traditional business model, where they’re selling products to these retailers or to a distributor who’s selling it to the retailers, and they’re just selling wholesale.
Essentially, by going to e-commerce, you’re going to DTC you’re cutting out the middleman, there’s no wholesale, you’re capturing that whole margin. And it provides such a bigger incentive for you to make the shift to the platform.
Now, if you are looking to figure out which of your products or if you have a lot of manufacturing capabilities and produce a lot of different products, the best way to start is just by getting in either with partnering with a firm like myself, like my own firm or like other firms that are out there to help do a lot of the market research for you.
So you can understand what markets within your product category look the best.
Or if you want you can also purchase a lot of the research tools that are out there, there’s one called JungleScout, another called Helium 10, and other that’s viral launch.
All of those can help you get some insight into what the markets look like and different marketplaces. And there are different tools for different marketplaces as well. So depending on whether you want to sell in Europe, if you want to sell in the US, Canada, Mexico, Australia, you know, wherever India, wherever it may be, there’s a lot of different tools out there to help you get some insights into where your best opportunities for the sales are.
So I want to touch back, you know on the example that you mentioned about the CBD oil.
So when we talk about this particular customer, obviously it makes sense for them to go for the e-commerce path just because number one the product is small, you know, this shipping is probably not going to be as much of an issue.
But if you look at the bigger products, such as automotive manufacturers, right then I don’t know if the e-commerce path is going to be relevant for them.
So do you have any specific recommendation in terms of who is going to be the right fit for the e-commerce path before they explore this?
Right. So if, in general, if we’re talking larger e-commerce, essentially, I mean, there are more opportunities to sell larger bulkier items.
But if we’re talking specifically about Amazon, one of the ways to really outperform on the platform is to be using the Fulfillment by Amazon fulfillment model. And using that model actually rewards products that are smaller and lighter.
So if your product is under two pounds, if it’s less than, I believe, 18 inches, you’re actually going to pay less fee. And once you hit those, you start getting above those, those packaging sizes above the product weight, the fees start really adding up. So that’s one thing to consider if you’re going to be selling heavier products or bulkier products, the price point needs to be there for it to really make sense, at least within the Amazon platform.
Now, if you are going to be selling in general, like you said, automotive parts, in e-commerce, there’s still a lot of opportunities to reach the right audiences, however, the marketing that you’re going to need to do is going to be a lot more targeted.
So on Amazon, we’re going a lot broader. If you think about it, at least here in the US 69% of all consumers are going to Amazon to at least start their product search.
So you know, if you’re selling, let’s say, I don’t know, a carburetor, it probably doesn’t make sense on the Amazon platform. Because it’s so broad the amount of search volume that people are searching for, are I’m sorry because it’s so specific, the carburetor is so specific on the platform, people are going to Amazon and search for everyday household items apparel like lightweight things that they need.
If you’re looking to do e-commerce in a specific niche like automotive parts, you need to make sure that you’re engaging with automotive groups, making sure you know Facebook groups, Instagram, social media link building with other platforms, being in the automated forums, whatever it may be, there’s still a lot of opportunities to drive traffic to your own website or to another platform that way to sell your product.
However, selling on Amazon, those types of products probably doesn’t make the most sense.
So let’s take a bit of a scenario here, right, the traditional manufacturers that we see. And what I was thinking is if we have a traditional manufacturer, who was actually looking to go for D2C. Their current channels at this point of time are pretty much going to be trade shows. Their marketing spend is not as much. So if the average manufacturer is looking to go for D2C again, if they have a very small product, they are slightly more mixture of e-commerce as well as the manufacturing then it would make sense for them, right.
But the traditional manufacturers typically go for the traditional, you know marketing channels, and typically they are going to be working with their distributors. So my average manufacturer, typically what they do is they have their distributor channel, they just work with them, they have their margin set up.
But now you know, we are talking about going for the D2C path for that. And obviously, we need to compare the margin. So as you mentioned that the margins could be slightly more lucrative because you are not really sharing that with your channel.
But at the same time, you are going to have your existing channel because you can’t go all-in in the D2C.
That could be too risky.
So, you know, we need to look at number one, the margins, and number two, the happiness of the channel.
So how do you manage the channel conflict? If a traditional manufacturer is going to go to D2C?
Yes, and I think you bring up a very good point understanding that the amount of advertising you’re going to need to do if you’re a traditional manufacturer, is significantly different than what you’re going to be doing in your you know, traditional model where you’re selling to a distributor.
However, that doesn’t mean you personally need to go DTC, you can also find other sellers that are out there. And there, there’s a variety of different sellers that will do this where they’ll actually partner with you.
So instead of if we’re saying in a traditional model, you’re wholesaling to the distributor and distributor selling to the reseller, or the retailer, you would go directly from yourself to the online reseller, cutting out the distributor, you can increase the margins a little bit, the seller will probably be paying for more of the advertising to get it going.
But you’ll also be giving them a discount on the product allowing them to make a margin on the spread. But that is one way you can do it.
Now if you’re gonna do it yourself, you do have more margin, but if we’re talking about Amazon-specific, there are significant fees that you need to understand as well.
So Amazon charges a 15% referral fee. If you’re using Amazon FBA, the fee comes out to be about another 15%. So right there, you’re looking at about 30% of your margin. And then if you add in advertising on top of that in shipping to get the product to Amazon, you’re using FBA Amazon will pay for the shipping to get to the end customer, but you also need to factor that in.
So at the end of the day, you may be looking at close to 40% of your margin.
If you’re doing advertising, it could be significantly higher, it could be about 50-60%. So depending on where your product margin is on the manufacturing side is really going to determine whether it makes sense for you to go DTC or not. Or to continue to use a similar model, a lot of distributors are getting more advanced and starting to sell on the platform more.
So again, maybe if you don’t feel like tackling the platform yourself, you can find the distributors that are doing e-commerce and selling products through e-commerce and partner with them as well.
So you can continue to sell your product in the traditional model, without having to make that jump to DTC if you’re not entirely comfortable with it.
Right. So basically, what you are saying is, rather than doing it yourself, you know, what you could do is you could actually enable your channel, and you can help them understand to increase your sales.
And as your distributors or the channel is going to increase the sales, obviously, that is going to increase for you as well.
Exactly, exactly. Yeah, everyone’s realizing the opportunity, whether you’re the manufacturer, or the distributor, there’s so much opportunity to sell online and more and more people are adapting to it. There are a lot of distributors out there, they’re actually acquiring agencies like mine that had the expertise within the Amazon platform to help them sell their products more online.
So, they’re actually increasing the relationships and the number of wholesale purchases that are buying. They can increase their margin, and then they’re turning around and selling it on the e-commerce side instead of selling to retail.
So they’re increasing their margins that way. So there’s a lot of different opportunities for you, if DTC is not something you’re willing to invest in yourself, just finding the right partner can help you achieve more sales for your products through online channels.
So let’s go back to our example a bit more. So as I mentioned, the traditional manufacturer, right does not really have as much marketing spend if you look at the kind of their website, they have, they would have spent, let’s say, $5,000-$10,000, just to build the website, and that’s pretty much you know, their marketing spend, their marketing spend is also going to be more from the trade show, because that’s their primary channel to get the leads.
And then they actually hang out in a lot of different forums such as the National Association of Manufacturers (NAM), that’s where they are going to be building relationships with the fellow manufacturers. So this is their marketing landscape.
Obviously, they are targeting their distributors for marketing and education.
But let’s say we are going on the path of D2C. And the goal is not really sales, because it’s not always sales that matter from the marketing perspective. It’s also the relationship with the customers because the customers need to know your brand, irrespective of whether your channel is selling or you are selling.
So what would be your perspective, let’s say if the manufacturers don’t want to, you know, go for the DTC, from the perspective of sales, they simply want to go from the brand recognition perspective, do you still think DTC adds value and the manufacturers should be investing something there?
Yes, and I think there’s a lot of value there if that is your goal to actually build brand recognition and a brand name.
However, the amount of investment and the amount of time it’s going to take to do that is significantly longer than just putting a product up and getting sales immediately.
If we’re going to really build a DTC relationship for your brand, we really need to look at the entire sales funnel. And that includes not only your ecommerce channels like Amazon, but also what you’re doing through your own website, and whatever traffic sources you’re using there.
So within the Amazon platform, you need to start with the basis which would be the SEO and getting the product part and content done. So the product listing looks good. But then we’re actually building the sales funnel within that platform. So within Amazon, we’re working at the bottom of the funnel, using ads to target customers that are already interested in buying the middle of the funnel targeting customers that are considering other products in our category, and the top of the funnel to build that brand awareness to get your name out there to make more people familiar with it.
I think the research shows now that the average number of impressions that a customer needs with your brand before they actually purchase from you is about 20.
So being able to hit them in these different stages of their customer journey within Amazon, but also within the entire ecommerce sphere, not just the Amazon channel. Whatever channel you’re looking at is extremely important in being in multiple places as the way you’re really going to build that brand recognition.
Now within Amazon. The ability to build an audience is starting to appear there allowing you to create followers, people can follow your brand within the platform. And then you’re going to be able to use certain retargeting through different ad types in the future. Or you can use Amazon DSP, which is demand-side programming, which is a whole different sphere of advertising. It really focuses on brand awareness and customer retargeting, but you can use all of this to build that funnel to start building that loyalty and then retargeting those customers to get more sales over time.
And again, Amazon is just the largest brand discovery tool. I mean, if we’re going 69% of customers are going to search there. So by not being on the platform, there’s a very good chance that your brand’s not going to be discovered. And then if we are expanding it to that next level of what’s your overall brand, and through all of your sales channels, Amazon is going to be essentially the top of that funnel. That’s where everyone’s going to find you. Then, as people start buying through Amazon, you’re going to want to try to find a way to bring them to your website. There are different practices and tools you can do for that.
But Amazon just becomes part of that funnel, and then you’re looking at how you’re going to build out that entire funnel for all of your ecommerce channels, not just one platform. It is an involved process, it’s very difficult to do on your own. But if you have the money to invest in it, you can find the right partners that can set up those funnels for specific sales channels for you, and help you build your overall DTC online presence.
Yeah, couldn’t agree more. You know, Mike, Amazon is really that big, I mean, synonymous to its name, I guess, you know, it’s really that big channel.
So if you’re ignoring that, obviously, you know, that’s going to be very limiting. So now, you know, based on that, I want to make sure my audience has some action items here, with respect to let’s say if they want to include Amazon as part of their strategy for 2021, and 2020, is almost ending with COVID. Obviously, there are challenges.
So let’s say they want to include Amazon as part of their strategy for the next year, what will be your, you know, 30-60-90 day plan for them? How they can structure, how they can talk to companies like you, and what they can expect out of it?
Yeah, well, I think this is we’re at a very good point right now. I mean, we’re already in Q4, it’s too late this year, to really get capture those sales on Amazon. If you’re just looking to get started on the DTC side. Really, we need to start shifting the focus to what we’re going to do next year. And the first thing you should be doing and using the rest of this year to do is to start interviewing other agencies that are out there.
So there is a variety of them that can help strategize exactly what you need to do for that sales channel. But there are a few different things that you need to be really learning you need to be figuring out if you have products within your catalog that can do well.
So you are going to want to be paying someone for research or doing the research on your own to see what the sales market looks like for these products. That’s the first thing, you need to consider what your logistics are going to be to get the product to whatever market so if you’re shipping from Asia, how are you going to get it to the US? How are you going to store it? What logistical challenges might you run into with customs or whatever it may be?
These are all things that you might have to deal with. If you’re already shipping to the US, maybe you already have that part figured out. But then once you’re here in the US, how are you actually gonna be able to fulfill the customer orders. And as I mentioned before, Amazon FBA is a great service to do it.
However, there are other services out there. So now Shopify is rolling out a fulfillment network, Walmart is rolling out a fulfillment network. And there are also third-party logistics companies that can help hold that can warehouse, your inventory, then fulfill orders as they come in. So there’s a lot of different complexity there that can be done.
And I would honestly recommend looking at having multiple distribution networks within the US or within whatever target, excuse me, whatever target market you’re looking for, I think that’ll be extremely important to focus on in the next 90 days.
And then just start budgeting, start calculating what you’re going to do. I mean, we, like I said before, about if you’re selling on Amazon, about 30% of your margin is just the fees. Now, if you How much are you willing to spend on advertising to help you achieve your goals? How does that fit within your margin on your overall product, determining what your end goal is whether it’s actually getting sales, or as we said before, building a brand within the e-commerce space, that’s going to lead to different outcomes and how much you’re going to want to advertise?
I mean, if you’re just looking for sales, the advertising spend may not be as important or you may be willing to scale it down a little bit or have a more efficient target that you’re looking forward to, to maximize the profit you’re making.
But if you’re looking to build your brand, you might want to be more aggressive on the advertising to reach more customers get the brand name out there more. These are all things that you’re probably going to want to talk to an e-commerce agency about. So they can help layout the roadmap for you and help you start planning that stuff with you.
But I mean, by the end of the year, you know, we’re in the middle of November at this point right now, by the end of the year, you should already have whoever your agency partner is going to be for 2021 you should start they should start having the research for you.
So you can start figuring out what products within your catalog or your manufacturing capabilities are going to be ready to go and then start looking at the distribution networks that you’re going to use. Those are probably where I would recommend starting.
And then once you have that down as soon as you start are able to start sending products to the US whether it’s Amazon FBA or your third-party fulfillment network, that your agency partner will be able to start pushing those sales for you almost immediately.
So use the rest of this year to start planning. Just get find the right partner to help you. And that’s gonna be the easiest way for you to go DTC.
Okay, amazing. And, what about the manufacturers that don’t really have an e-commerce website at this point in time? I don’t know if that is required for the manufacturers to go D2C, can they do Amazon without having the e-commerce site? If not, do they need to build an e-commerce site first? What will be the strategy that you would take to build the e-commerce site for them?
Again, I would say it really depends on what the goals are, if the goals are just making money and making a profit, you don’t need a website right now.
I mean, you can get started selling on the Amazon platform, eBay, Walmart, whatever the channel may be. And as long as you have a brand and consistent branding across those three platforms, you’ll start getting sales, you’ll look more professional, and you’ll start making money.
If your goal is to build a brand, build something of value, and you know whether you have an exit strategy plan for the future, whatever it may be, you do need to focus on building a website, however, it’s probably not the biggest priority.
I mean, unless your brand is already out there, it’s already well known in the e-commerce space or in the consumer space in general, then people are still gonna be going to Amazon and you’re still gonna need to reach them there to make them aware of your brand.
So starting on those sales channels, where people are already going to shop is probably the best way to start just creating that brand awareness, more building more brand loyalty, there are other programs you can use within Amazon, such as Subscribe and Save, where you’re offering a discount for a customer to buy the product each month.
So you can build that recurring revenue, build that up brand awareness within the customer, they’ll start you know, that can lead have other knock-on effects too, you know, other referrals, more social proof on your product listings, all of this will help you build as a brand.
And then as that is starting to go, you can focus on actually building out that website. So that is really the way I would probably recommend just getting onto the platforms to start selling, especially if you don’t have a brand that is known right now.
And then focus on placing the pieces like the website and everything else later down the road, once you’re already making the sales, and you can focus on a way to get these people to your website.
Yeah, right. I completely agree. I mean, Amazon could be the near-term revenue opportunity from the sales perspective. And once you have the revenue, things obviously become slightly easier. So from the marketing and sales planning perspective, Amazon could be near term strategy. And you know, if the manufacturers want to take advantage of that, especially with respect to COVID, I think this is the right time to do that.
Exactly. I mean, across the platform, most categories have experienced significant sales increases. I mean, we’ve had clients that have had sales go up 400% since COVID happened just from e-commerce sales, just through the Amazon channel.
So really not being there is just missing out on revenue and the opportunity for sales to reach new customers. So you really don’t have much to lose by being on the platform. You really only have things to gain.
Amazing. Love it. I think that’s it for today’s interview. Mike, thank you so much for your time. Do you have any last-minute thoughts before we close?
I mean, I think I’ve laid out a lot of them. As I said, it’s really important if you are going to go the e-commerce route to just get started taking action.
Just getting onto the e-commerce platforms where people are already shopping is the easiest hurdle to get started in DTC and using other fulfillment networks out there. So you don’t need to start your own. You know, warehouse your own operations for fulfillment within the US or whatever target market, it may be like Amazon FBA, third party, logistic companies, those can all help you skip that step and at least start getting the sales, see whether it makes sense for your business.
And then you can look at actually building out more of the processes, building out more things yourself within your in-house to help your business grow over time.
But just getting started on the platforms is the best way to see if DTC is going to be for you.
Amazing. Love your advice. Do it today. Do it right now. Mike, thank you so much for your time. Really appreciate it. You know, you have a wonderful day.
Thank you, Sam. Have a great day. I really appreciate being here and having the opportunity to speak with your audience.
I cannot thank our guests enough for coming on the show for sharing their knowledge and journey. I always pick up stuff from our guests, and hopefully, you learned something new today. If you want to know further about Mike or AMZ advisers, please visit amzadvisers.com. Links and more information will also be available in the show notes.
If anything in this podcast resonated with you and your business. You might want to check other related episodes, including the interview with Chase Clymer from Electric Eye, who brings a unique perspective on D2C from the angle of e-commerce toolset and Shopify. Also, the interview with Jason Chester from InfinityQS, who touches on D2C from a real-time manufacturing quality intelligence standpoint.
Also, don’t forget to subscribe and spread the word among folks with similar backgrounds. If you have any questions or comments about the show, please review and rate us on your favorite podcasting platform, or DM me on any social channels. I’ll try my best to respond personally and make sure you get help.
Thank you, and I hope to catch you on the next episode of the WBS podcast
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