Why Duke Cannon Rebuilt Its Amazon Strategy

Why Duke Cannon Rebuilt Its Amazon Strategy Speaker 2: Hello, everyone, and welcome back to the Better Advertising with BTR Media podcast. Today, I'm incredibly excited to have Josh Webb on the BTR Media podcast. Josh is the director of e-commerce for Duke Cannon. For those who are not familiar, how do you describe Duke Cannon and your brand positioning? Speaker 1: Oh, yeah, good question. So Duke Cannon, we're a men's grooming brand, so think body wash, bar soap. All of the kind of the facial skincare cologne like we've got pretty much the gamut to help a man smell really great And then where we kind of sit is like high quality grooming products, right? We try to come to the table a little bit of humor. You'll see that in our packaging and various other things, but we're not that sophomoric Derogatory type of humor that you see sometimes with our in our space. So yeah, maybe that's a place to start. Speaker 2: It's fantastic. You all take a wonderful angle of being incredibly classy and mature. It almost reminds me of a new age Old Spice. And I say new age because Old Spice had this brand positioning and then they started running the quirky commercials and kind of changed their positioning in the market. I think you all are taking up and moving in as that mature brand that looks great on a shelf, but also a lot of men resonate with it. Speaker 1: Yeah, I mean, like I said, we're for supporting men and we want to talk to men how they talk to each other. The other awesome thing about the brand is we have a noble cause in supporting men. So we try to support all men, but more specifically, we have set up the Duke Cannon Veterans Fund to help support veterans. So proceeds from all sales go to helping veterans through a number of causes, mental health, things like that. So it's awesome to work for like A fun brand, but also one that gives back, kind of a double-edged sword there. Speaker 2: I love that when you have a vision and you have values that you can back into, it makes the day-to-day problems a little bit easier. A lot of brands, especially e-commerce native brands, almost start with that revenue goal first. Without actually understanding their positioning or the problems they're trying to solve. Dude Wipes is a great example. Sean will tell you immediately, we started to solve problems for men. It was a bunch of collegiate bros sitting on a couch and they did things different. I'm sure you can resonate as well when you have a bad sales day. It's, hey, we're still changing lives. We're working for this cause that we're passionate about. It makes it a little bit easier. Speaker 1: Agreed. Yes. Speaker 2: Amazing. Well, one of the first things I asked you when I reached out on LinkedIn and was like, hey, will you please hop on the podcast? I fangirled on your brand. It was, what is your superpower? And you had told me that one of your strengths was, you know, ambiguity and solving complex problems. Can you give us a little bit of insights into more of what that looks like, especially in your role as director of e-commerce, where it's often, hey, the youngest person in the office, go figure out what a PDP is. What is a BIPOC? Run with it. How have you stepped into that role and that strength as your superpower? Speaker 1: Yeah, exactly. So like when I joined Duke Cannon about a little over a year ago now, basically I came in and they're like, Here's our e-commerce, like, grow it, right? That's a very broad, like, ambiguous thing. But I started off my career in R&D, like, working in spaces of doing stuff that people haven't done before. So I got used to working in spaces with no roadmap and having no direction where you kind of have to, like, test and learn your way into results and figuring stuff out. I've kind of built up a little bit of a knack in that space and feel pretty good about it. And yeah, like I kind of just came in and sat through and just started to learn. And the more you learn, the more you then can start to paint a picture of how you're going to improve something. Speaker 2: I believe Duke Cannon has pretty strong retail positioning from what I've seen. Were they retail first or e-commerce first? Speaker 1: Retail first. So really interesting brand. They kind of started more so in like specialty mom and pops, like just how you found us, right? And had wide distribution, all these random places like Lowe's and Tractor Supply, places you wouldn't expect to find a soap company. And then they built up D2C and that was kind of the growth edge for a little bit. And then I would say in the last handful of years is when we really actually started to get into target Walmart and taking Amazon seriously. So kind of like built this really strong following through all these kind of niche places. And now we're on the precipice of like, how do we accelerate through big retail? Speaker 2: That's amazing. I know I've seen your expansion in Target. I think that it makes things a little bit more difficult in your role because you built a lot of brand loyalty from everything I've seen and that helps definitely accelerate your e-commerce presence because one of the core drivers of shelf positioning is just search volume and conversion rate. You all are probably going to have an inflated conversion rate. And by inflated, I mean people love you. So when they see your products, they're going to buy, which is immediately going to improve your positioning. One of the difficulties I could assume of being handed the e-commerce business is you have a lot of big spenders in the space. You're competing against some big names and the digital shelf can be relatively expensive when it's saturated with sponsored ads. When someone hands you an e-commerce business and says, you know, just grow it, what are the first few things you started really looking at when it came to the Duke Cannon business? Speaker 1: Yeah. Yeah. I mean, I definitely didn't want to come in with any preconceived notions. So just started to dive in and ask a million questions, which I love to do. Better asking questions than answering them sometimes. But where I kind of start, where I usually start, start broad, right? And kind of work your way down. So the P&L was the big thing for me. Kind of started to look at the P&L, look at like what the business was doing, what the track record was, what we're spending, all those kinds of like high level levers. And honestly, I start there just to get like a concept of like size of prize, right? I think one of the hard things with an e-commerce business is you can pull a ton of levers, but the downside is you can pull a ton of levers. And to be really effective, you have to like really focus in and figure out what are the most impactful things. And it's hard to figure out what's the most impactful if you don't have that sense of like size of prize and things like that. So I kind of started there and then you kind of start to peel back the layers as you see things. So really interesting, like, I kind of got into D2C, saw what they were doing. It was a good size business. No major red flags there. I feel like everything was moving. Definitely like room for improvement, but like nothing that stood out. But when I started to look at like Amazon, our Amazon penetration, like how small it was compared to how big our normal business is, it was tiny. And I was like, wow, there's a huge opportunity here. And then I started to like, well, Tell me if you've ever heard this before, but have you ever had anybody come to you and say, hey, Amazon's our most profitable channel? Speaker 2: When it's only branded, I've seen that. And I'm assuming you guys have incredible brand loyalty. Speaker 1: Yeah. I would say like, I've never been a place where Amazon is our most profitable channel. And I was like, whoa, what's going on here? Kind of starts to like, and you start to go layers down. And then ultimately what I was seeing then is, We, the team before didn't really have any much Amazon experience. So we didn't have a native person who knew how to drive Amazon. It's kind of patchwork. Amazon kind of fell in a gap between ownership too, which was interesting. And so a lot of what Amazon was, was given to a third party and just kind of handed off to run. And so when you see like how we're, the price we're giving them, And then they're, as a third party, are adding on Amazon fulfillment costs. When you're thinking of like a small, or not small, like a 10 ounce brick of soap, that price is at $7.99, FBA costs are a pretty good chunk of that. So they're adding that on, then adding their margin on, and next thing you know, the price of the consumer is super inflated versus the rest of the market. So a specific example, when I started Body Wash, we were selling at Target, Walmart, $7.99, $15 on Amazon. That explains the profitability and why it was so small. And so once you start to kind of get in there like, okay, now the question becomes, How do I get that price point to that $7.99 with the rest of the market to really unlock that growth? And that was also kind of challenging. Speaker 2: Coming from an R&D background, I feel like you have a competitive advantage in this area. A lot of brands we talked to are now being faced with, especially on the 1P side, being faced with price issues, losing the buy box. So they're really looking at skewed differentiation per retailer. Is that something you've had to consider as well? Speaker 1: At this point, no. Again, I would say, so we talked about FBA pricing, right? Like big chunks. So when I went through the exercise of like how we should structure Amazon business to get the most out of it, we went through the different options. Like, you know, we can run through third-party, we can bring in in-house 3P, we can go 1P. Ultimately we decided to go 1P. And the reason we did that is because Amazon through their efficiency of scale, What they're charging us on those co-ops and things like that are much smaller than what the FBA prices was. So it allowed us to get to the price points at Walmart target without highly eroding our margin. That then like when we know the numbers, like when we know what the FBA and all that stuff, we know that there's not too many people out. I don't think there's anyone out there that can actually get to that price with how we know that the numbers work. So that allows us a little bit of a moat through 1P and we don't have to be as worried about getting undercut and some of those things. But yeah. Speaker 2: Were there any operational hurdles that you did not plan for or were surprised by when you went from working with a 3P partner to a 1P model? Speaker 1: Yeah, I mean, I've been in this space, so I've worked, I've been a vendor manager. I get how it works. Speaker 2: You know what was going on. Speaker 1: And you try to like de-risk most of that, right? But the big thing you give up is control. Like you don't have control of your pricing, all of those types of things. So we ultimately made the decision to go 1P. It was kind of a one-way door decision, right? It's like a big one. We spent quite a bit of time just making sure we felt good about that. I would say we got set up, got through the negotiation, got the terms in place. That went really smoothly. And that's like where the good grace ended. It got pretty challenged pretty quickly. If you want, I'll dive into more of like the journey so far. Speaker 2: I would love to hear about it. I know this is a big debate. I see it on LinkedIn all the time. Is it 1P? Is it 3P? Do we do the blended model, which comes with its own risks as an Amazon vendor manager? I would love to hear a little bit more about some of the difficulties or complexities afterwards. Speaker 1: Yeah. So basically how we started, we went into 1P. You know, we started to put in inventory, right? So that's the first key, get them to order up inventory. We started to see the inventory flow in. But after a month, we saw that like our unable to sell inventory kept growing and growing and growing and our sellable inventory didn't change. And it drew a big red flag, right? Like, okay, what's going on? It took us another couple of weeks working back and forth with Amazon to figure out that The third party was using transparency and so all of our inventory was getting flagged. We're here to help you in transparency. And we had asked the question up front, like, hey, is this going to be an issue? Yeah. They didn't seem to think it was. Speaker 2: It was. Speaker 1: So now we've got a bunch of inventory we had to work through that problem. We put in born-to-run orders to kind of juice a little bit to kind of get things speeding up again. But then right as we started, inventory started hit, you start to get the two-day shipping. Now we want to start to market, right, to kind of start to get that ramp going. Like 90% of our portfolio was blocked from marketing because of possibilities. Speaker 2: Getting cramped out. Speaker 1: Yeah, right? Because we're in a small margin space, but then also the challenges of like, As there was small amounts of inventory, I'm sure Amazon was shipping it longer distances than they would like. That hits the P&L for them. So because of what happened there, there was like this cascade effect. Then we couldn't market. So we had to work with them to get us kind of like to allow to do that. So then we get through that and get marketing. And then we hit the like pricing challenges. So anything in target Walmart, right? Like price matching works well. Anything, the tail skews, the tail cents aren't there. We're starting to get inflated in prices. So we put in more to run orders thinking, hey, our run rate would be this. Well, if we're not going to price at this, that run rate is significantly lower. So then we started running into risk issues of like, okay, you're not going to sell through this. But luckily, we were able to work with our Amazon team. They were great partners that helped us out there. But as you can see, like one thing kind of just led to another and it's going to be this cascading effect that we took a long time to get through. We needed buyer support, which is hard to get, you know, frequently and all that kind of stuff. And I think we are now like we started this in August of last year, we're now kind of finally through the hurdle. Like we missed out on deal opportunities as well in the back half of the year with Black Friday, Cyber Monday with, you know, October Prime Day deals. But now we're kind of in there like, okay, we think we got to figure it out. Pricing's in line, like everything's kind of humming as it is. And now we're starting to like fully, fully ramp up the business. Speaker 2: Listen, when Josh said his superpower was dealing with ambiguity, that should be anyone who is looking to be a director, a head, a VP of e-commerce. I think that is one of the biggest superpowers because no matter how perfectly you plan. No matter how seamless you think the transition is going to be, there's going to be hurdles and being able to react incredibly quickly while still keeping that end game in mind is incredibly, incredibly important because I don't think anything you're saying is a shock or a surprise. That's the playbook with e-commerce in general. It changes so rapidly, you just have to be willing to figure it the heck out. Speaker 1: Right. Yeah. A hundred percent. Like we had no idea that was going to happen, but we knew something was going to happen. Speaker 2: Yes. It'd be a bigger red flag if everything went seamless, if we're being honest. Speaker 1: Yes. A hundred percent. I agree. Speaker 2: I will say I have heard that it could be a negotiating piece during AVNs to get your products kind of White listed from the automation that prevents you from running ads due to your products being crapped out. I've heard it from a few successful brands that they've been able to bring that to their vendor negotiation. Now, some brands don't want that to happen in case someone else is in the buy box because within your central, you can run ads on other SKUs and if you have leaky distribution, someone lowers your price, you're running ads and losing money. But if you are really clean with the distribution, I've heard that you can get that prevented and turned off. So that way you can continue to run ads even if you're dealing with price mismatch issues. So anyone listening in, that may be something that you can worth testing. Speaker 1: It's worth asking for at least, right? Speaker 2: Yes. It's always worth asking whether or not they're going to give it to you. I'm not making any promises. Speaker 1: Right. Speaker 2: Now, you had mentioned that when you started, you know, strong profitability primarily due to price point. I would also assume because of the heavy focus on D2C, you all weren't using Amazon as a channel for new customer acquisition. It was probably just a seamless checkout experience. Again, you had high conversion rates, but the majority of your advertising and just general search terms is probably driven by branded terms. Knowing your experience and everything you've done on the e-commerce front, how have you balanced out utilizing that strong brand voice, but also looking at Amazon as a place for new customer acquisition? Has that changed how you're looking at e-commerce strategy? Speaker 1: Yeah, a hundred percent. I mean, our decision to go with 1P was why. We like flipped the script from, you're right, it was basically at the pricing point and stuff like that. So one, singles, which is how people test your brand, right? Like they want to buy one, not 10 of something. Our COO says you always want a date before you marry, right? That's how we think about it, right? We had high price points on the singles. But the way also to like make more margin, the third party, 90%, I wouldn't say 90%, but a huge chunk of our business was in bundles, right? When you have heavy, bulky stuff at low price points, bundling is a way to kind of offset some of that. Again, you have bundles though, starting at like $30 or something, another barrier to new customer acquisition. So our, like once we saw all of that, it was, wow, we can really open up not only a sales group, but like to that point, like getting new customers, By getting those price points down, getting it, removing those barriers to the customer ultimately. And now we're seeing that, like we're seeing a ton of goodness come from like new customer acquisition through Amazon with where we're at. And like, it's kind of the tip of the spear for us to drive new customers. I would say, Before it was just kind of a, like, replenish, a convenience replenish, right? And now we're really trying to use as new customers. Retail is still going to be the biggest space for us to get new customers because we work with a product that smells. You can't do that online. So you want to get someone into a Target, a Walmart, a specialty shop to smell and touch the stuff. But the point, Amazon is a huge lever to try and drive new customers. And that's where we're really focusing. Speaker 2: I love that. And you mentioned at the very beginning of the episode of, you know, the first question you asked is like understanding where the business is at, where the opportunity lies, starting with the P&L. That's something that we really love with Amazon is just access to information, especially more frequently, has been opened up. Something I always recommend when I'm auditing brands is we go look at brand metrics, insights and planning, and just look at what are the detail page views we're getting compared to the category median and category top. And something I tell my brands is, look, you may be growing 10% year over year, but if the category is growing 30%, you're losing. The digital shelf is not infinite. So I think that's a really good starting point that you mentioned at the beginning of the episode and kind of relates to this question of how do you push new customer acquisition and brand growth? The second thing I would say that's been really advantageous for brands like yours is we're seeing Amazon lean into creative opportunity so much more. You all have a very interesting niche in the market. It's not a me too product. You're not trying to race to the bottom and be the cheapest. You know your audience and you can curate that experience. Now that we have things like sponsor product videos and sponsor brand videos expanded quite a bit and ANC audiences, So it's just really cool to see Amazon lean into the brand building narrative a little bit more. Still not as powerful as what you have on D2C and to your point of people want to smell the product. They want to be in stores to make sure they love it. Now, one kind of final question as we look at everything you're managing, how have you kind of viewed the differences in Amazon versus D2C versus retail? Have you backed into different KPIs for each of those or do you take, you know, a traditional blended ROAS? What is that? How do you rate success when you're managing so many different platforms? Speaker 1: It's a good question. I don't think I have one answer for you, to be honest. Unknown Speaker: That's probably a good thing. Speaker 2: We don't want to give someone a simple, just a five ROAS and walk off. Speaker 1: Yeah, right. But I think we talked about it a little bit. You first have to understand what's the purpose of the channel, right? We see D2C as a loyalty play. Come to us if you love the brand. We'll give you some unique experiences, unique scents, unique items that you can't get anywhere else. You get points, you get subscription discounts. That's probably the most valuable place if you love the brand and are willing to buy in bulk. That's the place to go. Amazon, again, because we're thinking about singles and trying to drive awareness and things like that, the ROAS, the AOV, all those numbers are completely different. And so you have to, again, taking a step back, understand that context. Cause you can't compare them apples to apples. So yeah, we kind of build at least like how we want each channel to look or what like we're trying to accomplish with that channel. And then we, you know, build the KPIs around that. And it's hard to compare channel to channel, but what we try to do with our partners and stuff is like, Hey, can you give us insights to the market? To your point, like, how does this, like, what does this look like for the market? Like, are we above average? Are we below average? And that's kind of, I think how we start to judge things. Versus trying to compare different channels that are not alike at all. Speaker 2: I love it. I think that's incredible. A lot of people or a lot of brands that we talk to are struggling with that aspect of there's so much differentiation across each channel. You have, you know, TikTok shop now becoming a big player, creating a lot of buzz in the space. How do I focus? And your immediate feedback, and again, the beginning of the episode was you need to understand the lay of the land first. And then you can kind of work backwards of here's my long-term goals and here's how each platform plays into that.