We're joined by Chris Bell, CEO & Founder of Perch, one of the fastest growing and most acquisitive companies offering a platform to e-commerce brands leveraging "Fulfilled by Amazon" and other third party marketplaces. We learn how the model works, why the business model is attracting so much investor interest, and what's on the horizon for one of the hottest sectors in retail today. And if you run a brand looking to be acquired, you'll definitely want to check this episode out.
We're joined by Chris Bell, CEO & Founder of Perch, one of the fastest growing and most acquisitive companies offering a platform to e-commerce brands leveraging "Fulfilled by Amazon" and other third party marketplaces. We learn how the model works, why the business model is attracting so much investor interest, and what's on the horizon for one of the hottest sectors in retail today. And if you run a brand looking to be acquired, you'll definitely want to check this episode out.
But first we open up with the top retail stories that caught our attention this past week, including what to make of the "Great Rebalancing" evident in earnings reports from Best Buy, Dick's Sporting Goods and Nordstrom. We also give our take on the new hybrid format from Starbucks and Amazon Go.
Steve Dennis is an advisor, keynote speaker and author on strategic growth and business innovation. You can learn more about Steve on his website. The expanded and revised edition of his bestselling book Remarkable Retail: How To Win & Keep Customers in the Age of Disruption is now available at Amazon or just about anywhere else books are sold. Steve regularly shares his insights in his role as a Forbes senior contributor and on Twitter and LinkedIn. You can also check out his speaker "sizzle" reel here.
Michael LeBlanc is the Founder & President of M.E. LeBlanc & Company Inc and a Senior Advisor to Retail Council of Canada as part of his advisory and consulting practice. He brings 25+ years of brand/retail/marketing & eCommerce leadership experience, and has been on the front lines of retail industry change for his entire career. Michael is the producer and host of a network of leading podcasts including Canada’s top retail industry podcast, The Voice of Retail, plus Global E-Commerce Tech Talks , The Food Professor with Dr. Sylvain Charlebois and now in its second season, Conversations with CommerceNext! You can learn more about Michael here or on LinkedIn.
Be sure and check out Michael's latest venture for fun and influencer riches - Last Request Barbecue, his YouTube BBQ cooking channel!
Michael LeBlanc 00:05
Welcome to Remarkable Retail podcast, season three, Episode 18. I'm Michael Leblanc.
Steve Dennis 00:10
And I'm Steve Dennis.
Michael LeBlanc 00:13
Well, Steve, as you know, I spent a bunch of years in the As Seen On TV, retail, the TV retail with the shopping channel, which is like a QVC or HSN. And you know, our guest today, and his business model, and what's happening actually reminded me of the gogo days of, of that kind of industry and how products got to market. And our guest today is Chris Bell, CEO of Perch.
Steve Dennis 00:39
Yeah, it's really, I think there's a few things that are, that are interesting. In this space. One is, you know, when we talk about Amazon, I think maybe, maybe I've got this wrong, but I think most listeners probably think of, really the first party sales of Amazon. In other words, the products that Amazon carries and fulfills itself. But there's this whole world of the broader marketplace and fulfilled by Amazon. So, we'll talk about that a little bit. But Perch and a few other companies are buying up these smaller retailers that sell on Amazon and kind of providing economies of scale and applying some of their expertise across the portfolio. And these companies have gotten some pretty rich valuations. So, very hot area, really pretty.
Michael LeBlanc 01:25
Yeah.
Steve Dennis 01:25
View. It really just emerged in the last couple of years. So, it's, it's interesting to dig into,
Michael LeBlanc 01:30
And attracting a whole lot of revenue, right? A whole lot of interest from VCs, like there's, there's literally billions of dollars pouring into this.
Steve Dennis 01:38
Yes.
Michael LeBlanc 01:38
I loved how you said it's a portfolio. That's how we used to view as seen, As Seen on TV products. You wouldn't always know which one was going to hit, you know, you don't every day get a ShamWow if you remember the ShamWow. But one out of every ten would be a ShamWow. And they'd pay for the other nine like it was always a portfolio strategy, right? So, a lot of what he was talking about, I think it's, I think it's more focused than that. Speaking of retail, let's jump into the news of the week what what's on your mind, in terms of what's been happening this week, in our industry?
Steve Dennis 02:11
Well, the big, the big thing this week, as has been the case, I guess, for a couple of weeks now it's earning season. So, we got a bunch more earnings report’s this past week. And as our standard disclaimers, we're not going to go through all of them in any detail, really just talk about what.
Michael LeBlanc 02:27
Yeah.
Steve Dennis 02:28
What are some of the highlights were and what it suggests. Overall, we continue to see for the most part, we'll talk about an exception in a minute, but pretty much every retailer seems to be beating on sales, and seems to be beating on income. And again, this gets into this issue of, of expectations and why perhaps Wall Street's expectations.
Michael LeBlanc 02:29
Right.
Steve Dennis 02:33
Were a little bit more moderate. But in any event, the overall picture, it has been quite healthy. Consumers clearly, clearly spending whether that stimulus pent up demand, you name it, and I think they're earning certainly are leveraging the cost structure that's been in many cases optimized better, but also just not quite as promotional, an environment. A few I just wanted to point to very quickly. Best Buy was kind of interesting, their sales were only up like point 5%. And eCommerce was down 10% year over year. But that's double pre pandemic level. But Best Buy was one of the retailers, you probably remember that it's really been on a tear. So,
Michael LeBlanc 03:32
Yeah.
Steve Dennis 03:33
Whether the slowdown, they didn't talk too much about supply chain issues, it seemed to be more of a slowdown, because they were comparing to really robust numbers from last year. But their profits were up nicely. But nevertheless, the stock got hammered. So, maybe, maybe Wall Street's starting to wake up to this, what I sometimes refer to as the great moderation or the great rebalancing of some of these stocks that performed incredibly well. But now.
Michael LeBlanc 03:57
Yeah.
Steve Dennis 03:57
Kind of reversion, reverting to the mean, Dick's Sporting Goods. Oh, the other thing Best Buy is going to mention a few retailers mentioned is this issue in the US of a great increase in retail theft, some of these organized.
Michael LeBlanc 04:09
Yeah, I saw that.
Steve Dennis 04:09
Brands, whether it's being driven by you know desperate economic circumstances or, or what have you, but a number of retailers have pointed to that as a growing concern. And of course, sales associates then get nervous about being in the store. So, that's definitely something to watch.
Michael LeBlanc 04:26
The Best Buy was interesting, because he was saying very specifically, we're seeing people quitting, and we're having a hard time with hiring because people are, as you said, they're getting nervous, and they don't want to be part of any violence. And, you know.
Steve Dennis 04:38
Yeah.
Michael LeBlanc 04:39
This has got to be, this got to be addressed.
Steve Dennis 04:41
Yeah, I think it's a big issue. And, and to your point with organized retail crime, the word spreads quickly, right, both in terms of where there are opportunities.
Michael LeBlanc 04:49
Yeah.
Steve Dennis 04:49
As well as if there is a real crackdown, where to avoid, so big issue, we'll see how this plays out.
A couple other earnings I was thought was interesting Dick's Sporting Goods big sporting goods player in the US and continues to do really, really well. I guess some of this you could count or, or say is, is due to the COVID effect of people working out more of those kinds of things. Their sales were up 14%. eComm looked pretty much flat, but also just like Best Buy double where it was on a two-year basis. So, again, that kind of rebalancing, but still very strong if you look back to where they were a couple years ago.
Dick's is also an interesting company in terms of innovation, not only have they done well, in their core business, but they've been piloting I think it's five different concepts. Two of which they said they were going to be expanding, I don't think they're saying they're not going to be expanding the other three, I think it's too early. But House of Sport, which is more of an experiential, since everybody loves that word and Public Lands, which is a more kind of REI outdoor, Cabela's outdoor kind of focused concept, they're going to be opening more of those. So, a business that's got a lot of, a lot of momentum.
So, the other one or, or two others I'm going to mention quickly, Nordstrom was a big disappointment. The stock really got hammered. Their department store that kind of main full line, department stores are actually up 11%. But that was disappointing, I think to a lot of people because Macy's, Kohl's, some others have reported much better numbers. I don't think it's surprising that Nordstrom is not up as much because it's higher and more going out kind of apparel. So, that even though that is, that part of the apparel market is getting better. It's still not anywhere back really to where, where it was. But they were up overall 3% on a two-year stack. So, not terribly exciting. The big problem.
Michael LeBlanc 06:47
Yeah.
Steve Dennis 06:48
Though, we're in the Nordstrom Rack division, the off-price division, which was down a lot, and that, that division has been struggling for a number of years. I'm not quite sure what, what's going on there. I know there has been some, some questions of sloppy execution. Neil Saunders, who was on our, our show Fault in the Stores episode, a few weeks back has called them out. I think the overpriced market is in general, probably a little oversaturated. And there's obviously some issues with the supply chain there. But that was the thing that really seemed to send the stock down.
Michael LeBlanc 07:20
Yeah, right.
Steve Dennis 07:20
The digital sales.
Michael LeBlanc 07:21
I think it's the, the I think you call it the overpriced market. Which is kind of a play on words. The off-price market is what, what we're talking about that. That whole.
Steve Dennis 07:32
Yes.
Michael LeBlanc 07:32
Category that and Saks Off Fand all that, but I think, I think that was a double entendre. So, congratulations.
Michael LeBlanc 07:37
Yeah.
Chris Bell 07:37
Yeah. Well, sometimes, sometimes these things happen Freudian slips or whatever. A couple, a couple of other quick things to mention their digital sales were down 12%. But up 20% on a two-year basis, also not as strong as a couple we mentioned but a lot of other retailers have reported. Again, I think this is somewhat the nature of the merchandise categories they're in. But the other thing is that Nordstroms now has 40% penetration. 40% of their business is eCommerce which is about I mean it's very, very high for a player.
Steve Dennis 08:02
That was principally a retail. So, I think there's also just, you know, it's fairly mature. So, there's, there's not as much to go up.
But the thing that I thought was the craziest was after their stock got hammered, and we talked about off mic Warby Parker. Going up on the COVID variant news. Nordstrom is now valued a couple billion dollars less than Warby Parker.
Michael LeBlanc 08:36
Unbelievable, right?
Steve Dennis 08:38
That just seems crazy to me. So.
Michael LeBlanc
Yeah, it seems crazy.
Steve Dennis 08:40
To short Warby Parker, buy Nordstrom, you heard it here first, I don't give stock advice. You shouldn't take it. But if I were going to give stock advice, that would be the advice I gave. And last one is.
Michael LeBlanc 08:53
Worth and by the way as you often say worth every penny you pay for it.
Steve Dennis 08:56
Exactly what you paid for and because it's Black Friday, 40% discount on the advice for the next 24 hours so order today. So, that's the earnings round up.
Michael LeBlanc 09:06
As if Starbucks needs to get even more convenient. I mean next thing they'll just be pouring some coffee down your throat when you just think of having a Starbucks. They have now teamed up with the shop it like you stole it format of Amazon. Talk about that.
Steve Dennis 09:19
Yeah. Well, you know, the old joke that a, I think from the Daily Show that the first Starbucks opened up inside another Starbucks, but they're varying, they're varying this. Yeah, they're, they're testing in New York. A combination Amazon Go Starbucks store. And I think this is actually pretty interesting. Not that combining two different concepts is a, is a totally new concept. I know we've seen this in food service.
Michael LeBlanc 09:46
Yeah.
Steve Dennis 09:46
In particular. And it's not a shop within a shop. It's kind of designed in a coherent way. But what I think is most interesting about it is, is what Amazon Go brings to Starbucks, I think is they bring the technology certainly, but they also bring.
Michael LeBlanc
Yeah.
Steve Dennis 10:02
In some additional day parts and additional product lines. If you haven't been in an Amazon Go store to your audience. Amazon Go, in addition to the walkout technology is, is a convenience store in some respects, but it's very much geared towards the kind of the office worker takeout, lunch snack kind of items. And so, I think that's quite complimentary to Starbucks offering which is, you know, pretty, pretty light. When it comes to.
Michael LeBlanc 10:02
Yeah.
Steve Dennis 10:33
To dinner, lunch, and snacks, you know, it's much more of a morning play. So, I think.
Michael LeBlanc 10:39
Sure.
Steve Dennis 10:39
That day part assortment is, is kind of interesting. And I think from an Amazon Go perspective, certainly a big traffic driver, a complimentary item is coffee and Amazon Go could offer their own coffee, clearly. But having the well known brand associated with it. So, we've got two companies from Seattle, just down the street from each other in Seattle, now just next to each other in one cohesive format. So, we'll have to go see that Michael when we are in New York, but I think it's pretty interesting.
Michael LeBlanc 11:08
We'll pilgrimage to see the latest greatest in Manhattan when we're there for the NRF, which is coming up in, in mid January.
So, I want to take, before we get to our great guests, I wanted to remind folks that if you're listening to this, we have a YouTube channel with some bonus content. And you can see us chitting and chatting about stuff as well we kind of break the episode down into five or seven different episodes. So, if you just want to hear one or two things. Sometimes often our guest interviews are not on the YouTube channel because we just do audio for that we both prefer audio, but there's lots of content there. Our guest today is Chris Bell, CEO of Perch. Great interview, fascinating business model. And let's do some chit and chat with Chris.
Steve Dennis 11:48
Well, welcome to the podcast Chris. We're excited to have you here today. And it's our custom to welcome our guests and then just maybe start off if you could tell us a little bit about yourself and your personal journey. And then we'll, we'll dig deeper into to Perch and what you guys are up to.
Chris Bell 12:06
Yeah, absolutely. Thanks for having me, guys. So, my background, real quick is a Computer Engineer by training, I started my career at GE Healthcare doing product management. I then, I took a pretty sharp left turn and went and I sold copiers and software for a couple years at a local family owned firm based out of Madison, Wisconsin. I went to business school at Carnegie Mellon. And then Bain and Co. hired me into the Boston office back in 2009. I spent six and a half years at Bain, I did about a third of my time there in their private equity group. Working on over 40 transactions. And then the other two thirds of my time, I spent working with retail and tech clients almost exclusively on customer led growth type initiatives. So, after being in sales, I just loved customers and wanted to help companies grow and was lucky enough to be able to mostly work on that type of thing.
Then in 2016, Wayfair reached out to me and asked if I would come and build their North America supply chain, which was yet another interesting turn in my career, because I had absolutely no supply chain experience at the time.
Michael LeBlanc 13:15
Okay, hold on. How did that come about? That, you know, did you know somebody there like?
Steve Dennis 13:20
Supply chain is never going to be important. Why would you want to learn that?
Chris Bell 13:23
Yeah, yeah, so I did. They had hired a couple of other people from Bain. And I went in actually first to talk to somebody on the retail side. And I thought that was a good conversation. And then they introduced me to their COO. And I thought it was just like, hey, meet the COO. He's part of the team and, and then he started telling me about this weaker delivery network thing. And they wanted to, actually they weren't even calling it that at the time. They just wanted somebody to come and build their heavy, bulky supply chain. And I actually tried to leave halfway through that interview. I said, nope, sorry got the wrong guy. I just.
Michael LeBlanc 13:57
I'm in the wrong office. I'm in the wrong office here.
Chris Bell 13:59
Yeah, really? Yeah.
Michael LeBlanc 14:00
I just, I just I just want to drop off the Penske file I'm in the wrong place.
Chris Bell 14:04
Pretty much. And he just continued talking about it. And I think maybe lucky for me and lucky for him. I was actually in the middle of a home remodel. And so, he was saying things like 3PL, LTL. And I was like, I don't know what that means. And then he said, well, let's just talk about the customer experience. And I said, why I know if I know a thing or two about that. And I started to vent about the delivery of my vanity that been broken four times. And he was like, yes, yes, that's exactly it. That's what we need to fix. And so, the short, long story short, they convinced me that really, it was a customer role. And a supply chain was just a means to the end.
But as they thought about their customer experiences, I thought about their moat versus somebody like Amazon. The supply chain is really the most important part of that journey. And one of the biggest touch points with the customer especially at Wayfair where you're delivering heavy, bulky items like a couch, so you actually meet the customer. It's not like leaving a book on your front porch.
Oftentimes two people are coming into your house, entering your personal space, moving things around. And then also, as you think about in three and a half years, we opened 50 sites across North America, 42 final mile centers, 8 sort centers. And there's a bunch of fun, interesting things we did in that time. But one of the most fun was when I joined Wayfair averaged quick to deliver for heavy, bulky items was 27 days. When I left, we were doing two day delivery of head skews. So, basically, our best seller is in 15 metro areas across North America. And as you probably would imagine, conversion was way up when we badged them, NPS, the measure of customer satisfaction was way, way up. Ninety days repeat rate was way up, cost was down about 15%. So, it was fun. It was a really amazing time and an amazing company.
And then I left in 2019 to start Perch. And that was, that was driven by a couple of things. One was James, who was is the COO who kind of talked me into that role, he announced his retirement. And so, I decided that was a good time for me to pull up because he'd been such a good mentor to me. And then I saw this opportunity within Amazon. And this is kind of a popular space now. But back then really nobody was doing this except one other person, one other company. And it was kind of under the radar, which was by itself interesting.
And then it just felt like I guess two things. One, the opportunity seemed really compelling. Because it's big, it's growing, it's really fragmented. It's a space where scale should matter, should help because you think about all the companies that we acquire, they are really small consumer products companies, and scale helps a lot in consumer products. It helps with supply chain and manufacturing costs. It helps with access to capital, access to talent, access to other geographies and channels. You know, 90% of the brands that we've acquired only sell in one geography, in one channel, partially for working capital reasons, partially for administrative complexity, and just access reasons. Amazon's very easy to sell on many other channels are still very hard to get access to.
And the second one, I felt like a perfect match with my background. I've done a lot of M&A at Bain. I've done a lot of operations and supply chain and eCommerce work at Wayfair. And then early in my career building technology. I mean that's a really big important part of what we're building at Perch because.
Michael LeBlanc 14:59
Yeah.
Chris Bell 17:18
The difference between what we're doing and what say, big CP does, like Unilever and Procter and Gamble is (inaudible), Legacy CP is very acquisitive, they buy brands all the time. But they can't buy a one to $5 million brand. Because the way that they're structured, the headcount costs associated with running a brand would make that massively unprofitable for them. And so, and we would be subject to the same issue, right? If we, if we bought a $5 million revenue brand, that was throwing off a million dollars a year profit. And we hired five MBAs to go manage that brand. All the profits gone, right, there's, there's nothing left. And we've just decimated the profitability of the brand. And so, the only way that we can get around that is by building this tech platform that allows us to manage our supply chain, manage our suppliers, manage our pricing, our advertising, our merchandising, our customer service. And so, we're building, we're buying some pieces of it, but a lot of it we're ending up building in house platform to manage and grow these brands after we acquire them.
Michael LeBlanc 17:18
Sure.
Steve Dennis 18:20
So, Chris, maybe it would be helpful, before we get too much into the details of what, what you guys do and how it works, and your strategy and so forth is just maybe and I imagine, you know, part of our audience probably understands, fulfilled by Amazon and the Amazon marketplace pretty well. But maybe you could just kind of give us a little bit of the lay of the land in which you play, and then specifically what it is you're trying to do with purchase, and then we can kind of go from there.
Chris Bell 18:46
Yeah, yeah, absolutely.
So, a starting point that people may not realize is that if you buy from Amazon, about 60%, of the revenue from Amazon's retail business comes not from Amazon, as selling to you as a customer, but actually from what's called a third-party merchant, selling to the end customer. So, 60% of the things you buy, is just Amazon acting as a middleman for something that Perch, for example, would sell and you buy and Amazon, both sells it to you and then fulfills it to you as a customer and handles all the returns and payment and things like that.
And so, that is, is just an astounding stat related to that is Amazon's third party marketplace is $300 billion of GMV, which is essentially revenue in 2020. So, massive, massive marketplace of them connecting buyers and sellers, and just taking a cut of the revenue and charging for fulfillment and ads. And so, to enable that Amazon has what they call FBA, (fulfillment by Amazon). So, we as a seller on Amazon, we send our things in Amazon's warehouse, and they store it and they forward position it. So, that we can get Prime badging so it can get to you the end customer within your same day, one day, two-day Prime Badging.
And so Amazon's created this really amazing engine, where you know I'd say five, ten years ago, if I wanted to launch a consumer product, I probably needed to raise, you know, half a million dollars, at least, because I would have to go buy one. I'd have to buy a whole lot of you know, there's what's called MOQ's, (minimum order quantities). So, for a factory to pay attention to you, you five or ten years ago, you had to buy a bunch of stuff.
And then two; to get somebody to sell it, you would either have to find a retailer and sell through there and pay trade allowances and promotions, or you'd have to set up your own website. And you'd have to buy Google ads, and Facebook ads and all these things that are very expensive to, to sell. Or today, if you Google this, you'll find YouTube videos that say if you want to launch a product on Amazon, make sure you have at least $1,000 in the bank. Anybody with $1,000 can go and source a product from Alibaba or mfg.com, or something like that, and then sell it on Amazon. And Amazon really doesn't charge you anything until you pay for ads, or until you sell something, there's a little bit of storage fees, but they're very, very small.
And so, for the most part, Amazon has millions, hundreds of millions of people every day, that come to their website. And if you want to sell something on Amazon, for example, the first thing I ever sold on Amazon was my business schoolbooks after business school, I just sent my books into FBA. And then money just showed up, you know, a few weeks later after they were old Amazon, right? They, they sell it, they process the payment, they fulfill it, the customer gets it, they're happy, and then you get your money. And so, it's really, really amazing how one; they've streamlined that whole process of finding customers getting them, you know, high intent customers to buy things, and taking care of pretty much everything for us.
And so, what we do is we find products and brands that have been successful on Amazon, predominantly, we have a number of multi channel brands as well today. But typically, we look for kind of 60% or more of the revenue to be on Amazon just because that's still where most of our revenue is and where we're most comfortable understanding the puts and takes of the customer dynamics and the advertising, unit economics, things like that.
So, we find branded products, so we don't buy companies that are reselling other people's brands, or companies that are just reselling commodities. So, you have to have created your own brand, you have to have something that's unique about your product. Has to be selling on Amazon for at least two years, has to be profitable. We look for a number of indicators that customers liked your product. And so, what we call product market fit. And so, that means that you have to have ad spend, as presented revenue has to be below certain thresholds, usually 20% is pretty high. Usually, we like things that are closer to 10% of revenue, has ads, great reviews, high review count, low return rate, low quality rate, issue rating, things like that. So, we look for people that have launched successful products.
And, and we one; we give them liquidity, right. So, several years ago, if you had a successful Amazon business, you just ran it for cash. And then you know, maybe you've got your, your kids to take it over, you just shut it down. And so, we can offer liquidity to those entrepreneurs who didn't have it before. And then we bring it onto our platform, and we try to take it to one; we try to optimize it on Amazon. So, we have pricing tools and advertising tools and things like that. And then two; we take to other channels and geographies.
Michael LeBlanc 23:30
Now, is this a business model that you in effect created from an ecosystem from within an ecosystem? Was this a model that already existed that you're working on perfecting? Like tell me a bit more about the origin story, I guess of the model itself? I guess it's all predicated on FBA and Amazon. Right. So, I, I also suppose there's some inherent, perhaps some inherent risk about being so attached to a platform like that. Talk about that for a bit.
Chris Bell 23:56
Yeah, for sure. I mean, in a bunch of ways, this isn't that new of an idea. It's just in a new space. So, when I was at Bain, one of the most popular and also, whenever we did these retrospective studies, at Bain on all the private equity transactions that we've been a part of. The role of strategy typically was one of the highest returning was one of the best strategies for acquisition. And so, people have rolled up dental offices and physical therapy clinics and steel mills, right. For, for as long as business has been around, people have tried to acquire businesses, put them together and.
Michael LeBlanc 24:33
Consolidate markets things like that.
Chris Bell 24:35
Yeah. So, it's a, it’s a kind of a tale as old as time. And so, so yeah, so it's applying a similar business model to, to this space, which in a bunch of ways somehow got to $300 billion in revenue, and nobody really noticed, right? Typically, many of these other spaces where people are rolling up companies are not $300 billion market spaces and are not growing 30% year over year, and that's and we're just talking about Amazon. If you think globally, this marketplace concept is happening in South America on Mercado Libre, happening in India with Flipkart in, in Japan with Rakuten, and South Korea with Coupang. And so, this is, this is happening in a lot of places. And it's growing pretty quickly.
And so yeah, so it's, it's not a new idea, but it's a new space. And there's new challenges with these, with new spaces. And that, this is, you know, when I was first looking at it, I went to a conference in New York and I met a few sellers, just like a seller conference. And, and one of them described it as the simplest, most complex business in the world. Which I think has turned out to be true in many, many ways. And it's simple, because a lot of what I just talked about, in theory, you don't have to attract your own customer, Amazon's attracting the customer. A lot of these businesses, especially the smaller ones really make most of their money from one or two products. We have acquired a number of bigger businesses that have more of a product spread. And so, you could say, hey, it's a one or two product business one channel, one geography, how hard can it be? But when you get into it, you know, you're, you're moving physical goods around the world, you're sourcing from Asia, you're dealing with tariffs, you're dealing with international ocean, you're dealing with import in the US, you're dealing with 3PLs in the US. You're dealing with Amazon, who is an amazing partner in a whole bunch of ways, but also an incredibly difficult partner.
Michael LeBlanc 26:27
Well, I was going to ask you, I was going to ask, dive into that a little bit. I mean, it is, was famously said, ‘Your profit is my opportunity’. It feels like there's a lot going on here attached to them that there have they not, kind of saying, hey, you know, it's nice that there's a big ecosystem growing up around us, but maybe there's an opportunity is that, is that a concern? Or you think that's just they are going to create a marketplace and other things that grow up in and around it? Or are, just part of that, you know, their flywheel in a different direction?
Chris Bell 26:56
Yeah, I mean, I think there are a couple of ways to think about it. But the main one, and we have, as you might expect, being in a business that sells mostly on Amazon, we have done our best to talk to people at Amazon, and formerly at Amazon, and, and make sure we understand the lay of the land. And really, if we do our job, the right way, which we try to, and I can tell you more about what I think is the right way. But essentially, like if we, we sell great products, have great customer service, have great pricing, try to drive cost out of my supply chain, take these products that are selling well and take them globally on Amazon, and also other channels. That is helping their flywheel, right?
They're, while Amazon is trying to do is serve their end customer the best. And the way and the big way that they do that is by having great products that people want to buy, have those products be in stock at great price points with great reviews, good customer service, all the right safety and compliance documentation. And so, for sure, are they going to try to take a little bit more of our profit pool over time? Undoubtedly, they absolutely will.
But we also have this interesting symbiosis, where they are very clearly moving from first party to third party, right? They're realizing that when you have hundreds of millions of people who visit your site and buy things, if you could either take that inventory risk yourself, or somebody else could take that inventory risk for you. Why not have somebody else do all the hard lifting in terms of product launches, buying the stuff, floating the capital wallets, in transit, and then taking the selfie risk.
And so, pretty clearly with their actions, they've let you know, 10 years ago, third party sales on Amazon were what like 2% of sales. Now they're 60% of sales, 62% of sales. And so, this is how they're driving their deep assortment and how their, their success model is unfolding. And the consistent theme we've heard in the conversations with people, what both within Amazon and formerly at Amazon is one of their biggest areas of focus right now is high quality sellers and high-quality products. Because if they get known as a place where for example, there's lots of fake reviews, which I know has been news articles about and or, poor quality products and high return rates. That's when they start, end up start to lose their end customer. Because the end customer wants, they don't want to shop around, right? They want a great product and they want a great price. And so, I think as long as we continue to invest in our business, it's, it's a flywheel that kind of adds on to theirs.
And then we just got to be faster than the, you know, the there's, there's a law of diminishing returns where if they consume too much of the profit pool, people will just stop launching products, right, like the entrepreneurs who we are acquiring, are launching on Amazon because they can make really good money launching on Amazon. And if suddenly, there's you know, only a 5% profit margin to be made. They'll go other places, right? They'll.
Michael LeBlanc 29:53
Sure.
Chris Bell 29:54
And so, there's a, there's a balance and, and also with our scale and our ability to pull out costs and drive in stock and things like that, we should be able to, to stay on our front foot around that.
Steve Dennis 30:06
So, tell us a bit more about, I guess, both how you differentiate yourself from the competition? Because certainly there are other players, I know you've got at least one big competitor, which I think is attracted a fair amount of capital. So, I'm just interested in how you differentiate yourself. But more specifically, if someone, a brand is thinking about working with you, what's, what's the value you get? How do you drive those, those synergies to the entrepreneur and across your whole product portfolio?
Chris Bell 30:35
Yeah, yeah for sure. So, there's two. You know, one of the interesting parts about our business is we're basically running two businesses within Perch. One, is I called, I call our B2B business, which is our M&A business. The reason I call it a B2B business is because I tell Nate who runs that our M&A team, that his number one goal is to get NPS of 10. We want every seller who sells to us to say, to tell all their friends that Perch is the only person that they should talk to. And that's actually been working, we have a really high referral rate. And so, we try to be fair and transparent and quick and know what we're talking about and be very knowledgeable.
And so, on that side of the business, that's where we compete a little bit more directly with these competitors is on the acquisition side, because there are lots, we think there's 10s of 1000s of sellers that fit our criteria in terms of having, you know, profitable business, high quality product, great ratings, and reviews, product market fit all the things that I mentioned before. And so, it's not like there's 10, and we have to like fight tooth and nail to get those 10. There's a, there's a pretty deep and wide set.
But still, every year just like any small business ecosystem, 100% of people are not selling this year. So, every year only a certain percent of people decided to sell, because selling your business, your baby is a very personal thing. And maybe somebody can tempt you with enough money. But, more often than not, it's a, it's a life decision, right? I'm tired of working this hard, or I just have my first grandkid. Or, you know, just want to move to Florida and relax for a while or so a bunch of people want to start the next business. They say, ‘Hey, I've gotten to a point where I feel like this a little bit more steady state, and I want to take this money and put half in savings and go start my next thing’.
And so, how we run on that side is twofold. One, as I mentioned before, is just being really transparent and really fair and really thoughtful with the entrepreneurs. And this is a really big life decision for them. And it's the biggest financial transaction in their life, typically by a very wide margin. And so, being really transparent about how we think about businesses, how we value them, as we go through the diligence, keeping them along goes a long way with them.
And then the second piece is showing them a little bit of the magic sauce, right showing them what we're going to do with their brand, why Perch is the best place for it. Give them examples of how we've taken other brands and growing them either through product launches, or new geographies and new channels and things like that. So, they can see that your Perch is a great place for their brand. So, that's on the B2B side on the M&A side.
On the B2C side. You know, there's, there's a mix of two things that I would say at a very high level. One, is we have the saying that actually I heard from somebody relatively senior at Amazon that he said retail is detail, right? And we've, we've kind of adopted that saying within Perch. So, one side of the magic sauce at Perch is retail is detail. And so, we get really maniacal about making sure that every listing we have is great, right? It has great photography, has great bullets, has a great title is, is kept up to date, daily and weekly. In terms of the latest information, we're responding to customer questions. We're, you know, we're getting all over any customer issues if they got a broken product or something like that, making sure we refund them or send them replacement. And so, there's a bunch of just day to day, stuff we need to do to be great.
And then the second is, we have this really cool and interesting information and data advantage that we can use to be great at things like pricing and advertising and promotions. And so, because we're running lots of brands, I think we're running at a well over 60 brands at this point. We can do pricing tests and advertising tests and promotions tests and merchandising tests at a scale that many other people cannot. And we can watch and measure what happens. And we're also kind of ingesting not just our data, but our competitor’s data daily. And soon we'll be doing it pretty frequently intraday, and so we can also see how competitors are pricing and deals that they're in promotions that are running and things like that.
And so, as we continue to grow and expand our ability to understand what levers make the most impact in a data driven, scalable way and then apply that across our entire portfolio with a click of a button. It's really powerful and really interesting. It already is that continues to build on itself, which is fun.
Michael LeBlanc 35:07
So, as we think about and you know, great conversation, it's a whole space Steve and I were chatting about this. And it's a whole space that's, I wouldn't say new to us. But it's very interesting to us because in and around the, the ecosystem. Marketplaces seems to be having their day right now we, you know, we started talking about supply chain, the supply pain that's happening. And I was speaking to Sucharita Kodali yesterday from Forrester, and she's saying this is where marketplaces can really win because of this distributed product model. That's not all in the same place. And it feels like the marketplace momentum is just beginning and it's going to play a pretty interesting role time to shine. Do you agree?
Chris Bell 35:44
Yeah, absolutely. It does. This feels like the first or second pitch of the first inning. And I agree, marketplaces broadly, are, are gaining a lot of steam. And there's a lot of ecosystems building around them that's going to help reinforce this. And so, it's a, I think the next decade for eComm and retail will be really, really interesting. And I think we're just getting started.
Michael LeBlanc 36:09
It's a, it's also feels to me like it's also going to be a flight to quality, right? I mean, what you've been describing as well run. Your running well run businesses, you know, all the moving parts around everything from, you know, treating the customer right to innovative products to responding to customers, as opposed to the kind of opened the door one day, close the door the next, right? So, it feels like in marketplaces, some days it can be like that. But it feels like there might be a flight to quality if we could put it in the kind of the bank consulting jargon.
Chris Bell 36:37
Yeah, there you go. Yeah, I agree.
Steve Dennis 36:40
So, what's next, Chris? Coming up on our time here, but I'm just curious, what's, what's on the horizon? Where do you hope to be in a few years time? And what challenges are you hoping to overcome other than Amazon trying to squash you like a bug, which I'm sure won't happen, because they would never do such a thing. But just, you know, on the off chance that might be on your radar screen. But what's, what's next for you guys?
Chris Bell 37:04
Yeah, I mean, we have been chugging away for, for a couple of years now. And I would say most things are unfolding, within, you know, a few degrees of how we hoped they would. So, I think there'll be a lot of the same in terms of finding high quality brands, bringing them onto the platform and expanding them into new (inaudible) channels.
I would say one thing that we're doing now is a little bit more of a data driven retrospective now that we have all these brands, and our playbook generally has worked quite well. But it doesn't work on every brand. And so, making sure we understand the winners and losers and what we could have learned pre acquisition that can make us better and better over time about buying brands that work well within our platform. And so that'll be that's, that's kind of a never, and we've been doing that and we're just continuing to do it in a more data driven way. And with more just time under our belt running them.
And then you know, we're really early days on a bunch of really exciting and interesting things in terms of you know, we have a kind of feels like weekly expanding list of brick-and-mortar retail partners that are interested in working with us and taking on our product portfolio. And so, really excited that to see lots of those relationships starting, as you guys probably know, it takes several years for a brick-and-mortar relationship to kind of reach full potential. And our, and our product portfolio will continue growing in that time. So, I think we will continue having expanding conversations with them. But it's been really honestly, I'd say two years ago, that was an area I didn't think would be a real expansion opportunity for us. And so, I've been surprised how much they've been interested in what we're doing and the products we're selling and the brands we're selling.
And then you know additional geographies. Europe has been we've had some success in Europe but hasn't been as much as we'd like. Because just you know selling in Europe is tough. And all the compliance and all the, all the moving pieces.
Michael LeBlanc 39:05
And language issues. Yeah.
Chris Bell 39:07
Yeah. Language and.
Michael LeBlanc 39:09
Packaging, yeah.
Chris Bell 39:10
Yeah, yeah exactly. Yeah. You know,
Michael LeBlanc 39:13
I'm a Canadian. So, I deal with, and I've been on the other side, so that you know, the number one question, as the merchants here in Canada, we ask is do bilingual packaging? And they're like, ‘What?’
Great conversation it was super interesting. And they have Steven, thanks so much for joining us. We wish you much continued success. Now, if somebody is listening, and they're like, want to learn more about your business, who knows? Maybe it's an entrepreneur listening, where should they go to find more information and get in touch?
Chris Bell 39:38
Yeah, they should go to perchhq.com
Michael LeBlanc 39:41
Keep it simple. Are you a LinkedIn guy?
Chris Bell 39:44
I am on LinkedIn. Yeah. So, you can look me up on LinkedIn as well. And have you check there.
Michael LeBlanc 39:49
Wonderful, wonderful. Well, once again, thanks for joining us. It's been a real treat, getting to know you and again, wish you continued success and, and have a great rest of your day.
Chris Bell 39:58
Yeah, thanks, guys. It's been fun.
Michael LeBlanc 40:00
If you liked what you heard, please follow us on Apple, Spotify, Amazon Music or your favorite podcast platforms. So, you can catch up with all our great interviews subscribe. So, that just automatically shows up. Tell your friends and, and, also in new insights and new episodes will show up every week. So, tell your friends because that will help us share the word the good, the good wisdom now. Be sure and check out and be sure and check us out on our new YouTube channel. Not so new anymore, we got a couple episodes up there and just look for Remarkable Retail.
Steve Dennis 40:31
And I'm Steve Dennis you can check out more of my work at my website, stephenpdennis.com. Or on Forbes or on Twitter. And please check out my second edition of my book, ‘Remarkable Retail: How to Win and Keep Customers in the Age of Disruption’. Available just about everywhere books are sold.
Michael LeBlanc 40:51
And I Michael LeBlanc, Producer and Host of The Voice of Retail podcast and a bunch of other stuff. You can find me on LinkedIn. Learn about me on meleblanc.co.
Alright Steve, great episode. Look forward to chatting again. Next week. Be safe and have a great rest of your day.
SUMMARY KEYWORDS
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