#114: Elevate Your Brand From RA to Rollup

Episode: 114

Title: Norman Farrar Introduces Ryan Gnesin, CEO of Elevate Brands, A Seasoned Entrepreneur And An Experienced Amazon Operator.

Subtitle: “Once You Are Willing To Take A Little More Risk, It Scales So Much More Efficiently.” 

Final Show Link: https://lunchwithnorm.com/episode-114-elevate-your-brand-from-ra-to-rollup-w-ryan-gnesin/

In this episode of Lunch With Norm…, Norman Farrar introduces Ryan Gnesin, CEO of Elevate Brands, A Seasoned Entrepreneur And An Experienced Amazon Operator.

Ryan has two decades of experience in commodities trading, management, business development and startups. In this episode, he talks about Retail Arbitrage, Wholesale Reselling and Private Label.

If you are a new listener to Lunch With Norm… we would love to hear from you. Please visit our Facebook Page and join in on episode discussion or simply let us know what you think of the episode!

In this episode, we discuss:

• 3:31 : Ryan’s Background
• 9:11 : Retail Arbitrage
• 14:38 : Apps That Can Help You Out With RA
• 16:04 : Profitability In RA
• 20:16 : The Difference Between Wholesale And RA
• 25:41 : Using PPC With RA
• 27:03 : PPC And Pricing
• 33:54 :  The Importance Of Having An Invoices For RA Products
• 37:19 : Getting Invoices For RA
• 45:22 : Is The Amazon Market Too Saturated For New eCom Sellers?
• 51:32 : Amazon Is An Opportunity
• 55:56 : Range For Multiples

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Explore these Resources

In this episode, we mentioned the following resources:

• https://www.linkedin.com/in/ryan-gnesin-52554b11b/
• Brit Treats
• Scoutify
• https://www.sellersnap.io/
• https://www.elevatebrands.io/

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Norman 0:04  

Hey everyone, I’m Norman Farrar, a.k.a The Beard Guy here and welcome to another Lunch with Norm, The Rise of the Micro Brands.

Norman 0:22  

Okay, today, it’s guinea pig time. We’ve changed our studio around, we got new cameras, we got new mics, we got stuff that zooms in. I don’t know, we’re five minutes late because the camera’s crashing so sorry about that. If something happens today, it’s all on me. I’m at the controls here while Kelsey is at the controls. But if I touch something wrong, it’ll all crash. I’m kind of scared. Anyways, today we have Ryan Gnesin and he’s the CEO of Elevate Brands. He’s a seasoned entrepreneur and very experienced Amazon operator. So we’re gonna be talking to Ryan about retail arbitrage, wholesale, private labels. What’s the good bad, the ugly about all three of them. But before we do that, where is Kelsey?

Kelsey 1:14  

Hello. 

Norman 1:15

Hello, Kelsey. Look at that mic. I thought it looked familiar.

Kelsey 1:16  

Happy Friday. I know.

Norman  1:20  

Wow.

Kelsey 1:21  

I hope it smells or sounds nice and smooth now. I don’t want to smell it. I don’t want to know what that beard has been up to. But welcome, everyone. So if you’re watching right now, like smash those like buttons, give us a share. We really appreciate it and welcome Oleg, Marcia, Manny, welcome to the show. Let us know where you’re watching from. We always love to know, we’re in the world are our audiences from and hello, Radd. Welcome, welcome. We have a couple of things that we should talk about first. 

Norman 1:59

What do you mean we should talk about? 

Kelsey 2:01

So Monday, Monday is a big day. We’ve got a really special guest coming on, we have to move around some things. So there’s no 12 o’clock show on Monday. It is getting moved to 2 o’clock pm eastern time and we have Rand Fishkin from Moz. So we’re gonna be talking about SEO and all that fun stuff and that also means that there will be no Clubhouse to that week, for Monday. So it’ll resume for the next week afterwards. But other than that, we’ll be good. We also have a couple giveaways today, which I’m excited about and we’ll get more into that later on in the show. But welcome everyone and yeah, if you have any questions, throw them over into the comment sections, and we can get started. 

Norman  2:50  

All right, you took my line. Okay then, I’m gonna say it again. Alright, if you have any questions, just throw it over in the comment section and we’ll get to your question. If we don’t get to it, we’ll be answering it in the group. All right. So sit back, relax, enjoy the show. Welcome, Ryan. Where are you?

Ryan 3:08  

Hi, thanks very much for having me.

Norman  3:09  

Well, you’re the guinea pig.

Ryan 3:11  

That’s okay.

Norman  3:12  

Yeah. Well, you experienced there right beforehand, like panic mode, tribal funding.

Ryan 3:17  

It was fun. You look cool as a cucumber.

Norman  3:20  

I don’t know about cool, but man. All right. So Hey, Ryan, why don’t you tell everybody a little bit about yourself, what you’re up to and then we can get started.

Ryan 3:31  

Yeah, sure. So my background, I’m based in Austin, Texas at the moment. I just moved here last weekend, Friday night. So we’ve just come in here, I was in New York City and we’re setting up shop over here, we’re going to have an office in New York and Austin. So that’s where I’m calling you from and my background is I grew up in South Africa and I’ve also lived in Australia for 10 years and I lived in Switzerland for a year and in Indonesia for eight years. So I’ve kind of lived in a few different places, and then New York for four years. So, my accent is a little messed up. But so bear with me, everyone and I started my Amazon business, having been in the commodities trading world for 10 years and decided to leave there in 2016 and I moved to the US and was looking for a business to buy or a business to start and I kind of stumbled upon the Amazon world, as I was looking for things I I went to a bunch of conferences across a bunch of different industries and one of the conferences I went to was Amazon and I found it really interesting that you had all these very fragmented sellers, many of whom were doing like really, really well, running multimillion dollar businesses, and some of them doing it in their spare time as a side hustle and I just thought it was super interesting and so we started our Amazon business at the end of 2016. We’ve been running it for several years. We originally started out as a reseller. So actually we were doing clothes out inventory, we were buying clothes out branded footwear and apparel, Adidas, Reebok, New Balance, Asics, we’re buying clothes out branded footwear and apparel and then selling it on Amazon and that’s how we kind of learned the Amazon game. We also did a bunch of retail arbitrage in the early days, so we were buying from within stores. We’d go to Nike stores or Marshalls and buy it and sell it on Amazon and then over time, we started buying from distributors, and we kind of started buying bigger bulk orders and then in 2019, we took the plunge into private label, and we acquired our first Amazon business at the end of 2019 and then in 2020, we bought a whole bunch more of them and now that’s our core focus, is acquiring Amazon businesses and then growing them and scaling them and it’s pretty exciting time for us. We’ve just raised our series A, we raised $55 million in our series A and we’re working now on our Series B which is pretty exciting. It’ll be a much bigger round and that’s what we’re up to. We got about 60 people on the team today and we’re moving pretty quickly. I mean, we acquired three brands, we bought three businesses just last week. So things are moving pretty quickly for us at the moment and it’s an exciting time and I’m happy to be on the show and to chat about anything your viewers want to chat about.

Norman  6:30  

All right, fantastic. So one thing though, because this is a new mic. Just if people in the audience could give us feedback. Does it sound okay? Does it sound loud? Does it sound staticky? Does everything sound okay? If that’s the case, we’re just going to move forward. One of the other things, Ryan, or Kelsey, let’s talk about the giveaway today and I love what Simon is saying. I think whatever it should be, it should be #how’s it Ryan.

Ryan 7:01  

Perfect. Love it.

Kelsey 7:04  

Okay great. So well, we have two giveaways. I believe your mic is a little quiet too. So if you just want to thank the knob a little bit Norm, but we have two giveaways. Our first giveaway, we’ll do #how’s it Ryan and Ryan, do you want to explain your consultation?

Ryan 7:23  

Yeah, look, I’m happy to spend 45 minutes chatting with someone for, we’ll give that away and we can dig into whatever it is you want to talk about business, your specific business. We can share screens and we can dig into your particular Amazon business. Or we could talk about general kinds of entrepreneurship, whatever you want to talk about. Happy to spend some time with one of your viewers..

Kelsey 7:49  

Okay, great So, #how’s it Ryan, just like this in the comment sections, and you’ll be entered for that. But also, we have some chocolate giveaways today, too. So we have our sponsor, Brit Treats, is going to be giving us two Quality Street chocolates. It’s a tube, I think 650 grams. Personally, I’ve had these before, and they’re amazing. So that will be #Brit Treats. If you want to enter that, that’s only for US and Canadians only. Sorry, everyone. So if you’re interested in the consultation, how’s it Ryan, we already have three people coming in already. That’s great and if you want some chocolates, #Brit Treats, and I’ll put all that information in the comment section.

Norman  8:36  

Fantastic. So I think the area that I wanted, you gave like, okay, where do you want to go and I think that people still would really like to talk about RA, Wholesale, Regular private label and if you have any thoughts on merch. But let’s start with RA. What are the benefits? First of all, is there a market for RA and when I say RA, I’m talking about retail arbitrage.

Ryan 9:11  

Yeah, look, my view is yes and we don’t do RA anymore. We haven’t done it for probably two years now. Particularly, if you’re new to Amazon, and you want to learn how the game works, to me RA is the greatest way to get started because it’s such a low risk, easy way of getting into it right? You can literally go to a Nike store, we used to use what’s called Scoutify and you would just scan the barcode and you would check it, you would look at the price of the product in the Nike store, you would look at and Scoutify will tell you what price that product is selling on Amazon and you could also then see what the sales rank was and so like you could literally just walk in there and say, I’m going to buy a pair of shoes that’s got a sales rank of under 50,000 and I’m going to buy a men’s size 10, or size 11, because those are the most popular sizes or a woman size 8 and I’m going to buy that and there’s a margin, I’m going to sell it, put it up and send it to Amazon and sell it and I always find that the best way to learn something is just by doing it right and I sometimes come across sellers, where they’ve been studying the Amazon space for a long time, and not sure how to get started and I’ve been studying it for six months and to me, you learn a lot more by just getting started and doing it and you’ll learn what works and what doesn’t work and so that’s how we started. We literally bought a few pairs of shoes and put it up on Amazon and it sold. So, I think it’s a great model for testing Amazon in a pretty low lift away with low risk. Because that pair of shoes, I mean, the value of that pair of shoes is not going to drop dramatically, right? I mean, private label, you could go spend 10 or $20,000 you’ve got MOQ’s, and you’ve got all sorts of other ways that you got to get started and if you don’t do well, your value of your inventory could go to practically zero but when you’re buying Adidas or Nike shoes, worst case scenario, maybe you lose 10 or 20 bucks on a pair of shoes, if you make a mistake. So I think it’s a great way to get started and you can do it at scale. I mean, I’m saying it, we used to go to the Nike friends and family sale days and at one point we had like 25 or 30 people we’re running around with a bunch of minivans buying stuff from Nike stores and because the discounts are so heavy, you can make some really strong I mean, we were making like 70-80% ROI through those friends and family sales. Now over time, I think the ROI may have dropped slightly because the business model became more well known and more competitive. But I think RA’s, we had a lot of fun doing it. I think it’s a great way to get started.

Norman  12:02  

I have a good friend of mine. I’m not gonna mention his name. I’m sure he doesn’t want this story out. All the rules have changed now. But he started his Amazon career by going to a Lowe’s or Home Depot and there was a special going on and he bought a special and then he put an order in for the product that he bought across the country depleting the retail store of all their inventory, putting it on Amazon, and he made millions.

Ryan 12:40  

Oh yeah, I believe it. I mean, I’ll give you another example, when COVID happened. So we weren’t sure how that was going to play out. Right? When it’s like, literally when everything got shut down. We weren’t quite sure and like, the very next day, myself and my co founder, James said and said, Okay, well, our shoe business is already down, right? The resale of the shoes, like we could already see that was down. We don’t know when that’s going to recover. But what we do know is that groceries have already spiked, we can already see the grocery category spiked, right and what were the best selling items in the grocery category was like yeast, flour, sugar, everyone was baking bread. Okay, so what did James and I do? We went to a restaurant depot. Okay, so we literally went and hired a truck, like a big truck and we went to a restaurant depot and in our restaurant depot, if you’re not familiar, a restaurant depot is like a supermarket for restaurant owners. So if you want to stock your restaurant, right, you don’t go to a regular supermarket and buy four potatoes, you go by a massive bag and you go by massive , 50 pounds of meat or what I mean, you got to buy a big audit and so that’s what we did. So we rented a truck and we went and we went around New York and New Jersey and bought every batch of flour and sugar and yeast that we could find and we put it up on Amazon for sale and it went crazy. It was crazy. We couldn’t keep up, we just couldn’t keep up with the demand. So yeah, it works.

Norman  14:20  

I’m kind of curious, but do you know the apps? So if our listeners are wanting to explore RA and I think there’s still tons of opportunities out there like you were just talking about. Are there any apps that could help them out?

Ryan 14:38  

As I said, the only one that I know is I mean, there’s the Amazon app, right? You can actually just go to the Amazon app and they have a scanning function where you can just scan it and see what the price is. The other one, which I said is part of inventory labs, is Scoutify two. I think it’s Scoutify two now, maybe they have an updated version. But the nice thing about that one is you can also see what the not just the current sales rank, but the historical sales rank as well. Right and so that’s helpful because sometimes sales ranks can increase or decrease and it’s also valuable if you look at historically, just to see what kind of volatility there is on the sales rank. So, that was useful as well and the other useful factor is, you can actually talk in the price, and it will automatically spit out your expected return on investment. So I mean, those are the only two I know that you actually use for scanning. In terms of how you learn to do it, to be honest, I don’t know. I’m sure there’s a bunch of stuff on YouTube, but I’m kind of not running that game anymore. 

Norman  15:47  

Right. But I am curious about profitability. So when we’re talking about private labels, we have a sort of a set profit margin going into Amazon. What about RA? What can you expect to get out of it?

Ryan 16:04  

Yeah, so it depends also on the velocity of the product, right? So sometimes we would go in there, and we would say, we’re happy to buy this pair of Nike Pegasus, right? Because we know that, like, there’s practically zero risk of that shoe telling, like the latest model of Nike there’s like zero risk of their products that it will absolutely 100% sell on Amazon, so we’re willing to take a much smaller margin. So maybe we would take, we were happy even making a 10 or 15% ROI, right? When you’re buying a shoe with a sales rank of like 2000, you don’t mind making a 15% ROI, because it’s gonna sell within a matter of days, sometimes weeks. There were other times where we would buy a pair of shoes from a Nike store, and maybe the sales rank was 80,000 and so maybe it’s gonna take you several months to sell that shoe potentially and so for a shoe like that, we would say we need a higher bar. So maybe we would need a minimum of a 40 or 50% ROI for a shoe like that. So if we kind of took a portfolio approach, in a sense to how we would buy our inventory and it also depends on how much capital you have, right? So I mean, if you’re very limited with how much money you have to spend, let’s say you’ve got $1,000, right? Well you can be a little more picky, and you can really find those opportunities, if you’ve got much more money to deploy and let’s say you’ve got $100,000 that you want to go spend, well, it’s hard to get that capital to work. So you’re going to have to maybe be a little less selective and in that case, your average ROI is actually going to fall. Right. But I mean, if you’re getting a 30% ROI, or even 25-30% ROI after your Amazon fees, after freight and shipping expenses and everything, that’s pretty much the level that we were seeing is around 30%.

Norman  18:09  

Not bad. Not bad at all. Have you heard of Saba sim? Canadian.

Ryan 18:16  

No, I haven’t.

Norman  18:18  

He killed it. He absolutely kills it in RA. He’s got this down to a fine science. But anyways, if you don’t, and this is really important. So a lot of people will jump in and they’ll ask, how much inventory do I need? Or how much is it going to cost? How much money do I need and a lot of people that fail on Amazon are just not properly capitalized, they go into private labels, they try to spend $5,000, and they think that they can use that and leverage it. They don’t think that if you got a home run, or even if you get to second base you don’t have enough money to properly fund your inventory, or advertise or do any marketing whatsoever. So you’re doomed. But with RA, what I really like as an option is that you can go in with 1000 bucks, play around with it and it’s not the same game as private label where you’ve got to put in your building a brand and there’s all sorts of different approaches, right? I was listening to a Clubhouse meeting the other day, and people were saying, Oh, you only need 200, Oh you need to buy 1000 or you need to buy 2000 and it’s how long is a piece of string. With RA, if it’s a starting point, I look at my buddy that I was talking about that made a million bucks by just going and buying up stock or sod, who I know is just killing it. Hey, there is a market there. It might not be as sexy as a private label, but there is a market there. Well, let’s talk about another and this one’s got my interest by the way. I love this. Todd Snively was on the podcast a little while ago. He’s got a course on this, but it’s wholesale and making deals with different distributors, going after them. It’s different. A lot of people confuse the two, RA and wholesale. But it is a different model. What’s been your experience with that?

Ryan 20:16  

Yeah, we used to think of RA as like getting our training wheels, right, because it’s a very low risk way of starting. Wholesale, you can buy much bigger volumes. You can buy bigger volumes. Now, there are often MOQs in place as well. So I mean, in theory, you could buy lower volumes of wholesale to I mean in theory, you could but we found that wholesale was that was the approach we took when we really wanted to put a little bit of extra rocket fuel behind us. So we could buy much bigger volumes I mean, because at one point, as I said, we had about 20 people working with us doing RA, just driving all over New Jersey to Marshalls and Nike factory outlets and we had a decent little operation going. But then once I really started getting into the wholesale approach, I found that I could buy more inventory because our bottleneck was always finding good inventory, right? We had the capital, so it was finding great inventory and with wholesale, once we made a couple of good contacts, I found that I could buy 5-10x the amount of inventory before lunch, that it would take a whole team of 20 people a week to buy, right, and the inventory would come and I would just be sitting at my desk with a spreadsheet, it was much more comfortable than having to like bags around and worry about insurance on cars and it was like a much simpler process and the inventory would come to a warehouse and it would be perfectly packaged, and it would ship them to FBA. It was just a much simpler, more efficient, easier process once we did it. But it took us a bit of time to develop those relationships and our first few wholesale orders were relatively big orders. I mean, when I say relatively big, I mean, they were like $50,000 plus orders and the reason we did that was because if you go to a real serious wholesale, and you say I want to place a $2,000 order not going to take you very seriously and now some guys might and some may understand but like we said no, so we develop really good relationships, and then we’re able to grow really quickly with our wholesalers and so that helped us a lot. Because when they had a great deal, they would then prioritize us because we were giving them a lot of good business.

Norman  22:34  

Very good. One of the other things that you can try too, I did, this is my first real kick at the can with wholesale on Amazon. They like I said, I’m just Todd got me like my eyes this big going, I gotta try this out. But I reached out and I reached like a couple of places that I knew already and I asked for consignment, I got it. Well, they gave me consignment. So I got a product in my warehouse that I can use and I’ve got consignment so it cost me nothing.

Ryan 23:11  

You would sell it probably with fbm. So like, you wouldn’t have to send it to FBA, you would put it up as a sale, if it sells, great, you ship it. If it doesn’t sell, it doesn’t matter, you just send it back, low risk way on.

Norman  23:23  

We’ve got a 90 day agreement and so if I move it, great. If I can start selling and start to move in 30 days, it’ll ship me more.

Ryan 23:32  

Love it. There’s so many ways if you really hustle and you and you really do your research and  if you keep knocking on doors, something’s going to open, right and if you just keep trying we always say there’s never a lack of resources in the world, right? There’s only ever a lack of resourcefulness and if you’re resourceful enough and you willing to hustle and roll up your sleeves, you can always find a way.

Norman  23:59  

Right? Yeah, there’s always different, there’s ways to make money and so I don’t know, do you have anything or does anybody else have any questions about the RA or the wholesale side of business? Kels?

Kelsey 24:17  

We have a question from Radd. Let’s see. Is it advisable to have an Amazon store? Our products are trademarked, but our selling store is not. Is your advice on how to create an Amazon store?

Norman  24:31  

Sorry, I can’t read the question.

Kelsey 24:36  

Yeah, is it advisable to have an Amazon store? Our products are trademarked but our selling store is not. Is your advice on how to create an Amazon store? This came in earlier. 

Norman  24:52  

So, I guess more along the lines of for me anyways, it would be along the lines of a private label. But Ryan, can you create, I don’t know this answer. Can you create a store in retail arbitrage just under your company. I guess you can, can’t you?

Ryan 25:11  

I mean, a store? I don’t think so. Because I mean, you need to be selling your own products. I don’t think so. But I mean you’re just competing for the, it’s a different game, because you’re just competing for the buy box and depends on how many products you have anyway. I mean, we had 8000 SKUs. I mean, like you couldn’t put all of that into one Amazon store. You wouldn’t want to put that into an Amazon store anyway. So no, I don’t think I don’t believe you can do that. Yeah, just compete with the buy box.

Norman  25:41  

I do have a nugget though, that Todd Snively gave me and I was asking him about RA and how do you compete with 20 people on the listing and price. So I was always worried about price and he came back and he said, you don’t have to worry about price. You’ve got a 10% give, usually, and you’ll get a promotion, Amazon now is just, it’s shuffling it up. So even though you have the best price, it doesn’t mean that you’re going to lose the buy box, or you won’t get the buy box. Yeah and he told me, which was really cool. I mean, this is the nugget, is that like we were talking about PPC and I said, isn’t it a waste of money to put PPC, like driving traffic over to a listing that somebody else might get? He says, absolutely not. You create a PPC campaign, that will only show you and there’s a cookie dropped. So the cookie lasts for 24 hours. So if the person comes back and buys the product, they’re not seeing any of your competitors, they’re seeing your listing. Yeah, so I thought wow, you can. I didn’t know you could really use PPC with retail arbitrage. I thought that was a great tip.

Ryan 27:03  

Yeah, it is. Yeah, it’s interesting. I’ll tell you our experience with pricing in general and PPC. So first of all, as it relates to PPC we never had a lot of success doing PPC with retail arbitrage right? We tried it a bunch of times and you’re exactly right. It doesn’t help everyone else, it only they only advertise your product so they only advertise your product when you have the buy box. So if you don’t have the buy box, they’re not promoting it’s only when you have the buy box that they promote you so because people used to say, What if I do PPC but someone else has the buy box they’re gonna go buy from the other guy? Well, no, no, it’s only when you have the buy box that they promote you. So yeah, but we still never found it to be very productive because the margins with RA, just like at the margins with private labels are much higher and so you can afford oftentimes to spend 10 or 15, or maybe 20% ACoS in order to drive sales. But with retail arbitrage, it wasn’t quite there. So our focus was rather buying the right product and we did almost zero PPC now and we had a $15 million reselling business and we did almost zero PPC, practically zero PPC for our reselling business. So the focus for us was making sure you buy really good inventory and then using really good repricing to sell. So I mean, one of the big factors for us was we started using Seller Snap and they have an AI repricing tool, which for us was a game changer because prior to that, we were using like a very basic sort of rudimentary repricing tool where you can either match your competitor or beat your competitor or go higher than your competitor, right? So we used to have this idea where like in game theory economics, there’s like a prisoner’s dilemma thing that you learn in game theory economics and the rational strategy is always to be the one undercutting everybody. That’s like the dominant strategy in Game Theory. So we tried that and all that happened was we just would sell out inventory really, really quickly. But we would drive the price down for everybody and so very quickly, we learned that that’s not a strong strategy. You’re much better off using an AI repricer and the AI repricer is very smart. So it will do something for example, it might it may do something like this, it may say, you set a limit, you say a minimum and a maximum price that you will need to sell it and so let’s just say for example, your lowest price is $80 and the price currently is $100. Let’s just say of the competitor, so the AI repricer might go okay, if the competitor is at 100, I’ll go at 99 and then it will watch to see what the competitor does. Let’s say the competitor now goes to 98. So now you go to 97 and now the competitor goes to 96, Well, the AII repricer just learned that he’s following me down. So the AI repricer will maybe just stop there. Right and maybe it will say, you know what, why don’t we try and push it back up to 100 and let’s see what happens. If you push back to 100, the competitor goes back and follows you. So the repricing tool is now learning what the competitors are doing and how they’re working and it’s trying to optimize your ROI for you. Versus a much more rudimentary tool which just says beat the competitor 50 cents or beat the competitor by $1, you go 98, 99, 98, 97, 96, and it drops it all the way down to 80 within a matter of like two days, you’re down at 80 bucks, and you’re just setting everything at your lowest possible price and so, like we learned the hard way that you get great sales, but you’re missing out on margin and we learned this lesson so many times where every time you panic about Oh, there’s a competitor, he’s lower than me, Oh my God, I’m never gonna be able to sell the product. If you just wait and you’re real patient, sometimes you have to wait a week. Sometimes you have to wait three months. But eventually the competitors sell out and we always sold our inventory always at the margins we wanted. 

Norman  31:05  

I guess you have to look and see like I look at this more with a private label. But with what you’re talking about in that scenario, do you want to be a bottom dweller? All I see is you can move volume. But all you’re doing is product cannibalization. If you’re driving the price down, driving the price down. Yeah, you’ll make pennies instead of dollars and do they really want to do it? Let them sell out like you said, I love the philosophy or the strategy of Okay, wait till they sell out and yeah, we grabbed the market.

Ryan 31:37  

Exactly and we used to have this like tiered repricing structure where we would let everything ride at like a really strong minimum ROI for like three months and then we would start like slowly reducing the minimum and if the product still hadn’t sold off for like 10 months, then we would start getting aggressive and start pushing prices down so that we could liquidate because we never wanted to hold anything for more than 12 months, because then you start paying storage fees and particularly if you’re coming up to q4, that can kill your business. Right? So we would just be really flexible and then slowly start to get more aggressively if the product still wasn’t moving. So that’s how we did it. 

Norman  32:19  

Okay and you know what, completely off topic or we have to circle back. But Radd, we went down a couple different paths about the store, I would definitely do a store. I think that’s a really great selling tool for you. So if you’re doing private label, like I said, I don’t have experience with retail arbitrage. But with your private label brand, a store is definitely a selling feature. I drive traffic to my store. I can make it look much better than the actual listing. So it’s not just oops, I don’t know if everybody just got a whacker. Did everybody hear that? Okay, hopefully that wasn’t a blast, and everybody’s here. Anyways, when you go and you create your storefront, the ability to first of all, just have drive traffic back to your storefront is one thing, but being able to show beautiful pictures of your product and about the company and what you’re all about and video and all sorts of rich media, and then have the ability to click on three layers deep about your product or products, I love it and you can definitely drive traffic that way through social media, landing pages, whatever you’d like to do. It’s definitely doable. So okay, Kelsey, was there. I think I saw another question.

Kelsey 33:46  

Yeah, we have a couple of questions. First one is from Oleg. Hey Ryan, have you ever been asked for the invoices for your RA products?

Ryan 33:54  

Yes, a lot. That’s one of the reasons that we’ve slowed down on the RA. Because, I mean, we had our Amazon account shut down three times. Right? Accusing us of sort of having inauthentic products and so you have to submit the plan of action, you’ve got to submit the invoices and we always eventually got our accounts back up. But I mean, like if you’re going to do wholesale or RA, you’ve got to have watertight invoices and you gotta make sure they’re authentic and watertight.

Norman  34:32  

I’ve got a client of mine who was selling it through a distributor. So the distributor was selling them products and all of a sudden one morning, cops came through his facility. He was shut down, they confiscated all this product. It was a competitor that was saying it was counterfeit and excuse me, the challenge was not that he didn’t have an authentic product, but the wholesaler selling it to him could have been counterfeit because they didn’t have approval from the manufacturer to sell the product.

Ryan 35:16  

I see.

Norman  35:17  

Just something that you might want to ask is that does the distributor or the reseller have the ability or have the okay in their reseller agreement to sell it to you, so you can sell it on Amazon? A lot of reseller agreements right now say that you’re not allowed to sell on Amazon or sell against somebody that might have the exclusive rights and you could get confiscated in this case, it was a $600,000 lawsuit.

Ryan 35:48  

Yeah, it’s interesting. This is an interesting debate that wholesalers talk about a lot where the US has the first doctrine, which allows you to resell something as long as it’s authentic. So even if even if the company doesn’t want you to be selling it, but you have an authentic product, you legally by the laws of the US are allowed to, don’t take this as legal advice anyone. Go get a lawyer but legally, you are allowed to resell it. Of course, the brand can send you a cease and desist, and they can send you all sorts of stuff and they could drag you into a legal battle. Just because you’re allowed to sell it, it doesn’t mean they’re not going to drag you into a legal battle. They could. But typically, brands don’t do that. If you start getting into real heavy trouble, you just stop selling it. But I mean, as far as I know, you can’t get into a real legal trouble with the law here unless you’re selling a fake counterfeit product.

Norman  36:45  

Okay, very good. But that doesn’t stop you from having to send in your plan of action, send in your invoices, you are still guilty, till proven.

Ryan 36:56  

Amazon has its own policies. I mean, just because it’s legal. Amazon has its own policies, Amazon can kick you off for any reason they deem relevant, regardless of whether you’re breaking the law or not. Amazon will just say, we don’t want you to sell it. So stop selling it. 

Kelsey 37:12  

Okay, great. There’s a follow up with Oleg about that. How do you actually get the invoices for the RA?

Ryan 37:19  

Well, you got to ask the supplier. Now some distributors and wholesalers, they’re approved by Amazon. Right? So like Amazon recognizes their invoices, know they’ve been doing business with them for a long time and so Amazon will accept their invoices. Sometimes, if it’s a new wholesaler that Amazon maybe doesn’t recognize their invoices, you may have to get the full chain back to the distributor or the supplier. Right? Because if let’s just say, hypothetically, Company X buys from Adidas, well, when you ask Company X for an invoice, they send you the invoice and then you send that to Amazon. Well, Amazon goes, who’s Company X and so like, if Company X happens to have a website, and it’s a legit website, and it looks legit, and everything stacks up, then you might be okay. But if Company X doesn’t have a website, or that or it looks a little dodgy, when Amazon wants to check for verification, they may call Company X to ask, Hey, are you legitimate and have you been selling to eCom or whatever the company is and then Amazon is going to vet that and make a determination whether they think that’s a legitimate source of the supply or not and you may get unlucky, right? So if you want to be safe, you’ve got to make sure that the supplier will give you proof of invoices all the way back to the distributor, and they may be two or three invoices that show the chain back to the original supplier. So, you do need to be careful and you want to check to make sure your supplier is legitimate.

Norman  39:09  

Great advice. Next question.

Kelsey 39:12  

Okay, great. We had a question from Clive. Ryan, do you use social media to drive outside traffic?

Ryan 39:19  

Yeah, we do. It’s something that we’re ramping up. So we do it and it’s something we’re starting to do a lot more of. As I understand sort of the A10 algorithm is, is attuned to driving traffic from off Amazon to Amazon. So you’re getting pretty good ROI when you do that. So the answer is yes. I think it’s a good strategy.

Kelsey 39:48  

Okay, and we have one from Steven. Hey, I have a question not related to RA. I have a product checked in 127, the 73 still on FC transfer. Should I start activating my listing? Or wait till all of them are available?

Ryan 40:10  

So like I don’t get involved in some of these logistic things anymore. I’m probably not the best person to ask, James and my team would be a much better person to ask. Should I start activating my listing? I think the answer would be if the 73 units are available for sale, then there’s no problem activating your listing. Having said that, it depends on your strategy. So like, I mean, there’s nuance to this stuff. If it’s a new product, right, and you’re going to start doing some PPC, the last thing you want is to do some PPC, get some traction, and then suddenly, you’re out of stock, because some of the product hasn’t checked in yet and now like all the work you did, and all the money you spent to drive the rank up and get your product off the page, you’re not going to lose that because you don’t have any stock. So if you’re worried about that, then better to wait. If you’re not worried about that, then go ahead and make it available.

Norman  41:17  

Yeah, I like to add to that. So Steven, I don’t know if you can type in a quick answer. But is there going to be available inventory outside of the 200? So do you have another 1000 units somewhere, or what’s your lead time to get more inventory into the system? So and the reason I’m saying that is that if you’ve got that 200 restriction, and you’re trying to boost it up, I’ll usually try to get some quick sales, and then you’ll start to see, like, let’s say it’s a rebate, or let’s say it’s some form of giveaway or something, you start to see some sales momentum and you’re going to see that the restriction is going to be lifted, you’re going to go from 200 up to 300, 500, over a period of about a week and a half, we did something recently where we monitored it very, very tightly. So every day, and if we saw about 50 to 75 units move, we would ship in immediately more units and then we’d watch it if there were 50 to 75 more units moved, we would ship in more. So over a period of a week and a half, we saw it go from 200, 350 I think got up to 500, 50 and then I think we got to 1200. So that’s just the strategy that we use for monitoring the 200 inventory restrictions. I always like if I have the inventory available to start pushing inventory and getting sales right away. Get your product launch going, get your automated PPC going, set up your campaigns, get the post going, drive traffic, just Blitz traffic wherever you can to try to get sales. Now, oh you have 800 units in 3PL Okay, very good. Oh, well, very good and sourced by Honu Worldwide. Thank you for your business. All right, Steven. Alright, so we got 800 units back on the 3PL site, it gives you time. Now, depending on the search volume that you have, you want to just make sure that you have time, the lead time to place the order and get them over to maintain your rank. So some categories, 800 units can be snapped up very quickly. But if it’s a brand new product, they could take a lot longer. But that so you have 200,000 units, that’s probably what I would do just to get it moving. The other products are just probably either in reserve or being transferred to another fulfillment facility. There’ll be up and running at any time, and they’re not going to penalize you if they’re in transit. Okay, so that’s something to keep in mind. I hope I answered the question I thought I’d just add to what you were saying Ryan. Okay. Let’s see any others?

Kelsey 44:29  

No, that’s it for now.

Norman  44:31  

Okay. Now, one of the things I want to talk about too, because we’re definitely not gonna have time to talk about this today. But Ryan, you’re an expert in scaling business and we haven’t touched on that, that could be a whole podcast in itself. So I do want you to come back and talk about scaling and exiting your eCom business. But just to continue on the same path that we’re on right now with wholesale. Okay, so we’ve got the wholesale model we touched on. Now you’re moving into a private label, in your opinion right now, the pros and the cons of private labels and maybe I’ll add another question for you to tuck away and is the Amazon market too saturated for new eCommerce sellers?

Ryan 45:22  

Yeah, so I mean, I definitely do not think it’s too saturated. There is ample demand for new sellers to come on and one of the things we’ve noticed is, in all the businesses we’ve acquired in the last probably three months, almost every one of the sellers has told us because when we ask, okay, well, what are you going to do next, now that you’ve just got a big paycheck? Well, almost every seller has told us, we’re going back to do it again, right? We’re going to go build another product, and we’re going to go build another Amazon. We bought a business the other day from a seller who sold their fifth Amazon business, and now they’re going to go do their six one and so the benefits of private label, in my view, far outweigh the RA and the wholesale approach. Again, RA and wholesale are an easier way to with a little less risk and a little less capital, to get into the Amazon space and learn how it works, right? But once you are willing to take a little more risk, in my view, the private label model, it scales so much more efficiently. Right and when you own the product, you have a more sustainable business that you can sell one because you can’t sell and it’s very difficult to sell an RA business or, even a wholesale business is much more difficult and the multiple, you’re going to get to that business is much lower. Versus, we’ve got sellers too and we’ve paid multiple millions of dollars for businesses that are 18 months old, for example, right? Or two years old, for example. That’s difficult to do with RA and wholesale and so my view is, yes, it’s a great approach, private label and no, I mean there’s constant, right? I mean like, I remember when I started in 2013, people asked the same question. Well, it’s saturated, and it’s too late now and you should have gotten in 2014 and that was the time to get in, and now it’s too late. Well I’ve heard that every year and well, eCommerce just took a giant 10 year leap in the last 12 months. I mean, literally, eCommerce went from 16% penetration, retail to 27% in the first half of 2020. So, with that extra demand, it bring tons of new opportunity for new suppliers to come in there and offer new products and so sometimes you come up with something really innovative, sometimes go for act, and you think how can I slightly improve that and I mean, we launched a business early 2020, where there were a bunch of people selling a tent, a particular tent on Amazon and we went and just like optimized the tent slightly, just added a few extra things that some of the other guys didn’t have and it was a massive success and sort of we paid our money back within a few months, not even a few months, weeks actually like six weeks. So yes, there’s plenty of opportunities to still still get in and I don’t see that changing for a long time. Because most forecasts I see are that the Amazon third party marketplace. In 2018, it went from $200 billion, 2019 was $300 billion and it’s expected to get to about $500 billion within the next few years. Right and so the fascinating thing about the Amazon flywheel is that you get more customers, you get more sellers, and as you get more sellers, it brings more variety and better prices. So you end up getting more customers and more customers brings more sellers and the flywheel just spins faster and faster and that’s the magic. So there’s plenty of opportunity.

Norman  49:12  

Right. Yeah, I definitely agree and just being one of the top, you don’t even have to be the top but just one of the contenders by having a great listing will get you much, many more dollars. One of the things that we were looking at a brand just recently, this was just the other day, I’m not gonna mention the brand. I know the person is listening. But anyway, we couldn’t get the brand like we were driving tons of impressions over to the PPC. But the PPC was not converting and so why wasn’t it converting and we realized that the grouping of keywords was, I gotta be careful. But it was for kids rather than organization rather than laundry. I’ll just put it this way and anyway, by changing that, I think that’s going to make the game changer, but just reevaluating. Now all of a sudden, you make those little tweaks and you can see a huge difference, we’re just tweaking now, but I know we’ll be able to see a big difference. So it’s not Oh, my products are not selling. Is it competitive? Did you do the Brady Bunch? Or did you make sure that yours was equal to or better than your other listing? Not only in your photos, but in your titles and in your bullets? Did you test it out on mobile? But even more importantly, what about the price? Are you going to be a bottom dweller? Or are you going for perception? Did you spend that extra quarter on packaging, and show it off a little bit? So there’s lots of things to consider and I’m in 100% agreement. Right now, Amazon is an opportunity, still just waiting for a lot of new millionaires and there’s going to be a lot of people that are going to fail, a lot of people are going to fail, a lot of people will make some money. But I still think that Amazon is the quickest way to make bigger dollars, to build a business in 18 months to 24 months, and have a seven figure exit.

Ryan 51:32  

I totally agree with that. The thing about Amazon is no matter how good you are, there’s no guarantee that your product is going to be a success. But if you launch several brands, and if you have the luxury to be able to do that, if you can go launch maybe two or three different brands, and you do all the right things, and you use the right experts, and you go to Norm and you get his expertise in import, for example and if you follow the methodology, and you’re sourcing it correctly, there’s a pretty high chance that one of those is going to be pretty successful and success begets more success, because you can afford to take a few more risks and launch a few more brands and then it becomes a numbers game. Because if you launched three brands, if one of those brands gets success, it will far far far outweigh the cost of the two failures. Right, and sometimes a failure just means like, maybe it’s unlikely you’re going to lose all your money, right? With the two failures. I mean, if you’re going to spend $30,000, or $50,000 per product, right? I mean, it’s unlikely the two of those aren’t successful, you’re going to lose all your money, maybe you lose 10%. But the winner, you might make hundreds of 1000s of dollars, and that more than makes up for it. So our view is if you take a portfolio approach to this, and you keep trying and you keep at it, and you persist, it will pay off and we’re seeing it all the time.

Norman  53:03  

Yeah, and one other thing. I was in New York, I was having dinner with a Scott, incredible guy and he was telling me about exiting and he said people don’t realize that when they’re building an Amazon business, as long as they understand their numbers, and they’re making a profit and they’re gaining traction every year, that 80% of what you make is going to be on your exit and so don’t think, Oh, I’m only making x or I make x, add a few zeros. If you run your business like a real brand, and a real business, and you trim back your expenses, and you do whatever you can, but make it look like a real business, make it look like it’s turnkey, have your systems in place. Man, you can exit 80% of your profits gonna come through when you get the check at the end of the day. That’s what I like.

Ryan 54:07  

Yeah, it’s totally right. Because these are very cashflow intensive businesses. Even if you make a million dollars a year in sales, for example, and you’re making $200,000 of earnings at the end of the year. Well, you’re not usually taking all those 200 into your pocket, right? Because if you want to grow the business, you have to reinvest, right? Maybe you’re taking 80,000 or $70,000 for yourself, right. But if you can go sell that business for $700,000, or $800,000 with multiple ends up being, you’ve just made 10 years worth of earnings on your exit and so that’s absolutely right and, and that’s very accretive to the seller, and it’s great for guys like us who are buying the businesses, because we can then take them and rockpooling to them to grow them even further. So it is a very advantageous little symbiotic relationship that’s going on at the moment.

Norman  55:05  

One of the things, and this is I know, we’re getting up there now. But one of the things I just want to talk about really quickly, I’ve heard a lot of people with very exaggerated multiples, just wild multiples. Oh, I got 10 times. No, you didn’t, there’s no way you got that. If you did, it’s a miracle. Or the company you bought, you just didn’t do their due diligence properly. But anyways, what would people expect? Like I’m thinking, and it depends, if you’re a private company acquiring it, or an aggregator or a public company, the multiples will change. But where’s the range?

Ryan 55:49  

Yeah, so I mean, I’ve never heard of anyone getting 10x for an Amazon business.

Norman 55:54

I just heard that. 

Ryan 55:56

Okay, that’s interesting. At that price, I’m the seller, so that’s good. It depends on the size of the business. So I would say I’ve seen sort of three and a half times upfront, multiple, right? Three and a half times upfront. But then there’s typically like, an earnout on the back end, and so within earnout, you get to have some exposure, that when we take over the business and basically, in every brand we’ve ever acquired, the business has improved, it’s gone up, we don’t have a single business that’s down. Now, some are up several 100%, some are up on the maybe 10, 20, 30%, because they’re newer, but the seller gets the benefit of that uptake and if we can grow that business 500, 600%, the seller gets tremendous extra bite at the cherry as it were, through the earnout. So, all in multiple, when you take into account that earn out and the upfront can absolutely be five, six times. So that’s pretty good. But for smaller businesses that, if it’s doing like, let’s say, 50, or 80, or $100,000 of EBITDA, that’s a I would consider that a slightly smaller business, and then the multiple for those may be slightly smaller.

Norman  57:25  

Right. Yeah and I sort of heard and this is more for a public company coming into a choir. I would think the average would be four to eight would be the maximum. I’m not sure about what you think your thoughts are on that. But anyway, we are at 1:02 and we’ve gone completely off of RA and wholesale and private label selling today. But anyways, I think that was just a little bit of incredible information that you’re talking about at the end there. Let’s talk about Wheel of Kelsey.

Kelsey 58:04  

All right. I’m excited. We got quite a few entries.

Norman  58:09  

By the way, my setup worked, although I kind of look like an apple. So I’m gonna have to change the color. Slight pink. 

Kelsey 58:19  

Okay, actually, we just got one other person. 

Norman  58:20  

Curtis squeezed in there

Kelsey 58:23  

Just in time. Okay, so sharing my screen.

Kelsey  58:31  

Okay. All right. So for the 45 minute consultation with Ryan, here we go. 321

Norman  58:41  

Wheel of Kelsey.

Norman  58:48  

Simon.

Kelsey 58:50  

Okay.

Norman  58:51  

I think Simon was the first to enter. 

Ryan 58:55  

Well deserved. 

Kelsey 58:58

We also have our chocolate giveaway, too. So I’m just gonna quickly bring that over. The odds are pretty good on this one. Not gonna lie. 

Norman  59:07  

Well, I think people were thinking that they were going to.

Kelsey 59:11  

It’s difficult because it’s only the US. Okay, is this there’s a separate hashtag, but there’s two. So one of these winners will let me see, just a second. Okay, so we got two Brit Treats chocolate. Here we go. 321. Okay.

Kelsey 59:37  

Sarah.

Norman  59:39  

Okay, congrats Sarah.

Kelsey 59:40  

Last one.

Norman  59:46  

Oh, all right. Radd, he gets it. Okay. So I think next time I think there was just mixed up in communication because a lot of those people that were on the wheel were also from the US but anyways, congrats to the people that won the chocolates and congrats to the big prize winner who got the consult with Ryan. So Ryan, like I said, we’re gonna have you on, we’re going to talk about scaling. We could talk forever on that but I do really appreciate you coming on and talking about RA, wholesale and private labels today. So thank you so much, sir. Have a great weekend. Enjoy Austin.

Ryan 1:00:29  

Thank you very much. It’s great being on with you and we’ll definitely stay in touch and I look forward to talking with Simon and digging into whatever he wants to talk about and we’ll see you guys soon. Happy Friday. 

Norman  1:00:40  

Enjoy the heat.

Ryan 1:00:42  

Yeah, it’s been a little warmer than New York.

Norman  1:00:45  

Oh, just wait.

Norman  1:00:48  

Alright, everybody. Let’s see. Let’s get Kelsey back here.

Kelsey 1:00:54  

Okay, hello, everyone.

Norman  1:00:56  

There we go. Your mic sounds so good today.

Kelsey 1:01:00  

Oh, thank you. I wonder why. It’s a bit of an upgrade. But yes, thank you everyone. Thank you for tuning in today. Super important, our show on Monday is being moved from 12 o’clock to 2 o’clock. So make sure you get in at 2 o’clock pm Eastern Time. There’s no Clubhouse next week because of the conflict of time. But that’s the big thing for next week. It’s with Rand Fishkin. 

Norman  1:01:27  

No, no, no, the big thing next week. There’s a big thing next week. Yeah. There’s a birthday next week.

Kelsey 1:01:35  

There is a birthday? Whose birthday is it?

Norman  1:01:36  

It’s Kelsey’s. It’s his big day. We’re gonna have a big party, a big celebration. So there we go. Also, on Monday, Rand Fishkin is the former CEO and Co founder of Moz and if you don’t know Moz, check it out. This is gonna be great. Kelsey actually reached out to him to see if he liked to be on and he blew me away when he came back and he said, Yeah, he wants to be on to talk about SEO and digital marketing. You are going to learn a ton. Rand is the guy. So please tune in at 2 o’clock on Monday, but under normal circumstances, we would tune in Monday, Wednesday and Friday, Eastern Standard Time at noon. So thank you, everybody. Really appreciate you joining us today. Thank you for being part of the community. Got a few technical things that we’ve got to work out for the next show. But anyways, have a great day and have a great weekend.