What could kill Amazon? My interview with The New Warehouse Podcast
In September 2019, I was interviewed for the New Warehouse Podcast with Kevin Lawson. We spoke for approximately 40 minutes on a couple of big topics in the retail world.
Who or what could kill Amazon? This section of the podcast talked about two major trends that threaten Amazon in the long-term. One is trust - if Amazon continues to be a haven for shady merchandise, then that reduces trust which means it harder for people to get over the “creep factor” of buying products on Amazon as opposed to a manufacturer’s website. The second major option I discuss is what I call “verticalization”. In this instance, Amazon could be disrupted - at least in certain categories - by websites that are dedicated to those categories providing a much better experience than Amazon could provide on its own. An example might be what happened to eBay in high-priced sneaker collectibles. Sites like StockX and GOAT overtook the market and now have created two billion dollar companies off eBay, whereas the bulk of that inventory used to be on eBay in the past.
How should a manufacturer think about entering Direct-to-Consumer eCommerce? Kevin is no stranger to eCommerce fulfillment as well. He and I have a robust discussion about some of the best and worst practices for manufacturers looking to take their first steps into consumer eCommerce.
Thanks so much to Kevin for hosting me. You can find more about his podcast on his website:
http://www.thenewwarehouse.com/home/
I’ve attached a full transcript of the podcast here below:
EP:27 – An Interview With Rick Watson
Speaker: thenewwarehouse podcast. Hosted by Kevin Lawton as your source for insights and ideas. From the distribution, transportation, and logistics industry.
A new episode every Monday morning brings you the latest from industry experts and top leaders.
And now, here’s Kevin.
Kevin Lawton: Hello and welcome to thenewwarehouse podcast. I am your host, Kevin Lawton.
Today, we are going to be joined by Rick Watson who is the CEO and founder of RMW Commerce consulting. Rick is definitely an expert in the ecommerce space. He posts a lot on LinkedIn about ecommerce, that is actually how we got connected. Our mutual connection, Bruce Welty, who was the guest on episode 1, actually commented I think on one of his posts and I saw it and we had a discussion from there and now we are here today. Rick is going to talk to talk to us a little bit about his background, what he does and then of course he is going to talk to us a little bit about ecommerce and Amazon and all those different kinds of things.
So, Rick, welcome to the show. How are you today?
Rick Watson: I’m doing great man. It’s really great to join you and it’s a beautiful day here in New York City.
Kevin Lawton: Great. Great. Happy to have you on the show. Definitely. You know, ecommerce is such a big thing in fulfilment and distribution now. It’s like almost essential for a lot of businesses to stay alive. I’m so really happy to have you on. I would say you are an expert, so definitely I’m happy to have you on to talk about it.
Why don’t you give the listeners a little bit of your background so they can understand where your ecommerce knowledge comes from.
Rick Lawton: Yes. I’m happy to be on the show and I really appreciate being on.
So, my background, I’ve been a little under 20 years in the ecommerce industry and I got my start back in 99 with the little and now a much bigger company called ChannelAdvisor. My background was originally in much of engineering and pure Science so I started out in software development and as my career progress, I start myself running not only leading software teams but also leading business teams launching new products. And in particular, the problem that we are focused on was how to help eBay and Amazon sellers be more successful. How do you take them from selling 20 items a month to selling thousands of thousands of items a month? And my advantage point from watching the e-commerce industry from that time was really seeing the origins of the eBay and Amazon marketplace from the beginning. Before they had API’s, before they had millions of sellers. And so, helping so many businesses over the years is really how I gained my knowledge. So, those are some of those big points. So, when I was in North Carolina, I was part of a ChannelAdvisor for about a little over ten years there. And then, some of the other stops in my career were mostly entrepreneurial type roles. I was the general manager of the Third-Party Marketplace at Barnes & Noble.com. So leading e-commerce teams, better helping basically expand in assortment of Barnes & Noble with in that case, millions of items at a time and we were partnering with companies like Wayfair and others that clearly are also leaders in fulfilment and distribution. From there I moved on to be CEO of an ecommerce startup in New York City called Merchantry which I led for several years and then exited. So that was a private label marketplace platform business helping retailers like Modell’s Sporting Goods and PacSun expand their assortment and help with dropshipping which is probably something also that some of your NewWareHouse listeners are involved in one sort of form or fashion. And then most recently I was with Pitney Bowes for a little under three years as a head of Product Management for their Cross-Border ecommerce division. Mostly focused on big retailers. Helping them with things like payments, conversion, check-out and supply chain services for retailers mostly based in the US that are trying to sell into 220 markets around the world. Super complex and interesting topic especially with all the noise around trade and customs and duties and tariffs. It’s wild and a lot of brands out there don’t know how to navigate that kind of space. That’s really my background in the industry and it’s something that I’ve always been super passionate about.
Kevin Lawton: Yes. And I can tell your passion about it by your posts on LinkedIn. I mean, everything is like so into staple. And I think your post really make people think about the topic that you’re discussing and the article that you used to share along with it. So, I’m really happy you could come on and share your 20 years of experience seeing the beginning of it so whereas right now, it has grown so much. So, currently now you have RMW Commerce Consulting which is your company right? So, I need you to tell us a little bit about what you do from a consulting standpoint and what your company is all about?
Rick Watson: Yes. So, this is the company that I started earlier this year, really in February and it’s really a strategic advisory firm. Companies come to me, generally in a couple of different situations. One, they’re trying to answer a new market. And companies are doing something new to them to accelerate their growth and they need help figuring out key questions like “Who are we?” What is that roadmap for answering this market?” “Who should our partners be?” “What should our customer acquisition strategy be?” “How should we build on our technology platform?” “How do we access the customers that we are trying to get after?” “What are the competitive differentiators we have versus other players on our space?” So, really helping them think through strategically how to answer a market and not just be in the market but actually win in that market. The types of companies that come to me are generally SaaS companies in the e-commerce technology space as well as marketplaces as that matches a lot at the background in my experience in the space.
Kevin Lawton: Got interesting. So, not only like a pondering into the market but then succeeding over the long run as well. So, really the full on strategy.
Rick Watson: Yes, that’s right. And then I think there are a lot of consulting firms rather that are focused on just marketing, or just copywriting, or supply chain. I really tried to take the CEO and Management team view of the business so that we could help them make sure that their strategy is a balanced one. They could help them win and not just sort of hit a certain ROAS goal or an advertising goal and to the detriment of maybe some other part of their business.
Kevin Lawton: Got it. Okay. That’s good. So, now you saw, like you’re saying, we’re saying before you saw like passionate about e-commerce. What do you think it is about e-commerce that is so interesting to you and make you so passionate about it?
Rick Watson: I think, number one, I’ve always been passionate about technology. It could happen to get in to e-commerce and so there are few different aspects. Number one, there are a lot of players in the space with complex. I love analyzing complex situations and understanding how to create win-win for various partners. Second it’s so dynamic. As you would’ve notice. Following the supply chain for five minutes, Amazon will do something and send actual respond, and then USPS would chime in then FedEx does something. It’s crazy to keep up with all these changes and really, if you are brand, you are sort of scratching your head like what do I do with all these? And not just because there’s a lot of things you can’t take at face value. So someone, a company says they’re doing X but, in a while technically they might be offering X, it doesn’t necessarily mean they are the best partner in your segment. They might be the best partner for a smaller brand or a larger brand or someone in apparel. You know, or somebody like that. So, at that, it’s definitely something that you know, to look out for.
Kevin Lawton: Definitely. I think there’s so many options out there now. And so many different things like you mention like you know it was under something FedEx. That is something and it was like you know you were there with your smaller company. And you’re like “Uh, do I need to do some take down? So it was like driving. Driving everybody to the kind of, it’s almost like everybody is like challenging each other to get better in some way which is pretty interesting to see the developments that comes of that. Like you mention Shopify, you know Shopify. So, you posted about it but I saw it also because we had 6 River Systems on previous episode of the NewWareHouse podcast. And Shopify just acquired them right? So, all different kind of things that are happening and I think it’s pretty interesting.
So, you know we’re really want to talk today about how we kind of connected I think. You posted an interesting thing on LinkedIn with an article, a fewer article from but I was about you know what would be, you know Amazon, the Amazon killer so to speak, is there actually an Amazon killer? Alright, so how do you feel about Amazon because I was seeing Amazon is such a big player and not only e-commerce space but also in distribution space in general, in logistic space and now our transportation space too with their own fled and all those different things. So, how do you feel about Amazon and what do you think about the future of their sustainably and do you think the way that they’re challenging in the industry like we’re kind of just talking about, do you think that’s you know, a positive way or do you think maybe there’s some negative effects there as well?
Rick Watson: Yes, I mean, anything you talk about on Amazon is like such a charged issue this day so let’s break down from the fundamental. Amazon is an amazing and phenomenal company. Jeff Bezos does not get enough credit for what he has built. Obviously, being the largest billionaire in the world doesn’t hurt and in terms of the pantheon of CEO’s in the past 30 years, I would put him alongside with Bill Gates and Steve Jobs. That’s kind of the level I view their execution, and strategies and philosophies. To building a big business which is pretty rare air. So to me, that’s where the conversation starts. Like it is very hard to deny what they’ve done is really amazing and truly difficult. Again, some of the best SaaS companies in the world like eBay, PayPal, FedEx now, Ticker company that they are trying to do. So, that’s kind of a starting point. I think in terms of staying that are stress the Amazon, there are two big ones that I think about. There’s a lot of focus on the tech press about all. That’s find it something and the really smart get to Amazon and now they are doing great. Or let’s say that means you can, best buy can beat the Amazon. Like, oh, they’re not really beating Amazon per se but what they are trying to do is defend their customers so that they don’t decline anymore. And e-commerce is growing so they should be growing, right? So, good that they’re able to grow faster than the rate of e-commerce which is great.
In terms of the things that I think or real threat to Amazon outside of an individual company are really two things. The first they want is trust. Amazon is a big place, you know. Over two million sellers by any count. Over thirty million products by any count. How many distribution centers? You have Amazon fulfilling, you have sellers fulfilling, you have bad seller actors, you have bad buyer actors, you have mistakes. In a supply chain, that many different levels, both intentional and unintentional. And so, when I talk about trust, there’s really… when the buyers and one of the biggest things that e-commerce company has to worry about is conversion. If a buyer visits your website, and look staring at the product page or going through a check-out, if they’re having doubts that they’ll actually get the product that they want on time and it will show up as described, they’ll going to bail and go somewhere else. So, if you’re reading through Amazon reviews which is a whole nother topic. I mean, there’s a whole industry which thinks that these Amazon reviews have been completely gamed these days which I think they’re right to a certain extent. But if you go….
Kevin Lawton: Yes. I’ve seen such case.
Rick Watson: But if you go to like a Jabra headset and say, if five of the ten reviews on the thing said, “well, I got a Jabra headset but it wasn’t the model that I expected. It’s not what the picture said”. If that continues more and more, if you have one in ten experiences like that on Amazon or one in five experiences like that on Amazon, your trust level is going to start to go down. And that’s going to manifest itself in really two ways. Number one is, you’re going to start going to the manufacturer of that item or to a trusted retailer like you may go at Walmart, you may go to the manufacturers website directly which is where other manufacturers are going to be to see. So that’s one effect. And then the second effect, you get, you know I’ll call it a kind of a free marketing effect. You could have the best antic in the world and if you soon to be sold it versus you go down to the end of your town and you find the same item in the free market, you are going to buy it for 30% of what the seller’s would sell it for. Because you’re trusted, it’s authentic. And if you to Amazon, now you can’t trust that product is what you expect it’s going to be. Mentally, you’re going to be that product that a price discount in your head. So, if the manufacturer is selling for a $100, then for me to be worth that risk that I might not get what exactly what I wanted. You might only buy it on Amazon if it were $80. Which that becomes frictions for buyer who may not. Some buyers are okay with that. Some buyers are not okay with that. That’s where I sort of follow the trust angle of things. [Crosstalk: 00:20:00] No matter what is your experience on the side or some challenges you might have had buying on Amazon.
Kevin Lawton: Yes. I mean definitely sometimes we’re, as you were saying, like we’re… you know I think like I’m looking at something and then you know, looks like the pictures maybe not as sharp or it’s like a fuzzy picture. And it’s being fulfilled by some place that I’ve never even heard of. You know there’s a kind of like that question in your minds. Like is this the legit thing or what’s going on here but unfortunately I haven’t had a bad experience in anything that I’ve received in terms of it being not what I expected but I think what we’re saying in terms of going direct to the manufacturer or like a best buy or something for electronics. Or something that needs you’re maybe a little bit larger purchase. Personally, I tend to feel like yes, I think I would want to go to the manufacturer direct over Amazon first just because I’m spending more money and I’m not sure if I necessarily have the trust of where it’s coming from, if it’s coming from Amazon. So, I mean like for Amazon, my personal use of it is like I probably little things here and there like toys for my son something like that. But when it comes to a bigger stuff like that, I definitely get what you’re saying in terms of trust like I don’t know if I were going to Amazon and spend like $800 on something. Like I don’t think I would much rather go through manufacturers just because I don’t know what’s going to happen. But then at the same time, I think Amazon, because you’re talking about e-commerce, and then one of the huge things about e-commerce too is the other side of it which is reverse logistics. There’s so much e-commerce explosion that, which is also a big explosion in reverse logistic with people behind things that they’re not seeing in person. It’s in our hands to the returning but you know one of the benefits I think there which I recently experience is now Amazon has this return it at a cost which is like I did it as super easy. So in that sense, then I’m kind of like whoa. Maybe I’m not sure what I’m going to get but then at the same time the convenience to return it if I need to is also there. So it’s like, I don't know, it’s kind of bouncing at this. They don’t have you with one part but they do something else and they have on that part.
Rick Watson: Yes. And the effect that will have on the buyer, not that Amazon isn’t great but you would just not go there for that category of product if you’ve stopped trusting Amazon in that category. And for me, it used to be that if something has five-star review then I was okay buying that from Amazon. I don’t say that anymore. I won’t buy anything, most people I talk to, won’t buy anything that is not Prime. And then that’s the standard now. Before I was like five-star reviews, now it’s five star reviews and prime. Pretty soon it’s going to be five star reviews, prime and next day. And you know, maybe Amazon will going to come up with some other badge or steal. Got with brand Arsenic. There has been a lot of noise about Amazon choice and senators are writing letters to Amazon based on some reports from where I can sell and they read from the Wall Street journal. It’s a little crazy how regulation seems to happen in this country.
Kevin Lawton: Yes. Definitely. But I mean going back to the review thing, I have done research on like FBA, fulfillment by Amazon stuff and it was like research on setting up shop and getting items and whole thing. And one of the things that you see is definitely about getting reviews and like how do I get five star reviews and it’s not necessarily like getting them in an authentic way I would say. Kind of like, you get some items, you give to people for free like friends and family and then you have them go on give you good review. Or you send them to somebody for free or at discounted price and then you know, that’s already kind of, probably screwing the conscience of people because they want to pay back I guess that they got an item for free. They got a discount and I don’t know. I think your statement about trust, I think I definitely see how that could give have a negative effect on Amazon. You know, it’s interesting about that because I think what I had said when you posted was, I think the Amazon killer would be the consumer themselves right? So that is kind of a long the same line. The Consumer start to lose trust and you know the business start to go down a little bit. But how many, like you said Amazon has 30 million sum of cues and so many different product categories and different options. How many of those negative instances is going to take if it’s really making an impact. Out of 30 million, how many sales they do? How many customers do they have? It’s going to have to be a big, big wave of mistrust. So, what other things do you think might be killer Amazon as you said you have too much to talk about?
Rick Watson: Yes. I think the other big one is that trend that I call “Verticalization”. And essentially, what it means is that, Amazon is a big platform that is very shallow and very wide. Which means they cover like you said, a million categories whatever the number is. But if you’re trying to have… like if you were to custom design like the best way to buy a sneaker online, you probably wouldn’t design Amazon’s experience right? And so, in terms of things that could hurt Amazon’s business, not kill it I don’t think but overtime what happened to this companies is that there’s a big platform and they’re the giant that everyone is trying to close down at and knock down. And so this happen to eBay over the past years when they didn’t innovate and stuff the rest of the industry. Now you have two separate, $2 billion sneaker marketplaces that for sure 15 years ago would have been on eBay. Guaranteed. Because there’s nowhere else to go. But if you have alternatives in the market that are big, they got funding, they can acquire customers cheaply, maybe more cheaply than they should be able to if they care about profitability, that’s kind of a whole new podcast probably. But the thing is, it’s been a very well-worn venture capital or the best known model over the past 25 years. Let’s say take a big platform and you can call it like eBay, Craiglist. How many people, how many different furniture they’ll site order now online like AptDeco, LetGo and OfferUp and Facebook marketplace that are all taking aim as part of Craiglist. That could have keep happening to Amazon more and more as we go forward. So much is going to take a very hard category or unique category that is meaningful. It could be a multi-billion-dollar opportunity and try to take Amazon sellers from that experience.
Kevin Lawton: Interesting. Interesting perspective. Yes. I think it’s definitely something I’ve seen to as interesting that you talk about how eBay didn’t stay up to speed I guess right? And so I remember that you mention, like I remember, eBay was like the big big thing online. And then Amazon like quickly jumps in front. So, it’s pretty interesting to see that growth. It’s cool that you were selling well at it. Since like the beginning of ’99 you said one thing is starting to really pick up I guess online. So you were really interesting insights definitely on Amazon and the future sustainability and what might be the potential killer of Amazon. But like you mention, a lot of manufacturers are going to open up this B2C channels as well in connect direct to consumers. So, your special, the kind of in your consulting staff is that helping people and turning market and stuff like that. What would you say is the best way for a company like a manufacturer who or smaller company even, who is looking to open up their own ecommerce channel to start to sell direct to consumers instead of B2B or diversify and have a B2B, B2C mix? How would you say is the best way to start to go about that?
Rick Watson: Yes. I think in the first, the real one of the first steps is figure out; number one is just like figure out where your buyers are and who are they? What are the demographics? Where do they interact online? How much are they spending? What sites are they on? Are your buyers on Amazon? Or they are not on Amazon? Or they are on fashion sites? Where are you trying to take share from and be present on. So that’s kind of one I think big part of the equation that will determine your channel mix. Are you primarily trying to sell through your website and that is really your ultimate strategy or there’s so many businesses that are just on Amazon and don’t care about having their own website. A lot of those people are not manufacturers, a lot are just small and middle market manufacturers. But there’s so many CPG’s on Amazon now and that’s a direct. If they are selling on 3P which is third party that are shipping directly to consumer service sells, then that’s a direct to consumer business too above maybe then their own consumer relationship. That sort of powered of half of the biggest [inaudible]. So, one is like determining who your buyers are which will help you determine where you need to be. And then I think the next big thing is determining how much do you aim this for? And I tell people all the time, you could set up an e-commerce platform, the same one for free, for $500 a month or for $2 million dollars a year. The same platform. So, it is just the true thing in the industry that however much money you have to spend, people are willing to take that away from you. So this is how I think will have manufacturers can get in trouble because they are used to be massive budget. And it just start with the basic platform that selling B2C. You don’t need to have this multi-million dollars on premise platform that is future for ten years because in ten years it’s going to be out of date anyway. Really, what you need to do is understand that consumers care about your value proposition. You can execute the basics of e-commerce which is really pretty simple like; step one, get buyers to your site or whatever site you’re talking about. Step two, be interesting enough to convert them. And then three, satisfy them with the actual product and post sale experiences which include fulfillment and delivery and all these other things that you need to be great at. Those are the things and I think a lot of manufacturers who are used to wholesale and really to be honest a lot of them don’t know a lot about their direct customers. They’re better off outsourcing it to a firm that does this a lot for CPGs. Assuming that the same people who built what they already have can figure out e-commerce. Not to care the spend. Hiring an e-commerce, director of e-commerce marketing, someone that is good at PPC and figuring out shop. That’s a lot of stuff for a manufacturer to figure out.
Kevin Lawton: Yes. Definitely. I have worked at a place and we were always distributing to retailers like grocery stores and drug stores and things to that nature. And you know the business was very much the model of getting out. Not necessarily purchase per quantities but a close to purchase per quantities and getting them out to do the retailer. There is no real direct to consumer. And then they decided you know, let’s try, we have products that we distribute that’s consumers will be. So, let’s try a little something up and they set it up and I was like, oh we launch it like the week of by Friday or whatever. So we launch and it was I guess a good thing that they had, they were so…
Rick Watson: The worst choice you could ever make to launch right before Black Friday by the way.
Kevin Lawton: So they really like I guess they didn’t know what to expect so they had like expected a certain amount of sales maybe. It was like their goal. And what happened was they just exploded and I think they did like it was like three or four times their goal. But they didn’t have the infrastructure and place to fulfill to that. They had to stack but it was all about getting the orders out then. And they’ve got themselves into real trouble because at the end of getting backed up and they weren’t delivering into a service level to the customer. So, they actually had to say, wooh huh, we got to shot this off and take a step back. And now it was like actually figure this e-commerce thing off. Worse because obviously they are interested but we didn’t figure out how to do it the right way. Like you said you’re going to make sure you can deliver on that service to the customer. Because you know they are not going to come back and there’s so many other options of course to buy things. So, it was pretty interesting. So, yes. I mean like you said, I think going to like a different if I can set you up and do it for you is probably a smart thing because you have these other things in play that you have to ramp up further quickly to get to that point. So, what else would say is important in order to set up e-commerce. Like maybe from a fulfillment standpoint. It’s a totally different I would say different world but totally different way of fulfilling orders and from a B2B standpoint where you are doing mostly purchase per quantities. Things with that nature. Now you’re getting down to each payer can always pay in different way. And so what kind of expectations would you say companies should have in terms of change in that arena?
Rick Watson: I think there’s change basically from such a point of view was pretty massive and their just a lot of things they’ve never done before. So you find people that are like, “Oh well if I do one-part e-commerce very well then it’s going to work”. For instance, like if I can just get people to the website is going to be successful. That was kind of a problem that you pointed out with the last company that you mention. And then there’s people who have oppositely view that’s like, “I’ve been shipping pallets forever. I know how to do it. How hard can this be to ship eaches”. And so, they figure out technically how to ship eaches right? They were able to ship throughout the consumer one box at a time. But they don’t do it very well and they don’t know what good is. So, I think the biggest thing in the supply chain point of view is go to eBay and go to Amazon and write down what their standards are for sellers and supply chain. Write them down study those metrics and then first back set in to measure your own business and then try every day and mark any product that doesn’t hit those metrics as a defect. I think what people forget and direct to consumer e-commerce that any marketplace seller who’s on there for five minutes, you could have kicked off if you don’t ship the same day. They measure the bottom line. And a lot of time if you can get order by 8 o’clock and it should go out by 3 pm. No questions. It doesn’t matter the reason. So, that’s the bar that consumers are expecting. It’s not Amazon’s fault that’s the bar. That’s what consumers expect. Maybe they trained them. You can say they trained them or not and a lot of people just disagree on that. But the reality, that’s where we are. I think most manufacturers head would explode, if they thought they could get their order in by 10 o’clock then it has to be out by two. I would just be, they’ll think you’re from another planet. And you ask them like what your same day ship on time, delivery rate is… and then you’re like “huh? What do you mean?” Their order went out. They’re a carrier’s problem now. But no, it’s not a carrier’s problem. It’s your problem. Because the consumers going to yell at you and you can’t pass the box to the you know, down somewhere else in the supply chain anymore.
Kevin Lawton: Yes. Definitely. I think it’s definitely a big shock like you said and I think it is like a total change in a perspective and perception. So, I like the tip that you give you know to look at those are requirements from eBay and Amazon. And those different kind of thing. And I see how can you fit your business into meeting those demands before you find out later that you’re not meeting those demands from your customers and you have a bunch of angry customers.
So, Rick it’s been a great talking to you. How can people I guess read more about your insights? Obviously I’ve mentioned LinkedIn so they can search for Rick Watson on LinkedIn. But how can they get in touch with you otherwise and what’s your website for your consulting business?
Rick Watson: My website is; www.rickwatson.io and anyone could find me there. Or you can find me on LinkedIn as you’ve mentioned.
Kevin Lawton: Okay. Well, definitely. And we’ll definitely post links to both those on thenewwarehouse.com. So Rick thank you so much for joining us on the show and talking e-commerce today. Definitely, so many more topics that we could talk about so hopefully we’ll have you on the show in the future as well. So, thanks again for being on the show and this has been thenewwarehouse podcast.
Speaker: You have been listening to thenewwarehouse podcast with Kevin Lawton. Subscribe and check us out online at thenewwarehouse.com
