New business model. Bring together and accelerate consumer product brands in Amazon FBA environment (Fulfilled by Amazon)

Strong growth of the Amazon FBA segment

Around Amazon, with an annual sales volume of about 400 billion USD and growth of +38% vs. last year, it is normal that new business models be generated. “He who a good tree is still, good shadow shelters him.”
Amazon’s segment of third-party services achieves its highest growth and profitability. Thousands of small businesses offer their specialized products by leveraging Amazon’s commercial and operational coverage that receives a commission for its services in return.
In many cases, it is successful small entrepreneurs who are behind these companies and who encounter sustained growth and profitability issues from some billing thresholds. Their revenue is often concentrated on a class-leading, privately branded individual product with 90% of the sales through Amazon.

Thrasio. Growth and profitability for a unicorn. Unusual

Thrasio, created in 2018, is a clear example of a company growing at high rates and with positive operating results. Unusual exception in unicorn typology with a valuation of more than USD 1 billion. It is focused on identifying, acquiring, and improving consumer product brands marketed primarily through Amazon FBA.
Thrasio does a detailed job of identifying and selecting candidate brands for their acquisition and subsequent commercial and operational improvement thanks to their super specialization in the Amazon environment.
In its first two years of existence it has acquired 40 brands with incomes between 1-40 million USD in categories as disparate as home, kitchen, leisure. Among these brands are: Angry Orange, Best Gear, Creative Space, Maxim Fitness, Coffee Gator, Trail Buddy Poles…

Apply effective business and operational improvements after acquisitions.

To materialize these acquisitions Thrasio has reviewed 400 candidate brands with an advanced and well-shot Due Diligence process.
Once within their portfolio, their own marketing and operations teams make improvements by applying a proven tool kit in just 35 days in areas such as:

• Positioning within Amazon, consumer ratings and comments
• Content and visual communication tailored to the Amazon environment
• Packaging
• Product design
• Range reduction
• Product Sourcing
• Expansion to other international markets where Amazon has a significant presence such as the UK, Germany, and Japan

The results are there and Thrasio already has a total annual revenue of more than 500 Million USD doubling every 73 days its turnover. Still far from the size of large consumer product conglomerates such as Procter & Gamble and Unilever that through acquisitions of individual brands and supported by strong traditional advertising investments managed to occupy end caps in large retail chains.

Omnichannel Retail >>

Replica effect. Clones in action

Thrasio currently has 700 employees and its high growth rate generates a wide range of vacancies (+240 positions in February 2021). The type of functions and profiles required are revealing the company’s priorities and contrast with the current structure of many retail chains. We recommend visiting their WEB Thrasio Jobs.
Thrasio’s acceptance among investors has been very good (including Advent as the main player), achieving a total of USD 900 Million in 6 rounds of funding.
The replica effect is fast and there are already clones of this type of business in both the USA and Europe. Among them are: Perch, Heroes, 101 Commerce, Razor, Seller X, Brands United….a whole new generation.

Selling on Amazon is “easy”. Growing and doing it profitably is difficult. Looks like Thrasio is in a good position to achieve it. Like any challenge, it is not without difficulties ahead including the heavy dependence of an innovative giant like Amazon.

Más info: carlos.dominguez@mheconsumer.com

www.mheconsumer.com

NYC Flagship. Reinventing your Third Place: Home, work and Starbucks experience

Temple with more than 2,000 square meters

A new temple for Starbucks lovers opened last December in NYC, in the Chelsea Market area, across Google’s offices in the city. They are more than 2,000 meters distributed over three floors with 5 well differentiated areas including an area for cocktails, Italian pastries and sandwiches (Princi), ice cream and of course, 6 different ways to make a coffee (in addition to the espresso).

• 280 employees strive to realise a differentiated experience for customers who are willing to pay 7 to 10 euros for their coffee. The price does not seem to be an impediment to continuing to grow this company that with sales of 22 billion euros (same Inditex and Mercadona league) and annual growth of 10% is making Starbucks that “third place” desired by its customers after home and work.
• With a local design, copper colour dominates the environment. The central axis of the store is a roasting area that prepares more than 500 tons of coffee to be used in some of the 28,000 outlets that Starbucks has. With a high annual x17 inventory turnover, it is indeed the envy of any other retail business.
• The plan is to have a total of 6 Flagships with similar globally characteristics. They have already also opened in Seattle, Shanghai, Milan, Tokyo and soon in Chicago.

Declination of formats

Few businesses have declined their format in variants as different as they have, from small kiosks implanted in hotels/office blocks to these 2,000-meter theatre stores maintaining a special aroma and atmosphere.

Mhe works for major chains and brands improving retail strategy and operations

Retail Customer Experience Optimisation

Food

Food already accounts for more than 20% of its sales and the alliance, in full execution with Nestlé to distribute its products on supermarket shelves and other distribution channels, will facilitate the transfer of the same experience to theirs home that’s why they will have additional reasons to visit “the third place”.

Strong Competition in China. Luckin Coffee

It is present either directly or through licenses in 80 countries – with varying results – and the strategic points are USA and China. In fact, it is in China where they are encountering a first-timer but strong competing operator: Luckin Coffee. This startup (October 2017) has already opened 2,000 outlets and plans to double them during this year 2019 beating Starbucks in the Chinese market. With -30% lower prices and focused on a queueless service, take away and Home/Office Delivery Luckin Coffee is managing to change habits in their compatriots.

Innovation and size can work together

Innovation and size can work together and Starbucks achieves very high levels in omnichannel, loyalty programs and advanced initiatives in corporate responsibility as support in the secondary and university education of its employees, hiring 22,000 wives of military veterans and a strong commitment to sustainability and the environment. Profit and support local communities live together and feed each other very well.

Beyond the product, beyond the price

Approaching its 50th anniversary, It gets a renewed experience that makes its followers continue to consider it as their third place: Home, Work and … Starbucks. Beyond the product, beyond the price.

More info: carlos.dominguez@mheconsumer.com

www.mheconsumer.com

For some conventional Retail chains, flagship adjective is synonymous with point-of-sale that generates heavy losses. Efforts by some brands like the one Nike makes in this new flagship only have a good reason to be when there is a clear focus on omnichannel and core wholesale activity.

Located on NYC’s Fith Avenue and opened on November 2018 with more than 5,000 square meters of surface and six floors. Originally named as House of Innovation, follows  the track of the first opening of this type of Nike store in the Asian continent, not randomly (Shanghai).

It contains within it different new concepts, some of them already tested individually:

• Nike Speed Shop
• Nike Sneaker Bar
• Nike Expert Studio

Nike, with a growth of +10% annual sales (with only +1% stock) and consolidating margins, materialises in this new flagship store its three principles:

+ Innovation
+ Speed to market
+ DIRECT to client

Direct to client
“DIRECT” sales to customer already account for 1/3 of Nike’s total including own retail and ecommerce, the latter with year-on-year growth of 25%.

Platforms vs individual products
They are not based on merely releasing new individual products to market. Otherwise they make use of already proven platforms (e.g. Air Max) as a growth vehicle through new models designed much faster than the past.

Innovation
Strong support and development of its app and omnichannel with new features such as:

• Click & Collect internal in store. Looks and individual items
• Scan & try
• Express Check out paying from mobile without going through the cash register
• Extreme customisation for some products
• Selection of the goods displayed based on online analytical criteria for the specific geographical area where it is located
• Members of Nike Plus community enjoy special perks and privileges such as personalised assistance, express shipping and increased product customisation possibilities

Mhe works for major chains and brands improving retail strategy and operations

Retail Customer Experience Optimisation

For some conventional Retail chains, flagship adjective is synonymous with point-of-sale that generates heavy losses. Therefore efforts by some brands like the one Nike makes in this new flagship only have a good reason to be when there is a clear focus on omnichannel and core wholesale activity.

More info: carlos.dominguez@mheconsumer.com

www.mheconsumer.com

Amazon introduces new patterns in the Fashion sector. Customer will decide.

The strong bet of Amazon in the Fashion sector is not only based on the powerful introduction of its new own brand “FIND” for men and women, it is also adding new patterns that are  new for the sector. Some of them will be appreciated by the consumer, others will not. Sometimes they might be replicated in the physical stores and, in other cases, they will have to remain in the online arena.

Dynamic Pricing

It is by far, the area where Amazon incorporates the largest number of novelties for Fashion.

Continuous changes in Prices

For a similar clothing product, Amazon changes prices an average of 9 times during the season, while a department store (eg Macys) just changes 2,1 times per season, and clothing specialists, such as Kohl’s, just 1,6 times per season.
Sales period will not be the same ever. Relevant price endings and price points for costumers in brick and mortar won’t have the same importance in an online environment.

Different prices at colour level and size for the same model

Amazon doesn’t innovate just in time factor. The difference with fashion specialists is that Amazon starts with just one unique sales price for all colors and sizes in the same product and applies its predictive analysis based on sales, stock and availability at size and color level.

Thus, it is usual practice in Amazon that, for the same garment they provide different prices based on color and size and always based on customer sales criteria and not original cost prices and mark-up.
It will be difficult to implement these criteria in stores. But, who knows… 3 years ago nobody could imagine “free delivery” at home just the day after the purchase.

Consumer ratings

The massive use of user generated content, providing ratings and comments by other costumers, has demonstrated huge effectiveness in other retail sectors where Amazon has a higher weight, like electronics. Fashion is introducing this new pattern that provides confidence in Brands based on other costumers opinions.
The use of costumer ratings is done through filters and relevant segments for each type of product. In addition, Amazon incorporates costumer opinions from other countries where the same product is sold. Amazon manages in a superlative way the popularity of the products by UGC.

Echo Look

This initiative provides the facility of take pictures of products tested at home by customers. Through a specialised application you can receive recommendations about other products or offers regarding different brands that combine better with costumer preferences. It is like a “personal” assistant to facilitate the clothing purchases. 

Prime Wardrobe. Try before buy

In this case, Amazon provides to their “Prime” clients the possibility to monthly receive a box with 3 to 10 fashion products selected by customers to be tried at home. The costumer try on it at home and can return the garments they are not interested in.
Based on the number of items that the customer acquires, they receive a 10 to 30 € discount. This service is similar to the “subscription” model in other sectors. It is an advanced version for home of smart fitting rooms, which its use is now increasing throughout retail chains. 

Prime Service. Shopping consumer networks

The success of the “Prime Amazon” service (even with an additional charge) it has been an inspiration for the development of other shopping consumer networks services, such as SHOPRUNNER, which allows retail chains provide similar experiences to Amazon but without investing in disproportionate structures for their activity.

Other innovative initiatives for fashion

• Wider development of the size range maintaining same model
• Incorporate, in a selective way, men products among women items taking advantage of the fact that more than 40% of men products are bought by women
• Literal description of products evolution to “tactile” descriptions that compensate the no physical presence of the product
• Private brand sponsorship, promoting in a simultaneous way incomes from third brands

But not all Amazon initiatives become successful. The Amazon branded “Style Code Live” TV channel for interactive purchases has been cancelled after one year try out period without good results.

With Amazon new fashion patterns, clients are having the chance to try new experiences in their purchases, some of them will be demanded to other competitors in physical store environments as they will get used to.

MHE, retail consultancy, works for brands and retail chains in strategy and operations in omnichannel environment.

More info: carlos.dominguez@mheconsumer.com

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