#442 - Inside the #1 Amazon Seller in the World: Rob Hahn Reveals the 3 Secrets to E-Com Domination

#442 - Inside the #1 Amazon Seller in the World: Rob Hahn Reveals the 3 Secrets to E-Com Domination Kevin King: Welcome to episode 442 of the AM-PM Podcast. You know, there's one seller out there that globally on Amazon is the biggest seller in the world and I have the chief operating officer on the podcast this week, Rob Hahn. We're going to talk about what it takes to actually be the number one seller in the entire world on Amazon. His system, he's got three parts to it of why they're so successful and some opportunities where you actually might be able to work with them as well where they could really blow up your brand. Enjoy this episode with Rob. Unknown Speaker: Welcome to the AM-PM Podcast. Welcome to the AM-PM Podcast, where we explore opportunities in e-commerce. We dream big and we discover what's working right now. Plus, this is the podcast where money never sleeps. Working around the clock in the AM and the PM. Are you ready for today's episode? I said, are you ready? Let's do this. Here's your host, Kevin King. Kevin King: Now sometimes you know on the am-pm podcast we have some really interesting guests, but today I think we have an extra interesting guest You know everybody's always out there monitoring looking at you know talking about Chinese sellers And how they're crushing it, and they're all the top sellers, but actually most people don't realize the number one seller on On Amazon, globally, in the entire world, is actually based in Utah. It's a company called Pattern. They do their own show. They're huge. I don't even know the exact number. It's in the gazillions of dollars, I think, way up there. Today, we have the CEO, the Chief Operating Officer of Pattern on the show. Welcome, Rob. Glad to have you here, man. Rob Hahn: I'm glad to be here. Thanks for inviting me. Kevin King: For those that haven't, that have been living under a rock and they don't know what Pattern is because you guys go under a lot of different names and so they might not actually know the underlying name. What is Pattern? Rob Hahn: Yeah, so Patterns, we call ourselves an accelerator, right? There's other accelerators in the space. We kind of coined that term and that concept of working directly with brands. So we buy and sell inventory, sell in marketplaces globally. So we work with brands directly in a very, very close relationship. We really are pretty obsessed with that relationship, but we take their inventory, we buy that inventory, and then we sell it kind of everywhere. But we do everything kind of soup to nuts, right? So really, truly end-to-end partnership, ranging from fulfillment, logistics, through the marketing. We've got a bunch of... We're really at our core a technology company. We are using and leveraging technology, physical hardware, and software in our fulfillment centers, and really an end-to-end solution for our brand. To be an extension and to just really grow internationally and domestically here on all marketplaces. Amazon is our biggest marketplace in the US. Obviously, it is the by far biggest. Yeah, so we're an accelerator. It works with brands and really just helps them hit the gas. Kevin King: I just want to make sure people that are listening understand the difference. It's not, he didn't say aggregator. He said accelerator. So you're not actually buying brands like the Thrasio and the other model. Brands are coming to you and maybe they tried it themselves or maybe they're in some other channel and they just don't want to mess with the Amazon channel. So you take them and put gas on it, basically. Rob Hahn: Yeah, I mean, there's lots of reasons that somebody would work with Pattern or somebody like Pattern. Hey, I kind of outgrew my bridges. I started really well. I've created a great product and that product did really well and now I'm kind of maxed out. My team of six people or whatever that I've got on my team today, they don't have the fulfillment expertise. So they don't have the marketing expertise. So I don't have the dollars to go build the tech that's required to go really be successful in the marketplace. So I have a great product, but my team is not one that can actually go blow up on the marketplace. I don't have the knowledge and the expertise. So if somebody has kind of gotten to that point, a lot of times they're like, Hey, how can I get? We're here to help you grow bigger and grow in that marketplace without a massive fixed expense. And that actually is where we come in, where we kind of take that and have that really grow. We do let fewer cold starts do all in the marketplace. We really take people that have already a good product and a good idea and a good team. And we, as you said, pour the gas on. We also work with really, really big brands where they're like, hey, we're so big sometimes that we can't, we're so segmented and siloed. We don't have this expertise We're able to really give the effort and the time and be as agile as we need. We work really well with brands like that too. Kevin King: So I just want to make sure I understand the process. So if I'm, let's say I started selling on Amazon in 2018 and I've built up a pet brand and I'm selling some dog treats and I'm doing, I don't know, $5 million top line per year. And I'm like, like you said, six people and I'm like kind of tapped out. I'm kind of getting, you know, this is getting beyond my expertise range of logistics and handling and growing and, you know, because there is a difference between, it's easy to get to a million on Amazon. It's a whole different mindset, a whole different structure and everything, the bigger you get. I have a few options. One is, to heck with this, I'm going to go sell real estate and not do this Amazon business. Another one is, I'm going to sell to an aggregator and take some chips off the table. Hopefully, in today's world, that's harder than it was and not as lucrative as it was. Or I'm going to say, you know what? I want to retain ownership of this thing and maybe I want to sell this in five years. But right now I'm at five million, but I'm going to go partner up with these pattern guys. Let them blow me up to 20 million, retain the ownership. Correct me if I'm wrong on this. Retain the ownership and then maybe look at options of selling it five years from now for a much bigger multiple. And these guys take a lot of the headaches off, a lot of the growing pains. They got the experience. They paved the road for me. Is that kind of how it works? Rob Hahn: Yeah, I mean, I think there's kind of two... Yes, you're very... That's a nail in the head kind of situation. I mean, really, there's a couple options, right? Like I'm going to grow this thing that I want to sell it or, hey, I'm close to profitable today. I don't want to add to my fixed base. I don't want to go hire 20 people to go accelerate this thing. If I keep my cost base the same and keep the same profit percentage, but I get more volume on top, right, then I'm leveraging what I've already got and I get to keep more dollars and I become profitable or more profitable over time and then I don't need to sell it. I've just now gotten something that's paying me a check every single month. So it's kind of one of those two options, but you're exactly right. It's full ownership. We don't do any of that. We don't buy companies. We're buying inventory just like Amazon would in a 1P relationship. We're buying that, but it's a lot closer partnership. There's a lot more control. Partnership is the right word, right? We actually say like, hey, what are we trying to do together? What target do we have together? Let's go chase that. Let's market share or chase that top line number. Let's figure out how to optimize and maximize your advertising. Let's take away the complexity of your logistics. It really just, like I said, it unlocks what that brand can do in that marketplace. Kevin King: In this example that I gave where I've got my dog brand of 5 million, do you take over my listing and it becomes inside of your pattern? We've got a massive wholesale network. Am I still running on my listing and you're managing it? How does that process work? Rob Hahn: We would go under our accounts. There's some advantages to consolidated accounts for lots of reasons. We work with lots of brands that transition them off of their account or wherever that is. They're working with an agency or another seller or whatever that would be and it comes over under our accounts, but it's fully managed by us. The ASIN either exists or we need to create the ASIN or whatever that would be, but we would take over We would bring the inventory into ours and we'd set it up in our product catalog. We would run and create a new listing, but we do everything. We do all the content. We do all the pictures. We do all of the everything associated with running that listing and managing it from then on. Kevin King: So instead of me getting a royalty, I'm basically turning it over to you. I still own it. I might be sitting on a board and have a little bit of say, but maybe you can override me because you've got the expertise. If I was wholesaling to Chewy in this dog example before for my dog treats for $5 a bag, I'm just going to make an agreement with you to wholesale them for, I don't know, whatever, $6 a bag. But then you're going to take care of all the costs, the PPC, everything above that, because it's all in your account and you're going to blow it up. So at the end of the day, maybe I'm making, in theory, less on paper per unit, but I'm making more because of the gas you put on it. Is that a fair way to describe it? Rob Hahn: Yeah, I mean, sometimes it's not less, right? It really depends on the product. It depends on what you're doing before. Sometimes, for example, like, you know, I lead our global logistics and fulfillment. Sometimes our logistics and fulfillment is so much cheaper that sometimes it's like actually for the same exact price, we can just buy it at your, you know, your wholesale price or what you were selling it at. And sometimes we can just give you the same check. We're just going to, you know, double your business or whatever that might be. Kevin King: You make your margin off the economies of scale and your efficiency on your side. Rob Hahn: That's right. And the growth. That's exactly right. So it's really hard to do. I mean, we send in more to Amazon than anybody in the world from a fulfillment perspective by many times over. And so we've been able to invest. I personally have many, many developers on my team focused on fulfillment tech alone. I've spent millions of dollars on hardware and warehouses. You can't compete with that with a small seller. My variable cost per unit is gonna be dramatically lower than anybody else out there by a good distance, right? And my transportation to Amazon's gonna be faster because I have density and cheaper because I have density. We can lower a cost structure so much that This consolidation actually allows us to basically make the money on the savings that we can give to a brand while we're accelerating that brand. It's this like flywheel that keeps giving back as we continue to grow it. Kevin King: So do you go out and read because there's a lot of people at least in the in the FBA 3P space that don't they've heard that your name but they have no idea that you do this. They don't understand this at all and I think this podcast is gonna open some eyes on several fronts. So do you go out and recruit? Do you guys have an analytics team that's like, oh, this would be a good brand that would fit into our portfolio and you go out and you approach them or do people come to you and say, hey, I'm at my wit's end here. I've done what I can. Please help and help me take this to the next level. Rob Hahn: Yeah, both. There's lots of brands that find out about us and see us at a trade show or see us online or whatever that might be and they'll be like, hey, I wanna go faster. I wanna grow and so I'm gonna reach out. So you can go to pattern.com and contact us and do it in more of an inbound motion. But we also, we've got something like 37 trillion data points from Amazon transactions, both ours and other people's. We're a data company, tech company, like I said. We're getting an enormous amount of information from Amazon on products, everybody's stuff, everybody's products, every customer experience that we possibly can, for example. And we've got some that we're like, hey, that brand That product is in the strike zone. It could be so much more. If it was optimized in this way, it should be getting more market share. We do market share analysis across multiple categories and so we can go outbound and say, hey, your pet food, you should be doing better. Let us take a crack at it. So it's both. Kevin King: That's interesting. So how did Pattern actually start? Did it start as a seller and he just evolved into a tech company or was it a tech company first that said, oh, there's an opportunity in Amazon or how did it start? Rob Hahn: Yeah, it really was a seller. So the founders, Dave and Mel, they like out of a garage basically were like, I try to go sell some stuff and see what this Amazon thing was just over 12 years ago now. And they started selling random stuff. And then they kind of got in the VMS space and started getting some more kind of exclusive or semi-exclusive contracts with brands. And then they brought on and they're like, hey, this is really hard. And so they built some of their own first technology to say, hey, how do I help manage my own stuff better? And they're like, this is super hard. I bet you other sellers could benefit from Having software. So then it was initially like, Oh, how do we go? Maybe, maybe it's a software solution is the right option. But then it was like, well, actually, why don't I just buy the stuff and, and I'll, I'll take on all the complexity for you. You just get the benefit of it. And that's where it really started kind of spinning for brands where they're like, you can just send me a check versus a service model where, you know, I'm charging a fee where you, you know, I can send you an invoice or I can send you a check. And like a lot of brands like to get a check, right? So it kind of shifted from, okay, how do I be a really good seller to how do I then use technology and leverage that technology to build scale, which then lowers a cost structure, which then makes it more attractive for a brand to come in and work with us. We're certainly not the cheapest solution out there, and I don't think we're trying to be. It is definitely something where brands get very, very strong results from us, and we've gotten a very good track record of growth with brands. That growth from seller into a power seller, if you will, that's powered by technology, took multiple years, but really in 2018, really started hitting the gas, and we've been on a really, really strong growth trajectory since. Kevin King: When I come in, if I work with you guys, I got my six people. I hit my five million, I say, Pattern, take it. What are my six people now doing and what am I doing? Rob Hahn: Well, it depends on what they were doing before. Generally, it's not like there's nothing anymore. It's still a partnership. You still have an inventory person, but it's now we're doing the math and saying, hey, we want 100 units. What are you seeing? What's your demand like, right? They get to focus more on building the brand than the execution part of being in the marketplace. So it varies brand to brand. Some brands want to be more involved in creating content, for example. Some are like, hey, that's not our expertise. Some want to be more involved in forecasting. Some are like, I have no idea. So it really depends on where your expertise is, your brand. We come in, we fill in the gaps. And so it allows us to really then figure out like, okay, where did, where do you have gaps? Let's fill those in and let's grow from, from there together. Like that is our genuine approach. Kevin King: I think a lot of people that get into, especially on the FBA side that saw a YouTube video or they took maybe the Freedom Ticket or something, they don't realize the complexity that this business has become. I mean, in the early days, 2013 when Pattern started or 2014-15 when Amazing.com was blowing up and that's when Helium 10 started around 2015-2016. It was much easier. You didn't have to be, yeah, you still had all these different components of logistics and inventory and this and that and the other and ranking, but it was a whole, much easier and a whole different game. Now it's become so competitive and so much more refined. There's so much more data. In 2015, one of my products is a seasonal calendar and I would sell 400 a year on Amazon in 2015 during the fall season. Now, I sell 400 a day. That's how much Amazon has grown and the logistics and just the size and the sheer magnitude. To scale, it takes serious systems and serious know-how. And a lot of money. So who's funding this when I come to you with my little pet brand? Am I still funding it on my side? Are you helping out on the purchase order side? Or how does that work? Rob Hahn: Yeah, so the mechanics of, you know, when somebody, when a brand works with Pattern, we end up buying the product, right? So inside that is almost everything that's going to be required to run and operate and sell that thing. Generally, you know, we work with brands on advertising comes from the brand usually, right? Like they're the ones that are saying, hey, I want to grow the brand because it's a more holistic marketing strategy. It's not just here's what it is on Amazon, right? Generally, it fits into a more holistic marketing strategy. So you actually don't want to segment it and leave it to us, right? It's more of like, hey, we're going to spend dollars to go do that thing, but we don't do an upcharge, for example, on... We're not a marketing agency. We buy the product, running those ads are included, but the dollars to actually like, hey, I want to spend X number of dollars or X percentage of my top line sales, that comes from the brand, but then we operate that budget using our technology. Kevin King: You buy it on net terms? Rob Hahn: Yeah, we buy it on... Kevin King: Yep. And so the brand's got to have the capability or the connections to actually finance it. It's just as if they were wholesaling this to Tom's Sporting Goods or something like that. Rob Hahn: That's right. Kevin King: Okay. And then your primary focus is Amazon, but you also do Walmart and other channels, Chewy and other channels, and retail as well, right? Rob Hahn: Yeah, so, I mean, we actually are pretty expansive across, so, like, we operate, we've got offices in London, in Australia, got a warehouse in Poland, we are a pretty big, you know, T-Mall and Pinduoduo, like, we've got quite a bit in China, we got an office in Guangzhou, we got an office in Hong Kong, got a decent presence in Shanghai, so we've got very much a global presence, but even in the U.S., like, we're a large Walmart seller, On the three-piece base. We also have other products like we've got a PIM Dam, a PXM where you can actually connect content and do syndication. And actually also from a logistics and fulfillment side, we're more than just our own stuff. We built all this technology. We spent millions of dollars in hardware, software, and now we actually sell 3PL services. So like I'll do, I sell a bunch of stuff on Shopify about our own product, for example, and Amazon. But if you have your own seller account, I can actually combine your inventory. I can create your shipments. I can label your product. I can do carton labeling and pallet labeling, et cetera. And get it for transportation consolidated as a 3PL. So we'll do D2C fulfillment. We do prep. We sell just our transportation called middle mile. So we do services also on the side in some scenarios. But the best way for a brand to accelerate is still through that main buy-sell motion where it's a more all-inclusive type of offer. Kevin King: So what level do I need to be at if I want to use your 3PL services or to come to you to put gas? Do I need to be, you said earlier, you only want to really work with some proven stuff. So do I need to be at a, or where you see a major gap? So what's just a baseline? I know it's going to vary by situation, but just as someone listening, Just starting out, they're not for you really. Someone that's kind of proven that there's a market demand for this and you can go in and go, wow, you're not exploiting this. That's the idea. So probably someone that's already hit like a million dollars run rate. Yeah. Rob Hahn: I mean, like I think if you're in that range where like you said, like if you're, you know, We're doing seven figures and you're like, yeah, I think I can do this thing or whatever. As you start to get to the point where you are like, hey, there's actual demand for this. I'm not just buying and selling arbitrage, but I've built a product and that product has a place in the Amazon ecosystem or the Walmart ecosystem or bull.com, whatever it is globally. I have traction. Now I don't know what to do with myself. That sometimes is when people come to us. Then yeah, absolutely. If you are at that level and the 3PL side, what's cool, I mean, if you think about it this way, if you're under that mark, we could actually service from the 3PL side. When you're smaller, that is a much smaller entry level because it's like a lighter touch for us, right? It doesn't require as much but if you are hitting it, you know, some people will come in the 3PL side and they're working with us on 3PL side. They get big enough and then we can transition into like that full kind of acceleration model, which I think is really attractive to brands. Kevin King: You got your start in the e-commerce by actually working for the man himself, Amazon, right? Rob Hahn: I did, yeah. Yeah, so I was eight years at Amazon. I started as an intern there back like, I'm going to say early Amazon days. Like all my swag, I kind of kept swag from like each year Amazon does a lot of like t-shirts and stuff. But my stuff, it's like amazon.com. I remember when I came back, I had my offer from Amazon and I came back to my college dorm and I was like, I have an internship offer from amazon.com. And my neighbor or my neighbor, my roommate was like, what's Amazon? This is a college student. I look like I'm 15, but I'm older than that, but this isn't that long ago. A lot has happened in whatever 15, 16 years since that happened where my own roommate was like, I don't know what Amazon is. This is a college student, right? That's unheard of to think about today. So it was pretty early on in the Amazon years. Yeah, it was eight years. I started as an intern and then I got into the robotics space early on with Amazon as they acquired Kiva in 2012 and then started launching buildings. And I had a really cool opportunity to lead very, very large, very, you know, awesome teams. And a lot of people took bets on me very early in my career. But yeah, I ended up leaving Amazon as like, you know, executive level, director level, running large Amazon Robotics Fulfillment Center. So like these 6,000 person, millions square foot monstrosities. I was in Baltimore when I ended my career at Amazon. But yeah, then I joined a startup, a very, very small startup called Whitebox. And I was there for Four years and we ended up selling off the fulfillment side of the business to UPS and I joined the Pattern team about two and a half years ago now. So I've been in this ecosystem the entire time but I was inside Amazon at a really cool kind of like hockey stick growth time for about eight years. Kevin King: Amazon's distribution system is amazing. They're a projection system where they project. I've always told people where Amazon comes in and says, oh, we recommend you order 3,207 units. I'm like, ignore that is what I tell everybody because they have no clue what you're doing on social media or what you're doing on this. So there's some of their projection stuff and some of their tech is pure garbage. But a lot of it is just freaking amazing. And when it comes to the fulfillment side of things and the distribution, man, if you just sit back and just sit for a minute and just Sit and think, go to a park bench for 15 minutes and just listen to the birds and just think about how they freaking do this. It's an amazing freaking well-oiled machine. Whoever built this freaking matrix and this maze, and you're one of them, you said, back when they went to robotics, it's brilliant. People are always like, well, Walmart's gonna catch up to Amazon. No, they're not. Walmart has distribution centers, they got stores, they have some advantages on their side, but that's why Amazon bought Whole Foods. But there's the tech side on Amazon, the logistical side is crazy. I mean look at now, they're doing What, 70, 80% of their own delivery. Four or five years ago, it was UPS and FedEx and the post office doing everything. They convinced the post office to start delivering on Sundays. I remember the post office showing up at my door on Sundays eight, nine years ago. I'm like, what the hell is this? It was Amazon convincing them to do it. Now, Amazon is doing it themselves and UPS just finally threw up their hands back in February and said, we're out. It's an amazing freaking system. Unknown Speaker: Can you talk a little bit to that? Kevin King: A little bit about the robotics and how it evolved and where it's going and what a competitive advantage it is. Rob Hahn: I think it's probably more amazing even than it seems. It kind of feels like magic sometimes. You're like, it just works. It's not magic. It's a lot of math. It's a lot of logistics. It's very hard to do. I was pre-Amazon logistics. This is when FedEx did a lot, OnTrack. UPS was doing a giant percentage of the deliveries at that point, early on in my career at Amazon. The interesting thing, you said Amazon is so much farther ahead than Walmart than you think. They're so disgustingly far ahead of Walmart in so many ways. I think Walmart actually has a really cool advantage In some ways where they're like, you know, it's like over 70% of the US population is within 10 miles of a Walmart, right? Like Walmart has this ability when and if they go chase that thing the right way. They're so siloed, right? Like to really make the e-commerce experience. But right now it's so fractured. They're like, they're working, they're investing a lot. Like I do think it will be better, but they're still like at where Amazon was in, I don't know, 2010, 2012. Like they're very, very, very far behind. Amazon did this thing, right? Where they made a transition from All the money's in transportation. If you think about the total cost of fulfillment, if you think about e-commerce, why Amazon won. If you go back to dot-com boom and then bust time frame, there were lots of e-commerce companies. It's hard to really grasp and understand, but there were a ton of e-commerce companies. Amazon won for a couple reasons. One of the major reasons is because they owned their own logistics. They didn't use 3PL. They owned, because they tied the logistics And fulfillment, so much of the customer experience that it differentiated them from so many of their competitors and peers at that time. And that has become the common strength. That prime tag has nothing to do, it's a marketing wrapping around logistics and fulfillment. It's trust that comes from a fulfillment operation. People don't really, I think, think about it. Today, if you say, how many days does the prime tag mean? People still say two days, but that's no longer what the Amazon consumer expects. One day is a huge percentage and you see a giant lift. Kevin King: I want it at 4 a.m. tomorrow. Rob Hahn: Exactly. Same day, sub-same day, next day network now is a huge percentage and it's proven. You can look at it a hundred different ways. You have a massive conversion lift if you can get it faster. And so what Amazon has basically said is transportation cost is the highest cost and it's also tied together with speed which improves my ability to increase conversion. And so they've built this entire network out to try to get it closer to the end customer. Along the way, sellers have taken on a ton of pain here, right? I guess we could talk about the inbound network in 2024 and how disastrous it's been with placement fees and everything else, but if you focus on the outbound network, Amazon made, if people think about robots in an Amazon environment, people are like, and I was there before, right? When I went to Amazon, there was very little automation, very little automation, very manual processes back in the day. Then they like accelerated very fast and then they got robotics. But the robotics they have invested in first have very little to do with like manipulation of items. It's not about people replacement. It's actually about transportation. Let me tell you why. My building that I was in initially could hold X number of units, like millions and millions. They're big buildings, million, 1.2 million square feet. These are huge buildings. They could fit millions of units. But if you get a robotic storage solution, you can Google this, right? These robots that Amazon acquired through Kiva, they're like big orange Roombas, right? They're like pickup shelving units. But the density that you can do for storing inventory in a building doubled. If you can double the inventory that you're holding in a facility, what it means is when you buy, because people on Amazon don't buy like a red marker and a blue marker. They'll buy an iPhone and a blue marker, right? If I can get those two things in the same box, my cost to do fulfillment to you is cut in half, because I'm not shipping a blue marker and an iPhone to your door, right? I'm going to have it in the same building. So it not only leverages fixed costs, but it reduces down the time that I have split shipments. And therefore I save money on transportation. I don't have to combine them and I can go faster, right? So they've gotten higher density buildings in more effective storage solutions closer to the end consumer, which reduces down transportation costs and reduces down the time in transit to get it to your door, which increases conversion. It's this incredible logistics and fulfillment flywheel that drives this marketing machine and gets all these eyeballs, right? It's a dramatically more impactful thing than the experience you get on any other marketplace in the world right now. Kevin King: I've always been, you know, I noticed this years ago where I would order something, I would order the black marker and then an hour later I would order, I don't know, a gadget for my kitchen or something. Rob Hahn: Yeah. Kevin King: And both of them would say they'd be delivered tomorrow. But Amazon's system would be so sophisticated, it would push the orders together, you know, and then what most people don't realize is like I live in Austin, so there might be, I know there's several distribution centers here and there's like seven or there's, there's a spider's web of like warehouses and stuff here. It's down to San Antonio and up to Waco and some of that stuff is coming, that black marker is coming out of San Antonio and the kitchen gadget is coming out of Buda, Texas and then they're all getting merged into a South Manchac Road in Austin and they're getting to me the next morning. And that's a sophisticated system to combine all that stuff and to automatically tell you what size box it's got to be in. It's mind-blowingly good. But where I think they fall down is on the inbound side. And they haven't got agreed. There's there's there's the inbound side is still a freaking mess. And that's what is still are feeling the pain. So the outside to the customer. Almost perfect. The inbound side, it's got a lot to be desired. Why is there such a mismatch there? Are they two completely different thought processes and flows? Or is it just Amazon's like, we only care about the customer. We don't give a shit about the sellers. So we're going to focus all the energy and money there. Why the mismatch? Rob Hahn: I think there's a couple different inputs to that. One is that Amazon culturally always starts at the customer and works their way backward. That's true at each point. That actually is a positive thing about Amazon. Now, sellers are definitively not a customer for Amazon. They're not seen as customers, right? They are not their sellers. They are purchasers, they're clients, they're not customers. In many, many ways, it's like, hey, we're enabling you to sell stuff on the platform, and they don't see us as customers, and they don't treat us as customers. But they do start at that end consumer and work their way back. And also, the cost for Amazon severely sits on the outbound side of the house, not on the inbound side of the house. From both a labor perspective, but also, you're on the hook as a third-party seller to get it to Amazon, right? They are on the hook to get it to the customer. So their cost center all sits on the outbound side. They have made a ton of advances on the inbound side, to be super fair. But let's talk about this last year. Last year was a shit show. This has been an absolute insanity around the change in the logistics network. When Amazon did this last year... Okay, let me pause though. Stick with me. I'm going to be on Amazon's side for a second, then I'll come back. Amazon is not wrong about placement. Because what we just talked about, getting closer to an end consumer, getting the right stuff in the right place, where people are going to buy things, that is key to getting faster delivery speeds, which absolutely converts better. It is undoubted, it is very, it's true, it is not a question. It's not even debatable. Absolutely has incredible opportunity for you to be able to sell more if you're closer to the customer. So the concept that they're trying to solve on the inbound side is not wrong. Get the right stuff to the right place. Traditionally, when they had, you know, when I started at Amazon, they had like eight fulfillment centers. They've got a billion fulfillment centers now. The problem is, when you send something to Amazon that's a standard sized product, it goes through a cross dock. Amazon can no longer connect all of those cross-stocks to all the fulfillment centers, meaning if you send it to one place, you actually won't get to the population. You won't get the spread. You won't get the placement. You won't get the density you need close to where people are buying. Kevin King: Let's explain real quick what a cross-stock is. I know what that is, but a lot of people Don't understand what a crosstalk is. Rob Hahn: Yeah, so what a crosstalk will do, you send stuff to Amazon. It's not a fulfillment center. They don't ship to a customer. Kevin King: They're not storing it there. Rob Hahn: That's right. It just flows through that building. Kevin King: It's just passing through. Rob Hahn: That's correct, yeah. Kevin King: It's like an airline hub or something. Rob Hahn: That's exactly right. Yep, so you come in and then it just distributes it to the multiple fulfillment centers and that is where it sits, is stored and then is shipped to the end consumer. So that crosstalk, You can't ship to that many fulfillment centers because you can't mechanically ship to that many places. So you're constrained. So what Amazon ended up saying is, I need to regionalize my inbound network. So I need you to send it closer to the end consumer and then I'll get it to the fulfillment center. But they ended up creating a two-tiered crosstalk system. They have a national crosstalk system and a regional crosstalk system. The national crosstalks would say, hey, you're doing a two-tiered crosstalk, which means you're going to send, if you can't split it up to five or more locations, that's how it's configured right now. If you can't split the five, you're going to send it to one. I'm going to split it to the five for you, and then it will go to an FC, and that adds like a week of lead time. So it's not only more, they charge a placement fee if you send it to one place, but it also adds a week of lead time, at least in most scenarios. If not more, during peak it was a lot more. And so you've got this super complex fractured environment and you've added a bunch of cost for sellers. If I was sending one truckload before a week, now I have to send it to five or 10 places and I'm sending LTL. And they blew up the entire LTL network in the entire country because they were trying to get things in. They still, in early January, I'm sorry, early February, 2025, they still have not recovered from peak, which is crazy. They still had not recovered because they were digging out of this massive backlog and hole from fracturing the inbound network right in peak. They were launching new cross-stock buildings in October. Honestly, they botched the entire rollout, but the concept of placement is the right one. It's a challenging thing to be like, you guys suck at the execution of rolling it out, but the concept is the right one for brands to lean into. Kevin King: A lot of brands, from your point of view, because you're able to mix a lot of stuff together, it's probably a cost savings for you. And improved available to ship or availability time frame. But for the smaller guys, it's actually costing them more. Rob Hahn: Way more. Way, way more. It's actually one of those where scale absolutely is important. This is why we've started selling some of our 3PL services as well, because density wins, right? And this is where a large seller like me that has the technology, but also more importantly, the density. I just have more transactions than anybody else. I really believe that Amazon will not solve our inbound transportation problem. They're not going to come out with great products. They're not going to invest in it. And I actually believe we can solve this ourselves as sellers, like banding together to work together to do this thing better than Amazon's going to solve for us, I think is a very real thing. And we have the architecture. We've got the backbone for it and the expertise, right? So it's, I think it's, it's a thing that I'm passionate about. Like it, Amazon is hurting the small and medium sized seller way more than they're hurting the big seller when they added this type of complexity from a logistics perspective. Kevin King: Like you said, they really don't care because if they heard a medium-sized seller, they don't really care about him because there's another guy standing right behind him waiting to take his place. Rob Hahn: That's correct. That's the Amazon way, right? Kevin King: It's the Amazon way. Somebody else will take his place. We'll fill the gap. No big deal. It's back to what you said about the change. It used to be that if I'm in Austin and I ordered something and it was in a warehouse in Pasadena, Prime Air would bring it over before Prime Air would get trucked over in a couple days or sent on a FedEx plane or whatever is you know with other agreements and then but I would get the item. Now they've gone from that to like you said this hub and spoke system where there's like I think there's like eight regional eight like divisions in the US. It's almost like you know American Airlines has a hub in Dallas, Chicago, LA, Charlotte, Miami and JFK. It's kind of like that same Now it's to the point where if I order some product and it's in the warehouse in Pasadena, it's probably not even going to show up as an available item to buy perhaps or maybe on page two or three with an extended delivery time. If it's in one of my little eight regions, it's in a warehouse in Dallas, it's probably going to be available to me. Now, the logistics of actually playing the game on Amazon and knowing where is your inventory, it's going to affect your sales and affect everything, whether you show up. Some of these tools, you can't trust that. You're ranked number 17, and you actually may be number 17 in Duluth, but you're number 290 in Miami, and number three in San Diego or something. Rob Hahn: Yep, 100%. It's extremely different depending on where you are. I think the reality is that if you're gonna be excellent, if you're gonna be excellent at selling in marketplaces, you have to be world-class at selling stuff, That motion of marketing, that motion of advertising, that motion of content, but you also have to be world-class at moving stuff. You cannot, they're so linked together and that is like how much of the right thing at the right place. You can't send in too much, you can't send in too little, like finding that balance is very, very incredibly hard and you have to be world-class at both if you actually want to grow and win market share in the hardest environment ever, right? Amazon has created the most competitive marketplace in the history of time. If you're gonna do that, you have to be world-class at both. You can't choose one or the other. Kevin King: I used to say, 10 years ago when people were doing FBA, the money's in finding products on Alibaba and sticking your name on it and finding an opportunity and one of the keyword tools of the day. Then it became, as the competition came in, it became more and more competitive, like you just said. The money was made in the sourcing. Who could source better? Who could source for a lower price? Now, I think it's evolving to two things. I think it's evolving to who has We can do the logistics better, like you just said, world-class logistics, and make your margin there over somebody else. And then beyond that, it's AI. And who's going to be able to use AI properly? And I'm not talking about to analyze your PPC and your keywords. I'm talking about to use AI in some of this big stuff that's coming out. There's some amazing stuff like some of the deep learning tools from Gemini and OpenAI, where it can use past data. And someone like you, you said you had 37 trillion or some crazy number of data points. Someone that has that kind of data. You have your own LLM inside there. That's right. And you guys have a proprietary one that nobody else has. I mean, Amazon's the only one that's close to you, probably, that has something a little bit more, probably. So your tools can go and take a look at, like, what's the history, the 10-year history of, I don't know, these dog treats. Oh, we see a cycle that it always, you know, when it's year of the... Chinese New Year's, a snake or a rat is always the sales spark or whatever the trends may be. Who is it? Is it a Democratic president or a Republican? All these different things and it can say, okay, it can project forward. Because right now, everybody that's trying to sell on Amazon, it projects from the back. They're looking at what's going on right now, looking at past sales data, past keyword history, past rank and deciding where's the opportunity going forward. And they may be looking at Keyword Tracker or Google Trends or some of this stuff to see what's coming, but they're still a step behind. With the AI and the big data like you guys have, you can be six months ahead. So you can be actually like, look, this product, nobody's ever heard of a, I don't know, Doggy Donuts. I'm just making something up here. You've never heard of Doggy Donuts, but the AI says that Doggy Donuts, Doggy Donut Chews, you know, little toy chews for puppies, is going to be a hot thing six months from now because of all this past data. You should go out right now and make Doggy Donut Chewy Toys. And if you do that on October 13th to the October 31st, somewhere we're estimating the AI, this is going to start taking off because of these different things. And that may happen, but even if it's at 80% time, 80% accuracy, 20% failure, that's the same failure rate that a lot of the most sophisticated sellers have right now using past data. So you might get stuck with something, got liquidated out, but no big deal. But you're now, you've got the data and you're ahead of the game and you're going to win every single freaking time. And now with agents and stuff that can do a lot of this stuff, I'm sure you guys are probably on top of a lot of this. It's going to become a data and logistics game because anybody can source, anybody can use the tools, anybody can come up with an idea. It's fastest to market and who can do it for the least cost. That includes everything across the board. Rob Hahn: And fast too, right? It's like speed, it's cost, it's all those things. And the logistics side, the fun part is it's actually kind of sheltered from AI in so many ways because you're physically moving a thing. First of all, it's kind of like the least sexy. People don't want to go They're like, Oh, it's like, you know, you have to do it. And you know, how, how interesting could it possibly be? But sometimes people's entire margin is in their logistics, right? Like their entire margin of logistics. I break this down, I mean, I think you're absolutely right, like data becomes super important. I break this down in three ways. You've got data, you've got insights, and you have actions. Those three major critical important buckets, right? Data, where am I collecting that data? How am I housing that data? How am I, like the architecture of how I'm sourcing and holding that data? Insights are more like, hey, here's my, anything that you can glean from that, right? Like that insights layer basically is like, how do I know something about what's going on in that data? Give me suggestions of what I should do or tell me what happened. Either read me the news of what's happened or tell me something that's interesting that I should do. It comes from that layer. And then you've got the actions. That's placing an ad. That's changing a keyword. That's shipping a thing. That's buying another product. That's six months ahead I can see a doggy treat making something different. And it's very infrequent that anyone in the world can do all three of those things. Big data, like collection, housing and accessing, creating an insights layer that says, with that data, I should do something that's actually interesting, not just tell me something that's going on, but actually give me an actionable insight. And then to do the thing. And we're really solving all three of those in a very unique way. Genuinely, that's why we're winning in so many ways. We are attacking each of those three buckets Very intentionally because you have lots of ad agencies or like agencies out there in general like third parties that can do one of those three things. If you tell me what to do, I can do it really well. I can show you what to do actionably but like I can't click the button and do something with that thing or I can just give you access to the data. It's very unique and where we've kind of planted our flag is we can do all three of those things and we can do them all in the same house with kind of world class in each of the three buckets in multiple areas. I can do it marketing, I can do it logistics, I can do it in content, I can do it in you know Add tech, like all of those things, it creates a unique environment where we can give something that most brands can't because you can't live in one of those buckets as a brand and be successful. You have to nail all three of those things. Kevin King: How's Pattern's relationship with Amazon? Is it strong or do you guys go through some of the same pain points where you're having frustrations getting things done or do you have, because of your size, they actually give you the golden glove or are there still issues where you're like, God dang it. Just fix this. Quit messing with us. I mean, quit screwing around. Do you know who we are? Rob Hahn: No, I mean, I think one of the things that you know is like Amazon is Amazon still. So just to be super clear, it's not like they're catering to it. They're still like you're still you and we're us. We don't get like special treatment. What we do though is we do get to spend time In having some strategic conversations, a medium seller can't do. We get to give a lot of feedback because we get to try some new things. If they're trying a beta or try something new or test something, we get to try a lot of stuff and give feedback on those things. I think that's one of the cooler pieces. We get to be part of the solution for not only big sellers, but for everybody. We're like, hey, this is a bad seller experience for some of these things. But as far as, do we have the same issues? Do we still have to put in tickets and yell at people and all of that? Yeah, that's exactly the same. So unfortunately, our focus is on how do we be as efficient as we can in those processes. We're still just a seller to Amazon in so many ways. Kevin King: So a lot of your people that are doing, are they experienced e-com people that you guys hire? Are you bringing them in and you want them to not really know anything about e-com so you can teach them the pattern way? Or do you want people that were previous sellers or previous agency owners or whatever and they have a clue and you just kind of help them out? What type of people are you looking for that work a pattern? Rob Hahn: In leadership roles and kind of at our highest level, our C-suite is filled with a bunch of people that have been doing this for a very long time and that we have a ton of experience doing that. As you work your way down, we're getting very experienced people that have done this. But we've got kind of a wide range. If you were someone who's been doing this a lot and If you're an experienced seller or you've worked in the marketplace ecosystem, we can come in and show you the pattern way. But also, we've got entry-level roles from somebody who has no idea what they're doing, right? And they can come in and learn about this world that they probably have very little exposure to. We just want great people. We have incredibly good high bar for talent here. That is the truth. And that drives a huge percentage of our success is that as a team, we are experienced, we are drivers, we are collaborative, we've got low egos, we just go chase the problem. We're problem solvers. So regardless of what you've had in the background or your past, if you're a badass and a rock star, you've probably got a place here. Kevin King: So the next intern just got hired that's going to be the next CEO of Pattern, right? The COO or CEO, you never know. So how is AI affecting everything that you're doing from logistics to everything within? There's some people that are getting super serious about AI and some people that just talk about AI, robotics and Tesla robots and driving cars. Here in Austin, there's a toll road that's called 130 that circles Austin. The idea was to get traffic out of the middle of town. It's a longer way and it's a toll road, so they try to get the trucks and stuff to go there, but they actually just cordoned off 13 miles of this road. I don't know exactly how they're doing it, but I guess a lane or something. It's solely for automation testing of semi-trucks where there's no drivers and semi-trucks moving goods. They're going to be testing a whole bunch of stuff. To me, I think the vast majority of people in e-commerce, maybe at your level, it's a little bit different. But down at the lower level, us peons down here at the lower level, we hear about AI and we dabble with it with a tool that might help us write a listing or help us analyze our PPC or some of these little Little miniature chatbots that people have done to say analyze and help me get rid of my bad reviews or something. That's cool, but when it comes to AI, that's barely scratching the surface of what can be done. I think a lot of people in the e-commerce space don't have their head down into the weeds of what's really going on in AI and how this is going to revolutionize not only the way people shop and the way they buy pattern products, but the way you source, the way you do logistics, the way you do Everything across the board, what is Pattern doing or how advanced are you guys or what are you doing or where do you see, where are you projecting this is going to go? Rob Hahn: Where humans probably think AI, we're kind of uninteresting, I think, in the purposes and the uses. I mean, you said it a little bit, right? The uses that we can come up with like, oh, it can help me do X, when actually, I think we will continue to be surprised by where AI will be most impactful. I think where we think it will be the most impactful is like, yeah, that stuff's pretty easy. But if I break it down again, like data insights and actions, The insights layer of what I can glean, what I can do versus a machine that can do it not only faster, but would get a connection that I can never possibly do, and then execute an action that would be better than what I could have thought could have been done, that is across the board. That can be in advertising. That can be in content. That can be in product, like gap analysis of products that exist in the world. That can be pricing. That can be So many things for trends, logistics, how much should I buy, like what, you know, forecasting, like all of those things. And we are leaned in really, really heavy. So we have spent a lot already and we're continuing to invest. In AI as a pretty big driver of efficiency as we continue to scale, we're able to, this is transparently one of the advantages of scale. We're able to invest a lot of money and people and time into taking a bet that on multiple different areas of AI that are going to separate us from our competition and from many brands that are trying to do it on their own. They can never invest that type of money, right? Or that kind of focus in growing. So across the board in every single one of our areas, we're investing in Technology and specifically AI to help leverage what we've already been built. Kevin King: Are there any pattern, do you guys really have any competition in what you're doing or are there some small players are trying to get their foot in the door and they're just kind of far behind or is there anybody, I mean you're up at the top, you're number one globally. And you look at number two, up in the top 10, there's several Chinese companies, there's a Pakistani company, there's several, but what's the biggest threat to Pattern? It doesn't have to be a competitor. It could be a technology or a political thing or whatever. What's the biggest threats that you have to guard against? Rob Hahn: It's a good question. I mean, I think as more and more Nobody's invincible right and nobody cannot be caught right now where we are in this space. I think we are very much differentiated from other accelerators and people that are trying to do the thing that we're doing. I think we've got Really, really good people. I think we've got the logistics side cannot, right now it cannot be touched. It cannot be touched. Our ad tech is really interesting and we're continuing to invest in it. So from that side of like doing the thing that we do, I think it's gonna be hard to catch us for quite a while. I think where what we can't know is what's gonna change from a trend perspective on Amazon. Does Amazon change the rules of how their marketplace operates? If that thing changes in some substantial way, does that unlock an opportunity for a competitor, for themselves, for something else to happen? But the motion that Amazon currently exists, we are the best at that thing. It's definitively true. Both from a growth perspective and from an execution perspective, we are the best in this space. So how do we keep being the best in this space is a challenge that we've got. I have a high level of confidence we have the right people in the right place to continue doing that. I'm super interested to see what happens in this market. Nothing is forever. Nothing is forever, right? Like I just said, 15 years ago, the Amazon ecosystem is completely different. So I think it's probably more some unseen thing that would put more of a threat on us than the execution that we are doing right now. As we continue to grow, our own internal threat is how do we stay really good, really scrappy, really partner-obsessed as we continue to scale and grow. If we can do that, I think we're gonna be in a really good spot for a long time. Kevin King: One of Jeff Bezos' most famous quotes is your margin is his opportunity. With the amount of data you have, with the amount of awesome logistics and infrastructure you guys have, why don't you start your own marketplace? Rob Hahn: I don't think we... I don't think that's... I mean, who knows down the road, but I don't think we actually need to do that. Our margin is low. We are a low margin, high volume business. We don't keep a lot of percentage points. In any transaction that we are keeping, we are all about scale. We're all about growth. We know we're a middleman between a brand and a marketplace, right? So we don't get greedy. And I think that's one of our advantages as well. We're not trying to expand and grow our margins and get really, really fat on a crazy percentage. We're really trying to stay as close as we can to a certain low percentage and just grow the number of transactions we get so that grows. I don't know that we need to do a marketplace. There's so much, I think the other thing, you know, another thing that Bezos actually, I don't quote Bezos much, but this is one that I talk about when I say, he's like, there's a lot of winners in this space. We are not, I think that we're not anywhere close right now to the end or like terminal percentage of e-commerce transactions. I don't know what it is. It's not 100%. It's not, you know, if you go in somewhere like Korea is like 43% or something like that of transactions happen in e-commerce, you know, China's 36 and I think the US is like, 24 or something like that, right? Like in worldwide, I think it's 22%. We still have so much opportunity to do here. Like it's not necessarily yet interesting. We're not close to kind of that terminal percentage where we need to go get more new primary demand. There's so much secondary demand that already exists. And we'll continue to grow for primary demand in e-commerce. I think there's so much room to run still. I think we're just getting started. Kevin King: Awesome. I think you're just getting started too. And I feel like we're just getting started talking about this. We could keep going for quite some time on this. I think so. But Rob, if people want to follow you or reach out or learn more or learn about Pattern or what's the best way to get a hold of you or to find out more if they're interested in maybe working with Pattern on some level? Rob Hahn: Go to www.pattern.com. You can check out all the different stuff we have both from services, from 3PL fulfillment services or what we would call our core accelerator model. If you're a brand, you've got some traction, you're like, I want to go hit the gas. Like all of that goes through pattern.com. There's a contact us section. And we're also on all the socials. Like, you know, I'm Rob Hawn. I'm on LinkedIn. Uh, happy to always like follow and connect there. We post stuff about what's going on in our world all the time. Um, and you know, connect that way. So, uh, we were any pattern.com is the most effective, but we're all over the place from, from that side. So we're also be, you know, we're at trade shows where, you know, we're prosper. We're at, We're at Manifest, we're at Expo East, we're, you know, all of these types of, Expo West, like all of these types of shows throughout the year as well. If you run into us, we're always willing to kind of chat and see if it makes sense. Kevin King: And you have your own show too, right? Don't you do? Rob Hahn: We do, yeah. So Accelerate, we have our own Accelerate in May, May 21st, 22nd here in 2025. Coming up, it's in Salt Lake City. It's really cool. We actually, it's not like, it's not like a Pattern timeshare or something like that, where you have to come and listen about us. We actually get some really incredibly cool People to come talk about, like Jesse Itzler came last year. Jessica Simpson came to talk last year about like brands they've, you know, Honest Company came. Like, we've got these really cool people that are out there. We bring in people from Walmart, people from Amazon. Our competitors come and talk. We actually don't care. We just want an environment where people can come talk and learn about e-commerce. May 21st, 22nd in Salt Lake City. I highly suggest it. Honestly, before I joined, I was like, is this kind of a hokey thing? It's super legit. It is a fantastic We had a couple thousand people come last year. We expect it to grow this year. It's a very cool opportunity to talk to people that are solving all the same problems. At the end of the day, we're all trying to do the same damn thing. It's cool to get everybody in a room and talk about that. Kevin King: Rob, I really appreciate you coming on. This has been awesome, man. Thanks again for joining us here. I know you don't do a lot of podcasts, but thanks for coming on. Rob Hahn: Thank you very much. I very much enjoyed it. Kevin King: Awesome talk there with Rob Hahn talking about logistics and Amazon, what it takes to succeed and where everything's going. And I think there's a massive opportunity there for a lot of you too. If you're at that point where you're just kind of like ready to put some gas on your business but don't want to give it up. They may be a good option to actually check out. So reach out to Pattern or reach out to Rob on LinkedIn and he can connect you to the right people and maybe they can help you really explode your brand if you're already doing a million dollars plus and then sell it for even more money two, three, four years from now or take a look at the logistics. I mean, they got this stuff down. I mean, maybe as a 3PL, they'd be a great option for you as well. And a lot of you, when you're listening to this, when this episode comes out, we're at the Billion Dollar Seller Summit. It just wrapped up and now I have my Elevate 360 event going on in Iceland at the Blue Lagoon. So hopefully some of you saw the stream of the event. Or if you didn't, there's replays available. You can go to BillionDollarSellerSummit.com and check that out if you want to get to see replays of some amazing stuff that just went down in Iceland. We'll be back again next week with another incredible episode of the AM-PM Podcast. Don't forget to sign up for my newsletter at BillionDollarSellers.com. BillionDollarSellers.com. And remember, life is all about the experiences you have and the people you meet. Life is about the experiences you have and the people you meet. See you again next week.