Trends in Amazon Brand Strategy and Innovation, with Jay Lovelace, CEO at Jungle Scout

Transcript

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Transcript

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. These are, how should I say it, interesting times to be a seller on Amazon. It's good to be able to make decisions based on data in the midst of the chaos. So Jay Lovelace, CEO at Jungle Scout joined the podcast to lay out the trends that the data is identifying over overall and across some specific categories that are on the move. Jay, welcome to the podcast. Thank you so much for coming on.

 

Jay Lovelace (00:44):

Thanks, Peter. I'm excited to be here.

 

Peter Crosby (00:47):

Well, I mean, you are sitting on over 10 years of Amazon data, which is exciting, but must be incredibly uncomfortable, but I bet it tells an incredible story. I mean, with all of that data that gives you kind of a front row seat to what is happening all the way down to the category level. And so we'd love to start with some overall trends. What are you seeing with Amazon right now with the chaotic world that we live in, and then what are the opportunities that you see there?

 

Jay Lovelace (01:16):

Obviously when we look at the overall US retail marketplace in general, we're talking about a $7.4 trillion market. And then when you peel that back and look at e-com, e-comm today makes up about 16% of that growing to 22% of the overall retail market. Then if you peel back the e-com section even further, and you look at Amazon, Amazon makes up 40% of us E-com flowing through their platform. That is a massive number and a massive sample. When we talk about Amazon data and the importance of the data, there is nothing better than Amazon as a proxy for what's occurring in the marketplace. Obviously, I think you used the term volatile, but the market is interesting and it's dynamic right now, especially as it pertains to the tariffs and the beauty of what Jungle Scout can do is we can dig in real time as a pulse on everything that's happening.

 

(02:09):

And so although the tariff situation may seem to have subsided a bit, at least temporarily, the activity that occurs on Amazon is a unbelievable barometer of what's happening. For instance, looking at things like price, the velocity of products that are moving, we did a search, if you remember back in April when this really heated up, we looked at the amount of searches on Amazon for people searching the term made in the US that went up 80% in a matter of a couple of days. And so having real time access to this types of information can really serve as a good roadmap for the decisions that you have to make. How is price affecting what's happening overall in a category or a subcategory that you're working with our products more being produced overseas, say in China than they are in the United States, and what's happening to those items as these conversations occur?

 

(03:08):

And so although there's no conclusion to what's happening with tariffs today, having the ability to understand real time what's happening gives brands the upper hand. And so we're fortunate to have that. More importantly, let's talk about disruption. And this was probably triggered by a white paper that we put out a couple of weeks ago about the three or the third party marketplace within Amazon. And when you take a look for those that don't know, there's obviously the first party sellers where Amazon's buying their product, they're fulfilling their product or managing price and whatnot on the Amazon marketplace. And then there's the third party sellers. What most people don't realize is that the third party sellers on Amazon who are selling directly to customers make up over 60% of overall Amazon sales. And so it truly is a large portion of what is occurring on Amazon and causing both positive and in some cases negative disruption to the larger brands that are out there.

 

(04:09):

And our white paper, we hit on three points, erosion of brand control, the impact of profit margins, and then finally what we would call the rise of dupes or duplicates that are out there today. And each has a unique position that's really affecting the disruption on Amazon overall. And so one of the number one concerns that brands are coming with us today is the fact that Amazon is an open marketplace where three P sellers can list frankly resell products even if they don't manufacture or have an exclusive relationship with the brand. And so you think about a reseller who's listing, let's say for instance, clearance goods or worse, a counterfeit selling counterfeit goods or damaged or expired goods. This is a challenge for brands because a brand might not be able to own that, call it buy box experience because this third party player is winning the buy box. Maybe they're utilizing your ASIN to control the buy box and based off price or performance, even if they're not you, they're winning it. And this could unfortunately be a reflection of your brand or your experience. And so because you don't have control over that product or where it was sourced or where it was stored or how it was shipped and everything, it becomes a direct reflection of your organization because potentially it could be your brand even if it is a counterfeit.

 

Peter Crosby (05:33):

I was just thinking on behalf of our listeners, I think a lot of them are familiar, I think with this area of brand control, we've covered it a bit on the podcast, and I'm wondering, are you seeing anything in this particular period that's either increasing that erosion of brand? Is there something different about this moment in the area of brand control that our listeners should be particularly aware of?

 

Jay Lovelace (05:54):

I don't know if the theme has changed much over the past, call it a year or so. What I'll say is the trip that most brands run into is the fact that they don't have a plan. They don't have a plan for their third party sellers and managing those third party sellers or really having a true understanding of what's occurring real time on Amazon. And so fortunately or unfortunately, the marketplace scenario, whether it's Amazon or other marketplace, is a highly competitive situation. And unlike a brick and mortar store where you have a certain amount of shelf space, as we all know when you're talking about this, it's unlimited shelf space and it's really how do you win in these scenarios, whether it's through keywords or winning the buy box to gain eyeballs from these consumers. And the third party area is doing the same as well, and they are getting very creative in ways on winning, whether it be through keywords or timing, just having a real time post on what's occurring and enter in, call it the influence of let's say China. China today makes up over 50% of the three P items on Amazon. That is a huge sample, and I'll get into it a little bit when we talk more about that, but these are just themes with people that are putting a ton of pressure on the system in a very competitive environment where you have to have a full-time team managing what's happening otherwise you're going to lose. And more importantly, you'll probably take it on the chin with profit margins.

 

Peter Crosby (07:24):

So

 

Lauren Livak Gilbert (07:24):

You had mentioned du Jay, can we talk a bit about that because I think it's both a value play as well as more of adjusting to the changing of the world and wanting to see where it's manufactured from a tariff perspective. I remember when they came out, and I remember people were talking about Lululemon leggings and everybody was going on Amazon saying Lululemon dupes because they're so expensive, but they wanted to have that legging that felt the same, kind of looked to the same. When did you see the DUP craze increase? Are you seeing it even larger now from a price perspective? I'm just curious if you can dig into that a bit because I think that's an interesting one.

 

Jay Lovelace (08:05):

Yeah, I mean, yes, we are seeing it on the rise and it continues across multiple categories. Wherever there's opportunity or wherever there's increased eyeballs or increased demand, you're going to see dupes start to rise to the occasion and it fills a void or a vacancy on the consumer front too, because there are individuals that just don't want to pay top dollar for these items. And in many cases, the es, I don't want to say are at parody, but they're almost as good in most cases. And so I mean you can look at different categories all the way down to the subcategories and determine the Es, but you hit on an interesting point. I actually have a stat on that. Do you know how many times the Lululemon dupe was searched on Amazon? How many times a week? I should say it was searched on Amazon.

 

Lauren Livak Gilbert (08:55):

How many times a week?

 

Peter Crosby (08:57):

2 million.

 

Lauren Livak Gilbert (08:58):

I was going to say, I was going to say million. So there we go. You doubled my number.

 

Jay Lovelace (09:01):

No, it's over 15,000 times a week. An average doctor searched for Lou, but hey, I love the 2 million. Peter, I love your

 

Peter Crosby (09:09):

Optimism. No question there. I know nothing about Max.

 

Jay Lovelace (09:12):

It's funny that you said that because I actually had that stat and that occurs with all big brands. People are trying to look for possibly a knockoff or a substitute for that. This is really what I would say, and this isn't a recent occurrence, but with the rise, and marketers can speak to this a heck of a lot better than I can, but the rise of social media specifically TikTok and a lot of these influencers out there, they take these things under their wing and before you know it, you've got not thousands but millions of people looking at this and then searching for it and trying to find it. And that goes back to when you talk about a plan for your product, are you really looking at the market holistically and what others are doing? I've seen it over and over, even pre my experience here at Jungle Scout for the last year.

 

(10:00):

So many large established brands take for granted the innovation that occurs and the new entrant that come into the market and begin to take share. And before you know it, hey, it's one point, it's not a big deal, then it's two, then it's five, then it's 10, and then there's five or 15 or 20 of them. And you're starting to ask yourself, why in the world are we not gaining share? More importantly, why are we losing? And so having access to this data can be, I use the term before a barometer, real-time barometer so that you can start to monitor what's happening and when to make business decisions.

 

Lauren Livak Gilbert (10:34):

And we're seeing a rise in a lot of the smaller players. I'm wondering if you have any stats around some of the smaller, maybe more digitally native brands that are popping up on Amazon and how much they make up the market versus some of the more established CPG companies. I know it's a very targeted question I'm throwing at you, but any insight there? I

 

Jay Lovelace (10:53):

Just happened to be looking before this call to one of our Jungle Scout strategy accelerators and this particular strategy accelerator looked at amino acids. And so what I thought was interesting is that when you look at the category overall, it's around 712 million, which is up 22.5% from last year. And units sit at around 17.5 million, which is up about 18% from last year. And so the category has some really interesting dynamics in growth. More importantly, and I hit on this topic a little bit earlier, there's been so many new entrants or new brands that have come in to this specific category. And so what we had done is we had looked at the top 10 emerging brands and you're talking significant dollars in the top brand, I'm sure I'm going to butcher the name, I think it's Bodhi or Badai. It is like $860,000 in revenue, and that accounts for 17,000 units with an average selling price of around $48, $48 and 50 cents, and they have 111 ascents.

 

(11:59):

And then you go down to Mr. Penn that has about 500,000 in revenue and units of about 59,000. And so all of this starts to move into a category that whether or not it's mature or it's been around, typically the dominant players don't realize that before you know it, you have 10 players that are starting to gain share on that category. Further, when you think about specific categories, and I had mentioned how big three P was to Amazon overall, this study also looked at the amino acids category. Overall, three P or third party sellers makes up almost 75% of the sales or the revenue within that category. And so you can see that by understanding these things, it allows you to really adjust how you're going to strategize your planning moving forward around Amazon. So hopefully that's helpful.

 

Lauren Livak Gilbert (12:52):

So Jay, let's chat about beauty and personal care because it is a fast moving category. I mean, number one, search terms sometimes change every hour. There's so many new players. What are you seeing there? What are the opportunities for brands?

 

Jay Lovelace (13:08):

Well, beauty is such an interesting category. We actually put out an annual report every year on beauty specifically because of how dynamic it is and the changes that are occurring. But there's a few trends that we're seeing overall, and I'd say the first is what we would call the rise of luxury brands in beauty specifically, even if we don't hit on beauty, it's been in the news as of lately, companies like Saks Fifth Avenue and Neiman Marcus now having a presence on Amazon. But if you look at the beauty category, one of the examples that we pulled out for this because I thought was super interesting is let's take Estee Lauder and their brand Clinique. They launched what we would call an interactive storefront last year within Amazon. They have skincare analysis tools, they have wine and live ambassador chats right there built into Amazon, and it has really impacted their numbers overall.

 

(14:03):

We looked at our data and our COBOL platform and we found that the searches on their brand were up almost 30% compared to 2023. And before they launched this Amazon experience, they were not even moving in that direction and it's gone up 30%. And moreover, when you look at some of these stats, typically the price points for a brand like this called $30 per unit, they would avoid Amazon. And now they're seeing a huge lift and they're starting to say, wow, Amazon does have the consumers that we need and we're having success. So how do we make the experience unique or different than what they're accustomed to? And this exemplifies that to its core. If I go into the category as a whole, Lauren and talk a bit more about that, we can go back to the social media stuff that I talked about before and just the explosive growth due to the influencers that are out there and some of the impacts that the social sphere has kind of created.

 

(15:03):

But because beauty is such a fast moving category, like I said, we do this annual report that summarizes a few things and we took a few things out that I thought were worth sharing. And so the market, and this is where consumer sentiment is super important because when you look at the searches and what people are actually looking for, it starts to drive your roadmap on where you want to be, whether it's through SKU optimization, new products, new solutions. And so for instance, lip stain was up 27% and lip gloss was down 36% in our recent study. And so what does that speak to that Amazon demand equals sales, but demand also equals opportunity. And so the lip stain revenue increased to whopping 112% year over year demand was also for you look at ASINs on the lip stain, I'm sorry, we saw numbers of units, I should say units of ASINs for lip stain were up 55%, the revenue increased 112% and then we had units up 55 or ASINs up 55%. That's a tail on what's happening. And for those viewers that don't understand ASIN would be comparable to a UPC,

 

Lauren Livak Gilbert (16:16):

I feel like I need to up my chapstick lipstick came. I did not even know lip 16 was a thing.

 

Jay Lovelace (16:22):

I'm pretty embarrassed to say that I was working with our head of marketing Hillary on this and I had to ask her what lip stain was.

 

Peter Crosby (16:29):

Well, it seems like something you wouldn't want. Is it just me? That just seems like not a good thing to have your lip stained, but

 

Jay Lovelace (16:37):

All I got to say is according to the concern here, they want it revenues up 112% the

 

Lauren Livak Gilbert (16:43):

Consumer. I'm a pure CHAPSTICK cow over here.

 

Peter Crosby (16:49):

Yes. Yeah. So see, you just never know. The consumer knows pay attention. So diving into patio, lawn and garden, which is a hot category right now or should be wondering what you're seeing, what the activity, what are the ways to win there?

 

Jay Lovelace (17:08):

Yeah, great question. You look at beauty, and I think I used the word dynamic because it is, it's kind of a ever-changing great pulse of what's happening in the market. And then when you take a look at patio, lawn and garden, very seasonal as you can imagine, folks in the spring and early summer really starting to think about what their experiences are going to be at home in their backyard and so forth. And so we typically see spikes in this category, like I said, in the late spring and summer. And here's just a few stats that we had pulled that I thought were interesting. In the last 30 days, searches for gardening gloves were up 85% searches for grilling tools up 28%, bird feeders, 75% and 30 day revenue was up for all of these subcategories across the board. In fact, may, which most people don't realize is actually the peak month for those subcategories.

 

(18:05):

And so what we often counsel brands on is the fact that hey, you need to make sure that you understand your advertising strategy as it pertains to these times and these peaks and valleys because you need to plan accordingly with how you're going to manage this flow. More importantly, the dollars that you have, you just can't have a universal plan. You've got to take into account the seasonality that occurs. And what we are typically doing as we work with brands or agencies and partners is we are looking at last year's trends. We are looking at the trends that have occurred over the last call it 52 weeks and starting to help them to determine what decisions they need to make moving forward from everything from keywords to ads and simple demand

 

Lauren Livak Gilbert (18:50):

In that category. Jay, are you seeing, because I know in beauty it just changes so frequently you have to change content, you have to stay on top of trends, you need to know if stain is a thing. But in the patio and lawn and garden category, are you seeing as frequent of an update around content? Are there as many new types of products? Because that's an interesting one, right? It's seasonal, it's heavy, it's more expensive. I'm just curious if there are any trends around new products refreshes that you've seen?

 

Jay Lovelace (19:21):

Yeah, I mean as a rule of thumb, you're going to see pretty strong innovation around the majority of the categories and subcategories. I mean, I can even look, I don't have any specific data in front of me on what innovation has led into that category. What I can tell you is that it is a hot topic and we have many brands that look to us to guide us. I can look at my personal life and look at the changes that I've just had on. Let's look at any of these items, whether it's pair of gardening, gloves. I literally just bought on Amazon, I want to say four weeks ago, I could probably use to lay concrete. It's a different technology than ever existed. Go on to the days with the old gardening gloves where you rip a hole through 'em in the first couple of weeks. So yeah, I mean that's the beauty of this data and what we can follow is I can dig into anything and come up with data backed information that's useful to make decisions.

 

Peter Crosby (20:20):

So you had mentioned innovation, Jay, I know you don't have anything particular on the category, but if you think about cross category, do you feel like Amazon, obviously Amazon's become a very expensive place to live and to experiment, and so I'm wondering how you're seeing Amazon as a place for brands to launch new products. Is it still sort of the top choice for a lot of these categories or do you see anything shifting there?

 

Jay Lovelace (20:53):

No, I mean if you think about what I talked about at the top of the session here and just the pure reach that Amazon has, and so when you think of testing or launching, there couldn't be a better place to experiment on that. Brands come to us because they want better data on how to price, what better to look at than like I talked about that proxy. They want better control over their brand to knock out, like I talked about unauthorized sellers. The big stat that I think is super interesting is I mentioned the fact that there's first party sellers and third party sellers and third party sellers make up over 60% of Amazon sales. The unique thing though about the first party sellers is 40% of those brands that are one P sellers also have three p. And the reason they do that is for what you've just asked me, they look at that as their testing ground to start to experiment on new product SKUs and so forth, and how will that play out in the market. And so that's not the full use, obviously, of their three piece strategy, but it is probably a significant portion of it. And so yes, to answer your question frankly, that is Amazon becomes an unbelievable opportunity. I don't want to say it's cheap because it's certainly not, but compared to everything else to get a good understanding of what's occurring and why and to test the waters, it really serves a great purpose for that. Yeah.

 

Lauren Livak Gilbert (22:18):

And are you seeing any brands launch Amazon only products or exclusive to Amazon? I know from a price matching perspective, it's a strategy that a lot of brands are doing so that they have an Amazon specific product they're launching maybe a Walmart specific product, just general trends. Are you seeing that as a strategy?

 

Jay Lovelace (22:37):

I mean, yes. That's the interesting thing about Amazon because it's such so much activity. I don't have any specific examples to that, but of course that occurs on an ongoing basis. Certainly

 

Peter Crosby (22:50):

It's such an interesting time, and I don't know if with your clients you've been having conversation around this, but just watching the news and seeing recently that Amazon is really reducing the amount of inventory they will take into their warehouses, and that's causing a lot of brands difficulty where they're unable to get their inventory into the warehouse for the direct Amazon shipments. And so they're sort of holding inventory in other warehouses which costs more money and then they can move it in only as it becomes more, as it really gets close to Amazon needing. And it's just creating so much pressure out in the world. And I think that's just due to the environment that we're in right now with tariffs, et cetera.

 

Jay Lovelace (23:39):

It really, it's the unknown and we've seen the needle move several times just in the past, call it four. Now, as I said, we're in a holding pattern here, but people are waiting to make decisions. They're uncertain what decision to make and how it will impact their profit margin. It really comes down to the margin.

 

Peter Crosby (23:56):

And

 

Jay Lovelace (23:57):

Then consumers are saying, boy, which was indicative by the search I shared with products made in the us. I mean consumers are a real time check of what's happening and the fact that it rose that much just in a matter of days speaks to consumers trying to get ahead of what they believe is going to affect the bottom line, their pocketbook.

 

Peter Crosby (24:19):

Well, Jay, thank you so much for bringing this data to us, these stories to our audience. I think it's always great to hear right from the data lake's mouth what is going on, and we appreciate you bringing that to us.

 

Jay Lovelace (24:34):

It's the first time I've ever been called a data lake, but thank you. I'll take that as a compliment. It's a good swing. Thank you so much. I very much appreciate the opportunity to present here. Hopefully this was useful and folks find it informative and of course I'm available if anybody would like to reach out to me.

 

Peter Crosby (24:52):

Thanks again to Jay for sharing his data and insights with us. Seek refuge from the chaos and the strategies and research waiting for you at digitalshelfinstitute.org. Become a member while you're there. Thanks for being part of our community.