Buy Box Experts Partner on E-Commerce

it used to be. It seems like every day it's Prime Day. Yeah, that's I mean, this pandemic has accelerated the trend that we've already seen towards e commerce. Well, let's breg in our guest James Thompson, because he's partnered Bye Box Experts. Say that five times fast Bye Box Experts. It's a managed services agency supporting brand selling online. His former business head of Amazon's Services, which is the division of Amazon responsible for recruiting tens of thousands of sellers

annually to the Amazon Marketplace. He's also author of The Amazon Marketplace Dilemma. And James joins us on the own from Seattle. James Nice to have you here on Bloomberg Radio. How are you? Thanks for having me, Carol, Thanks for having me, Paul. At the busy time, people uh, excluding yourselves are buying on on Amazon right now, and they're buying in crazy, crazy volumes. Well tell us, yeah, go ahead,

tell us about that. What you're seeing. Well, I'm fascinated with this whole preconceived notion that somehow this is the beginning of the holiday shopping season. And the reason, the reason a little confounded by this is typically when people buy things on Amazon, if they're going to buy them for gifts, they send it directly to whoever they're gifting

it too. And so I ask you, would you be buying Christmas presents right now in the middle of October and sending it to people two and a half months early. You know? The the the application here is people are spending money on themselves. They're not spending money on other people. At least that's my hypothesis. And they'll be interesting to see what happens when we get to end in November, when you know, the normal start of the holiday see and kicks in. But right now we're seeing people buying

stuff that they're they're they're enjoying themselves. So I guess there's a lot of disposal income out there because the sales in the last two days are absolutely through the roof, even more than we expected for Prime Day. So, James, as we think about this pandemic, it's impact is so many facets of so many people's lives, daily lives, and one of that is retail. One of those is retail.

Give us your sense of to kind of how this this move towards e commerce is accelerating here during this pandemic. If so, and then how permanent you think that might be. So obviously, when everyone started quarantining at home that there were a few few other options for buying other than

going online. And one of the interesting aspects of what happened in March and April is that a lot of people not only moved more dollars online, but they started buying products that they had never before gone searching for online. So many of us were buying grocery products that we were used to win the grocery store and now we're

stuck having to look online. And if you if you did a curb site pickup, or you had groceries delivered to you, you know, for some people, that was a very good, good experience, and they're saying, gosh, I didn't realize my life could be so easy. I should have

been doing this a long time ago. Likewise, there are companies that obviously we're well positioned to sell online, and there were lots of retailers that were not well positioned at all, and so trying to play catch up and build yourself a website, figure out how to get logistics

in place to deliver packages, that's really hard. And as I think about what's going to happen here later in Q four, some of the retailers who still won't have enough stores open to generate meaningful foot traffic, they're gonna have to rely on their their website to drive traffic. And quite frankly, it's one thing to sell ten percent of your volume through an online site, but what if acent of your volume now has to go online and you don't have good inventory software and customers are saying,

do you or don't you have this product? Can you get me this product quickly? One of the things that we're gonna see, I suspect in the next six or seven weeks as we move into mid December, everybody except for Amazon is relying on UPS and FedEx and the

postal service to get packages delivered. Amazon owns last mile delivery for two thirds of its own packages, So their ability to say to customers, we're comfortable that these products are actually gonna arrive on time when you order them on December twenty, You're gonna get them by nine o'clock at night on December. What about everybody else who relies on you UPS and FedEx. It's going to be interesting to see how the big carriers are able to support

this crushing level of demand for online order fulfillment. So it's interesting one of the things that James is just talking about. You know, can people coming onto the Amazon platform? There's everybody, It's so crowded, there's so much availability, there's so many different brands competing against in effect Amazon, some of some of their brands. How do you how do you consultant and explain to your clients what's the best

way to compete there? At the end of the day, that there are some formulaic things that every company selling on Amazon needs to do. You need to have the very best listings, meaning you've got to have the right images you've got to have video. You've gotta have high quality content that helps answer customers questions. But that's basic black walking and tackling. Unfortunately, lots of companies selling on

Amazon don't do a particularly good job there. There there are questions around how do you make sure you stay in stock. Amazon penalizes products that are in stock, out of stock, in stock out of stock, So you've got to remain in stock and be in a position where customers can consistently find your product. And then the big catch all here is Amazon says, if your products are Prime eligible, we're gonna reward you with better visibility for customers.

And so, uh, you know Amazon Prime. Some people know that as FBA, some people know that as buying your Prime membership. But those are the products that are presented to consumers first and foremost on Amazon when you go looking for products. If I go searching for men's running shoes, I'm going to see all the Prime eligible products first because I'm a Prime customer and I'm playing in and Amazon says I want to show you Prime eligible offers.

There are too many companies on Amazon today who have said, let me dip my toe into selling on Amazon. I'm just gonna fulfill a few orders as they come in. Well, it's a self fulfilling prophecy. You're irrelevant unless you're prime ilig. It's like unbelievable. I've done it myself. I think I've even paid a little bit more because i know it's prime and I'm going to get it quickly and it's going to be easy. It's just pretty fascinating. I gotta tell you. I'm listening to you James talk and I'm

just thinking, where does Amazon go from here? You know, where is Amazon in your view? You know, you know this company so well, you see their domination. And I think that's a fair word to say when it comes to retail, where do they go in the next two years, the next five years? The reality is Amazon starts by saying, how do we do more for customers? How do we focus on what customers want? And for twenty five years they've been looking at how do we deliver as much

selection as quickly as possible at low prices. And the reality is as you grow your business and it becomes five times bigger, fifty times bigger, five hundred times bigger, it gets harder and harder for Amazon to do that, and yet they continue to step up and do that. And this year they've demonstrated that they're not just a marketplace, they're a massive logistics powerhouse. I mean they they hired a hundred seventy five people in order to do last

mile delivery of your packages. That they are now at a place where they are competing with FedEx and UPS day to day for all the most profitable routes. And that's that's pretty staring when you can think of Amazon as being a shopping destination, but yet they support all these other things behind the scenes that consumers don't necessarily see, but are critical to keeping the core business of a shopping site to keep that running. So it's expensive to

do that. It's really expensive to do that. It's expensive to do that, but it's actually cheaper to do it yourself if you do it at a scalable level than it is to wait around for UPS and FedEx to figure out how to grow fast enough to keep up with Amazon. And that's exactly what we saw when Covid kicked in in March, is the UPSs and FedEx is they can't keep up with the increase in demand that Amazon's experiencing and quite frankly, Amazon doesn't have to make

any money with their fulfillment capabilities. They just have to be able to make sure the pipe is there and they can push packages through the pipe. And that's one of the beautiful things about Amazon. You know, the same thing happened when they built out their AWS capability. That wasn't meant to be a profitable business. It was meant to be back end services that would support huge numbers of customers flow flocking to the site. You know on

Black Friday, we need to have essentially infinite capacity. Amazon said, we'll build it ourselves, and then they discovered, oh, we can now sell excess capacity to someone else. They're gonna do the same thing with logistics. Eventually they're going to be in a place here in the next year or two to start offering more shipping services to retailers who sell packages to people, not just on the Amazon site.

That that's a nice, tidy business. We know Amazon has gotten into the health care business starting with how do you build out better, better options for Amazon employees? But the reality is if Amazon gets this figured out, that's another trillion dollar business where Amazon would say I'd like the slice of the bi please. So I see lots of opportunity for Amazon, certainly to grow in this country. But everything they've done in this country with regards to shopping,

they're replicating all over the world. They've got over fifteen marketplaces now different countries they're moving into where they're saying, we could do the same thing and help local consumers in these other countries get huge, huge amounts of selection at low prices, delivered quickly. I did say domination, didn't I say domination? And the legal scholars, you know, the

anti trestlers, hears part though. So it's interesting you want to think and you point out that it's expensive, but I'll also point out they've got seventy billion dollars of cash on the balance sheet, forty billion dollars of free cash flow, so I guess they can afford it, Uh, James. One business where they haven't been so successful is the grocery business. Is that just a sideshow for them? Or do you think that they want to get bigger, better,

stronger in that retail space. They need to get better. And I'll tell you why. If you look at your wallet, the share of your wallet that goes towards grocery is a sizeable chunk of your spend and it's also one of those purchases you make at least once or twice a week. You're having to think about where do I go to buy my groceries. Amazon's endgame is to be top consideration for any type of product you want you want.

Amazon wants to be in a position where consumers say, I need to buy something, let me pick Amazon first as my channel, and let's see what they have. If Amazon can get enough grocery selection in place available for fast delivery, then Amazon will be able to get consumers to spend that part of their wallet on Amazon. And that's too. Maybe two or three times a week, the consumers again are reminded, hey, Amazon is the place I

need to go to buy everything else as well. So at the end of the day, grocery may not be a very profitable business for Amazon in and of itself, but it's a constant reminder and there's a constant ad for consumers to come back to buy everything else. That may make Amazon more money. But it is interesting that the grocery experience with Amazon is not the whole food's experience. If you go into the store and and it's interesting that.

I mean, I don't know what they want it to be. Um, you know, I don't know if you have any thoughts on that. James just got about forty seconds here, but I am curious what they wanted to be. They probably just want people to shop. Amazon is all about experimenting, and they're trying to figure out how do they position themselves so they can do this effectively. They're never going to be Walmart, but they they're opening up different types

of grocery stores in different parts of the country. They're trying things out. It's not that they're necessarily going to be the number one player in traditional grocery, but they can still make a very sizable business out of trying things and offering services to consumers in a way that still makes sense financially for Amazon. Yeah, it's interesting. It's just but it's about Amazon forever. And I agree with you. Right, And we didn't even touch on the cloud, which is

what most investors are focusing on. Yeah, exactly, well, right, because that's such a growth engine for the company. Hey, um, James, thank you so much. James Thompson, partner at buy Box Experts and former business head of Amazon Services. I mean, you make up a good point. I mean, but I guess that's what enables them to do that experimentation, Paul, with parts of their business that maybe aren't doing as well. Yeah,

it's amazing. And again, this is a company that invested every dollar it had for the first twenty years of its life. Uh, and issuing profits in cash flow. Um, and this is the payoff. Isn't this the place we go to buy books in CDs? Do? Isn't it used to do? God, I'm dating myself.