Brand = Consistency: A Chat With James Thomson of Equity Value Advisors

In this video, Rachel Go chats with James Thomson, Managing Partner of Equity Value Advisors, among other roles. Rachel and James discuss his background, early days of FBA, investing, and advice for brands.

Transcript below.

James’ background

Rachel Andrea Go: Thank you, James, for joining today. For my first question, I wanted to know if you could share a little bit about your background and how it led to where you are today.

James Thomson: Thank you, Rachel, for having me today. I have had the good fortune of being able to work at Amazon back in 2007 through 2013, when the marketplace was really starting to pick up and the FBA program was still in its nascent stages. I got to work as Amazon’s first FBA account manager trying to sell FBA into brands back when the discussion was more around, “I have a bigger warehouse than you do, so why don’t you use our warehouse?”

One of the fun things I got to do at Amazon was to take sellers on tours of some of the facilities and show them the vastness of the network that we had, and that convinced a number of sellers that, even if they had a decent-sized warehouse of their own, the fact that Amazon had a network of warehouses across the country and could support Prime — that was a major differentiator, and brands got excited.

After I worked at Amazon for a number of years on the marketplace side, but both marketplace recruiting as well as FBA recruiting, I left Amazon and started an agency with my business partner, a company called Buy Box Experts, which became a large agency for supporting both 3P and 1P brands. And I also had the opportunity to found the Prosper Show, which is an educational conference that Amazon sellers today still frequent.

I’m long gone from both Buy Box Experts and Prosper Show, having sold both of those businesses. But nonetheless, I’m still very much entrenched in the eCommerce space, helping brands think through, how do you build a strategy to either launch on eCommerce, or how do you think—help them think about what it takes to migrate from being not only a brick-and-mortar brand but a brick-and-mortar brand that also has a cohesive eCommerce strategy. So, that’s what I do today, and I’m very fortunate to have accidentally landed in eCommerce, because it turns out—I hear it’s going to be a growth business.

Rachel Andrea Go: You were really on the ground floor of FBA right at its Inception. Can you comment on how FBA has grown as a program?

James Thomson: Well, back in 2009, 2008, FBA was a money loser for Amazon. Amazon was trying to figure out, “How do we get sellers—third-party sellers excited about putting their products into the warehouse?” This was before everybody realized that, “Oh, if you’re in FBA, you’re Prime eligible. Oh, if you’re Prime eligible, your products are gonna have a really good organic search score. Oh, those kinds of things actually matter.”

So, it turns out it’s not really about whether Amazon can shift your product faster than somebody else or cheaper than somebody else; it’s really about how do you play the Amazon game effectively. And, certainly, the FBA program—by the time we got to 2011 or so, brands were starting to realize whether they had the capability to ship products themselves or not. It probably made sense for them to look seriously at using FBA, at least for the Amazon portion of their business.

Brands need an Amazon channel strategy

Rachel Andrea Go: What are some key ways businesses should choose their acquisition channels?

James Thomson: So, I have a little bit of a biased response here, because most of the companies I’ve worked with in the last 16 years decided that Amazon was a good place to go because it was a big place with lots of customers, and if they could go in there and grab a piece of pie, the piece of pie was probably bigger than the piece of pie they’d have to create if they were to build an initial DTC business.

Now, lots of the companies I’ve worked with started on Amazon and then diversified into other channels, including DTC, including other marketplaces, including international marketplaces. But, really, the world—my world has been divided into two different groups of brands: One is the brand that was already alive and well in physical retail, and the other one was the entrepreneur who decided, “I want to run a business, I want to build a brand, or I want to be a reseller and I’m gonna start on Amazon to make that happen.”

In either case, I like to say that every brand needs to have an Amazon channel strategy, whether you’re going to sell on Amazon, whether you’re going to advertise on Amazon, whether you’re going to use Amazon as a data source, whether you’re going to use it as a place to experiment and learn about new product development ideas.

Amazon’s an amazing place to leverage, and for brands that say, “Gosh, I really don’t want to be on Amazon,” okay, that’s fine. So, you don’t necessarily have to sell on Amazon, but you had best be looking at Amazon, thinking about, what can you learn about your competitors? What can you learn about potential customers? There’s really no other huge destination like this that has so much public data that brands can leverage to learn more about what it is they’re actually trying to build.

So, when I think about choosing acquisition channels, often, it’s not even an explicit discussion, because the brands have already said, “I’m going to start on Amazon. Help me grow on Amazon,” or, it’s brands that say, “Gosh, everybody else is on Amazon. I guess I should be there,” or, worse yet, “There seem to be a bunch of unauthorized sellers selling my product on Amazon. I’d like to take control of that channel and figure out, is there a way that we could do better than what all these other sellers are doing for our brand?” So, the more interesting question for me is, once a brand gets to a stable state on Amazon, how do you help that brand think about expanding into other channels?

And that’s a really scary thought for a lot of brands because they get really good at the Amazon language. The language of, “What do I need to do to perform well on Amazon?” And then, lo and behold, you say, “Well, if you want to talk about DTC, guess what? Go find your own traffic. Guess what? Figure out how to do, you know, proper funnel management.”

It was a lot of stuff that entrepreneurs don’t have to learn how to do in order to sell a lot of dollars on Amazon. And once you start looking beyond Amazon, you’re probably going to have to become a much more sophisticated marketer or even just a basic comp—you have to learn a lot more of the basics of what it takes to build a business from scratch where Amazon hasn’t taken a lot of the complexity in-house and chosen to manage it for you.

When I think back to the 2010-2011 days, I can’t tell you how many sellers I met where it was one guy or one gal and they’re running a multi-million dollar business sitting on a bar stool somewhere just sort of enjoying life. Life was easy back then: They could bring in a bunch of stuff from overseas, slap a brand name on it, sell it on Amazon, and make a bunch of money. Now the world’s not quite that complicated. Or, excuse me, it’s not quite that simple today as it was back then. But if you learn how Amazon works, you actually can make a lot of money without fully understanding what it takes to run a business. You can’t do that if you’re running a DTC business.

So, when brands ask me about how to diversify into other brands, I need to look carefully at what kind of in-house capabilities they have and help them understand that, just because it takes 40 hours a week to run an Amazon business, it’s going to be another 40 hours a week to run a DTC business. And by the way, you might make 10% of the sales that you’re making on Amazon. And so, the question around why are you looking to expand into other channels — if it’s purely for more revenue, you’re probably not going to be excited about diversifying, but there are lots of other good reasons to want to potentially diversify into other channels.

Success requires active branding efforts

Rachel Andrea Go: Tell me about some of your biggest client wins. So, how did your clients implement your advice for big results? And what was that advice?

James Thomson: When I look at brands that have done well on Amazon, I would say most of my biggest successes have been brands that woke up one day and realized their products were being sold by lots of unauthorized sellers: lots of poor branding content, probably a bunch of price erosion, and they realized, “My goodness, this is negatively impacting our core business and physical retail.” And so, [in] helping these brands think through, “How do you clean up your channel? How do you take back control of that channel? How do you take back control of the branding contents that you have consistent branding across all channels?” I’ve had many brands that basically never evolved properly to adjust to a world where eCommerce was a reality and in fact, a major, major player in their overall distribution.

Once brands learn how to make that shift and grow up and recognize they have to adapt to a world where eCommerce can have a lot of negative impacts if they don’t actively manage the channel, those are the kinds of clients that I’ve enjoyed working with the most, because the light bulb goes off and they go, “Oh, okay. It’s not about whether I want to do this; it’s about whether I need to do this because, if I don’t, someone else is ultimately going to end up controlling my brand. Somebody else is going to end up telling the story about what my brand stands for, and I don’t really want someone else to have to do that. I want to be the one that does that.” So helping brands make those difficult shifts — those have definitely been the biggest successes.

It’s not to say that I’ve had clients that have sold more dollars. Yes, I’ve had clients that were pure Amazon sellers that sold a lot of product, but helping a brand make that shift from, “I’m an old-school physical retailer,” to “I’m an old-school physical retailer who learned a new dog trick,” — you know, old dogs can’t learn new tricks — well, actually, you can; it’s just really scary because you have to make a lot of changes. Those are the kinds of clients I’ve really enjoyed working with and, you know, they’ve been able to go on and do very good things with the Amazon channel.

Rachel Andrea Go: Speaking of brand consistency, what are some big mistakes that you see when it comes to brands who are trying to keep their image consistent?

James Thomson: So, there are brands that start off thinking, “Well, I’ve been around as a brand for decades. Everybody loves my brand, everybody knows my brand so, therefore, I assume that people come to Amazon and they’re gonna look for my brand.” Well, right there is probably the single biggest mistake. Most search activity on Amazon is not branded, and so, even if you have a well-established brand, that’s not the way consumers behave on Amazon. And so you have to learn how to play the organic search game using typically generic keywords. That’s hard for a lot of brands who believe that there are millions of customers out there just running around looking for their brand. And when you’re competing against brands you’ve never heard of who know how to play the organic search game better than you, that gets really frustrating for a lot of brands.

So, you know, that’s one major mistake. The other major mistake that I would say is, when brands have gone through the exercise of getting brand registry, locking down their content, for a lot of them, they walk away at that point. They say, “Well, I’ve got the content in place. It’s locked down. I think my job is done.” Well, the reality is, if somebody’s not monitoring not just the listings that the brand locked down but listings that somebody else randomly may have created, that consistency of your brand message has to be monitored throughout all content that’s put on Amazon or, if we’re looking beyond Amazon, all content on other channels as well.

If we just stick with Amazon, you’ve got to be continuously monitoring, saying, “Is the system breaking down? Are people still going in and changing my content? Or, worse yet, are they creating duplicate listings and creating confusion for customers on Amazon?” So, recognize that your brand has to be raised like a child. You can’t just raise your child one day and then go away for a month.

And for a lot of brands, they raise their child — they’re like, “Okay, you’re all set. We’re sending you to school. You’re done. See you later.” Well, guess what? You need to continue to nurture that brand, and part of the nurturing exercise is consistently monitoring and making sure that all of your brand, not just the listings you created, but all of the listings for your brand across the Amazon channel continue to be delivered to customers in a way that’s consistent with what you’re trying to communicate in your brand.

Look for markets that check all consumer boxes

Rachel Andrea Go: I noticed you’ve invested globally. How do you choose which markets you want to invest in?

James Thomson: I’ve had the good fortune of meeting a number of entrepreneurs who are doing eCommerce in different ways. Most of them are what I would call brick—our “picks and shovels” businesses helping eCommerce—enabling eCommerce for brands. You know, I’ve had the opportunity to work with a number of entrepreneurs in the United States and Canada. I do have one company that I work with in the Philippines. It’s a former colleague of mine who happens to be based in the Philippines, and I like what he’s doing and made a very small investment to help them there. At the end of the day, customers around the world—everybody wants lots of selection at low prices delivered quickly to them. That’s kind of the Amazon promise. Well, there’s lots of companies that are needed to enable that functionality all over the world. And so, if someone’s tackling one of those issues — you know, lots of selection, consistently low prices, or fast delivery — those are all really good ideas.

And so, to the extent that there are companies that do those kinds of projects, you know, I’m certainly interested in hearing what they do. That being said, there’s an awful lot of “Me too” activity going on, and so you have to ask yourself, what can you do that’s different enough from what everybody else is doing that somebody’s going to get excited [about]? And with this particular company I’m working with in the Philippines, you know, they’re building a new type of marketplace for a wildly underserved audience in that particular country. It turns out it’s a very big country with lots of opportunity. And so, if somebody goes and finds a white space and figures out how to capture that white space, that’s exciting.

So, I don’t typically work with companies unless they’re somehow involved in eCommerce because that’s the space I know. Somebody wants to get into Cannabis, Bitcoin, I’m like, “I don’t know, that’s not something I know anything about.”

Amazon expands off the marketplace

Rachel Andrea Go: What happened in eCommerce in 2023 that you’re most excited about?

James Thomson: I am most excited about what Amazon did with starting to send out different ads to different people on some of their off-Amazon traffic. We certainly saw this with their Thursday Night Football being able to test how do you take some of the Amazon DSP content and show different ads to different customers who are at different stages of their purchasing—learning or purchase. That’s really interesting to be able to target different customers in mass media and send them different messages, and, certainly, in the last few days, we’ve seen Amazon acquire broadcast rights for more major league sports. And I think all of this is going to bode for how do we move away from the old-school “everybody turns on their TV and sees the same ads” to a model where somebody uses first-party data to be able to recognize that, “I’m at a different stage of the purchase exercise than you are and so I want different messages than you do.”

If that, in fact, rolls out in a way that we start to see the response rates, you know, much higher than what we would expect with just broad-based “everybody sees the same message,” you know, to me, that’s very exciting because all of sudden, you’ve got all this first-party data that historically has never been used in print, in radio, and TV — all of that is stuff now that a company like Amazon can use. What’s a little scary about it is that I don’t know anybody else that has this level, the mass and the granularity of first-party data that Amazon has.

And so, if Amazon figures out how to do this — there’s like, I think there’s, like, a hundred billion dollars a year in advertising dollars available in the U.S. — I can see Amazon taking a very large part of that, because advertisers will recognize that Amazon can do a better job of sending the right message to the right customer at the right time versus what everybody else does in standard print and media—or for standard print and television. So, [I’m] excited to see where that goes, also a little scared because there’s not really a good second option for companies that have that level of first-party data. And, certainly, some of the changes Google’s making to its own cookies — that will only reduce the ability of a company like Google to be a large competitor on the first-party data side.

The importance of controlling your brand

Rachel Andrea Go: So, you advise a lot of businesses, a lot of, you know, brands and businesses that target brands. What’s your advice to B2B eCommerce companies going into 2024?

James Thomson: Well, I don’t think 2024 necessarily brings a lot of huge, new challenges that 2023 didn’t have. I think we still have to look at a lot of the basics, and we’ve talked about some of this already: Brands need to control their channels so that they don’t have price erosion across channels. They need to make sure they control the branding so that the message is consistent; a brand is just consistent promises across all channels, and if you don’t have consistent content across all channels, then you don’t really have a brand.

And, certainly, we’ve seen brands get more interested in potentially selling their businesses down the road. If you’re gonna try to sell your business and you don’t have consistent content across different channels, then what exactly is it that you’re doing? You’re just selling a bunch of widgets in a box. So, control your branding, control your channel (and, hence, your pricing), be a position where you’re telling the same story to customers no matter where they are, start to test out some of these different forms of advertising so that you can see if you can capture new audiences of customers that you didn’t realize were actually potentially relevant to your products — all that kind of stuff is stuff that we need to be looking at. I don’t think I would have said something wildly different a year ago because all those basics were still in place.

For the 16 years that I’ve been fortunate enough to work with brands that sell online—what I just finished saying around the things that brands need to control, 16 years ago, we were having the same conversations. And so I don’t care what your widget is that you’re selling; if you’re putting a brand on that widget, you have to be a very good brand strategist, and the most important strategies for brands are consistency and making sure that you have control of your brand.

So, those are the kinds of impactful things that I would like to see brands continue to focus on. It’s easy even today to look at Amazon and get excited about, “Oh, we’ll just throw our product on there and we’ll grab some share. We’ll grab some sales, and it’ll be exciting.” Unfortunately, you know, Amazon’s much more competitive today than it was five years ago and certainly 14-15 years ago, and the opportunity for companies that know what they’re doing—even brands you’ve never heard of , those brands that know how to play the game on Amazon and hence know how to play the game more likely in eCommerce in general — they’re gonna have a much better opportunity to eat your lunch. And no stable, well-established brand wants to have their lunch eaten by a bunch of brands they’ve never heard of. That comes down to: Do you know how to play the game, and are you playing the game properly?