Operationalizing 3P for Greater Profitability and Growth, with Jordi Vermeer, VP of Revenue, North America at ChannelEngine

Here's the link to the report referenced in this podcast: https://eu1.hubs.ly/H0jHZDb0

Transcript

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Peter Crosby (00:00):

Welcome to Unpacking the Digital Shelf where we explore brand manufacturing in the digital age. Hey everyone. Peter Crosby here from the Digital Shelf Institute. I love starting out with facts. Did you know 47% of shoppers now start their buying journey on marketplaces and 63% of consumers prefer buying from marketplaces? It seems like this three P thing ain't going away, particularly in chaotic times when having channels and listings that you can turn on and off that you can control can come in handy. Jordi Vermeer, VP of Revenue at North America at ChannelEngine joins Lauren Livak Gilbert, and me with the why, what and hows of designing and executing a marketplace strategy that works for you. Jordi, welcome to the podcast. We are so delighted to have you on. Thank you very much.

Jordi Vermeer (00:59):

Thanks for having me. Yeah,

Peter Crosby (01:01):

Yeah, I mean, it seems like every other day there is a new marketplace popping up and brands are trying to navigate that. Our listeners are trying to figure out where should they be selling their products, what's the criteria for figuring that out? We talk about the consumer being everywhere, and so you need to be everywhere. The question is, is that right for your business and all of that. So you spend your time really focused on this topic, and so I'd love to just have you start out giving our listeners just what is going on out there and where are marketplaces going in 20, 25 and six?

Jordi Vermeer (01:35):

Yeah, no, it's a big question, so we're probably going to chunk it up in a couple pieces, but yeah, for sure. Overall, yes, it's been, I think for us exciting, but also at the same time challenging endeavor to try to keep all those marketplaces integrated globally. We also have to make tough decisions ourselves, but currently we support around 950 and that is only a portion of it, but very exciting trends. Last year for example, you saw Nordstrom launching their marketplace and a few other large retailers, and this year Lowe's and Best Buy in the US are launching. So three very powerhouse retailers are getting into the endeavor next to the years before that, companies like Kohl's and Macy's in the United States specifically Dana, have been launching so cool industries and indeed good to talk to today about what's happening and what decisions you're need to make in order to decide are you going to go for it or should you maybe pass up on

Peter Crosby (02:41):

It? Yeah, I mean the sign of those majors getting into it says there's a lot of energy and opportunity there for them, and the consumers seem to be doing the same thing, right? Correct. A lot of consumers are getting into marketplaces. Yeah.

Jordi Vermeer (02:58):

Yeah. So we actually in earlier this year we did outsourced a research company to do a behavior analysis on shoppers. So with the focus of course on the marketplaces, and we're actually seeing that almost 50% of shoppers are starting their buying journey on the marketplace itself, and that has been growing very rapidly around 24% in search engines and 14% on brand websites. So that's a pretty big shift. At the same time also, 63% of shoppers have actually told us in that research they prefer buying from marketplaces over the brand websites, and I think that's a very interesting piece. Diving deeper into it, we've learned it has a lot to do with customer service, ease of shopping and combining products from different brands in the same environment, but those are some of the interesting trends that we found.

Lauren Livak Gilbert (04:05):

Does shipping have a lot to do with that too? I imagine if you're buying from a brand site, it might be five to seven days, but if you're buying from Amazon it could be in two hours. And what was wondering just how that factors in from a choice for the consumer?

Jordi Vermeer (04:19):

Yeah, absolutely. The shipping, I think that customer experience, it's part of the shipping is part of that. I think as well as the customer service with Amazon almost guarantee you can get your money back and it's very easy to return without cost and that is just different on brand websites. You often have to pay for shipping separately, the shipping might take longer and the customer service is not as advanced as certain marketplaces have set it up today.

Lauren Livak Gilbert (04:56):

So in 2025, do you think that we're going to see even more brands go to three p? Is it a good strategy, especially with everything that's going on in the world, do you think it's something that brands should double down on or think about building a strategy if they don't have one?

Jordi Vermeer (05:14):

Yeah, for us, I usually see it as an inevitable opportunity. So around 59% of global sales is flowing or will be flowing through marketplaces by 2027, and this has been growing. So the percentage, and you have to understand the percentage of e-commerce that flows through marketplaces is growing with and also growing marketplace or sorry, growing e-commerce space of course. So ultimately it will be inevitable that you're going to be there. And you said the word brands is interesting. What we're seeing a lot is that historically it were a lot of resellers or retailer or companies that are reselling products from the brands and they're the ones who are doing a lot of marketplace sales. Now of course with the newest technology, we are actually seeing a lot of brands are starting to do it themselves, and that is an interesting thing to happen. And we're also seeing that quite a few retailers, sorry, resellers are stopping with their business or they're declining or we saw quite a few bankruptcies and that is very unfortunate of course, but it is also the reality because the supply chain certain steps can be skipped and that is just something that for brands is inevitable and also an opportunity for certain reasons.

Peter Crosby (06:48):

So what are the key questions that a brand ought to be asking as their considering what their three P strategy is?

Jordi Vermeer (06:57):

Yeah, that's a good one. Ultimately it's important. First of all, it's important to check, are my products already being sold on those marketplaces very often they are very often companies already have a whole 30 resellers and those resellers are all competing on those channels and that comes with its own complexities because you're selling to those resellers, you're authorizing them. There's also one that are not authorized, so you need to check that, but also someone needs to control that content, right? And of course with Salsify, it's a very powerful thing and often Salsify is very capable of controlling that content on these retail sites, but certain marketplaces, the first seller usually creates that content. And if you are not doing that as a brand, that means you're not in control of your brand, of how it's displayed. You're not in control of what images are used, what description is used, but you're also not in control of what price is being used.

(08:03):

So you could have a very nice mapped pricing policy, but very often it's the resellers are not complying to it. And then what do you do? Can you figure this out? So if you are doing your own three P marketplace, it ultimately you're going to be in more control. So that is part of that question. And I would say the second half of it, that answer would be to look at the numbers, look at the p and l, right? Selling through a reseller or not selling on the marketplace, it can one, bring more revenue, which of course is great. It's also an opportunity to improve profits, and that could be, and we're going to get into that a little bit, but it could be also that certain products are really good on the three piece side and certain products are just good. On the one piece side, which is a B2B transaction, you sell to Amazon and that's it. And we're seeing a lot are combining those two motions and the underlying reason often is those, let's say the profitability reasons, if that makes sense.

Lauren Livak Gilbert (09:14):

What makes something more of an option for A three P versus a one P? Is it lower price, is it weight? Is there any specific factors that brand should be thinking of that are like, Ooh, this product might make sense in more of a three P strategy?

Jordi Vermeer (09:30):

Yeah, actually you gave two really, really good ones already.

Lauren Livak Gilbert (09:35):

I have known answers.

Jordi Vermeer (09:36):

She's so smart. Your e-commerce. Yeah, I mean it's hard to say or generalize it, of course, because every p and l is different. Often it is lower priced products that just individually don't make sense as much. So in the CPG space, in the fast moving consumer space, you're seeing them doing to repeat themselves because they can start creating multipacks and selling multipacks. Of course, Hey, you want to go for a $30 price, and then the shipping, it makes more sense to do that and that control, selling a multipack, forcing a multipack is different than doing it in one piece space and it needs secondly, often bulkier items, larger items because it just avoids doing an extra shipping, right? If it goes from, or it's being created to the US, for example, and then you have to ship it again to Amazon and then you have high storage fees on Amazon if the product doesn't turn over fast enough. So logistical reasons are also big in terms of that model

Lauren Livak Gilbert (10:43):

We use to sell face masks, like the singular face masks that you would do hydration or moisturizer, they're like, I don't know, $2 per face mask. So it didn't make sense to sell them on one P, but it made more sense to do a multipack on three P and that was the option that we went for. But the challenge is making sure you don't have channel conflict within the same channel, right? You're making sure that you clearly understand what your strategy is for one P and what your strategy is for three P and they're not competing against each other. How do you advise customers on that from a hybrid selling model? Because they might be selling the same product on one P versus three P, but just in different variations, so how do they think through that?

Jordi Vermeer (11:29):

Yeah, it's a very complex strategy to determine. First, it's good to understand over 75% of Amazon brands are already selling hybrid. It's good to know that a lot of them are already doing it in one way, shape, or form of another. Some of them even do it through an authorized reseller and they're the only ones and they actually control the listings from the brand, but just have someone else be the seller record. That brings also me too, and it's a little bit also the complexities that we're diving in later, but it's important that the retailer is going to allow you to do it. Amazon has historically not always been as flexible to allow you to just start three P. So it's important to go about that conversation pretty strategically where for example, a Target plus, they are actually really nice about evaluating together with the one P team, which products just make more sense to sell three P because ultimately it'll create a higher profit for everyone to decide this correctly. So that is I think, an important way to go about it. So again, that profitability is often the underlying factor, and of course you need to have the operational setup to do it because if it's going to cost you a lot of time, a lot of effort, you don't have the warehousing set up and certain things don't work out for you, it could create just more of a hassle or a headache than an opportunity. So that is also something to take into account.

Peter Crosby (13:15):

Let's say you had said we'll talk about the complexity later. Now is later. I would love to dig into on what does it mean for a brand to take this on? What are the operational complexities that they need to be considering? And I'd love to know the mindset of your clients as they come to you. Are they often, they've dipped their toe in marketplace and all of a sudden they're like, oh wow, either this is going great, I'd love to scale it or this is really hard. I was wondering what is it that's sort of bringing them to you and how much of that is sort of the operational complexity part?

Jordi Vermeer (13:55):

Yeah, so I'll start with the second part. We have two sets of clients coming to us. One set are pretty savvy marketplace sellers and they're looking to improve their operations. Sometimes it's because they have a new backend system. Very often it's because the marketplaces have updated their requirements or new marketplace has launched and they want to go towards and they know how hard it is to manage it. So they're usually very happy to see, hey, this platform, what we do is very good for us and it's going to save us a lot of time. And I think that's great. So that's part of the reason, and I'll dive into those complexities after the second group is less experienced sellers or even ones that are starting their three P endeavor, they of course know from the industry complex, they also lack knowledge about it. So those are ones that we take a little bit more by the hand and we educate and explain how to set it up, how to do it, and those processes take a little bit longer, but at least they have a good partner that is with them.

(15:13):

And a lot of the integrations of what we've built is going to also make it a lot easier now to dive into those complexities or the operational complexities. Ultimately, one of the big things you gain is control. It also comes with a burden because you have to be always making sure your product listings are let's say, perfect or the way you want them to be. And often marketplaces have different requirements, so they have different sets of the categories are different and the taxonomy around it, everything is slightly different, the structure. So that's where, and sometimes requirements like image requirements or you need to have certain fields, certain data that you don't have or certain product hierarchy structure that you don't have set up in your backend. So even being in control comes with the burden. Secondly, it's important that we call it the offer. You need to make sure your offer is up to date.

(16:13):

So that usually is price and stock and very, we sync those very often. So every 15 minutes or less to make sure that when you make a price change or when you run a promotion or when your stock changes because you did sale on your website or you did sales on other channels, that's up to date. Having that infrastructure build, doing it that yourself is very challenging because all APIs are different from all these channels, almost all of them. And it's therefore very not unscalable for you to quickly launch a new channel test and see which products work and change your selection to see if maybe these bundles work with the face masks and keep testing and iterating because that's ultimately what you need to do in order to be successful on the marketplaces. And then lastly, also orders, cancellations, returns. There's a lot of operational flows that you need to make sure are managed. So ultimately those that comes with complexities where we of course recommend having a partner or a platform or something in between that have experience with these platforms. Trying to do it yourself is going to be challenging,

Lauren Livak Gilbert (17:27):

And it also has a different portal to access. You have a different way of logging in and dealing with that marketplace, which adds a level of complexity. Can you talk about the control piece? Because you have control of your one P listings to an extent as well. So for those that are familiar with three P, compare the control of your one P listings versus your three P listings from different elements like content and such.

Jordi Vermeer (18:01):

So ultimately the control piece, it's one thing to list and it's a second thing to keep optimizing and iterating. So in the one P, you basically feed content and they publish that and let's call it Amazon, they publish it. That works, that's fine. However, Amazon is often taking ownership of optimizing it or just their algorithms. They program it in a way that the listings are higher up pages, and they also set up a lot of the advertising sometimes. So it's like they support a lot with those things. In py, it's your responsibility. You need to make sure you keep optimizing your content, enriching it, doing enhanced content for example, but also have certain strategies around that. And for example, set up a proper advertising strategy, which is pretty complex. And then you do that for one channel and you can look into doing it through other channels and not every channel, your description of Walmart, you might want to have a different than a description of Amazon. So you see where that complexity starts writing even further.

Peter Crosby (19:14):

So growing up, my mom had five kids and she would always laugh and say, well, once you have three, the other two are kind of like, you just set 'em up, wind 'em up, and they run. I'm just wondering what is the incremental, once somebody starts to get that motion going, are additional marketplaces less effort about the same? What's the work involved in adding another

Jordi Vermeer (19:49):

So often? And of course this is what our experiences through our platform, so it's hard to say if it's, I believe every marketplace will be different if you do it outside of a platform like us. Ultimately, if you do spend more time on the setup because you have to do that integration maybe with APIs, plugins or feeds or whatever you choose to do, then the first one or two channels are going to take longer. This is where you're going to be trained also to use the automations in our platform correctly. But you're also going to find out you're missing certain piece of content and you need to create that, or you need to go back to your PI and make sure, hey, let's create a slightly different structure in order to facilitate for the marketplaces. Then we do see a decrease, a big decrease in the third and fourth channel in terms of how much time that costs and the channels after even cost less time because you very familiar with the tools you've had, most of the required fields you now have after the first four channels.

(20:55):

So you probably already have that data and you also know where it is so you can predict quickly and easily match it. I must give one caveat. There are channels that are just more complex than others. For example, Zalando in Europe, it's the largest fashion marketplace in the entire continent of Europe. They just have a pretty complicated way. You control your listings, you update it, but also product structure is, for example, a grandparent, parent, child relationship. So certain channels have those kind of different requirements and then they just cost you more time. So certain channels like eBay is very easy to set up and then Target, plus we know it's just a little bit more complicated because they have higher requirements.

Peter Crosby (21:41):

So my mom was right,

Jordi Vermeer (21:43):

Have

Peter Crosby (21:44):

More kids. That's the, exactly. So alright, let's get to the good stuff because we've been talking for a bit about complexities and it can be difficult, et cetera, but just rattle off some of the benefits of selling three P that you're seeing your clients get when they start gaining momentum and getting it set up.

Jordi Vermeer (22:07):

Ultimately, there's a lot of reasons why companies do it. I think one piece that I've seen a lot of larger corporations do is because of basically diversification. So a few years ago they actually set up channel engine without fully using it. They tested it and go live because they wanted to have the ability to very quickly turn on three P if that was needed two years later. So last year, a year before we actually saw them turning it on and very quickly growing and that had to do with their one P. There was a big one P shift, right? I don't know if you remember, but

Peter Crosby (22:50):

There

Jordi Vermeer (22:50):

Was a covid hit. So we had too little, so there was overstock basically, or sorry, under stock. So there was not enough stock and then there was a big overstock because people started buying less and then again it went down because the canal, the ship was stock. So there's a lot of volatility and that caused a lot of retailers to be a lot more careful with how much stock that they were purchasing. Year over year, we've seen around 20 to 30% less purchase orders or our clients have seen them. So this cost to certain situations. To give an example for a large CPG company that they've seen during peak season, they weren't allowed to ship enough products, so their products went out of stock. And for that reason, they lost in just a few days time, they lost millions of dollars of,

(23:47):

And that caused them to immediately say, we have to do this because when this happens, we need to be able to quickly turn it on. So the market volatility is one of the core reasons, but also benefits that you have this in your back pocket to turn it on when you need it. Now a second piece also comes from the profitability. So also the retailers are squeezing out margins more so they make it more complicated, but also they're adding more cost and services. And advertising is more expensive because the complexity, sorry, the competition for example, on an Amazon has increased significantly, so you have to do more advertising. So a lot of that comes with ultimately bottom line. It's like, Hey, it doesn't still make sense for me to do one P or can I actually make more profit doing a three P?

(24:46):

Yeah, so that's another benefit. Thirdly, some current companies, large, let's call it large CCP G companies that own a lot of brands. I think we all know the large ones, and they keep buying brands. So once they buy the newer D two C brands that are in the market, they need to be able to operate it because they only have done three P. So the newer D two C first type companies, they've been doing a lot of D two C already and they need to have the infrastructure in order to do that. So that's also an opportunity for them. And maybe lastly, I think the opportunity of expansion, it's maybe something I didn't underline enough here, but going to new markets, like going to a new country or a new continent, and I know it's becoming more and more complicated than more walls have been thrown up with interesting tariff developments, for example. But it has been a big trend. If you have saturated a market, you want to be able to expand because your product might be very successful in another market as well. Being able to go to another market and test that market, reach an audience that is very significant on the marketplaces is just much easier than trying to build your own D two C website and spend a lot with advertising attracting the audiences.

(26:24):

And I think that is important to realize in that the caveat also is Amazon in many markets is not the biggest player, and that is something that in the US often is maybe is a slight misconception about. But yes, the uk, Germany, France, they're pretty big or they're the biggest, but the second largest marketplace in those markets are quite significant. But if you go to Southeast Asia or Middle East, Amazon is very small, and that is also the markets where if you want to reach a totally different new audience, that's very interesting to do that through those local heroes we call them to be successful and grow your business.

Peter Crosby (27:08):

So you brought up the tariff word, so I have to dig in there a little bit and just see if through the breadth of your platform and how many brands are working through it, if you have any hints of what's going on to try and adjust in the midst of the chaos, how are things going?

Jordi Vermeer (27:34):

We haven't seen significant adjustments from our clients to be really honest. At least not that we've seen or heard about. It might still have, but I think everyone is currently still in a bit of a waiting pattern. I did read this morning the amount of container routes that are going to be stopped using. So that's worrying on me a little bit. The amount of ships coming from China to the us

Peter Crosby (28:02):

Yeah, I saw that

Jordi Vermeer (28:03):

It's decreased with 80 roots are shipped, are scraped or something, which is much more significant than what happened during Covid, for example. So those things are worrying a little bit to me, but we have seen companies see this as an opportunity. They're like, oh, if I can't expand to another region I need to expand to, or my home market is more important, so I'm going to expand to other retailers to be present amongst those shopping and buying experiences. I dunno if I call it out in the start, but around two or three channels are often being used for a buying experience as well. So it's like you use multiple channels to validate, Hey, this is the product I would like. So it's also important even if it's just for one channels revenue to also be present in the other ones.

Lauren Livak Gilbert (28:54):

So Jordi, if a brand is listening who's thinking about selling on three P, what would your couple pieces of advice be as they're starting to think about it and kind of building out their strategy

Jordi Vermeer (29:10):

Overall? I think start with the strategy, and it doesn't have to be extremely complex, but take a little step back and check why are you doing this? Be realistic about some of those operational complexities. It shouldn't be too daunting, but be realistic. They are there, so you need to resolve them. Obviously resolving them with a platform like Channel Engine, I would always advise, but if you don't feel like that, then just make sure you identify some of those costs or the time spent of it and build a channel strategy, I think. And also a product strategy for those channels. So you don't have to sell all your products on average channel with clients that literally build product lines for Amazon and they have the rest they sell on other channels because they know Amazon's audience is different than those channels. So you don't have to do it that complicated, but it's good to be conscious about it, focus on, well, I think then make sure you keep testing, learning, looking at the results.

(30:21):

It's not going to go overnight. So just launching a marketplace, it's not done tomorrow. You're going to have your full sales. It's going to be a process. So go about it, learn from it. And if you don't have the resources, invest in agencies or companies that know what they're doing and to help guide and learn to get better. Hire someone that has a lot of experience, is one of the key things we see brands do. And finally, make sure you keep focusing on profitability. It sounds that I keep repeating myself, but we see over and over again that companies are not realizing. To give you a good example, we have one of our clients, they put all their products on the marketplace and we found out that let's say decreasing, taking off a few, around 10% of products actually increased their profits by 20, 30%. So it's just sometimes you have products that are eating up your margins, so make sure what's going on because yeah, like I said, and these are pretty sometimes even savvy sellers, but it's important to realize where your costs are and build it from there.

Peter Crosby (31:36):

Jody, you mentioned one of the things you said, we see a lot of companies hiring people who know what they're doing in this area, and I was just wondering, organizationally inside your clients, when you look at it, how are they organizing around marketplace success? Is it somebody who owns marketplaces, owns three P as a strategy? Is it spread across different account managers, or what's your advice for the best practice to organize around? I know it depends. It always depends.

Jordi Vermeer (32:06):

Yeah. Well, it's funny because it's a twofold thing, right? Because we see companies do it one way, and then my advice might not be the same. Exactly. So what we're often seeing is it falls under the overall e-commerce, let's say bucket. So usually there's an VP e-commerce or someone that leads the e-commerce, which in my eyes is the online sales, and that could be D two C often that is the D two C arm. And then you have a wholesale department that is more B2B. So that is often how it's structured. And then of course, depending on your level of expertise, if you have a certain statue of marketplace business, they have a marketplace manager and they are responsible for all three P channels. And that could even be segregated at certain ones have responsibilities, like someone does content, someone does operations, someone does in that direction.

(33:05):

Now, one thing that we're seeing that my recommendation would be for brands is to make sure that you also have not only buy-in, but maybe even have a merged team with the wholesale, because we're seeing a lot in larger corporations, we're seeing a lot of battle between one P and three p, and that three P has a great setup and their margins are great, and the sales are great, but they're just not getting enough inventory from the one P team. That's Lauren, that's what you were saying. Like, hey, those battles, those happen mostly internally about how much, because the wholesale team also needs to basically agree with, okay, these products we're just going to move over because they're just eating up our margins as well. And sometimes the three P could resolve that. So that's a little bit, and

Lauren Livak Gilbert (33:51):

They have different metrics.

(33:53):

That's the big problem. I mean, this is something that we talk about a lot on this podcast, but they're metric differently. So that's why they feel like they're working against each other instead of together, because you're the same business trying to drive sales for the same company, but you don't have the same goals and objectives. So that's a big call out for anybody who's thinking about three P. If you're selling on three p, I agree with you a hundred percent Jordi, you should be together with your wholesale team, and it should be a holistic strategy, and you're trying to advance the brand as a whole, not channel specific, because then you end up just competing internally and you have enough competition externally. You don't need to compete with your own brand team members in your organization. So that's a great call out,

Peter Crosby (34:37):

And that's why the call out to profitability is so important. Those are the KPIs that should be shared, and people should be incented to make the decision that drives the most profitability for the company they work for overall. And so often that requires a singular leader who's leading both to be able to drive, or leaders who are very, very collaborative with each other, but

Jordi Vermeer (35:00):

Yeah. Yeah, and we've seen the ones that do best are the ones that someone, let's say the Amazon account manager has both. They're responsible for both one P and three P. You figure out which one you want to do to reach your goals the best way. And I think that is, and giving them the tools, whether that's a channel engine or an agency or people in their team in order to do so, is ultimately going to lead to a success from a team perspective.

Peter Crosby (35:32):

Well, Jordi, thank you so much though. I would say to our listeners, the marketplace shopping behavior report that they commissioned is really good. So I'm going to give you, it's a little bit of a long URL, but stick with me. Do you have your pencils out pens, iPad, whatever channel engine.com/marketplace shopping dash behavior. I'll say that again. General engine.com, marketplace shopping behavior. And Jordi, thank you so much for bringing all this brilliance to our podcast. We got what we paid for, so

Jordi Vermeer (36:10):

Yeah, well, super nice. I love doing it. And yeah, really appreciate you guys setting it up. So exciting for the results.

Peter Crosby (36:18):

Thanks,

Lauren Livak Gilbert (36:18):

Jordi.

Peter Crosby (36:20):

Thanks again to Jordi for all the marketplace wisdom, more wisdom is always coming out of the DSI. So stop by digitalshelfinstitute.org to become a member. Thanks for being part of our community.