E-Commerce for Brands
Amazon Brand Sales Models and Goals
Understanding 1P and 3P on Amazon and Where Goals Really Count
Andrew Morgans is the Founder and CEO of Marknology. Andrew and his team consult brands selling online to navigate sales models and make the right choices for their marketing strategies.
Andrew was drawn to e-commerce hungry for creative work, and after listening to him on this podcast interview it’s no wonder why. When Andrew is “on,” he’s really on — he takes in every word you say and comes back with creative solutions with profound analyses of ROI and competitive advantages.
Andrew got his early experience working for brands as big as Adidas and Marvel. When he started Marknology seven years ago, he was primed with his own clear goals for the brands he wanted to serve. He was ready to deliver creative solutions in the fast-changing world of digital commerce because creative solutions were the only way for brands to stand out.
Listeners of this interview learn quickly that Andrew is a man of goals. It’s like he sees the world through an AR pair of glasses, always superimposing ideas over everything he observes. Everywhere he looks, he sees opportunities.
Andrew describes e-commerce as “marketing and technology combined.” It moves fast, as technology is wont to do. E-commerce moves so fast, in fact, that Andrew’s early work at Marknology focused on identifying rocky paths brands faced that could specifically be paved with technology.
Today, Marknology works with 300 brands worldwide to create operational efficiencies and get their stories out to their target audience.
Andrew joins this episode of E-Commerce with Coffee?! to talk to host Nate Svoboda about e-commerce marketing goals, the Amazon sales models 1P and 3P, and more.
Setting E-Commerce Marketing Goals
Andrew got into e-commerce when he joined a start-up as member number three of a small team. He was hungry for more creative opportunities, and he certainly found them. Positively flooded by ideas, Andrew describes the experience in the interview as a time that he was able to redirect his “passion, sadness, everything” into innovation.
As Andrew focused on the exciting opportunities he saw around him, the natural next step was to turn those ideas into goals. Setting goals is how Andrew stays motivated. In the interview, he explains why he’s been that way since he was a kid growing up as the son of missionaries in the Congo. Whenever Andrew wanted anything — to have, experience, or become — he had to make plans to get it himself. He carried that into his adult life.
The result? Andrew structures everything he does around personal and professional goals.
Marketing goals in digital commerce should come just as naturally to a brand as professional goals do to Andrew. For starters, any brand that isn’t selling online yet should take the time to calculate their ROI of moving to e-commerce before they make any other plans.
Goals give brands a launchpad, but Andrew acknowledges how much fuel it takes to fly high enough for most goals in e-commerce.
Listen to the interview to hear about Andrew’s existential crisis around his own goals. There was a time when he met all the major goals he’d set in his youth and was at a loss of what to do next. The story is an interesting one, so don’t miss it.
Goals in e-commerce also mean establishing KPIs. That’s how we measure our progress toward any goals we set. Here’s how to choose KPIs in a world with so much data.
For brands just starting on Amazon, Andrew describes how to set realistic goals for the first year selling online. “Consider that first phase an initial investment phase,” he suggests. After that initial investment, there will be a growth phase, and then comes a recurring optimization phase.
The first phase in e-commerce takes longer while brands build momentum. As an example, Andrew says, “I can take a brand way faster from one to two million than from $200,000 to $500,000.” Listen to the full interview for more about what a brand can expect.
1P vs. 3P on Amazon
In the second half of this podcast episode, Andrew digs deep into the two Amazon sales models:
1P, Andrew explains, was the original Amazon sales model. It’s still popular today. 1P is where manufacturers sell their products to Amazon and then the behemoth marketplace handles pricing, marketing, and order fulfillment without anything else from the manufacturer.
Sounds like a pretty appealing arrangement, right?
Well, not so fast. Amazon more recently introduced the 3P model where brands and manufacturers determine their own prices and bundles, handle fulfillment themselves, and have total control over their marketing and margins. This is also appealing because brands keep control over their products and customer journey.
Most importantly, in the 3P model brands also collect and “own” the customer data of buyers and interested buyers that come in.
Listen to the full episode to hear Andrew’s break down of which model is best for which brand.
In general, 1P is great for brands just getting into e-marketplace sales for the first time. For brands ready to grow their margins and do more with customer data, building out internal processes with a firm like Marknology and then using the 3P sales model is the way to go.
3P sales on Amazon, Andrew says, is the Amazon version of the direct-to-consumer (DTC) commerce. This is important because today, for the first time ever, more than 50% of consumers prefer buying directly from brands instead of through retailers or even e-marketplaces.
DTC experiences are positive for consumers because the marketing content is more useful, the brand is able to speak more compellingly to its mission, and the customer service is far better. In exchange, DTC brands get to use customer data to tell their stories even more effectively to their target audience.
The Horizon of Digital Commerce
One thing Andrew loves about digital commerce is how, “if you’re good at [it], results speak for themselves.” He goes so far as to point out that the industry is so new that there isn’t a status quo of who’s supposedly the best at it. Unlike traditional retail, it’s not a “boys’ club.” It’s also not an exclusive domain of any geographic region of the world.
The result is that Andrew gets to work with “all types of creative professionals” from absolutely everywhere.
Tech plays a big part in this, too. Technology is the foundation of e-commerce, and new branches of creative possibilities keep sprouting up as new technology is introduced.
E-commerce has changed fast, and it will continue to do so. The technology used in the industry will see to that.
For instance, just look at trends in AR and the use of AR in e-commerce.
Not that long ago, consumers were still mailing paper checks to pay for products bought online. Today, technology is driving an increasingly competitive landscape with AR and VR-driven shopping experiences, same-day shipping, omnichannel experiences, and a growing mass of enriched product data.
Technology will make waves in internal processes, too. For example, product information management (PIM) software has become central to the e-commerce software ecosystem. How else can a brand drive success across multiple channels, each with unique requirements for the product data and listings used to sell there?