www.bobsledmarketing.com
Transcript
Peter :
Hello Everyone, Peter Crosby from the digital shelf Institute here. The explosion of marketplaces is causing both opportunities and challenges for brands. And it's not always easy to even know which is which. Kiri Masters, a Forbes contributor, and founder of digital marketing agency, Bobsled Marketing joined Rob and me to talk about this fast moving commerce landscape and how to decide where to invest. Kiri, let's get right to it. Thank you so much for joining us. Uh, you know, we're at a place where we seem to be experiencing the Oprah-fication of marketplaces. You get a marketplace, you get a marketplace, what is happening here? What is going on?
Kiri:
Well, yeah, that's a great, great quote, actually, because we're seeing more and more of these announcements with, especially in the grocery world, Kroger being the most recent high-profile grocery to launch a marketplace. And the technology company that powers Kroger's marketplace is a company called Miracle. And I spoke with the CEO recently that they're planning to launch at least four more major grocers on their platform by Q1 of 2021. So I think, you know, this Oprah-fication is definitely going to continue. There's going to be more marketplaces. The question is, is more better? And as a brand, do you want to be everywhere or do you want to be where all the eyeballs are? And I think that there's a very interesting debate to be had, which you know, who's going to be right here, but on one side of the debate, there is that more marketplaces equal better outcomes for shoppers and, and a good deal for everyone, which is let these retailers create marketplaces that are going to suit their customers and expand the assortment and drive discovery and things like that. Most selections are better. And then there's the other argument to be made, which is look, how are you going to out Amazon, Amazon? And the whole game is selection, a great customer experience and product recommendations. So how could you ever possibly beat that? And what's your real value prop that you're bringing to customers. So I think there's a, I'm not sure exactly where I stand on the debate. I see the merits of both arguments, but it's going to be interesting times ahead. I have, I'm going
Rob:
To just play the, the cynical devil's advocate card for a moment. And this, this isn't my personal perspective, but I think it's an easy card to play, which is digging into one thing that you said right in the middle of there, I'm maybe more marketplaces is better for the consumer experience, but how are you going to act out Amazon and Amazon for groceries in particular, if I think about where grocery advantages, grocery advantages, that a lot of people still like to go to the grocer, even when they try clicking collect, there's a lot of Americans in particular that have preference of going into the store for their food purchasing needs and whatnot. And we've seen lots of technology in grocery that can help out a lot. So for example, um, the, uh, micro fulfillment center additions to large grocery stores can help increase the assortment that's locally available for groceries in a, in sort of like a local mini FBA sort of way.
Rob:
I wonder though, for a marketplace, like a Kroger marketplace where you're not buying something to be delivered today, necessarily you're, you might go to kroger.com and you buy a bunch of stuff that you're going to drive to Kroger and then pick up. But the marketplace stuff that you buy in kroger.com that's third party, or is not going to be available at your local Kroger store. So the experience to me just seems like the groceries are adding marketplaces, but not, you know, they're not in a position of strength to add the marketplaces. So is it a consumer? Why would I buy something as you know, from a third party, I'm kroger.com. If I can't pick it up at the store, it's a long way of framing the question, but, but, but that's like the bare case in my mind for why not? Yeah.
Kiri:
I think that you're totally right. That's the point of view is it's going to be a very disjointed buying process. So if I'm going to kroger.com, I'm, I'm, I'm purchasing my regular shopping basket for my family, but then, you know, there's some new items which initially Kroger's marketplace assortment is going to be, um, uh, non-core assortment. So ethnic foods, health foods, things like that, sort of a long tail, if I'm also, I'm also purchasing there, there's going to be a completely different fulfillment experience, which is it's not going to be at my, um, curbside pickup delivery. It's not going to be, you know, part of that core grocery fulfillment, it's going to be shipped to me by the third party. And so I spoke with, um, one of the executives at Kroger, and I brought that up. Is this going to be an issue is it's going to be this disjointed customer experience. And that perspective is, well, no, we're going to make it clear to the customer that that's going to be the case. And, um, and we just want to,
Peter :
Our podcast listeners could not see Kiri's face, go uh.
Kiri:
Well, I guess that's, you know, that that's better than obscuring. The fact it's coming from a third party reseller, which is what Amazon has, has really done. Um, but yeah, their perspective is that we want to be with our shopper at all points of their journey, whether that's shopping for their core family shop, or if it's discovering new foods and, and household products that are offered by marketplace sellers. So I think that, I agree with you, Rob, I don't really have a, a play a stake on either side of the argument. I, I would like to see some more competition come into marketplaces and for there to be alternatives in the ecosystem. But, um, I think that there are some hard decisions that need to be made around what kind of game are we playing? How are we going to be different to Amazon rather than just adding selection?
Rob:
Yeah, it feels to me like a bear. So, that was the bear case. The bull case now is if true Kroger and other grocers are treating this as a dip, your toe in the water, first experiment along this line. And they've got other plans on how to back it up with a, with more grocery experience on the backend. Then this is awesome, so I can, I can imagine just a couple of examples here. One is the micro fulfillment center play, where you put micro micro fulfillment centers at most of the major Kroger locations and those micro fulfillment centers are our warehouses that a supplier like you're saying, you know, um, maybe non-core, uh, ethnic manufacturer can effectively rent space in the warehouse attached to the grocery store, just like people rent space on an FBA for Amazon. And, and then I'll, you know, so, instead of Kroger carrying the inventory risk, it's available for click and collect, but it's not available in store and it's into a micro fulfillment center.
Rob:
Um, I could see that play being really interesting, or I could see an Amazon locker kind of play being interesting, like you order on Kroger and they say, look, this is going to be available for you to pick up in three or four days. And then you get a notification when it's available to pick up. And that's great for Kroger because it's another excuse to go to the store. And, you know, even if all you do is go to the store and buy impulse, like you buy a Coke or you buy a chocolate bar or something like that, while you pick up your, your marketplace order and from your locker, I think, you know, that that could be a moneymaker there. So there's angles here where they could maybe dip their toe in the wall Potter and then further invest in capital. You know, these are big, you know, obviously cap X investments. Ha have you seen anything other than slapping third party marketplace seller capabilities on a website yet?
Kiri:
Uh, short and short answer is no. Um, I think as you were talking, it brought up some possibilities which might occur, which is Amazon has been gearing up these relationships directly with brands. So instead of working through distributors and resellers and third parties to acquire inventory and selection over time, they've shifted to developing a direct relationship with brands because the brands are the ones who are going to pony up the money for ad campaigns and product content and all of this, uh, this marketing, uh, expense, which is it's good for Amazon. It's good for the customer and is ultimately good for the brand as well. So Amazon has over time sort of moved to forging those relationships directly with brands, but with these other emerging marketplaces, depending on what their angle is, it could make more sense for a marketplace to have, um, invest in relationships.
Kiri:
And also with distributors and third parties, for example, a CAHE who, you know, the big, big food distributors who have that, um, that fulfillment capability. And they also have the selection and it's a boom, you know, instant, instant assortment on a marketplace with a seller. Who's going to understand the basics of selling online, which for a lot of, especially CPG brands, it's a bit of a learning curve for them. So wonder if that, if that might be an option for some of these new marketplaces to employ, which is, uh, you know, especially in, um, the world of, um, Kroger, going back to those relationships with which they probably already have with distributors.
Peter :
So with all of this coming together, and clearly, no matter what we say at this moment, people are going to be spinning. I mean, miracle got $300 million of funding. So, um, some people with money completely agree that they're just going to be marketplaces coming out, uh, from everywhere. So given that, and even today, we know talking to brand executives that figuring out the ad spend through retailer platforms and how to invest in where to invest, what is a brand to do as these, as these start to multiply. How do they think about where to invest, where to expand to new segments? You know, what is the size of the prize for doing this?
Kiri:
Yeah, well, I think there's two approaches. One is where, where are the eyeballs? Where are the customers where people are already shopping online? And that that's a much more of a sure bet. And that is this there's one answer, which is Amazon pays 50% of e-commerce transactions happening on Amazon's where half of search, product oriented search queries originate. So if you're going to be where the action is, then it's, it's Amazon clear and simple, but there's a couple of, um, use cases or a few use cases for looking at some of these other marketplaces, which is, um, I think best described in, in a conversation that I had with Julie Lou who's, uh, from cliff bar, I did a, um, interview with her on my podcast ecommerce brain trust a few months ago. And she talked about her criteria for, uh, identifying which marketplaces to expand into and cliff bobbing, CPG.
Kiri:
They've got a lot of options out there, uh, in terms of, um, marketplaces to, to investigate. So her criteria are first party targeting capabilities. So that's on the advertising front. How robust is the ability to target down to a shopper level and use the data of the platform efficiency of spend and rate. So having a strong ad platform with good, good targeting, good capabilities there, both quantitative and qualitative data, especially when looking at retail media and then a couple of other softer factors that she mentioned, um, one being early to market so early to a platform like walmart.com and able to, you know, get in while it's less competitive and, and build up some, um, Goodwill there, both with the platform and with the shoppers. And that might give them a longer term advantage. Uh, and then the final criteria, which you mentioned is, uh, as a national brand, obviously the big retailers eat up quite a bit of the marketing spend, but they, she also sees, um, their ad dollars and media dollars really stretching further with regional grosses. So I thought that that was, that was pretty interesting and kind of lays a bit of context as to what some of these factors are, um, beyond just volume, which is what you get with Amazon.
Rob:
Those criteria make a lot of sense. The, I think the word grocery is now from an e-commerce perspective though, is that the ad platforms, the digital ad platforms and targeting are just not there for, for just about all of them. They're there, they're way behind a Walmart or a Google or an Amazon, maybe the only exception being Instacart and Instacart's ad platform is brand new this year, too.
Kiri:
Yeah, yeah, totally. Yeah. They're, they're all quite different. And, and, you know, there's some charts I've put together, which are pros and cons of each of these platforms. And, you know, within the paid search world, Amazon advertising up until 24 months ago was a bit of a joke amongst people who were long time like Google or Facebook, um, paid search practitioners, they would someone who was, you know, an expert in Google paid search would look at Amazon's, um, uh, AMS platform and say, Oh, this is so basic. This is so simple. Um, but you know, digging beneath the surface a lot that can go wrong there. And I think that, you know, from my perspective, as someone who's lived in the Amazon weld for a long time, the big, um, th th the obvious challenge with Amazon, and probably, you know, the same with all of these marketplaces as well is actually the operational side of things.
Kiri:
And a little bit more of what Salsify does, which is product content. And the thing is you can have the best smartest paid search campaigns on Amazon. And if you're, if, if you don't have the inventory, if you didn't have the right pricing strategy, or if you didn't have the right product content, and you're misleading people, or just not really optimizing for the conversions, your ad campaigns are gonna fall flat. So you think about that, you know, and that sort of really great high-powered ad platform now with lots of targeting capabilities, but there's still that sort of the weakest link in the chain going on with operations and, and product content. If you look at platforms like woe model Instacart, who they're still catching up to Amazon, those same factors, those, um, multiplication factors still apply.
Peter :
And Kiri when you think about, uh, I mean, I think essentially one of the things you're talking about is if you don't have your fundamentals, right, then you might throw some money down the drain. If you haven't, to your point, gotten the fundamentals of how you sell and convert on that platform, uh, really set up then you're, you are just throwing good money after bad. But when you think about for, for companies that have those fundamentals and assume that they're doing what they need to do on Amazon, what is the sort of the size of the prize of, of a Walmart or, or going international and marketplace and stuff like that? What do you think about that?
Kiri:
Yeah, at a super ballpark level, we're looking at a factor of five to 10% of the creative revenue on, on an international marketplace or on walmart.com relative to amazon.com. So these, for example, Amazon just launched in Sweden and the Netherlands. Those are going to be pretty small, small compared to, um, amazon.com, um, and Australia where I currently am. It's certainly closer to 5%, but, um, you're looking at a, uh, at a multiple of, of yeah. Point Oh five to 0.1. Okay.
Peter :
And that's not something to sneeze at if you're trying to sort of add incremental revenue to your business, but each one of these things are certain, um, require attention and focus and dedicated resources. So, um, yeah, so it's a, it's a bit of a, of a math of a math problem, right?
Kiri:
Yeah, exactly. I mean, if you're a, if your company has, uh, you know, if five or 10% additional revenue makes a ton of sense for you as a company, relative to how much you're going to need to spend to resource that channel with dedicated, uh, your operational logistics requirements and, and, uh, sharing the product, just assault went over to that channel, to that marketplace, and then running the advertising and having the customer service, um, capabilities to back it up. It's all so relative for, for a really small startup brand, my recommendation is, is usually to, to, to double down on Amazon, really get that channel humming because that's going to provide a much better ROI than trying to expand out into all of these marketplaces too early.
Rob:
Yeah. That advice on starting with Amazon maximizes Amazon get as much as you can about Amazon and then go somewhere else and work on that is a version of snowballing your, your internet strategy, right? Like your, your e-commerce and digital shelf strategy. You don't do all the marketplaces at once, do the ones that matter. And there's, there's really one that really, really matters. And I understand where the retailers are going by trying to add the marketplace assortments to their sites. But also it's hard to, it's hard to see the habits change once the habits are formed. Here's a, here's a question for you though. If I think about Kroger in particular, because Kroger's huge and they've got a very big audience and, you know, if anyone in grocery has a chance of succeeding here, it's going to be, it's going to be them. If I think about Kroger, um, what percentage of those brands that are not core Kroger, assortments that are, you know, CPG center, aisle, shippable products, do you think that the brands actually have three P shipping capabilities already built out? Like my guess without having a survey then would be 20% of manufacturers could, could part even participate in these marketplace opportunities? And am I, in my way short, I mean, most of the folks I talked to just don't have the ability to pick and pack ships, and each to a, to a shopper directly.
Kiri:
I think you're a hundred percent right in that sort of fortune 500 space. Very few would have that ability to pick and pack eaches from their existing, um, operations, uh, supply chain. Very, very few. And so what, what I think a lot of phase companies are doing who really want to change and adapt because some don't and then, and that's the other factor here is that a lot of these retailers, including Kroger, they're still going to have their first party assortment that they're going to purchase direct from Unilever. And, you know, all the big CPGs, that's not going to change. They're always going to want to have that first party, um, channel. But if a brand does want to have a three P capability or, and, or they're seeing some opportunity in D to C, which is a whole other question we should, uh, uh, put in the parking lot. But, uh, if they want that capability, what I've heard from some of these brands is then not even attempting to do that within their existing supply chain, that going out to the market and finding a fulfillment partner who will do that for them, because to revert, to engineer into their existing warehouse, the ability to pick and pack H's is way too difficult. So they need to outsource that.
Rob:
Yeah. And that's a tough thing for them to do because a lot of these companies operate to margin as KPI. And so you're giving up margin to your three PL that you work with in order to do that. Um, so with marketplaces everywhere though, could they afford not to five years from now, if you're a manufacturer at any scale, can you afford not to have a marketplace strategy? Can you afford not to be able to ship, uh, individual order of an each directly to a shopper? What do, what do you think?
Kiri:
Well, that's a good hypothetical question. Um, I think they, they could, if they had a really good distributor PO distribution partners, distribution partner, rather, um, and, and that's a big question, Mark is w which, which distribution partner would you really rely on to, to sell through, to all of the marketplaces that you want to be on and the retailers and have the correct info product information, and do a really good job of that. That's, that's probably the first question that
Peter :
Yeah. Cause that, that the, how that process works for the consumer is your brand. That's your, yeah. Everything relies on that feeling right to the consumer and that in some ways, uh, does require you to operate at, if not at the level of an Amazon pretty close to, unless, unless you're a brand that has the consumers love so much that they're willing to be a patient.
Kiri:
Yeah, exactly. Well, and to add to that as well, one of the, um, um, I'm, I'm leading an investigation in the digital shelf Institute around profitability for specifically focusing on CPG brands and can e-commerce be a profitable channel for them. And, um, it's very interesting. I mean, the first question that we need to answer is what is profitability? And each of these CPG brands has a slightly different way of getting to the number, which is usually contribution margin. But again it differs between different brands, but some brands include retail media spend in calculating the contribution margin of a particular channel. Others it's held at the brand marketing level, and it doesn't go into that contribution margin number. So I think to, to, to find your point rubbish around these razor thin margins and how to prioritize that, the first question is how much of a focus does profitability even have for a brand, because some of some are even less concerned about it than others.
Rob:
Yeah. And man, that, uh, your point on there's no standard P and L right now, when it comes to, when it comes to this stuff, is, is a point well, made people, uh, generally speaking, have a hard time reasoning about, um, the, the financial implications of all of these moves that they could potentially do. And unfortunately it leaves them a lot frozen, right? Which again, this is another element of a bear case of marketplaces. If you look at Kroger, if there's a lot of manufacturers that themselves are not picking and packing and shipping eaches, or are not meaningfully working with it with a key distributor in order to make sure that their brand is, is realized when the distributor lists the product not available marketplaces, then in either event you're leading to a worst consumer experience than would happen if a consumer generally speaking would go to Amazon today. Yep.
Peter :
And, and speaking of Amazon, uh, we're about to enter a very interesting holiday season by the time this airs it will have already happened. But, uh, literally today, um, Amazon announced their prime day dates of October 13th and 14th. And then are essentially the message is getting out into the market that, you know, if you want your stuff by Christmas, it's not that much further after prime day, when you better have your orders in consumers, if the, you know, the logistic channels are going to keep up and the possibility of, of a resurgent COVID and flu season, like there's a lot of uncertainties coming into this holiday season. And, and so, um, you know, how does that calculus fit into the topics that we're talking about? Like, how are you approaching your, how are you taking control of your own fulfillment in the case of the uncertainty that's coming this season?
Kiri:
Hmm. Yeah. Uncertainty is a big one because we've got so many externalities that brands have never had to factor in before. And granted we've been on this path, a digital path for a few more than a few years now, but there's just so many factors just flying into the, into the machine right now. We've got prime day at a weird time of year. We've got COVID, we've got per, you know, potentially permanently changing consumer habits. So we just don't really know how to forecast even just for inventory purposes around Q4 of this year. And what's made it very challenging for a lot of friends is that they don't have enough time to reload between prime day and even cyber Monday black Friday. And, um, you know, the remainder of the shopping, um, period. So it's going to be very challenging just from a logistics standpoint.
Kiri:
For the last few months, we've seen Amazon really backed up with the, um, uh, inbound processing capability. And also I've heard a lot of complaints from brands around pickups as well. So Amazon's just not picking up the purchase orders because their fulfillment centers are full or that they don't have enough capacity to ship out. So, um, a lot of brands and this is more challenging for the larger ones because they don't have that ability to ship H's generally, um, is that they're gonna need to have a backup system in place to fulfill their own orders. And for a lot of companies, that's a lot easier said than done.
Peter :
I was talking with a brand executive the other day who was saying that, you know, they do their own, they do have data say shipping that they're doing themselves. And he said, recently, you know, they're shipping, I don't know, say 1700 items a day. And then UPS, who had been their sole provider, came to them and said, Oh, sorry, coming up, we can only ship 900 a day. You'll have to figure out something to do with your other. And, and he's like, what? And so now he's had to go and negotiate with one or two other providers to sort of spread his bats right before the holiday season.
Kiri:
Yeah, it's insane. Yep. Yep. Yeah. I've heard that the carriers are just, they're just putting these limits in place and saying, sorry, that's all we can do. And I think this is actually one sort of rare case where, um, people are generally pretty happy about Amazon coming in and disrupting a category, which is, which is shipping the kids that they do. They're figuring that last mile piece out. And that will be so key for everyone. Um, because of the exact scenario. Now, when,
Peter :
When Instacart is delivering a Sephora to your house, you know, things are really starting to shift and it is becoming about that last mile. So I wanted to close out Kiri. Um, I've been reading, um, Reed, Hasting, the CEO of Netflix. I've been reading his book on kind of from the Netflix perspective, how they built a culture of constant reinvention. And it's a, it's a culture where, uh, being able to stay flexible far outweighs achieving efficiency and sort of cost containment. Now that's something Netflix can get away with. I'm not sure every brand can. And particularly as we're talking about razor thin margins, but when you were talking about, uh, sort of all of the change and, and shift in thinking and new P and L and all of this stuff, that's required, bro, these difficult conversations to, to do that, you know, how do you think brand one, do you feel like, uh, flexibility is becoming so much more important during this time and, and how do you weigh that against efficiency, but how do you think brands can adapt into that thinking like how can they be doing that sort of, um, more flexible approach to their business?
Kiri:
Yes, this is pretty, pretty huge. And it's difficult for me to be completely objective because I'm a digital, digital native someone whose main context for retail is e-commerce. So of course, I'm going to say e-commerce all the way, but I understand that it's not, um, you know, the, the most profitable channel for a lot of companies and they still have a lot of work to do to figure out that, Hey, this might be the future, but we were still not profitable in the e-commerce channel, whether that's Amazon or data C. So that's, that's a big, big, um, turning point as a company. If your future is in this new channel and you haven't yet figured out a way to work it out financially, that needs to be a priority. Number one for the whole company, we're not going back where we came from. Um, so I think that there is, this is going to require some new skills to be developed within those companies and, and whole, whole ways of re-imagining a brand and how you do business, whether that's from packaging to the, just the general agility and cost efficiency within the company and things like that.
Kiri:
It's, it's just something that, that, that will need to be figured out. And if you're a small company, this is your, this is the opportunity of a lifetime. There has never been a better time to poke a stick at the bear of, um, your big competitors when they're sort of still needing to figure out these new strategies. So it's interesting times, I think every, everyone has a shot at re-invention. Um, and to, to, to recall back, actually, another thing that Julie Lou from, um, cliff boss said is, um, digital is not a skill. Digital is not a, not a department is a skill, and it's a skill that everyone in the company needs to learn. It's not just, um, REL relegated to the econ department or to the digital department. Everyone needs to develop this skill within a company.
Peter :
And one of the things, as I said, just to close out here, is that those skills are so important. And do you find, when you look at the upscaling, that it's required as people move D to C, are you finding that they are insourcing that upskilling, like they are teaching their own teams? Are they outsourcing that to agencies or otherwise, or is it a mixer, you know, where do you come down? I mean, obviously you were running, uh, an agency, so you, you have a, uh, a point of view on it, for sure. But, you know, what is your advice to, to getting those skills and making it, um, not just a department, but, uh,
Kiri:
Yeah, there's a real mix. So, and, and I've seen it work successfully both ways. There are some, so my agency bobsled, we provide, um, managed marketplace management services for brands. There's other agencies out there that do the same thing. Great, great work. And a lot of big brands use agencies heavily, and a lot of small brands use agencies heavily. And then we've also got a lot of companies who prefer to in-source as much as possible and to have their own internal teams working on the, um, the marketplace search and an operation side. I would, I'd say that the best of both worlds truly is to have, uh, to bring in what is great about an agency, which is context and benchmarking and best practices. Because for example, at bub said, we've got about 60, 70 retail clients. We're able to see these trends happening across different categories, across different accounts that you would just wouldn't be able to spot if you were a practitioner working just with one brand on one account. Um, so I think that context and 50,000 foot view is really important. And so even if a brand decides to invest in our own in-house team, they should still look to, um, bring some outside perspective in on that. I think that that's, that's the best of both worlds
Peter :
And finding an agency that is actually making those connections happen because even still in, in particularly I would imagine large agencies, sometimes it's hard to get those just as it is in large brands, hard to get those, uh, those, um, silos even there to break down. So you need to be able to test that.
Kiri:
Yup.
Peter :
Well, Kiri, thank you so much for joining us and talking about this incredibly fast, moving time in, in marketplaces and in commerce, uh, it's really been a joy to have your, your brain on and, and share some of your, your learnings from the work that you're doing out there. So thank you.
Kiri:
Yeah. Thank you so much for having me. This has been great.
Peter :
That's today's episode. There are so many issues, brand execs are grappling with, and this move to a digital first omni-channel model, and we are doing our best to cover them at the DSI over the next several months. See what we're up to. And again, digitalshelfinstitute.org/digital-first-omni-channel in the meantime, thanks for being part of our community.
