June 18, 2018

Gaining Traction On Amazon (PODCAST)

Michael Kanter of Eliot’s Adult Nut Butter takes a totally new spin on nut butters with his innovative and bold flavors. How would this play out with online customers who may not have tasted Eliot’s flavors before? Micheal shares his experiences selling via Amazon.com.

TRANSCRIPT:
Jennifer: Michael, thank you so much for joining us today.

Michael: Thanks so much for having me.

Jennifer: So now the first thing that comes to mind when hearing the name of your company is, and I imagine this is the same for most people, what makes your peanut butter adult? How did you come up with that piece of it?

Michael: So the quick and short would be that we’re doing grownup savory flavors of nut butter and as I was trying come up with the names of the company, Elliot’s Grownup Flavors, while already Elliot’s Grownup Nut Butters a bit verbose so condensing it down to adults seemed to be a good way to convey the idea ’cause when you look at our jar, we’re doing just grownup flavors that are meant for adults like Spicy Thai Peanut Butter, Honey Chipotle Peanut Butters. We’ve got seven different SKUs and so I thought there was kind of a hole in the market of targeting the more grownup, sophisticated adult palette.

Jennifer: You know it’s one of those things it’s funny because when I was looking at your products, it’s one of those moments when you’re almost like, “Oh my goodness, why hasn’t anybody actually gone in after this hole in this market before?” Because for so long we’ve just so calmly associated nut butters with kids and then maybe the adults will like the ones that the kids like. So how did you, I mean, how did you get started? What’s your background? Can you tell us a little bit about how you got to developing these flavors and realizing that there was that hole in the market?

Michael: So my background was an aspiring chef working my way up the restaurants for a good five years in Brooklyn, Seattle and Portland and my goal had always been to open my own restaurant. And I slowly realized that while I liked food, super passionate, always fully passionate about food, food systems, all of that, that a restaurant might not be the place for me. So anyways, I take a step back in the kitchen, I literally was thinking about creating software or app idea and I was literally sitting at my computer eating a bag of, like, spicy cashews and I started thinking, “Ya know, this is one of my favorite snacks,” tamari almonds, curry cashews, I love these by the handful, so why not as a nut butter?

Michael: So I went downstairs, turned on the food processor, [inaudible 00:02:15] nut butter, tasted it, and was like, “Wow, great by the handful, great as a spread.” I had friends and family try it, did a little experimenting, but I also started digging in to do some research to see if this was a good idea, ’cause while I was sitting at my computer, I looked and ya know, there really was nobody doing this concept. So either it meant that this was a terrible idea, that there’s no market for it, or that this was something that was untapped, that needed to be looked at, and one of the things I found out, which sort of goes back to the name, is in the US, about two-thirds of the peanut butter in the country is actually consumed by adults.

Michael: I think when I found that number, or found, ya know, looking at the statistics and then as I’ve grown the business and talked to people, it just seems like adults, we grew up as kids eating peanut butter, but it’s just a great comfort food. But we’ve also seen it across all sorts of categories where, whether it’s potato chips, ketchup, mustard, any number of mayonnaise, that we’ve just seen an evolution in the category and so it felt like, “Well, it’s this big category, adults seem to be driving it but there aren’t really kind of these mature grown-up flavors,” so I set off in November of 2013 and haven’t looked back ever since.

Jennifer: Very cool. Yeah, like you said, I mean, so first of all, that two-thirds figure, it’s interesting to hear that, but I also think about, at least in my circle, yep, all the adults eat peanut butter. Or some type of nut butter, almond butter. So it makes sense. But again, not an obvious thing that I had noticed before.

Jennifer: I know that you sell through multiple channels, and one of them that we want to talk about today is working with Amazon. And about a month or two ago, we had a podcast with another food entrepreneur who kind of gave us some of the basics about working with Amazon. And I asked that entrepreneur whether or not Amazon was a planned sales channel from the beginning, and so I’m wondering the same thing for you, that when you started and when you sort of maxed out your initial sales channel strategy, were you planning on using Amazon as a sales channel?

Michael: So the funny thing is, as I sort of describe how I started the company, at the end of the day, when I started it, this was very much a proof of concept, that like, okay, friends and family liked it, I thought it was a good idea, but time will tell. So from day one, it was not some grand vision of “One day we’ll be on Amazon selling”. I even actually had enough time while making a software app idea, initially for like a month, was like I don’t think selling it in a little bag that I have to pay for shipping, eventually I came around and of course it only makes sense to sell it online.

Michael: But, I mean, I think I always knew, as the company started to grow, that like we’d want to be on Amazon, that maybe initially I had decided that the time needed to be right, I mean, I was actually fortunate that I was at a trade show and some people from Amazon were there, and they reached out to encourage me to go into Amazon Grocery, which is one of the avenues to sell in Amazon and actually, for almost a year, sat on it and didn’t move forward. Partially just because I’ve been running, walking, crawling, sprinting, jogging at the same time since I started, so there have been efforts to be deliberate and strategy, but also things were like, “Alright, let’s see what happens if I do this.”

Where as of course now, not having an Amazon strategy seems laughable. Or the idea at least back then, but I can understand from the beginning, I don’t think I was ready or would have been remotely successful at it.

Jennifer: So can you explain to folks who may not be aware, I mean, what’s the difference between, let’s say, being on Amazon via Amazon Grocery versus, like, fulfillment by Amazon, where it’s shipped to the customer? It seems like there’s kind of many different avenues within Amazon.

Michael: Right, so one of the nice things about being on Amazon Grocery meant that, there’s two sides to selling on Amazon, basically. There’s either seller central or there’s vendor central, and so by being on Amazon Grocery meant, we would be on the vendor central side, which would mean that we’d list it through Amazon and Amazon, basically, as there was demand for the product, they’d place purchase orders, we’d ship them product, and they would just ship it out to their customer.

And the advantages, at least for us, having a lower price point that FBA on the seller central side, the costs are more you’re shipping it and you kind of have to gauge what your demand is, and do you want to pay for the warehousing cost. Of course, if you underpredict, you can send more, but this way, with vendor central, you gain the advantage of Amazon’s algorithms to decide how much inventory to hold, ’cause they do a lot of forecasting.

So for me, it’s certainly, theoretically, more hands-off than FBA in terms of what you need to do in terms of getting it to the customer at the end. Theoretically, you wouldn’t have to create your own barcode. I believe in FBA, you have to have like special barcodes every single product, has to be specially labeled. Whereas for us on Amazon Grocery, we initially were just shipping cases to the different warehouses, which is a lot simpler of a way of dealing with it, at least certainly from the get-go.

Jennifer: So then with Amazon Grocery, because one of the things that I had noticed when I was looking at your product listings on Amazon, is that one of them had, at least when I looked, there was a coupon for, ya know, first-time orders. And is that something that you control, is that something that Amazon controls, and then also who pays for that?

Michael: So one of the nice things, I’m slightly less familiar with the seller central side, although I’ve been led to believe there are more robust options on the vendor central side for marketing spends. So for the example of like, the coupon, that is us. Like I recently started working with an Amazon sales optimization team, and so they’re the ones who help implement that, but at the end of the day, we pay for it the same way that if we were in a store, running a sale or just sending coupons out, that we as the company would be paying for that.

Jennifer: And then with Amazon, do they then help you also gather the data afterwards? That you can determine ROI, did that make sense, did that not make sense.

Michael: Yeah, there is a good amount of data available, I’m under the impression that some things might change in terms of having to pay a little bit to get access to it, but I can look on a daily basis of what sales were for… there’s a 48-hour rolling lag of the data, but you can see your actual sales, if you’re running marketing campaigns, it’s relatively similar to Google AdWords of being able to drill down and then see the ROI, and how many people looked at which thing, and what did you pay per view, per click, per sale. So you can definitely see what’s working, what’s not working, and how to adjust and it’s definitely the kind of thing where any kind of advertising, if you’re not strategic, you could end up spending a lot of money and not seeing an ROI, or if you know that you’re investing money upfront and that you’re going to learn and adapt and adjust, it can definitely get to a point where every dollar, three, five, however many dollars depending on your product or how much margin you have.

Jennifer: So one thing that I was thinking about in regards to your product specifically – adult nut butters. Because it’s not something that, let’s say, consumers are aware of unless they’ve come across it, because a lot of consumers are just thinking it’s the normal nut butter… I kind of have a multi-fold question here. Is Amazon mainly for re-orders like from customers who’ve seen you other places, or are you able to market your products to people on Amazon and kind of bring awareness that, “Hey, there’s also this huge, other cool category that you might not be aware of.”

Michael: So there’s two things, which one thing was interesting I learned from working with my sales team, but I guess I’ll just start with that. So one thing that’s interesting, if you notice that Amazon has the sponsored posts, and so one of the things that Amazon does is they, to their credit, sort of, have democratized that in the sense that while, yes, you have to pay, they, I believe, try to like, 75 percent of it is to the highest bidder, but they also leave some room, like 20-25 percent for other companies, so it can’t just be Skippy or Jif paying to make sure I never get a shot to be a sponsored product.

Amazon is still running a business that, whoever is going to pay, they’re going to take the money from, but they, I think, are also where that sometimes the sleeping giants, the people who can pay a lot of money, don’t always have the best product and they want to make sure, they’re all about the customer experience and the customers, so they know that if all the customer sees is the things they already know, that they’re going to get bored and not want to be less engaged with the advertising.

So it does actually present an opportunity to get to the people who would not be aware that, right, it is true that probably a very small minority of people go onto Amazon and say, “I’m looking for a savory-flavored nut butter.” There is a minor amount of that, so then the flip side, which I think was the other question, is so, people can technically still discover us without even the advertising component to it, but to a certain extent, I definitely see Amazon as a place for our fans then, who either find us through other ways. We definitely have any number of people, who, I found a super fan in Iowa on Instagram that, a friend of hers in Seattle had brought her a jar and she ate the jar, and then was just buying it regularly on Amazon, and then posting recipes or things she was making with it.

So, Amazon to me is sort of, it feels like you have to be there both because it’s almost a marketing, as well as brand recognition, that people can find you. I mean, I don’t have the numbers in front of me, but the things I’ve learned from my sales team is, I think it’s something like 60 percent or greater of, I think, shoppers, and millennial shoppers, in stores, the first thing they do is look up your product on your phone, go to Amazon. And so part of it is there’s a trust that, A. Amazon will have a competitive price, they might also be looking up to see if it gets good reviews, ’cause you know, any time they encounter a new product, people are trying to decide whether to buy it. And so Amazon can often be a strong sales driver for even in-store purchases, because for us, our price point has fluctuated but no matter what, in-store is always cheaper than Amazon because there’s going to be a shipping cost that Amazon has to factor into the price. It often can help, because it’s basically never going to happen that they’re going to see the price on Amazon and say, “Forget it, I’m not going to buy it in the store, I’ll just order it off Amazon.”

They might know later they can buy it on Amazon, so that’s good to know. So I think that was a long-winded way to get to a several part question, but if I missed something, let me know.

Jennifer: No, that was perfect, and it actually led into my next question, and it was about, have you ever gotten pushback, because you are in a number of retail, brick and mortar, retail locations as well, and in the industry, you hear about this push-pull between online sales and brick and mortar. Have you ever gotten pushback from the brick and mortar buyers that your product is also available on Amazon, or to your point, you’re saying it’s normally cheaper in-store? Has it not factored into the conversation with buyers?

Michael: I mean, there have certainly been times that I’m like, I should lead with my sales data from Amazon and I’ve sort of come to the conclusion that people aren’t that interested to hear about how well or not we’re doing on Amazon, specifically because it’s a different market for the reasons I think you’ve alluded to, but also it’s online versus going to a store, but I think the flip side is, I really don’t think I’ve heard first-hand pushback of somebody saying, “The reason why we didn’t carry you is because you’re on Amazon.”

Is that possible? Sure, but I think that in the same way if they looked us up on Amazon, they’d see that the price we’re selling them to and the margin they’re wanting to get, that they’re more price-competitive than Amazon, so I don’t think they’re opposed to that, and there are ways that Amazon, with Prime now, they’re working with certain grocery stores in certain regions, and so, having our product listed doesn’t hurt. They’re working with Amazon to some extent. I mean, now it’s less because of the Whole Foods thing, but I haven’t felt that pushback and I honestly think anybody that would push back against you is more likely just small and insecure.

We’re fortunate that we’re now in the 100 Safeway stores in the Northwest. It would seem bizarre if somebody like Safeway was like, “Well, we can’t carry you because you’re on Amazon.” Realistically, some of their largest sales drivers, who are way bigger than we are, are on Amazon. So what are they going to do, tell Tide that they can’t be carried anymore? You’re not going to tell Reynolds Wrap that they can’t be carried anymore.

I don’t think so. I know some smaller customers that, I think, we’ve lost partially because they want to be unique and then once we’re in a number of stores in the area, they’re like, “Well, we’re not unique anymore, so we only carry unique items.” Which, that’s their right to do that, but I think I would say to anyone who does that, that’s the quote I mentioned earlier. Actually being on Amazon is probably going to help you drive sales in-store at the end of the day.

Jennifer: That’s really interesting, I hadn’t thought about that, and then as you were talking, I was also thinking about a buyer being able to read the reviews of your products also on Amazon as opposed to just being like, “I think this tastes great,” as the buyer, but also looking, “Oh wait, there are also all of these customers who also think it tastes great.” I would imagine it would also be reassuring.

Michael: Right, I mean, I suppose if we were big enough, at a certain point, maybe we would try and flex our sales data, but we’re still kind of at a point where I think some stores feel hesitant the same way that you’re kind of voicing. Maybe they feel confident in what they’re doing, but Amazon certainly makes them nervous, because they’re there to drive the prices down as much as possible. It’s a competitor for them.

Jennifer: So you mentioned that you’ve been working with a kind of sales optimization team with Amazon. When you first came onto the Amazon platform, did you feel like there was a really steep learning curve in order to kind of figure out working e-commerce with Amazon? You mentioned developing a software program before, so obviously you have decent tech knowledge. For somebody who might be a little bit more phobic of technology and e-commerce, is it something that they can wrap their hands around, or is it one of those things that you need to partner with somebody who has good e-commerce background, or just good tech knowledge?

Michael: I wouldn’t say it’s case-by-case, but like, having it up and running isn’t that complicated. Trying to figure all the ins and outs of, like, how to spend, how to set up marketing campaigns, how to get all the coupons or all kinds of different things, any number of ways you can sink all kinds of money into being on Amazon, that may or may not be successful if you don’t have a strategy and metrics and somebody who is implementing and observing things.

Realistically, for me, I can say I have some familiarity with technology, I was going with the app software idea of, like, I’ll come up with the idea and find someone to figure it out, because I’m relatively tech-savvy but coding programming is above my pay grade at this point.

So for us, fortunately, I got our Amazon site up and running pretty much as minimal as possible from just the sense of not knowing exactly what I wanted it to do, what works, what makes sense, and also being a founder of a kind of bootstrap start-up with a small team, it was difficult for me to spend a lot of time to work on it and we were fortunate to see our sales organically, which over time, sort of signaled to me that I need to find someone who can really optimize and take this to the next level, because we’re seeing our sales grow and we basically couldn’t have been doing less. Like on Amazon, I literally wasn’t doing any advertising, I was not doing any kind of campaigns, nothing to optimize even just the page itself. I’ve learned a lot about the things I needed to do, which some of it, you can literally just click around on Amazon and see the different things people are doing.

I think I knew that but I just didn’t have the bandwidth to really tackle it, so in that way, yes, I think you either will want someone on your team who can either spend a good chunk of their time or to find somebody to contract out to just help you get the ball rolling. The people I’m working with, their goal is to really get it up and running, and there will be a certain point where it’s just kind of on cruise control, as we’ve kind of dialed into what’s working and tweaked things here and there, add new content.

I think you can definitely get up and running without spending a lot of money to get rolling, and then it’s just a matter of investing the time to figure out how to optimize it, and I think it’s the same way for me. Ultimately, there are a lot of different ways to look at why you should or shouldn’t be on Amazon, there’s a strong part of me that I alluded to earlier, that I definitely somewhat look at Amazon as a marketing play that could lead to volume, which could also then lead to our margins generally speaking going down, but Amazon, it’s a stated goal of theirs to mind your margins.

So, it’s not that it’s impossible to make money on Amazon, you can, we’re doing fine, but it’s also deciding what your strategy and what your goals are, and that’s sort of why I didn’t want to start pouring money into things without having people who could show us what works and what doesn’t work, and what we need to be looking for in different areas. Which is why, right, you need to have a strategy before you start pouring money into it. So either find someone for your team, or find someone outside your team to help do it.

Jennifer: And you had mentioned at the very beginning of this podcast that initially, Amazon Grocery had approached you and you said you kind of sat on it for a year because there was so much going on. In hindsight, are you glad that you took that year to develop your business further before getting on Amazon?

Michael: Yes. I’m definitely glad, I don’t think it would have been some kind of colossal mistake, but just in the literal sense, the structure of the business, we’re not where they probably needed us to be, even in just the time we started ’til they approached or reached out until we actually crossed the finish line with the paperwork. We had like, changed our packaging, so even in that sense, there were just little under-the-hood things that we worked out some of the kinks that were more like what our product is today in terms of, like, the packaging and whatnot. Again, wouldn’t have been some kind of insurmountable task to overcome, but we’re better structured to actually deal with. That was just a learning curve, still things once you start working with them, how the systems work, and how to get better at it.

I mean, I think as I’ll say, we’re talking about Amazon, but for lots of things related to the food business, there are certain things that if you’re not ready, would be a mistake to do it. If you’re only making a hundred cases a week, and Walmart wants 10,000 cases a week, well taking that account would probably be disastrous for you, because the next leap is not there. Just needing to be better prepared for Amazon and have our team.

Jennifer: I asked that question because I was thinking there might be a handful of folks who are listening right now who are getting so excited thinking, “Well this is the way we need to go.” I liked what you had said about, you didn’t say no, you just said not yet, because sometimes it is a matter of getting some other things lined up, whether they’re operational or legal or packaging, in your business, before going out to that next step.

Michael: Right, I mean, I think, and as we know, Amazon now is, which has been true before, but I think they’ve really embraced this thing that they want every single product on the face of the Earth to be available on Amazon. Especially brands that they like, are promising. There are certainly, I’m joking about the idea of Walmart, there are some companies that you might be more, “Gosh, am I really going to pass on this opportunity?” I really don’t have the answer for certain companies, certain situations, but with Amazon, I was like, “They’re not about to close up shop, or stop bringing on items.” Certainly I’m sure I lost some revenue by not doing it, but letting it create different problems, you know, you want to get good reviews on Amazon and that’s definitely really important for growing your sales, so again, if we weren’t prepared, you could do yourself a disservice.

If customers are having bad experiences, it’s easier to just come out of the gate and be successful than to try to dig your way, claw your way out, from bad reviews.

Jennifer: Oh absolutely. Well, Michael, I want to thank you so much for coming out and sharing your experiences with us. I really appreciate it.

Michael: Oh yeah, no problem.

Jennifer: Thank you so much.

Michael: Sounds good, thanks for having me.

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