Amazon Aggregator Challenges ⎜ nReach ⎜ EP 174
Ryan Cramer: What's up everyone? Welcome to my corner of the internet. I'm your host, Ryan Cramer. And this is Crossover Commerce presented by PingPong Payments. The leading global payments provider, helping sellers keep more of their hard- earned money. Hello everyone. Welcome back once again to another episode of Crossover Commerce, I'm your host Ryan Cramer. And this like the intro I said, is my corner of the internet, where I bring the best and brightest in the Amazon e- commerce industry. Call it my corner of the internet because there's so much content out there. There's so many places that you can go for information. I'm just glad you found my little space that I take up in ether of the internet if you will, to bring you the best and brightest Amazon news, relevant topics, and thought leaders in the industry to help apply to your business or help you start thinking about that to move the needle forward. That being said, this podcast is presented by PingPong Payments. Cross border payment solutions have never been easier now with obviously five clicks, you'd be able to open up a free account by sending or receiving money, helping your brand grow. Whether that's paying out your VAs overseas or paying out supplier manufacturer, as you know, time is money to get money in their hands quicker so they can release goods to get it back to an Amazon warehouse. You of course want to use a solution that's going to be able to help you grow and put money to your bottom line. And you can do that with PingPong Payments. Sign up for a free account in the link below. Or if you're listening to us, you can check that out in the show notes as well. Thank you PingPong Payments for sponsoring Crossover Commerce. That being said, again, welcome everyone again. This is episode 174 of Crossover Commerce. That means there's 173 different episodes of content that we've put out there already, anywhere from branding and marketing to Amazon growth, tactics to strategies to logistics, you name it. We've covered a lot of this things and every once in a while, and occasionally I love to bring on friends of the show that have come out of the past that have just so much content. We ain't need more than one hour to talk about it. Therefore, that's why I call them friends of the show and I bring them back on applicable different things when there's stuff going on in the news. And I think that there's just great content that needs to be shared. So that being said, we have a friend of the show Chris Fryburger of nReach. Chris going to be hopping on with us today. And you know what? This is one of my favorite topics to discuss if you're listener of the show and one of the more fascinating things to grow and it's infancy as it is right now, where are these different paths moving forward for brands, obviously there's people three years go, or maybe four years ago, we're talking about, I didn't even know that brands could exit a business or buy brands on Amazon. Now it seems like there's an endless amount, but now as years progressed or 16 months or 18 months as a lot of these businesses have grown, what's our learnings? Obviously a lot of people tell you how to optimize your business to grow and exit your business. But on the flip side, what are those challenges on the aggregator side of the space and how are they looking at things now that they're 60 months in or two years or three years into this ether? What are these challenges that they're going to be facing moving forward and put down the crystal ball and put on our fortune telling hats and look at what the industry is telling us in the future and how this is going to continue progress. Without further ado, want to welcome back to Crossover Commerce, friend of the show, Chris Fryburger. Chris, welcome back. Joining us from space obviously, too. Right?
Chris Fryburger: I'll explain that a little bit, but Ryan, thank you so much for that and thank you to Crossover for having me back on. I think I was back on or was on June or January. I'm sorry. And thanks again for having me on and then shout out to PingPong as well. But Ryan, thank you again for having me on, I'd love to talk about this stuff, as you know, and there's so many things to talk about including this space station that was just announced, what? Yesterday, the Orbital Reef, but it-
Ryan Cramer: Yeah, that's what we looked at up pre- show when we found out what it was called. I just rolled my eyes and told Chris, if you're listening to this, it's the 3D rendering of what Amazon has... Blue Origin, excuse me, not Amazon. Jeff Bezos's company, Blue Origin has come out with a mock up of what a space station would look like. And Orbital Reef is what they called it. We were jokingly saying, what does that mean? Is that the 21st marketplace that Amazon is going to, is it now space? They've just bypassed all the different countries. But yeah, we can definitely talk about that today. So, you're the guy and for people who haven't listened to our first podcast, I've made introductions to you before, you've done vice versa. Your network is so expansive and I like to pride myself on knowing things going on in the industry. You're the guy who actually can connect those people and you know businesses that are being successful, you make those handshakes, those happenings, and we've called you the Amazon networker or the match crosstalk Yeah, matchmaker. I was going to say, yeah, almost like my fair lady or things like that or the matchmaker. So what does that mean again for a quick 30 seconds? What does that mean and how did you get in that space?
Chris Fryburger: Sure. Yeah. I will end up in space, I guess if that makes sense. Just maybe if I may, I'll share this little bit of personal stuff on me, at least that maybe others that don't necessarily know is I'm actually from the Midwest, I'm actually in Cincinnati. Other than the east coast, maybe New York and the like is actually a hub of advertising and I grew up here. My grandfather actually was in advertising, actually produced a book that's actually still taught today at some business school. And then my dad was in advertising, worked at Procter& Gamble and then lo and behold, unbeknownst to my best efforts, because believe it or not, I did graduate in aerospace engineering from Iowa State. That seems about 10 lifetimes ago maybe or so.
Ryan Cramer: Oh man, I didn't know that.
Chris Fryburger: Yeah. Yeah. And did nothing with it because to tie it together, really, my first job, I was plunked down in front of Netscape 1.0 on a very clunky PC at the time and just never looked back. Fell in love with the internet, back then if you knew HTML your career accelerated from there. I want to talk about how many hops I've had between there and then, but models a little bit of the internet if you will. But mostly my background is in the ad agency world. Applying digital marketing, the life of the internet, if you will expressed across the media world of marketing world. And so in many roles within those small agencies in case the first employee in some cases working for large agencies, again, low and behold, back in the walls of Procter& Gamble my forbearers a little bit, all of that said about three years ago, that whole industry, the ad agency world, the marketing world, if you will, really hasn't reacted to Amazon. And that was three years ago. For instance, they do all the digital stuff, Google, Facebook, including influencers things. Some cases actually do all the creative, the brand, the expression of that brand ad, campaigns within that video all of the content that needs to be created, including Super Bowl commercials. Right? But that whole industry has not figured out or entered the Amazon space. And thus we exist, right? This bubble of Amazon folk exists. And so what does nReach do in all of that, given that background is I'm basically just a network of resources in the space. I like to pride myself on knowing, especially in the Amazon agency world. I like to know what's going on. I specialize in helping brands and marrying them to agencies that are mature enough in an immature space to then execute all the things they need to do. I vet folks and I introduce folks, I'm a matchmaker is what I do.
Ryan Cramer: Which I love and that's the thing, too. And I know people, they just aren't aware of whether it's the time that they're growing their own business and service or heads down there's so much content that's being put out there, but also so many different businesses that crop up because of it. And because it's such an immature industry, like you said, I think I've only heard people, if I've been on Amazon for 10 plus years, that instantly makes me think, my gosh, you've been around for almost the inception of Amazon, which is clearly not true. But for even people, there's many skips of things, right? There's the technology world of how long Amazon's been around 1993,'4 something like that.'96 is I think-
Chris Fryburger: Seven. Seven.
Ryan Cramer: Seven. Yeah. I was going to say mentally'97. And then you have the people, Amazon as a company. So people are aware of that, but then knowing for Amazon's the different tiers, right? I think we talked about this too, of people don't even know that there's businesses that are selling on Amazon, it's a marketplace, not Amazon has all these products they're selling. People are selling through Amazon's network and distributing and selling. And the majority of it is people like you and me, or in our houses or in our offices doing that. And that's where the industry itself sits. And then there's the public. And they don't even know that exists, too. So you start to scale up and tear up. And you're like the 1% of a 1% in this case of business hasn't been around long. So that's why it's so fascinating. You and I were just talking about this, I heard about this, I heard about this. I heard about this. There's so many passing pieces of information. So how do you keep your eye on all the different things that are happening? Do you pull a tip or a trick that you can share?
Chris Fryburger: Well, it's a small world. It's a run off of what you had and I don't mean to run too far ahead and I apologize is that there is an ecosphere that has gone around basically helping either selling on Amazon or helping folks on Amazon. Okay? And so I call that the ecosphere that there's Amazon, everything, there are Amazon lawyers, there are Amazon accountants. There are Amazon HR people that are hiring for the space, which we'll talk about at length. There are Amazon API programmers. Okay? Very specialized. And then there are Amazon agencies. Okay? And when I say that is all they're usually doing is optimizing for Amazon and blocking and tackling the process of selling on Amazon, which is another thing we'll talk about how hard it is to sell on Amazon. It's extremely hard. It's not something that somebody can just do or a company can just do. And so these agencies become the only ones that know how to do this stuff, or at least the concentration of those things. And as a result of that, which we'll talk about other extremely valuable. But I want to switch my background off of the space station, which will probably look like something different. And just round out and to go with what you were saying, Ryan is, it's very early in the life of Amazon. You might think that Amazon pervades... You see your trucks out everywhere, and it pervades the US streets, if you will, but that's not the case around the globe. And they are just getting started, they're at what 14 official marketplaces, but those cover 50 plus countries, they cover a majority... Something on the order of like 20% of the available people are reached by Amazon only so far. crosstalk So behind-
Ryan Cramer: Yeah there's so many different things like technically 20 plus marketplaces of that, there's only open to public. The 20th was, excuse me, Egypt that opened up this year. But again, people are anywhere from 15 to 20 that either of, I think is Saudi Arabia, UAE and Egypt doesn't even pale in comparison to 1% of what Amazon's traffic is. So again, three of those only equates to 1% and majority is obviously India, United States, UK. And gosh, for population wise, I'm going to say Japan. I think those are the tough one which makes more sense. But in that regards, like you said, it's 40% again for the stat nerds out there with me there's only 40% of e- commerce, but then of that e- commerce bubble, there's only 10 to 15% of all of retail spent. So again, if you think Amazon's big and it is in the world of e- commerce, then you put that in the world of all of purchasing, still very small. And that's what a lot of people are really not struggling with. What a lot of people don't see of how big it can potentially get once you build on an ecosystem like that.
Chris Fryburger: Right. And we'll use an example... And thank you I throw stats as well and we'll just go with big. But that said, a good example be like Brazil with Mercado Libre, which there's still not the dominant marketplace for ordering product inland in that country. But they don't have the infrastructure and the technology that's coming at them including what could be behind me, right? Could easily be what it was actually intended to be rentable manufacturing space for COG manufacturing, which is a big industry that actually fuels the whole space program. Again, I'm an aerospace engineer, just in the sense I follow that. And what this actually means is that this is all space. It could be some entertainment space. These are all modules that are in the back behind me. But moreover, it could also be an Amazon distribution center and then things like drones and things like that could be dropped out of where we are. It's really going to be there. Think about what Amazon's going to be in 50 years. Okay? Think about what the railroad did in the last 50 years, but accelerated whatever the exponent is that you want to apply to that. And so it's going to end in space and that's why I want to start with this, but I will switch back to something a little bit less scary and space laser.
Ryan Cramer: Right. I mean, man, if we could use something like that to alleviate any logistics change right now, that'd be a game changer right now. But that's the thing too, right? Of maybe segueing into the future of what the third party world or what Amazon, in terms of the small seller world, right? There's lots of things going on and you can hit it from a hundred different ways. There's the government action of what potentially could have happened to small business sellers on Amazon. There's the, what it applies to in terms of monopoly, how brands are acquiring or just growing on Amazon, there's the play by the rules and the whole shutting down big time business that's happening on Amazon. There's so many different things that are being juggled around of the Amazon ecosphere but as feature prevails, there's emerging innovations happening, right? That's what the topic, I'll call with it. And one of those things, a lot of people are talking about and I'll throw up our topic for the day is the aggregator space. And pre- show, we were talking about... Man we said aggregator and we knew what we meant, but now it's actually almost like forked in the road even from there, the differences between agency aggregator, accelerator growth, brand accelerator, whatever you want to call it. Is there a quick definition that we can break down for everyone who's listening just to simplify terms and we can all be on the same page in that regard?
Chris Fryburger: Yeah. Yeah. I won't go too deep because there's other terms that are being thrown around and it is an industry where it's so new and we're trying to all catch up to Amazon. There's all these ecospheres falling out and even those people are starting to consolidate. Right? And even so young that the terminilogy is also being defined. Right? And so there was a term that's popped up called an aggregator, right? And all an aggregator really is, is a large seller, right? Again, we're all selling on Amazon. That's the gist of it. Right? So amongst large sellers, there are different types. And one of those types is an aggregator. And what an aggregator does is instead of being just one brand that sells on Amazon, just a typical seller has maybe one or multiple brands, but they're one seller, right? An aggregator goes and buys up multiple brands, right? Groups of brands and the idea is that an aggregator through scaling, through better technology, through better knowledge, through consolidation and the economies of scale also because, hey, did I mention this stuff is really hard and if they can figure it out better than the person that had sold it on Amazon to date, right? So it might be a brand for instance, that's sold for$ 2 million to date, the owner put their blood, sweat and tears into it. And it's now$ 2 million brand on Amazon, right? These aggregators will come along, offer them current rates between like six and eight, maybe 10 X and growing, right? To grab those brands when they know that other than that one guy, they know my team behind me can go further and increase sales faster, further than that guy could have. Right? And I'm going to pay him out on performance of that brand. And that's the whole game right now with aggregators. Okay? So in aggregators, multiple brands think of, them like groups of brands that they bought internally, they own those brands and they have to grow those brands. Okay? So that's one term, that's an aggregator. An accelerator is a little different. They have an easier job of it. Right? An accelerator is like a target, right? Like a retailer. Okay? All they're going to buy, they're going to ask, they're going to go to a brand that says, you know what? We don't want to mess with Amazon. We don't have the skills for this. Or we know that you can do it better. So it's better just to outsource it. You're a better plumber, I'm just going to have you do it. Right? And so all they have to do, they buy inventory, they ask for exclusivity to sell on Amazon. Right? And they say, okay, I want to take your brand in. We're going to buy a bunch of inventory into my warehouse. And all I have to do is move that product. Okay? I don't own the brand. If I need assets like video or a Super Bowl commercial, or I need you to grow an audience through social media and Twitter, that's all the brand's job. Right? I just have to move product. Okay? So examples of each, right? And a aggregator would be say, the top one is Thrasio right now, Heyday, Perch, these are some of the big ones. And there are right now 68 aggregators out there, 70, depending on who you count. Right? Right now they're sharing somewhere up close to a$ 10 billion to buy brands internally. Okay? Big business. Now, on the other side, the aggregators who big players are, Spreetail, there's also Pattern there. Okay. I'm sorry, the accelerators Spreetail and Pattern. Okay. And again, those guys are big and they're printing money because they don't have to haul the headaches of owning the brand. And we'll get into that more, which is the topic of this podcast. Okay? Is the challenges that they have. Okay. So I'll stop there, but does that help you?
Ryan Cramer: No, that's fantastic. Yeah. And we actually had Channel Key. We had Dan Brownsher of Channel Key. He actually is co- founder and founder of it. And I asked him the same question. I go, how do you distinguish when people come to you and say I wanted my brand to be operated. I want them to just sell my product or I want it to be collaborative in that person. That's what our agency. And he goes, honestly, there's just a lot of people at different parts in their business. They want all of those things and there's space for everyone. And depending on who you are, that's the fascinating thing about the space as how you define agency too, because there's PPC agency. Like we said, before you put Amazon in front of anything, Amazon photography, Amazon video, that instantly comes like a very popular service potentially for millions of brands that are on Amazon. I think six million plus sellers and growing. And that'll continue just to obviously grow over time and whatnot. And we're not even talking about one piece. So first party quickly on that question for an accelerator, is that more of a one P approach or is that more of a third party approach? Is that it a crosstalk.
Chris Fryburger: There's actually iterations of both. It really depends on the approach, but that model applies the idea here again, is that really the model is just like, I don't want to deal with this. Here's all the keys and exclusivity, go run into the channel. Again, like Target would, they buy a lot of stuff, they put it in the back and they sell it in their store and that's essentially what they're doing.
Ryan Cramer: Got you. Perfect. So yeah, for this definition, we want to break away from the agency and the accelerator part and what we'll compare the two obviously. But for aggregators, man, I remember February of last year and when the first name of Thrasio came out and again, great people have multiple people on this podcast. I think they're doing great things for the third party space in this regards. Just this week, I want to say, or on Monday it was announced that they raised a billion dollar around a series D equity channel. And that number is just phenomenal and crazily can think about, but quantifiably it's going towards equity. I believe most of it is. So obviously with lots of these different companies, a lot of it is debt or the opportunity to borrow that money, buy the business. And then at one point or another scale that business. So for an aggregator, lots of people are thinking, oh, they're just going to take over. There's going to be 10 people in the space that are just going to be running brands across all the channels. First and foremost, is that ever going to happen? Will they ever take over every single brand that's operating on Amazon or more than majority? Do you ever think that would happen or is it not going to happen?
Chris Fryburger: I use an analogy of real estate here. So think of that as like the play here for an aggregator is really like flipping houses. Okay? They know they can come along, they can see the owner, maybe put a fence up and cut the yard clean, but they know the value if they put in and wing on the back, right? Or do it faster, better than the next guy, right? The answer is there's millions of houses. There's millions of brands. Right? So no one could own them all by any means. And in fact, owning a thousand of them doesn't mean anything to the other millions. Right? And so there's plenty of room here. That's not the limiting factor at all. I don't think there's plenty of great brands and lots of gems out, born from Amazon and, or would be accelerated on Amazon to unprecedented scale. It's a beautiful model. And absolutely because there's the only thing, it's a long term versus a short term. Right? And an accelerator's like, I'm just going to print money, just going to move product, right? And get paid for that. Awesome. Right. Well, an aggregator's basically like I'm going to invest in babies. Right? And internally, I'm going to invest in a nursery. I'm going to grow those babies over time. I'm going to invest college money, all of this long term play in these things. And at the end of that, the babies multiply but they're also worth, in some cases, it could be a household brand that you've grown from nothing and it's a billion dollar brand. So in the end, the exit could be, if you execute on all these things properly, if much higher than say the accelerators, which are like... They have an easier job of it sort of like the tortoise and the hare kind of thing, if that makes sense. So, I don't know.
Ryan Cramer: Yeah. And there's a place where both a play and I like that analogy of you're investing in almost like a newborns feature of however mature it is, whether you're taking it on as a infant teenager, whatever it is, you're actually looking for their job it's almost like a risk tolerance bet, right? If you're looking at insurance of how much can I cover this, or until it gets to a loss and we can't actually rake in money with these people, we want to make sure that at some point or another, it's going to be a long term investment. It's going to yield results year over year. And we're not going to lose money on it. So by looking at the background, the market, the landscape, everything like that's what's so interesting and challenging where so many people are entering the space. And I see so many, 70 is not a lot. Again, there's a lot of different cup needs that can agency wise satisfy. There's lots of different tools, services out there in the market space, whether you do it individually, or at scale, lots of people came in quickly with this. And if it wasn't one, it became 10 and then 25 and then 40. And then all of a sudden, like you said, we're doing everything publicly. And again, this is all public. You have people operating without making public knowledge of what they're doing. That being said, is there a space for that amount of people to succeed on as it sits today? So 70 are going to be around in a year as 70?
Chris Fryburger: Yes. You look how many... We'll just pick on the agencies again, how many agencies there are in the non- Amazon world. I mean in Cincinnati, can throw a stone, maybe hit three or four digital agencies. One of them might be an SEO agency, right? But for the most part, there's a bunch of creative downtown, I could have, sorry, pre COVID hit a bunch with one stone downtown. I think eventually that's where this is going to be. In fact, I think eventually those are going to eventually learn these skills of Amazon. It's going to merge together eventually. But we're talking about 20 years the last time. At least 10 to adopt, 20 to adopt Facebook. We're still figuring out social media. And some respects, Google AdWords is more important than ever and so on and so forth. And so it's just a very slow industry to adopt, right? These types of skills. And so I'm not sure if I'm answering your question or not, but it's why it exists, this space exists
Ryan Cramer: Well. And the business model makes sense to me, too. And there's lots of people at play that I think maybe if we went down the challenges of the model hollows, how I always understood it from the basics and the mechanic and levers perspective was at the beginning, go to page one, find the top performing sellers, use data and analytics to see what it is on a month to month basis, where you can improve it. And the selling feature is how do you not want to, do you want to not do this anymore? Whether it be for money reasons, for headache reasons, anything like that, we'll take that over. But there's also that little chunk that we can operate and grow and make profit on it. Even more than our initial investment. That's just like acquisitions in general. So, but everyone, if you have 80 different companies going after, again, not an infinite number of categories, definitely a lot, but there's a lot that aren't getting touched. For example, electronics, topical, consumable. A lot of people don't even want to touch toys or child to a point, anything that's really breakable, not really sustainable and it's not repeatable business.
Chris Fryburger: Certain margin, yeah.
Ryan Cramer: Certain margin. Yeah, exactly. So at some point, you start to think about with the top people in the space, if they're consistent, they've only been around a little bit while is there a gap or a ceiling that theoretically if one brand and they're the top brand, they're the top dog and they're going to be the top dog forever. You shut down that lane for essentially anyone else to be optimized or you're trying to compete with them on a constant basis. Is there a notion of which those top people might all just be acquired by aggregators at some point? Or is that where it's going? Or do you think that there's always going to be ways around those kinds of things?
Chris Fryburger: Yeah. I mean, I think there's always going to be the option of selling to an aggregator. Right? I mean, that's always an exit. And I would say even like a new exit, that's again, you say a couple years old for these brands that just sprung up and oh, by the way, you can get more money going through that exit which is nice. Right? And also, I've seen it just accelerating brand owners efforts on Amazon to get to that multiple that exists right now. I don't think it'll go down a little bit, but it'll exist for a while. But to your question, is there a ceiling on any of this? I think and you're already seeing this and it's already, not that I predicted, but smarter than mines than I predicted, it's actually going to shatter. It's going to go the other way. I think you already see small brand groups which is another term in this space where again, they're sellers, they're selling on Amazon. Right? But within that, they're a different kind of bird where they bought maybe a couple, maybe there's mini aggregator. If you maybe look at them that way, they bought a couple brand groups, maybe within a category, maybe not, maybe they're different categories of spread risk. Right? But they figured out maybe they have an internal team or a partner that's an agency that they trust that can actually do this stuff. And they have a group of investors, maybe four or five guys that invest in those brands, that little three or four brands. And they have somebody that's growing them and just like flipping a house or investing in an investor or putting on stock market, which I think is maybe even a better analogy. You're seeing just these little investment groups and brands, right? Coming out of this ecosphere, right? Which is smart because what's going to grow faster and if done well then in the greatest marketplace to ever exist.
Ryan Cramer: Well, this is what was fascinating when you look at the model and you're like, of course you want to obtain the top sellers, right? You can almost put on your books, a consistent amount of revenue year over year. It's going to be there. For example, notoriously, I think it's Thrasio who mentioned, we bought the number one selling pillow on Amazon Beckham brands. I believe that's what the brand, I actually have one like, believe it or not. You're welcome, Thrasio. If you're listening, I've purchased, I believe four of them because they're freaking nice. They're really nice. But they've been around for five years, right? It's an evergreen product, which means it's going to be consistent. You're going to need new pillows around. People are always going to go back to, it could be a repeat purchase. You can theoretically get better cost and products and things like that. But there's only so much room for opportunity, right? It's not like taking something from 100 to 10, it's taking one and keeping at one, which theory seems a lot more expensive in my eyes. There's not that much opportunity for growth, but when I'm starting to hear, and maybe this is the case now, people are looking not just for top performers, but maybe under performers, great ideas, maybe more of that middle of the road inaudible turning out number one sellers. But maybe in that middle tier, they just don't have that push and they can offer that push over the line and be a really big investment in play in low risk, high reward play in products. Is that where it's shifting towards more?
Chris Fryburger: Yeah. Well in the aggregator model. Yeah. I mean, again, there's other models out there. Right? And there's even within the aggregator model, there's actually a couple models. Shout out to Stephen Pope for giving me this one, but there's aggregators and then there's consolidators. So an aggregator actually takes over the brand, all the functions of it. So the ad campaign, all that stuff that was managed by the seller, they may come along for the ride or they may not, it might be just complete buyout and we'll take the keys we go. Right? And so an aggregator would just bring it in and aggregate everything like a machine, bad analogy versus a consolidator actually maybe buys 60% of seller invites them over. They're still maybe a gentle handoff or they're part of the team to see that grow going forward which solves some of the next stuff we're going to talk about, which is the hiring problem in the space. So you see it developing before your eyes right now.
Ryan Cramer: Right? So that's a great next question. And so not just the challenges of obviously finding brands. So we put that pin a little bit in there and it's always going to be a constant challenge of, hey, are you in the market to purchase right now? No, you're good. Okay. Well, next person. And I always hear the story brand owners handle tens of emails every single week. Hey, how is the brand going? Hey, can we talk about the valuation? We're going to offer seven X, 10 X. I may have hearing 10 X. And that seems crazy. But again, people just acquiring brands to put in their portfolio. And again, there's only so many out there, if you did the math, a lot of them range anywhere from one to 10 brands for pretty decent amount, which is a good amount. You have the next tier of 10 to 25, another healthy amount. Then you have like 50 to 200 brands. And then you got your top tier, right? People are requiring quite a bit. At scale, you mentioned it before people. And on average, I'm constantly hearing anywhere from seven to 10 people per brand that you're operating.
Chris Fryburger: Oh, you heard that stat. That's an interesting stat.
Ryan Cramer: Well, that's just on for a team for marketing and again, that's across the board on average, anywhere from seven to 10 people who are touching brand, even on agency model makes sense. Right? On a month to month basis, you have seven to 10 people who are touching that brand. Whether it be creative, it could be logistics. It could be just operator in general PPP, anything like that. Seven to 10, if I'm thinking about the math and I have 200 brands that instantly puts me at what? 20, 000 people or close to, is that 20,000 or 2, 000? That's a lot of people. That's a lot of people power. And the economies of scale doesn't make sense for growth in that capacity. So what's the people problem for an aggregator right now, I guess is my question.
Chris Fryburger: Yeah. And maybe another way, and this is just indicative of how we're running through the fog and we're all like what piece of information do you have? What piece of... So we don't run into a wall, right? Another thing I saw out there and I can't remember who had done the survey, but it was recent of, they had sent out a survey to the aggregators and asking them questions about themselves. One, there is a survey for Tia Group and shout out to them from some other questions, but it's not the one I'm thinking of, but somebody had done a poll about what their plans for hiring was. And they came to 7, 000... Well, 30 something of them, of the 70 respondent and of those respondents the total hires, if you added up with the response was 7, 000 by Christmas.
Ryan Cramer: Of this year, they need 7, 000 total? 7, 000 more people-
Chris Fryburger: At the end of the year or by the end of the year.
Ryan Cramer: That's a lot of growth. And I know the stats too, I'm looking at, so take that number. And I know, again, we look at Thrasio because it's the biggest number out there and it's the biggest one to less dice, right? It's a little bit easier, a hundred people a month that they were averaging consistently. So if you're taking just a hundred on the biggest person under aggregator umbrella, where does the makeup come from. And that's what I'm trying to figure out is, Math doesn't align and there's a complete shortage of talent people power versus the brand power that they're acquiring. So what does that mean? What's that going to look like in Q4?
Chris Fryburger: Yeah. So there's a term here that applies. I don't think I'm the first to say it, but if you hear it, maybe it came from me. And the term applies is acquihire, okay? It's a old term might have learned at Harvard on a page, in a book or something like that. But basically the concept is pretty popular in the sense that you would buy a company for their people, not for their revenue or product or anything producing. In fact, some cases, all that's shed for the team and the talent that they have, and really the individual talent, in some cases, the leadership that put that talent together and the overall functioning, F1 racing team that can't be found elsewhere. Okay. And that's an acquihire moment when I'm going to spend top dollar for teams. I don't care where I'm going to find them. So examples, there's a Netscape moment, but the easy one that I think if you were to look at the Wiki page on acquihire is Facebook. Facebook back in 2001, when it first became blew up, you couldn't hire programmers that knew anything. You couldn't spell social media. It wasn't even invented yet. They invented it. And they actually bought again, stop me. There's some companies that they hired that were like SaaS solutions and they had 10,000 users. They fired the users and shut down the service and took those employees and ran off the crosstalk
Ryan Cramer: ...exactly.
Chris Fryburger: And they produced Facebook. Okay? So we're in that space now, I would even contend it's actually I would say it's 10 X, any of those moments. And the reason I say that is because it involves all of e- commerce really. And when I say Amazon, I think all about e- commerce, it either owns it, or it is, or it will be it. So that's greater than say the monetary opportunity of all of social media. Right? And then one could also argue that Facebook didn't own all of safe social media. Right? And so that boom, or maybe even take another boom, like mobile boom, right? There was more than one player in the mobile space. Right? There was eventually more than one Netscape. But at this point, I think Amazon owns all the things. So it's going to be even more importance to solve for Amazon than any of those moments. Certainly business wise and e- commerce wise and maybe pharmaceutical wise and maybe space wise and a bunch other wises, right?
Ryan Cramer: Right. And that's what's maybe this is just the beginning of this massive shift, whether it be massive or not, again, it's the eye and beholder. Just when you see money coming into the space and you don't know when no one knows what that means. I think a lot of people see it as panic when other people, if you're an innovator, you see it as opportunity. Right? That's why you saw this stem of lots of different aggregators and whatnot. When I say the phrase acquihire, I'm using it because I heard it from you and to me, that makes sense. Right? Because economies of scale, you're talking about massively instead of individually hiring out, building an individualized team, one on one. Why not either subcontract out essentially, or just purchase outright business partner with them, to who run those brands. And then all of a sudden, you have marketing team, you have photography team, you have sourcing logistics, you have all these people who are already in play and you are essentially just either utilizing their talents and resources for your brands or they just pursue you outright and they're becoming your company. So that makes sense to me in that regards. Is that something that you're seeing actual businesses and aggregators taking part in now, or is that the very beginning of it? You're still adapting.
Chris Fryburger: So it is the very beginning of all the things. Right? But even within that, there are little bubbles of other things going on. Right? And so the thing, and I want to paint a picture here just because there's a couple pictures that need to be painted because it just comes to this moment. Right? And I'm trying to write a blog entry and every time I pick it up and I have to set it down something changed, literally that week kind of thing. And that's the environment we're in. Obviously everybody, you hear the news about the hiring problem. Right? You can't hire McDonald's workers. Right? Which is true. Right? But let's say, if you draw a even smaller circle within that, you really can't hire in the e- commerce space right now, tech workers. Right? And everybody's screaming for Shopify talent and Salesforce and people that are savvy and all that. Right? And they've always been for the last 20 years. And then within that smart circle, you've got this people that are screaming for Amazon talent, which is within the e- commerce bubble. Although I would imagine it's almost becoming the size of the e- commerce bubble, right? Within that, there's people that are screaming for talent because there's even fewer, right? I would say, and I say this in all honesty, it was the point when I started like three years ago, I think like Prosper Show, which is the biggest growing network that probably represented a very large chunk of the community that could actually do this stuff well. Right? And their attendance say was 5, 000 people. Right? So that's with all of these people have to compete for, is that kind of talent pool. And I would say also within this, you might have a programmer. Right? But do you have a good programmer? I mean, you have a salesperson, but is that person like a 11? Or is that person a five, because guess what? It all goes straight to sales. Right? It all ends up in your Amazon sales. Everything's measured in sales, as it always should be, or always was. Right? But it's like, ding, I mean, real time sales. Right? So if you don't know what you're doing, and with respect to even just paid much less earned media and much less organic media and all the other things created and all these things, I'm rambling here, but you're not doing all the things right. So your sales is less, right? So to your team comment, if I want to go into a race, I want to go into the Grand Prix. Right? I could train my own from scratch just some regularly scratch tech guys that think they can put a team together and a car together and learn how to do this stuff. Right? And eventually 20 years from now, boy, we won but nevermind the area and the curve and all the races that you lost in the meantime. Right? But that said, or you can try and hire a team. Right? They're all sniping from each other. By the time you put some of those together, you're going to make some mistakes on, wow. This guy said he could do this, but now it's apparently doesn't do that. I see a lot of that, because this stuff's hard. Right? And so you could put that team together, a rag tag group that will eventually co or less and eventually win a race. So you only lose five races. Right? And which is sales, right? It's winnings. Or you can go out and buy the F1 racing teams that are out there, by the way, there's only like a hundred of them, right? Or whatever you're looking for, they're at a premium. Right?
Ryan Cramer: Right. And that's the thing is, right? Is experience is the eye of the beholder. Right? You've done it. You run a brand, you are experiencing a certain vicinity of e- commerce and how I guess breaking this down further, where are the areas of need? Is it logistics? Is it marketing? Is it all? What are the most dire needs that you're hearing right now from the aggregator space that they're just like, we can't find enough people of this. We would love eights, but only fours exist. We would love not perfect, but we would love at least this. And what is this to those people right now?
Chris Fryburger: You mean like, what's-
Ryan Cramer: What's the space that people are lacking in? There's not a lot of, and they're just yearning for those kinds of people power?
Chris Fryburger: Yeah. So if you look at that bubble of knowledge that people are trying to solve for, right? I think it's closer to empty than in full. Right? What I mean by that is that, no one knows what's going on. Right? And I think that it compounds to the problem. It's another thing I want to talk about in this is again and to emphasize how hard it is, right? In every one of those spaces. Right? For instance, you could be doing all the things, right? You're humming along your sales. You've got the optimizations down and optimization alone involves getting 50 things right. Okay. And having somebody that knows how to do that and measure it, and AB test and come back to you and be a working partner that says, what about these things? And what about this approach? Can you dislodge a little bit more of the budget for this because we are seeing these returns and oh, wow. There's a new ad type this week, by the way, there was nine ad types the last week, right? New ad types, popping up all the time in different platforms. What do we do with that? So it's really hard, right? You have to know this stuff, you have to eat, breathe and drink it and put up with Amazon, not helping you whatsoever. Right? So to answer your question, it's closer to, no one knows what's going on. It's almost like people find pieces and they test things out, and they figure it out, parts of the elephant kind of approach. But it's closer to saying, you have to start every conversation from the start because everybody's coming out of a different perspective, but no one knows all the things that are going on if that makes sense in the Amazon world. It's new.
Ryan Cramer: And going back to what an aggregator's charge is, right? We'll go back to they're talking to investors right? Ultimately these are the people who they're raising money from that certain point, they have to measure certain metrics. Hey, we're going to have a return on this amount. We're going to hire this amount of people. We're going to have this many brands, we're going to have this much in recurring revenue, so on and so forth. Right? So it's a speed test. This is the speed test of which they're doing. Otherwise they pull funding, they lose it or you pay a really big penalty for it. That's how I understand it. In that regards, because it's a speed test. And because there's no long term vision and some short term, if I'm a seller, is the ball in the seller's court in this regards or is it in the... Who is winning or right now in this regards? Who's benefiting the most beside maybe a seller because they're going to get 10 X for the product that may not actually be worth 10 X, but someone said they would be willing to do it. Is it going to be just people who are operating these brands or is it going to be... I'm trying to figure out the next step, right? Because it doesn't seem like a lot of people are thinking long term. They want to do it quicker, faster, more effective. There's all these funds and raises being boom, boom, boom, boom, boom. As quickly as possible.
Chris Fryburger: Yes. Maybe the root of your question is, is it going to come crashing down or is that what you-
Ryan Cramer: Yes. That's what I'm saying. Yeah. It's almost like, yes. As if you are running through fog and you don't see the brick wall in front of you and you can ebb and flow, even though that is possible, if you slow down a little bit and just took steps and methodically through it that doesn't seem like the business is set up for that. Yeah.
Chris Fryburger: What your investors want. Yeah, yeah. Yeah.
Ryan Cramer: So you're fighting both of, I want to make good long term plays. I don't want to buy crap. Again, essentially, I've heard people say I've bought brands that are crap and that's their phrasing and that makes sense. But also, you want people that say they trust the process, they're just going to go with them. And how do you marry the two together?
Chris Fryburger: Yeah. I mean, what's the price for making a mistake here? I mean, and you alluded to it as well as like, first of all, these guys are funded with debt. That's not going to be conducive to lackadaisical sales or learning while we go, right? Or anything less or more than the 300% increase or whatever they promised the investors. But also the ran over that I was going to get paid out based on I sold my brand for three million, but two of that's based on them hitting 300% sales for it. And they say, they've got a better team than the blood, sweat, tears, late nights that I put into it. Right? And it turns out, and anybody that is an aggregator out there, know we want nothing but your success, right? I mean-
Ryan Cramer: Right. This is not to, lack a better word shit on aggregators. I see this from a different perspective. And let's say, you see this when working with these people, I think the community at large is asking lots of these questions. The community again, it's like both sellers and service providers. It's agencies, it's all these people in play and it's exciting. And everyone's like, oh, the shiny new toy in the room, you want the shiny new toy to make a pathway. So that they're success for everyone involved. Right. I don't think that there would ever be a versus, I won't hope they crash and burn therefore we can obviously succeed and grow. That is not the case whatsoever. I'm almost more worried of which there's all these different options available. Amazingly. They all say they can do the same thing at scale that we can build on your business. We're going to take over your brand. You're going to make the right choice with us. And this is what we focus on. And every pitch is in very similar context. It's a quick close, we're going to do due diligence and all those different things. I would be just hesitant to letting my brand grow that again, I'm emotionally attached to which a lot of people are. And I've heard people just see their brand crash and burn and that's a hard thing to feel. And you can't really recover that. That's a PR thing.
Chris Fryburger: When you're going at light speed, right? I mean, there's going to be, and I don't mean to be callous, but maybe there's a better word than there's going to be some casualties. Right. There's going to be some learning. There's going to be some stumbling. Right? And again, we want the success for everyone in this space. We want that thing that's missing for all of us is a astronomical IPO in this space. These lights it on fire, the Netscape or the Facebook, right? That just sets the next five, 10 years into a bubble, an amazon.com bubble where there's going to be a back end of all this. And some people got paid more than they thought they should be paid or are getting paid more than they should. But those innovators created something, right? So blah, blah, blah. And the reason I say that is I have gray hair. I can say that it has the same feel as the late'90s. Right? It has that same. com feel right now. And I'm over in the hill screaming ahead of it before so that everybody can participate in that. Right? So that said, some of the challenges, obviously hiring is a huge thing, but it becomes even more of a challenge that it gets to the baby owning if I may, and it's going to be a couple paragraphs on this is, is that, okay. So they have to grow the brand. They have to grow the baby. They own the baby. Right? And so growing the brand involves much more. And we can argue about they're focusing on paid media and whether that's artificially inflating, they're buying their sales kind of thing to ease some of the transition of these brands into their walls, right? One can argue some of that stuff going on, but you have to grow it organically. You have to grow it earned. You have to grow it creatively. In some cases you have to rebrand. In some cases you have to create a voice with the storyboard. I mean, these are terms that aren't being used in the industry right now by anyone. Okay? This is the old traditional digital world that needs to come in. Some of those members need to come in, lead the way on what actually brand building is. Okay? What that actually means, that doesn't mean just increasing Amazon sales. That means yes, increasing your presence on Amazon in a number of ways. And it could be explosive if you do all the things right. But there's Walmart and there's really almost hundreds, depending on the niche of smaller marketplaces. And certainly the international play is there too for the first time. So again, the stakes of getting it wrong, getting even just one member in that team that just doesn't change tires very well. And you've got to replace that guy four times before you can actually win the next race, win the competition, just keep beating you because the guys just not changing the tires fast enough. Right? Well, if you hire a team that has a certain performance, that's done this before, you avoid some of that. And so agencies, which is where I'll get into what I do right now. But I mean, essentially that's where I think agencies are so valuable. I keep coming back to that.
Ryan Cramer: Absolutely. And that was the thing is, those teams already do exist out there. Is this a mentality because I know we talked offline and before this, is this something that people are understanding, oh my gosh, this makes complete sense. Why wouldn't you marry these two ideas together? Whether it be for business purposes or for just sheer profitability purposes that these partnerships should be made. And again, there's that network that handshake, that matchmaking ability of why not take economies of scale and marry them with needs of scale and put those two together which is a natural transition to the acquihire which you are putting together. Correct?
Chris Fryburger: Yeah. So first part of that question was, am I seeing it out there? Yes. I'm aware. And I always double what I'm not aware of. Maybe I should quadruple it. Is there are six or eight agencies in final discussions with aggregator type entities. There have been examples before that Buy Box Experts which was bought by Spreetail again, not technically an aggregator or of an accelerator or definitely an accelerator. But idea is absolutely that these are the people that know how to do this stuff. Right? And I think people just waking up because again, there's a perception like this is to just as easy as some other technology or as easy as something else to learn like or as easy as like figure out how to do Google AdWords. Right? That's easy. Right? And there's plenty of people to do that. Let's move on from that. Well, the thing that people don't realize is that there's a lot of things that go wrong with Amazon, right? There's a lot of issues. There's problems with shipping and there's reimbursements, there's issues of labeling, de- listing. I mean, again, optimization, which is just a never ending pool to solve for. Right? It just goes on and on and there's headaches, customer support, all that kind of thing. And I think that layer, I'm actually running into agencies, that's all they do. They've actually created agencies that do the stuff that the other agencies that are focus on marketing and optimization. They don't want to do either.
Ryan Cramer: Yeah. I won't say this sounds bad, the garbage people of the service industry do the things that no one else wants to do, the glorified positions, but hey, guess what? Garbage people get paid.
Chris Fryburger: Everybody needs a garbage man.
Ryan Cramer: They have a lot of money. And if it doesn't work, yeah. If you, everyone needs it, no one wants to talk about it or going to it. But people do, handsomely rewarded, can literally clean up figuratively and literally in that regards. So which is why, I guess in the final five minutes that we have on the show, gosh, I can only imagine, again, both for any industry, whether it be service, agency, or aggregator, or accelerator at scale in moving forward six months from now, we're going to be talking and looking at this moment right here and say I can't believe that pivot from person X and then you see the waves start to shift that way, whether it be on Amazon or whether it be on just industry responses. Right? You're seeing it in the SaaS world right now of everyone freaking out, everyone that has access to certain MWS files and access with the Amazon. There's agencies and services that are just getting kaput because of the tactics that we're doing it again, notoriously rebate key. And recently because of ringing services and whatnot, lead seller good company. But again, because of how Amazon sees it in that moment, that's the unknown, right? How will Amazon see these services and companies in the next four months, six months, 12 months from now. And that's hard to forecast for, too. Correct?
Chris Fryburger: Well, I mean, I don't know if the risk is there for them and the sense that, I mean, some of those examples were doing some backend using API. crosstalk
Ryan Cramer: Exactly.
Chris Fryburger: Yeah. But ultimately aggregators, I mean, they're all sellers, right. So I think in the end, Amazon doesn't have any problem with them. My question's actually more, the flip side of that table is why are they not helping them more? And in fact, I think that the human capital problem in the space will be a limiting factor of sales on the marketplace because it helps... We polish those... I say we, but the community polishes those listings and they deal with all their problems. We could go elsewhere. I mean, theoretically we can't, but I mean, the community could, I mean, if there's somebody from Amazon listening, it's like, why is there no dev program per se? I mean, there is technically, but the first thing that Microsoft developed after they launched a software was a development program for the community. Not only the business side of this stuff, but also the programmers and all the audiences of everybody that would tout your platform. There's none of that. There's not even that phone number. You know what I mean?
Ryan Cramer: Well, right. And and that's the question everyone asks in the spaces. If they're trying to educate again, why this not more help on this. And I think recently there was actually more of a natural, good response from the most recent Amazon news conference of, hey, we're releasing tools, it's coming directly from us and it's actually in certain senses be better than what exists out there. And I think that's maybe a step in the right direction, but again, with one pro, it always feels like there's a twist. I'm waiting for it, hit me with it. So again, why is there that not help when it's majority of where the sales are coming from, again, that everyone speculates on every certain aspect and that's what's frustrating, but there's other emerging platforms. I guess my final question is, in the Amazon aggregator space, do you see more people? And this is the shift that I love talking about too. People are not just looking for brands that are on Amazon and try to take them omnichannel, but off at Amazon and then really take their loyalty and following, put them on Amazon and say, watch out, here we go. I know it's a little bit more challenging, but is that another iteration that you're seeing people start to shift and focus more off brand a little bit tougher, find the diamond the rough and put it on and then we'll let people add it?
Chris Fryburger: Yeah. I mean, the short answer is yes. I mean, there's all of those things going on. There's so much going on in the distributor world, too. I mean, I don't mean to pivot, not answer your question, but one thing that's interesting is like the distributors that existed that distributed product around the world are realizing they're a really good place to put products straight up on Amazon. Right? Just cutting out all the-
Ryan Cramer: Data on their own brand.
Chris Fryburger: Yeah. Because it's either that or somebody else, their guy going to do it, the people they sell product to is going to put it up. Right? And so now they have 10,000 listings to manage on Amazon and that kind of stuff. So there was opportunity everywhere. If you're a brand owner, you are in an awesome place. If you're an agency owner, my gosh, call me, okay. If you're an aggregator, as long as you get this right. What a brilliant model? I mean, awesome. And so if I may, we'll leave it there, but-
Ryan Cramer: Yeah. Absolutely. Yeah. And I was going to say for Chris, obviously I know you've been on the show and how did people get in touch with you the best way to do was it LinkedIn or on your website?
Chris Fryburger: Yeah. It's nReach without an I, nReach, I'm chris@nreach, reach out on LinkedIn and we have contact info below as well.
Ryan Cramer: Awesome. Well, thanks so much. I know, like we already took a little bit, a couple more minutes of your time.
Chris Fryburger: It's all good. crosstalk.
Ryan Cramer: No, I was going to say, well, I'm hearing ding in my ear and that's that's just my computer saying, hey idiot, you have another meeting or you need to get off your podcast and let other people do their jobs. Hey, thank you so much. I think the programs are amazing. You're helping lots of people, we'll have you on again, for sure. But thank you again for hopping on Crossover Commerce.
Chris Fryburger: Absolutely. Thanks, Ryan. I appreciate it as always.
Ryan Cramer: Thanks Chris. And again, everyone else who is tuning in and listening to us on Crossover Commerce, thanks again for hopping on episode 174. Again, we talked about Amazon aggregator challenges, put our crystal ball in front of us, our fortune telling hats on, and really just surveying the landscape. Again, we hope this succeeds. We want lots of this success to happen. There are challenges, and we wouldn't want to bring those to light and really talk through what that means now, six months from now through Q4, everything like that, but stay tuned, put a pin on this. We'll have to circle back here in Q1, Q2 and see what the next iteration of this truly does look like. I'm Ryan Cramer. This is Crossover Commerce. We'll catch you guys tomorrow on another episode, take care.
Ryan Cramer of Crossover Commerce talks with Chris Fryburger of nReach one-on-one about the challenges Amazon Aggregators are facing today and moving forward.
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