#225 - Amazon vs. Your Own Website: The Great eCommerce Debate with Daybreak Agency and Gawronski Media

24:33It just builds a very substantial moat that's difficult to overcome for competitors. Yeah, that Vine program is tough because I remember using it and it was so frustrating. Some of the reviews that were coming in that were like, oh, well, I don't like zero sugar products. Well, don't review this then, jerk. No one should have sent this to you. Yeah, you would never buy this. You don't need to chime in and just stop what you're doing to come around and tell people that you wanted to give us a one star because you don't like these products. How is that helpful? And that happens all the time. So I really agree with you on being a little skeptical of the Vine program.

25:09I know you're not supposed to do this, but a lot of people out there just saying, nobody that I know, of course, but some people will just selectively go around to their friends and say, hey, could you buy this, please? And I will reimburse you for it and please leave a review because we just have to get to that certain critical mass for people to look at it. Of course, you can't do that according to Amazon's policy. And if they figure that out, they might delist you. So the people who I've heard whispers of doing that have done it very carefully and not with just their family members and stuff like that.

25:46So, but anyways, just a little birdie told me something about that. But yeah, Kevin, I don't know. I mean, just coming back to that review question on your own website, like how important do you feel like it is to get those reviews up? And like, do you need to buy one of those software integrations with Shopify that can go out and try to get those reviews? What's the importance? Think about the path on Amazon. And like I said, I'm looking for this specific product. This one showed up first. They have decent reviews. Oh, I'll try it. Like on D2C, and I understand all these brands want to make money.

26:15Like it's really about what did you spend? What did you get in return? But if you just think about like the path to actually purchasing something on D2C. So we're talking about like TikTok earlier, even like Pinterest, Meta, all those. If you're entering the conversation of like, I'm going to, I'm interested in this product because it's abiding by this benefit, whatever. And then I'm clicking to the website. what you have on the website is really what matters. Are you featured in New York times? Did this influence or post you? So I think like outside of just building up that credibility in the ads, however, you're doing that.

26:44When you get to the website, you could do whatever you want. You could position a brand, however you want, like the reviews, it's going to somewhat matter just to see. It's not the product didn't pop up yesterday, but really you can't lie on your website, like your credentials, awards, whatever, are they allergen free this, that. So there's just so much more storytelling that you could do on a website that even despite it not being as a high intent, that purchase that you got is so valuable because they had to go through so many touch points. And by the time they're getting that brand, they really understand what it is.

27:13They're excited. If they're satisfied, then you have a consumer for life, right? So it's just different. Like Amazon, you go to listing and - So what do you think about then my, like how I shop, which is if I get a product marketer to be, I go to their website. Okay, great. It's looking beautiful. They're featured in the New York Times, but then I am going to go check for their Amazon rating. And if I don't see them on Amazon and I don't see a rating, I might be like, what are you hiding? Why aren't you on there? Do you think a lot of people do that like me or you think you're pretty much good to go with just a good DVC website?

27:41I lost on this one. Yes, I think the majority of the people are going to go to Amazon. We see it all over the place and it just depends on like the price. Like if the price is a little bit cheaper on Shopify or if there's like a bundle or seasonal item that they can't get on Amazon that's limited. Same with holiday. Like if the promotion's only on Shopify, Shopify is going to win. But I will openly admit there is a percentage of people that we know for a fact are going to Amazon. And before they cut the integrations, it used to be they would search on Google, the Amazon listing would show up first and then they would buy through Amazon.

28:11So I will openly admit that is a real thing. Okay, so even as a big fan of D2C and your website, you might be telling some brands like, yeah, let's crush it on there. Also, maybe get your reviews up a little bit so you're in a good place when they go and double check that. Correct. And just to us too, when we're working with brands, we just want them to get the purchase, obviously. So if we're just managing D2C, we want them obviously to buy on D2C. If they end up going around, they need the product tomorrow, it's for their kids, they need it ASAP, whatever, that's fine if they go to Amazon and buy it.

28:43We just know the quality of the consumers that we're getting to purchase on the website are likely going to be more lifetime consumers versus like a near-term fax just to get the product. Okay. Kevin, starting with you, could you actually just break down how the channel works? So you have your website. Like, what are all the economics of this stuff? Like how going out and getting consumers and actually fulfilling the orders? What are all the things that people need to have in mind? Yeah. So we're more involved on like the front end of it. So like, how does a website look? What are the products listed like?

29:16But when we work with brands, the first thing is like, number one is who is the consumer? Because unlike Amazon, where it's only people typing and looking for stuff and high search intent. The platforms we're going to be advertising on 100 % depend on who the consumer is. So if you're targeting 60 plus, we're not dumping all of our money into TikTok reels with influencers, obviously. So really it's understanding who is the consumer, what is your price point, why are they buying these products, right? Then from there, this is who we got to work with right now. Here of this product on the intent side of things, here's what we're going to be covering on Google.

29:50Here are the non-branded campaigns we're going to be running. And then also on the Google side, like competition wise, right? So stemming up from Shopify on Google and intent. If it's a high intent category, we're going to launch branded terms because like similar to Amazon, you have people going after you left and right. Then from there on the initial launch, it's fitting the platforms with who the consumer has been after that. It's like, okay, then on these platforms, what's the actual contents that we're going to be pushing out. And then once you get the economics of it, it's really working with the brand to understand, Hey, lifetime value and purchase cycle is the biggest aspect of everything we do in Shopify.

30:25What can we break even with on first purchase on all of these platforms, knowing your purchase frequency is three or four times, knowing they buy the product every 35, 40 days. And then it's really a math equation from there. And you just have to factor in seasonality and consumer behaviors changing. We'll be right back. Are you going to crush it on Amazon this year? It's such an important channel, but it's so hard to do alone and most agencies are a total ripoff. We can't afford$5 ,000 a month and a commission on our sales. They just don't get it. That's why I love our partners at Daybreak. They are full service, meaning they do the creative work, the listings, the logistics, and of course, all the ads, all with the most reasonable retainer out there.

31:08I work with them personally. I'm so grateful we have such a good partner to recommend out to you, our community. They do evaluate your product first to see if it might be a fit. So if you want them to have a look, email them startupcpg at daybreak.agency and they'll do a free audit for you. Good luck, everyone.

31:27Okay, so Kevin, the way I understand it, I'm probably oversimplifying this, is basically you have your customer acquisition cost, which is called a CAC, and that is basically like how much money does it cost you in ads to go out there and find somebody who not just clicks on your ad, but actually goes and converts to being an actual customer. That would be your customer acquisition cost. And then you also have to understand the lifetime value of that customer because not all customers are equal. Somebody who comes in and buys a bag of chips is not as good as somebody who's coming in and doing their full basket shop.

32:00So you have those two things. And then you're going to have, obviously, the amount of money it takes you to fulfill these things, right? Which then gets you towards your overall profit. Yeah, it's a math equation. So then what you learn to say the brand comes to us, they're like, hey, our product is 50 bucks. As long as you get a CPA of$47, we are technically break even on that first purchase. So what we do and why they're saying that is because they have that data that says if they, the chances of somebody buying two, three, four times is 60%, 70%, that would be really strong. Then it's easy for us to maneuver.

32:36Let's say Google, paid social through meta Instagram, TikTok, programmatic. it's easy for us to maneuver what we have to hit on those platforms. And you can even break it down. If you have the UTM prices and like triple whale connected, you could see a lifetime value of the consumers you brought in from those specific platforms, which is just crazy. So that's why I'm saying, to your point, you're spot on. It just becomes a math equation at that point. And you just have to fine tune the creative, when to scale, whatnot, based on seasonality. For example, right now, we're in very high seasonality.

33:07So a lot of brands are looking at this as a great opportunity to get consumers in the door. So with their CAC, their blended CAC, they might come to us and go, hey, it's normally 60, I'm raising it to 70. I don't care. We're going to get a ton of volume this month. Everyone's buying. Our product is perfect for gifting. Go ahead and keep spending to X amount if you are seeing less than a$70 CPA in the platforms. So it becomes very scalable from that point. And what are some examples of brands or types of products maybe better that could have a really great, favorable customer acquisition cost. So a low cost to acquire people and a really high lifetime value.

33:44What kind of products lend themselves well to that? Yeah, it's usually like snack brands. Like we have like a meat delivery brand that we work with called From Out White Goo and they're unbelievable. And they just like abide by 4th of July sales, Father's Day sales. They're huge during holiday. So it's this weird mix. If it's like a beverage brand that's super heavy, and I know an Amazon beverage is really tough too, It's the obvious ones that don't work well. I'd say the ones that work the best are like the routine products for subscriptions, which we haven't talked about yet on Shopify, which is great.

34:15So you can do subscriptions through Amazon. I understand that. But like the subscriptions and the offers you can give to subscribers are more extensive on Shopify. So to answer your question, I'm kind of all over the place, but it's these cyclical products that like they just need at certain times that they can keep reordering. And then it's more of like the gifting products, special occasion type products, the ones that fit for all events. So it's really all over the place. That was a long-winded answer to that. There are so many Shopify tools, integrations, right? With like subscriptions, tools to help you upsell to them and just so much stuff in that ecosystem that you can try to plug in.

34:51Yeah. With Amazon, mainly you've got subscribe and save. That's the button you can press. Okay. So Rugvit, same question for you, just about the overall economics of the channel for Amazon. What are the different costs and structures that everybody needs to be aware of and try to get really good at. Yeah. So Amazon has a referral fee, which is basically a tax for being on the platform. So it's either 8 % or 15%, depending on the price of the product. And then the other major fee is the fulfillment cost, which you're going to incur whether you're selling through your own 3PL or through Amazon. I do find that speed to price ratio, the FBA is very strong.

35:31I think it almost, in my opinion, beats what you could do with 3PL. And what we've also observed, especially on Amazon, is once you are set up in FBA, we'll typically see conversion rates double for the same product. So naturally, the consumer that's buying on Amazon is expecting the prime delivery in two days. And if it's later than that, then we'll just often see the listing just won't convert as well. So that makes a big difference, I think, from a margins perspective. And then I think customer Acquisition cost on Amazon depends a lot on the category you're in, the cost for advertising, the CPCs.

36:07And in very, very competitive categories, we have seen CPCs as high as$20,$25. So let's say if you're selling a protein powder, you can have CPCs that high. So it's crazy. You really need to be able to play that CAC LTV game on the platform. But largely in the food and beverage, smack space etc you'll see cpcs that are sub two dollars even now and can be pretty profitable over time as well so i feel like where amazon stands out is conversion rates can generally expect a listing to convert six to eight percent starting out and within three or four months reasonably 14 to 15 percent conversion rates whereas i think on dtc at least in my experience it's difficult to crack that 3.5%, 4 % barrier generally.

36:58Subscriptions notwithstanding, right, of course, but in general, we see that that tends to be so. I feel like when you do a total cost analysis, and we've seen this like on P &Ls for many brands where ultimately when you do the total shakeout, you'll see that the channel that's actually making a little bit money, more money is Amazon, starting out, of course, and as an emerging brand. But then I would say over time, the margins from DTC will still exceed what Amazon can do. And also what's worse about Amazon, at least what we've been seeing in the last few years, is their fees are going up constantly.

37:30And there's absolutely no sign of that slowing down. So that part does kind of suck. And so you're forced to figure out how to keep improving on those conversion rates and keep optimizing those ads and things like that to keep figuring out ways to drive costs down. That's the reality of that marketplace. Okay. And then just coming back to that relationship with the customer point, Rugved, I know some brands do try to build a relationship with that end consumer, even when they're going through Amazon, right? You can put inserts in, say, would you leave a review? It would mean the world or like scan here and we'll give you a coupon.

38:05You can get your co-man to apply stickers onto the case packs of stuff that's going to Amazon or put something in a mailer into that box, right? How effective have you seen that stuff be? I would say, like, for example, review asks through inserts, maybe no better than 2%. So it works. I'm not saying it doesn't work, but yeah, I would say 1 % or 2 % really at best. And that's just generally true even for, like, if you have 100 sales, you might see one or maybe two reviews pop out out of that, just on Amazon in general as well. So there are some nice follow tools that are out there that you can integrate with.

38:43And that'll send a bit more informative emails around, please leave a review. This is how to use the product, et cetera, just within the confines of what Amazon's terms of service allows. But yeah, I would say in general, the ability to like really craft a narrative and craft a story and things like that, it's definitely still very limited on Amazon. Okay. So I wonder for both of you, is there a brand or strategy? you've seen be really successful. You can point to like, yeah, they did this. They grew like crazy. That's a great playbook if you can figure out how to grow that way. So Kevin, for D2C, anything that comes to mind immediately?

39:22Yeah, I just think like, instead of like calling out a particular brand, I just think when you go into D2C, the brands that win, there's going to be a short period of time where you have to figure out what works, what doesn't from a creative perspective, from a platform perspective, pricing on the site, like you said, upselling and all of that. But the DTC brands, in my opinion, that are successful that we've had is they just stick with what has worked historically. And I understand that we get this from brands all the time where things might dip, things might move a little bit. You might have some sort of algorithm change here and there.

39:55The brands on our side that we've been successful in, some of the ones that we've had for four years that we've been managing their DTC, they hear the noise, they interpret it, they figure out how to use it in their favor, and then they move on from it. So I would just say, like, so without calling out a brand, there's a lot of noise around direct to consumer meta, especially all the algorithm changes. Hey, we should be testing 1000 pieces of creative. That's what I saw in some random posts on LinkedIn or this on Twitter. If you ignore all that, you just play your game, your brand is going to be successful.

40:24And I would say the ones that everybody would probably think of that then you grew from D to C. That's what they did. They had some sort of piece of creative that worked really well here. There's something viral. Sure. But the core of what they were doing was sticking to it. They knew Google did this. They knew PaySocial did this. They knew their retention rate was that. They had their Klaviyo integrations. They built up their email list and they moved forward. So long answer to your question is the ones that figured it out after testing, stuck with it for years and years. Those are the brands on D2C that are successful.

40:52Okay, Redved, same question to you in the Amazon space. Yeah, I think fundamentals, right? So fundamentally, don't launch on Amazon if there's no demand for the product. That's like number one. Number two, I think the brands that have been successful, I think to Kevin's point is don't stretch yourself. I feel like that typically is the bigger roadblock than anything else. If you've got a budget and say you've made the choice that you're going to launch on Amazon, like stick with it and stay on that for at least a year and build it out like you need to build it out before you try to stretch yourself.

41:26I find brands in general, they'll want to be three months on Amazon. And before long, they're trying to get into retail, which is a very cash intensive game. Then there's DTC, there's ads, there's TikTok. You're trying to do a lot in one year. And from my perspective, the brands that have been very successful on Amazon is they've just stuck to trying to build that subscriber base. Keep optimizing the listings. Keep learning about what customers think about the product. Keep trying to deliver that message through creative, through copy. Run better and more effective. Sponsored brand ads, which are the banner ads, or sponsored display ads, which drives some more awareness, etc.

42:02So very incrementally put these strategies in place, do the right promotions, and climb the optimization, climb the ranking, and it's going to pay off in the long run. So those brands that stick to it don't get distracted and will put their energies in one particular thing for a while, will see success generally. Yeah, and that's fundamentally true about business in general. So, yeah. Well, speaking of things that are fundamentally true in business, both of you guys are entrepreneurs that I respect. You both have been building your own businesses and have done it in the past as well. I'm wondering, because you work with so many founders in the space and CPG, what are your reflections on the things that you want to do as an entrepreneur, the traits that you're really proud of that have helped you grow your business that you think would be similar for a founder in the CPG space?

42:54Kevin, I'll start with you. Yeah, I think the reason I started this is because one of the places I was at before, I knew the brand we were working with. I'm sure you could look it up at somebody once, but I didn't think that the team really cared about it. And then you're seeing it from both sides and you're realizing, oh, that's a real brand. That's a real person putting their money into it. They need us to be successful with it. So I think what I'm really proud of and just the way our team is set up. So it's me, five other people in office here. It's just truly trying to help the brands. We don't come in with a cookie cutter approach.

43:22Every product's going to be different that we work with. Every brand's going to be in a different financial situation, seasonal situation, whatever it is. So I think we're proud of being able to conservatively scale brands because you can go really wrong in this category too. You can come in and say, hey, you don't spend 30 grand a month and we're going to charge 20 % on it. You're not worth it to us. So I think we've done a really good job of understanding their situation, helping them grow. Even the ones that have multiple people on marketing teams and they've grown to a certain point, they're all taking risks being at that brand and we respect that and we just want to help them grow.

43:54So clear communication, caring about where they're at, and slowly scaling their brands and taking full responsibility for their financials. Because at the end of the day, it's paid media buyers. We're in charge of the financials and how they're spending their dollars. Okay, Rugvin, same question to you. you as an entrepreneur growing Daybreak, and I know you've grown other things in the past. What are you really trying to do as an entrepreneur? How does that compare to all of the CPG brands that you work with and what you would wish for them as entrepreneurs? So we like to really help focus on emerging brands.

44:26I think that's a fun space to be in. And we've made a lot of mistakes over the years when I was scaling my own brands as an example. So we try to bring that perspective of just responsibly growing a brand. There tends to be a lot of misinformation out there, especially about Amazon. It's particularly true. So we just try to be that calming, structured voice to founders. We try to say that, hey, this is the 12-month forecast plan. This is how we plan to get there. This is your expectation on how much to spend. And on your side, our expectation is meet with us every couple of weeks at the very minimum.

45:05please keep up with your production your inventory so that we can scale the account etc so for us it's more about just very responsibly without breaking the bank scaling a brand and not really trying to chase the next big trend that comes around but just very responsibly building a business brick by brick layer by layer until you get to a certain place when you look back it's like okay we've built something great i love it and i'm really happy to ask that question because it's nice just to remind everybody that people like you guys have small businesses the same way the CPG brands do and you guys have your dream to grow that while helping them also but I think it's just a nice way to just remind us all that we're all on the same page trying to accomplish the right thing and there is a really good reason that at Startup CPG we partner with both of you with Daybreak and with Garonsky and that reason is because we think that you are a great option for early stage brands.

46:00And I think a lot of it is because you have that empathy. And I know you both pretty well and know that there's really a lot of why you do this and that you see that you can do that. And it's a really great way to show up in this world is to support these early brands with an offering that is affordable for them. Like they can afford this because there are a lot of other providers out there that have an offering that is not affordable and not effective. And I have wasted money on those things before, but Rugvid, we definitely have worked with you for a long time and I got to work with you personally for my brand and was just really like blown away with how reasonable and thoughtful and logical you and your team is and just how great you guys are to work with and the very solid advice you always get and how it really always ties back to the numbers.

46:46And you can explain something to me by looking at a financial model and just like, look, like you can see it the same way I can. This is how it's all going to break down. If you put this much money in, here's a conversion rate. It's going to dump this out. I don't recommend that you do that. It's just so helpful to have a partner who can break it down and explain it to you that way and has so much experience across the categories. And Kevin, it's been awesome to be working with you as well. I think that paid ads area is one where you really like there are a lot, in my opinion, a lot of like sharky agencies out there who have 5, 10, 15K a month retainers.

47:18And like, oh, that for me is the quickest way to lose your shirt in this business. And so we're really happy to be able to partner with you guys who come so highly recommended by brands and all of the marketing people that we trust in the community as having a really similarly great offering for early stage brands where they can hopefully get on this great growth path with you guys without blowing all their money on, let's say, non-working money on big retainers without getting enough of it into actual ads to grow the business. So I really just like a very heartfelt thank you to both of you for being partners with us because we need you guys.

47:54And it is really a pleasure for us to get to work with you and just help educate all the brands in our community and help brands find you guys specifically because still have never met at this point. Anybody who I think is a better partner for brands in your respective areas, especially in this early stage as they're really finding their footing and hopefully hitting a nice growth curve. So thank you both for that. Thank you for the discussion today. I think it's been really interesting. I know now, okay, we've been playing the role of like, let's argue for one of the channels over the other, but I know you guys believe more fully in showing up online in the right way.

48:30So I wonder if maybe you want to just close out with some general advice to brands taking off your one channel only hat. So Rugbit, I will start to you to close us out. Yeah, I think for me, I am sort of one of those people that I think fundamentals are important. And first and foremost, if you don't have a, one, a great looking brand, and two, if you're not solving a real customer need, then it's just going to be difficult for you to be successful. It doesn't matter which channel, whether it's Amazon or DTC, doesn't matter. Do you have a great product? Is it retail ready? Is the value proposition there?

49:03Are you solving a real problem? These things matter. And these are just fundamental marketing principles. And if you get those right, then you're going to find an audience. Now, sometimes you may be ahead of the curve in terms of you're an innovator. You found something that's going to change the world and you're ahead of your time and you're not initially seeing much success there. That does happen. It's just important to be aware of that, that you are ahead of the pack at the moment. And so it's about sticking with your convictions and taking the time to educate your audience and your customer base and then success will come with time.

49:36So it's just fundamentals. If you have the fundamentals right, you can grow a brand. The rest of it is more about tactics than it is anything else. All right. Same to you. Over to you, Kevin. Yeah, I mean, I think you pretty much hit on everything. I think the gist of it really is like, you're going to hear a lot of noise. You have to continue on your path. Every single brand is different. Like nobody is the same. Everyone likes to talk about like, oh, midday squares, the best of this other ones. There's certain viral situations that are going to happen to people. It's one in a million. To do this the right way, you have to test.

50:09You have to learn. You have to stick to your path. It's going to take patience. I think the one thing, just from our side, because we don't really get to give our POV that much, there is no agency that has a magic wand that can fix all of the problems that the brand might have. That's the realistic portion of it. Let the paid media agency focus on the paid media part. Anything else, we can't just wave a wand and fix everything. We need time. We need to test. We need to identify those problems. And then we need to scale what's working. So if you stay the course, if you just stick to what works for your brand, you're going to be successful.

50:40I love it. And I guess going back to that earlier point you made about like someone hearing something that worked on Instagram, like, cool, we should just try a thousand things then let's do it. Like, I feel like it is really easy to just like, there's so much noise and people are going to tell you so many things and you'll talk to one brand that was successful and they'll be like, you should do this. Like, cool, let's switch our whole strategy and try all this other stuff. I feel like that can be so distracting for brands, like come up with a strategy for sure. Have good branding, like then get out there and like execute, run your playbook.

51:09And I feel like if you just chase every shiny thing and potential idea, then you will quickly just be chasing things forever instead of actually testing and learning in a methodical way and just hoping for reasonable improvements over time instead of just deading everything on going viral. Like when I'm playing skeeball and I just shoot every ball at the hundred and miss most of them, but that's okay. That's not my life's dream. Whereas these brands are for most of us. So thank you again to both of you. I just want to let everybody know as Rugvit and Kevin, what they do is, is very hard work to really try to grow brands at this level.

51:48And you've heard a lot of their advice here. We love working with them. Not every brand honestly is a fit to work with both of them. If you want to see if your brand would be a fit for them, because it's not a good outcome for anybody if they feel like it's not the product that either would be successful on the platform or that is just a fit for what they do exactly. but if you want to see if your brand is a fit check the show notes so we have links so you can connect with either of them if you want to talk to Rugvid about Amazon or Kevin about paid ads meta Google all that stuff click that link in the show notes chat with them I think you'll really appreciate an initial conversation with them both of them will give you a lot of information trust me you will like having a chat with them Rugvid is very famous for just showing you all of the data on your category.

52:34Like, yeah, here is actually the search terms for this category. Here's why I think it is a good opportunity or not a good opportunity. So you will learn a lot from that call. Kevin will do the same thing on paid ads and just really give you a good overview and help you understand the potential for it. So you're going to learn a lot either way. So thank you both. I really enjoyed this discussion and the spirit of it. I feel like we're high school debate club. But great. Thank you guys again. I hope everybody enjoyed it and we will see you all soon. Yeah. Thanks so much. All right, everybody. Thank you so much for listening to our podcast.

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53:55you