In this episode, David talks with eCommerce & Amazon expert and consultant, Melissa Burdick. Listen to Melissa talk about the challenges that some large brands have with the transition from offline to online and what they can do to start winning online. Dave and Melissa also discuss the current Amazon price war, ways to structure your organization for eCommerce success, and what retailers are and can be doing to differentiate themselves from Amazon. Melissa spent a decade at Amazon and helped launch their CPG and advertising businesses, and was most recently VP of eCommerce at the Mars Agency. She now runs her own strategic eCommerce consulting firm with Andrea Leigh, another former Amazonian, and her own marketing agency.
Melissa recently launched an eCommerce consulting firm to help brands with their eCommerce business. Contact Melissa on LinkedIn for more information.
Recording: This is Bricks to Clicks, a podcast presented by Content Analytics and hosted by author, CEO, and entrepreneur David Feinleib.
Dave: Welcome back to the Bricks to Clicks Podcast. I'm Dave Feinleib. My guest today is Melissa Burdick. Melissa was most recently vice-president of e-commerce at the Mars Agency. Before that, she spent 10 years at Amazon in various roles including as a senior product manager, senior program manager, and senior vendor manager. Melissa just launched her new e-commerce consulting firm with Andrea Leigh, a GM and category leader who also spent 10 years at Amazon. Melissa, welcome to the show.
Melissa: Thanks for having me.
Dave: First, congratulations on starting your new consulting firm. Tell us a little more about that and what you'll be doing there.
Melissa: Basically between Andrea and myself, we have 20 years of Amazon experience. We both were there kind of from the ground floor, both of us in the consumables business we helped launched in 2005. And so really taking the 10 years of expertise that we've gained through the years, both in how to negotiate with Amazon, you know, various e-commerce strategies to employ marketing and helping brands with all of the above with their business in e-commerce.
Dave: You know, I always love meeting a fellow entrepreneur. What made you decide to start your own business?
Melissa: You know, it's just kind of fun to take our many years of expertise and be able to help brands, and really it hasn't been too far from what we've been doing or what I've been doing in the last couple of years, and just having a little bit more ownership and ability to partner with experts in the industry like Andrea to be able to do that.
Dave: That's great. Well, I'm looking forward to learning more about what you're doing. I thought we could start out by taking a look at the industry more broadly. And we've seen a lot of that activity lately from Wal-Mart and Jet in particular in the M&A area. Coming from Amazon, what's your perspective on Wal-Mart's strategy especially around some of these recent acquisitions?
Melissa: I think it's pretty obvious that they're buying customers and they're buying different customers. So, you know, the acquisitions they may like ModCloth and ShoeBuy and MooseJaw and especially Bonobos, which is a totally different customer set than Wal-Mart, so I think that they're buying kind of...they're trying to reach a newer demographic, one that's younger and more affluent. And then similar to Wal-Mart buying Jet, you know, they got a great acqui-hire who is pretty expensive with Marc Lore, but if there's anybody that can beat Amazon it's him and he's very hungry to do that, so kind of both acquiring more customers, different customers, and also a great talent to really boost that e-commerce.
Dave: Now, if you were starting an e-commerce site and you wanted to get it acquired, are there any areas you'd be looking at in particular or are there any site you think we should be keeping our eyes on that might be next in either the Amazon or Wal-Mart M&A areas?
Melissa: That's a good question. I mean definitely they're going, you know, fashion and apparel, is a big target, an acquisition kind of target. So probably more of those, I would seem to think.
Dave: That's great. What about for other retailers, we've got Target, Macy's, and a long tail of specialty independent retailers, what advice do you have for them when they're thinking about their e-commerce strategy and also about making that transition from offline to online?
Melissa: Yeah. I mean I think that it's really hard to compete against the Amazon supply chain and fast shipping, and I think a lot of people are seeing that. We just saw Target increase their free shipping threshold, $2.35, and so, you know, it's obviously difficult for people to compete against Amazon's very efficient supply chain that they're really great at. But, you know, it's an opportunity for them to consider other areas that Amazon doesn't have like omnichannel.
And one example of that, I think Nordstrom does a really great job of kind of buying online and pickup in stores in just recent kind of year. They've really kind of created an area within their store where you can go directly to pick things up. And then making buying online and returning in-store easy, they've done a really good job of that as well. Others haven't done as great of a job, like Gap doesn't really do as good of a job as that where you can't return some items that you buy online.
But really focusing on some of those areas that Amazon doesn't have, which is the in-store experience and bringing people from online to offline. And I think Wal-Mart just launched the pickup discount, so you actually get a discount for buying online and picking up in stores to really differentiate themselves from Amazon. So really focusing on those kinds of core things to differentiate the stores from what Amazon offers.
Dave: That's great. What about on the brand and the supplier side, what suggestions do you have for brand managers, for suppliers, and is there anything you'd recommend for large brands versus for some of the smaller up and coming players?
Melissa: I think for large brands what's kind of interesting, what's happening is that offline market share does not translate to online market share, and so really not expecting that just because you're big offline means that you're going to be big online. And some of the reasons why is because, one, is there's a totally different supply chain and the way of working online and some of the larger brands are just not very nimble to change their ways. And so it's easier for smaller brands to be more nimble to be able to adjust and even launch first online and learn.
There's, you know, brands that are, like what I was saying in terms of not being leaders offline but they are online, so those brands like Soylent, and even deodorants, like if you look at top sellers on Amazon there's brands you've never heard of like Primal Pit Paste, and also like the specialty pet area, but there's such a lower cost to entry and easier way to get distributed in online than offline, which is why there are so many smaller niche players that are coming online and able to, you know, design and have great content and great customer reviews and they're really steadying their price points to be able to be in line with where they need to be at to have a compelling offer, and so some of the larger brands that are a little bit less nimble in these areas are kind of losing out.
And so my recommendation to the larger brands would be to try to be down those maybe bureaucratic processes to be able to be more nimble and to compete better online. And then for the smaller brands, use that to their advantage. And one example that they did early on was when Amazon launched their paid search program called Amazon Marketing Services, they launched with the need to use a credit card to be able to even use it. And so the small brands were able to jump on using paid search immediately because they didn't really have problems using a credit card, but some of the larger companies, they were unable to...
Dave: They got to get a PO and an invoice.
Melissa: Right. Yeah, exactly. So it is much more difficult for them to use credit cards. So, you know, small brands got in there and paid search was extremely cheaper then.
Dave: That's great. Speaking of large brands, we talked a little in the past about org structure. What do you think that's working and how should brands be organizing for success?
Melissa: Well, I think that the organizational structure is a really interesting thing and something that's kind of happening right now as a tipping point. The companies are kind of doing three different things, I kind of categorize it into three different ways. One is they're identifying the need to have e-commerce expertise or at least somebody dedicated in their company to run e-commerce. So they kind of find someone internally and they just say, "Okay, now you're running e-commerce," when they didn't really have a good experience before or didn't know or have any experience running e-commerce. So they get kind of a poor person to do it, which is great that they have someone now fully dedicated, but on the flip side of it, it's pretty tough for them to...it's kind of overwhelming, everything that you need to do. So that's kind of one thing that's happening, which is at least the identification that they need to start investing.
And then there's two other things that I'm saying, one is really going big and saying, "Hey, we really need to blow up our current organizational structure," especially within these kind of consumer packaged goods companies that have been operating for a very long time and have been very kind of longstanding organizational structures, kind of blowing up their current organization and creating a very horizontal, across all of their brands, e-commerce-centered excellence, and really focusing on those areas that are so important like supply chain and like kind of test and learn opportunities.
And I think that those organizations that are doing that, and I have some friends that have left Amazon and now kind of are in this organization like Mondelez and Rubbermaid, I think that they're able to kind of go full, full force ahead. And then there's kind of the third one, which is identifying the need and kind of going bigger into e-commerce and write spreading roles to their current organizational structure. So you may have dotted lines going into the e-commerce team, and while that's great that you get an additional head count of resources, you still have some bureaucratic processes and things that maybe are still difficult to navigate to get what you need to do then.
Dave: When you look at these different organizations, and it's so insightful to hear you talk about how these companies are structuring themselves, but so often we talk about pricing strategy or assortment or are you on the shelf, things like that. But it's really interesting to hear about the actual structure of the org. What do you see are some of the drivers that enable organizations that, you know, put in place an entirely new e-commerce efforts, what are they doing differently or what enables them to do that in contrast with let's say the first group where, you know, they task someone with e-commerce, but as you mentioned it's, you know, it's really overwhelming for one or two people to handle.
Melissa: I think that the companies that are doing this, it's really started with the board and the C levels at their companies where they're saying, you know, "We want to be X dollars by 2020." And when you think that, you know, putting like a stake in the ground that e-commerce is gonna be this big driver for them and they need to invest in it. And so when you get kind of like the board level, C level support to invest in e-commerce, that's the groups that are going on hiring freeze and really kind of blowing up their organizational structure. And it really doesn't work until you get that kind of level of support because otherwise you kind of are, you know, handcuffed a little bit to your current organization and I see people in those positions as being, you know, a little frustrated at their fate because they don't have that support.
Dave: Very diplomatically put. It's great, great words of advice, great wisdom there. Switching gears a little bit to the tactical front. You know, we've seen a lot of news lately about competitive pricing, the "price war" that's going on. What are you seeing in that area and what can retailers and brands do to compete with this price competition that's going on?
Melissa: The price competition is it's heated up and it's getting pretty bad and it's hurting people's businesses a lot. One of the biggest problems that I see brands that I speak to and work with is when they get these great items with lots of velocity and lots of sales and they're heavily distributed especially in Costco, and when they're in Costco and they price-match to the Costco in-store prices, all of those items are very at risk to what Amazon calls CRAP, Can't Realize A Profit, because it's this pricing more that just kind of keeps pushing the price down and there's very different economics at Costco than there are at Amazon. And it's a little bit unfair to kind of completely price-match to those two very different economic models, whereas at Amazon you have shipping cost then a lot of marketing cost and other stuff associated.
And so that's been a huge topic of conversation with a lot of people. And then an associated terminology, as people have probably heard of this term if they're in space of CRAP, but basically it becomes a very tough conversation. And to be honest, when that happens, there really is not a great solution. You know, everybody is kind of struggling with the same problem. And it doesn't even have to be the same exact item. It could be a different SKU. It could be potentially a different count if it's like, you know, beverages and it's a 12-count versus like an 18-count, Amazon will still price-match at a per ounce size. And so that makes it really tough. And they want to be competitive and they want people to keep coming to them and have a trust that they have the best price. But it makes it really difficult on brands and so what winds up happening is they potentially are unable to sell those items and have to come up with other alternatives.
And so you may ask, you know, what are those alternatives that you can do, and a lot of people are starting to think about, you know, potentially offering different types of products for different channels. Some people are going...
Dave: What's an example of that?
Melissa: You know, one example that I noticed, during the holidays, for example, with Fitbit where on Fitbit's direct to consumer site, they offer different colored bands. You can only buy unique colored bands on their site, and everywhere else you can only buy black or green or, you know, the typical colors. So that was a good...and it was more expensive because they're a little bit more exclusive. So I think that's kind of a good example of being able to differentiate and, you know, maybe buy the same item but it's a little bit different. And a different item that you'd be willing to pay for and I know that because I was willing to pay for different colors when I bought it on their site.
Dave: That's great. What color did you go with?
Melissa: It was kind of like a rose gold, kind of gray band color that was unique and different than, you know, just a normal black.
Dave: So differentiate it, so it makes sense. It makes sense. What, speaking of kind of profitability and differentiation, you've talked in the past about this concept of item level versus brand level profitability. What does that mean and can you talk a little about how Amazon thinks about that and how brands should be thinking about it?
Melissa: So I think one of the differences at Amazon is that every item has to stand on its own, and that's kind of a tough concept for many brands because they kind of want to be considered possible at a portfolio level. You know, there's a concept of loss leaders and then others that are the opposite so that, you know, it all averages out. But that is not the case at Amazon because every item is basically managed at an item level which is a little bit crazy, but that's kind of how they do it. And so really, you know, they have a CRAP list that they go through and if it's, you know, if they find...if they try everything they can and it's just kind of a no-win situation then, at an item level, they won't carry something. And so that's a really different way of thinking, to have to consider each item, so, yeah.
Dave: Yup. And what about private label, how much of a concern should that be for some of the large brands out there today?
Melissa: You know, I think private labels are a big risk. So the Amazon, for one, they don't really play fair on their private label. On one hand, I love studying their private label because, you know, they're gonna launch everything best in class. So I always tell people to look at what they're doing and use it kind of as a best in class example for themselves in terms of the content that they develop and the imagery and how it's packed in the price points and all of that.
So I always like studying what they do but, you know, just one example within electronics. So if you look at the...especially with the basics brand, with batteries and their cords and all that kind of stuff, I mean that's one category that's just been doing extremely well in terms of their private label. And if you look at like the Echo or any of their own devices, albeit they have a special treatment on the Buy Box where you can attach and buy the necessary cords and they're all the private label Amazon stuff. And so that's one way where they don't play fair.
Typically, when you ask for Amazon's Choice, if they play in that category, it's the Amazon private label product, even though their search rank in sales may not justify that kind of badge, they still obtain it. And so even though in the consumables category you have to be primed to buy their private label and so that is, you know, one hindrance to it, and some of the brands are doing better than others, but it's definitely a challenge and a risk in a category because they have everything figured out and they've used data to be able to even know which categories to go into.
Melissa: Yeah. So I think it's definitely a big risk.
Dave: And now, some brands are thinking about that have not ever sold direct to the consumer part are now thinking about going direct, any thoughts on that as part of an overall strategy for these brands and suppliers?
Melissa: You know, I think direct to consumer makes sense if you're in a product category that has enough traffic to direct it. You know, like Fitbit is a little bit different because, you know, their site has a lot of great content about fitness and, you know, extra stuff that you may want to go there. But the biggest challenge with building out a direct to consumer site is getting people there. And so if you're like, you know, beef jerky and you want to build your own direct to consumer site, you're just not gonna have a lot of traffic going there, and it burns a lot of your own internal resources to be able to even have a direct to consumer site which requires all of the fulfillment and doing all of that, plus kind of work with peer plays and managing e-commerce that way. So you have to really look on...
Dave: A lot of ground to cover.
Melissa: It definitely depends on the category that you're in if you've got a great following and able to drive the traffic there versus, you know, not.
Dave: Yup. Now we are in the tool space obviously, when you think about Amazon, in particular with Amazon Retail Analytics, ARA Premium, how easy or hard are those capabilities to use for brands, and what tips do you have for folks who are trying to get insights into their data?
Melissa: Yeah. I think the tools on Amazon are pretty testy to use, to be honest. And even, I mean, from working at Amazon for so long, the people that work there actually are not practitioners. They do not use the tools. And it's kind of obvious on the outside but I... When I first started with brands I typically tried to introduce them to third parties like yourself to make their lives a lot easier, and to be able to use other folks and other tools instead of using ARA Premium and ARA to help them with their business just because the tools are pretty clunky and it takes forever us pulling. And so typically outside tools make people's lives much more efficient and they can, you know, take out half a day to a day's worth or work every week. And so, yeah, and I'm sure you've heard this many, many times.
Dave: Yes. And I'm always curious, you know, you look at when you go to work with the retailer internally, you see that for any retailer, there are a lot of tools and capabilities. What is the thinking, would you say, have retailers on what tools they make available internally, you know, relative to their capabilities that are available to suppliers and vendors?
Melissa: Well, really with Amazon especially with my experience, they had to make tools internally useful to help with negotiation. I mean we'd be honest, if someone is asking for money all the time, which if you're a brand you probably are very familiar with these asks, but it was really a test because we have to run our own queries and, you know, try to even just get data to even negotiate with the brand. And so to be able to have really soft access to data is a necessity at Amazon internally to be able to know what's going on with your business and especially to really negotiate with brands. And so that's really why their tools are so much better is because, you know, it makes them money.
Dave: Yeah. No, that totally makes sense. And so that's a great, great insight. Before we wrap up, speaking of e-commerce, shopping, any favorite products you've purchased lately and so, you know, how was the purchase experience and what could have been better?
Melissa: Well, as you can imagine I'm a big Amazon shopper. I probably spend about 80% of my shopping power on Amazon. It could be more, I don't know. But my latest purchase has been getting prepared for my daughter's, she's eight, for her Girl Scouts camping trip this weekend. So I pretty much bought everything on the list in terms of a sleeping bag, bug spray, plates, you know, you name it. And my only complaint is that I couldn't buy any of that stuff on Prime Now because usually I'm not such a planner on the shopping stuff like this but I had to be in this case because I knew they wouldn't have...you know, Prime Now is great because it's, you know, gets to you within an hour or two. But they don't have a completely vast selection like the Amazon platform just yet. And so that stuff was not available on Prime...what about you, what was...what's that?
Dave: Make it faster.
Melissa: Yeah, make it faster. Let me be the complete...not have to do it until the night before, procrastinator.
Dave: I'm with you. My most recent purchase is a little more mundane. It's an air purifier. I've been...our family has been experimenting in the kitchen and I'm not always that quick with what I'm doing so I took the liberty of getting an air purifier to help out when I make a mistake. So I'm not sure it's fixing the root cause of the issue but hopefully, it at least corrects some of the symptoms, so that' great.
Well, it's been so great having you on the show. Before we let you go, what's the best way for potential clients to reach you at your new firm?
Melissa: The best way would be to reach out on LinkedIn. You can catch me at Melissa Burdick on LinkedIn and I'd love to talk to anyone that wants to...I'm always up for an e-commerce conversation.
Dave: Great. Melissa, thanks so much for being on the show.
Melissa: Thank you.