The Future of Search Volume: Amazon’s Search Volume and Relevance Change
As you may have heard, there was a recent Amazon API change which removed software providers’ access to real Amazon search volume data.
In this episode, Casey discusses how this impacts you as a seller, how this change impacts Viral Launch’s tools, and the future of Amazon search volume. It helps to see the visuals, so check out the link to our blog post.
Licensing On Amazon: Another Avenue For Revenue with Paul Miller (Follow the Data Ep. 32)
As an Amazon Seller, the hunt for great ways to expand your business never stops. Not many sellers in the Amazon community have considered, let alone heard of, Amazon licensing as a possibility. In this episode, we break down what licensing looks like and the great opportunity it holds as an addition to an Amazon storefront. Paul Miller, a successful licensor on Amazon, walks through how licensing has changed his business and how it can do the same for yours. Licensing isn’t for everyone, but simply considering it as an option is well worth the time.
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CAMERON YODER:
The opportunity that Amazon’s FBA program provides is incredible, allowing so many people the financial freedom to live where they want, invest in their passions and spend more time with their families. But the opportunity does not stop with private label products. Licensing is its own incredible opportunity for Amazon sellers. I’m Cameron Yoder, your host for Follow the Data: Your Journey to Amazon FBA Success. In this show we leverage the data we’ve accumulated at Viral Launch from over 30,000 product launches and our experience working with more than 8,000 brands to help you understand the big picture when it comes to Amazon and, more importantly, the best practices for success as an Amazon seller. In this episode Casey and I sit down to talk to Amazon seller, Paul Miller, about licensing and how it’s changed, honestly changed, his Amazon business. Paul Miller has been expanding his e-commerce brand since 2015 and says the best piece of advice he’s ever received was to seek out licensing opportunities for his product. He locked in a licensing deal with Nickelodeon in 2017, which had skyrocketed his brand and culminated in a global mass-market distribution deal, which is crazy. Now Paul teaches others how to follow his path, growing their businesses to a size they’ve only dreamed of. And he’s here to talk to us about how to reach new heights through the power of licensing. Let’s jump in.
What’s up, everybody? We have Paul Miller with us. Paul, how are you doing today?
PAUL MILLER:
I’m outstanding. Thank you.
CAMERON YODER:
Outstanding. That is outstanding in itself. Before we get started, before we get started with who you are, where you’re from, what you’re doing, can you just, since we’re talking about licensing today, can you tell the listeners what licensing is, just in general?
PAUL MILLER:
Sure, I’ll be happy to. So licensing is when one party basically rents another party’s intellectual property to use on their product. For example, a great example might be a kids’ play tent. Let’s say you manufacture a kids’ play tent and you go to Disney and you license, or rent, the opportunity to put the Disney characters on your tent. That’s a perfect example of licensing.
CAMERON YODER:
Okay, got it, got it.
CASEY GAUSS:
And what are the basic mechanics behind that? Does Disney get the majority share of the sale, like just really basic mechanics so people can kind of understand?
PAUL MILLER:
It has to do with a licensing contract that you do negotiate with a licensor, or the, you know, intellectual property holder. In this case talking about the Disney Princess, for example, that would be – the Disney Princess would be the property. The property owner is Disney, and they’re going to negotiate a right with you to use that property. And in general that royalty rate is negotiable, but it’s probably in the area of 8% to 12% of sales.
CASEY GAUSS:
So Paul, can you give us the specifics surrounding licensing? Like what does the agreement look like? Just for sellers to understand, maybe even before they start getting into it if they want to, what an agreement looks like.
PAUL MILLER:
Sure. So I kind of call this the anatomy of a license, and I’m going to talk to you about a license from the licensee perspective. That’s the one, us as product owners, we’re licensing someone else’s character or intellectual property to put on to our product. So again, back in the case of the Disney play tent, we’ve got the play tent. We’re going to license these images or characters from Disney. Probably the first big consideration is what’s called the minimum guarantee, and that’s the minimum guarantee dollars that Disney would want from you over the lifetime of that contract, which may be three, four, five years that you have to deliver as basically a mandatory royalty. So there is the minimum guarantee.
CAMERON YODER:
If you don’t fulfill that guarantee what happens?
PAUL MILLER:
You’ll probably get the sheriff knocking on your door one day.
CAMERON YODER:
Okay.
PAUL MILLER:
No, it’s a – I mean it’s an obligation just like a long-term commercial lease is. So it’s an enforceable contract. Doesn’t matter if you, you know, fall on hard times and can’t produce the product. That’s a contract. You owe the minimum guarantee no matter what. I mean unless there’s a clause in the contract that says, you know, the factory burned down or something like that. But that’s an obligation that you need to take very seriously. So there’s the minimum guarantee, and that minimum guarantee is based on the royalty rate. So the royalty rate is typically a percentage of sales, and that percentage of sales, as I mentioned before, could be from 8% to 12%, could be 5%, depending on the sales channels that you’re selling in and how you’re selling it. So if you’re selling for wholesale, which is typically 50% of retail, that royalty percentage may be different than if you’re selling direct to consumer. So it’s 10% on wholesale 5% direct to consumer. Then there is even FOB terms, for example. If you’re selling your product FOB to some big retailer you may even have a different royalty percentage on that.
So there’s advance – sorry, there’s the minimum guarantee, there’s a royalty, and then there’s the advance. This just keeps getting more fun. So the advance is usually the amount of money that the licensor wants when you sign the contract, and that’s a portion of the minimum guarantee paid up front upon signing of the contract. Now that’s not in all contracts. In my case it was, and I had to pay a third of my minimum guarantee up front. Now you kind of earn that out in royalties later on. So it goes against your total royalties, but they do want that as a basically a show of good faith from you and know that you have skin in the game and you’re not going to just sit on that license and not make it because that’s basically an asset that they have that’s not working with some other product. It’s working with yours. So they want to make sure that you have skin in the game through that advance.
And then finally, I would say the other big kind of negotiable on this is the term of the agreement that is, you know, how long it’s going to be in effect for. In my case it was three years. And also, the different marketplaces that you have a right to sell in. They’re not all going to be the same. Some licensors, for example, may not want you selling in Amazon, and if that’s the case then that’s something you might want to reconsider. Or at the same time you may be required to present that product to retail distributors in your contract. So that’s another thing, sales channels that you definitely want to look at and make sure that those terms and conditions fit your business objectives.
CAMERON YODER:
So that is – I think that’s a pretty good base to establish even just a basic understanding of what licensing is before we get into more details around how it is involved with Amazon. But before we get to all those details, Paul, can you tell us just a bit about yourself? So basically tell us about you first, maybe where you are, where you’re at and how you started selling on Amazon.
PAUL MILLER:
Okay, great. I am in Virginia, if that’s what you meant by where I’m at, but started selling on Amazon about three years ago. I was actually a multi-store restaurant franchisee running a group of restaurants that were having hard times at the time.
CASEY GAUSS:
Paul, could you share what that restaurant was?
PAUL MILLER:
No, I’m not going to. You know what it is, Casey.
CASEY GAUSS:
I know what it is, and it was really delicious. I really loved that place.
PAUL MILLER:
I’m afraid I might be violating some sort of confidentiality agreement if I was to –
CASEY GAUSS:
Got it. That’s okay.
PAUL MILLER:
– say what it was.
CASEY GAUSS:
So all you need to know is it was a delicious restaurant that I was very sad when it went away.
PAUL MILLER:
Yeah, that’s right. So business got pretty tough for me. I went from three restaurants down to one, and I was looking for a plan B, and that’s when I came across Ryan Moran’s basically podcast, Smart Passive Income. Heard him on that podcast, and from there signed up for his email list. Eventually signed up for Amazing Selling Machine through his affiliate program. Joined the tribe, his tribe, and developed my products over the past basically three years, and along my way I was given some very good advice to seek out licensing opportunities as a way to kind of protect and expand my products, and through that developed a level of expertise by hiring lots of consultants, spending lots of money and working with licensors. So today I have a license with Nickelodeon representing about four of their properties, and it’s been an amazing, amazing part of my business.
CAMERON YODER:
Now so when you started, when you started even just thinking about Amazon the intent was to, I guess, drop your franchises, right, and maybe move into Amazon as something full-time. Is that right?
PAUL MILLER:
Yeah, that’s right. It really started as kind of a plan B as I was mentioning before. I was really on my last leg with the restaurant business, had a restaurant 2 ½ hours from my home. It had kind of been neglected over the years as I had opened others. So we decided to close the other ones and then focus very much on that one. And so I was really, you know, concerned that I wasn’t going to be able to make it in that store. So I was really looking for some plan Bs and came across Amazon. And you know, what was a plan B quickly turned into a plan A and probably the best, best plan A I could have imagined.
CAMERON YODER:
Now where – you mentioned that you kind of – you were given some great advice into moving into licensing. I feel like most sellers maybe actually even haven’t really considered licensing. Where were you at in your Amazon-specific journey when you even started, first started considering licensing as an option?
PAUL MILLER:
It was about a year into my Amazon business when I discovered a category on Amazon that was doing very well. I basically took one product that was for one specific market and kind of redid it for children in another market. And it was on fire, basically. I was having great success with it, but I was kind of terrified that somebody was going to try to rip me off or duplicate what I was doing. So I was seeking the advice of everybody I knew in the industry who could help me figure out how to grow and protect my brand, and I actually spoke to a guy called – or a guy named [Mark Hirsch 0:12:12.5], someone who I had known from a podcast, and Mark gave me the advice if I were you I’d look into licensing. And at that time I had no idea what he was talking about. It took me a while, took me some research to figure it out, and we just made great progress.
CAMERON YODER:
Can you tell us about how – can you tell us about your first licensing deal? Like did it just kind of fall into place? Did you have to work really hard for it? Like what was that first one like, and then maybe how did the pieces fall into place after that? Like was it really easy after you started establishing a licensing relationship, or do you still have to work really hard at it? Like what was that kind of first spark like?
PAUL MILLER:
Well, I’m glad you asked that because licensing is not easy when you get into kind of major licenses. But it can be easy if you start small. And that takes me back to my first license. Mark’s advice to me was to check out the licensing show in Las Vegas, and that was I think it was about this time of year then, about March, and the show was coming up in May. That’s basically the world’s biggest conferences for licensing. And I think if you look up Licensingexpo.com you can find out more about that show. But what I did is went on and registered for that show and built a profile about my company, and they kind of have a matchmaking service there. And I immediately matched up with an author of a kids’ book. That kids’ book was called The Whatif Monster, and she reached out to me and asked me if I would be interested in licensing her character. It was a perfect fit for our product. So I basically immediately replied to her. We got on the phone together. She was a children’s book author with probably 30,000 fans. And I had my product. That was a very easy deal to do. We put together a simple agreement, and that was a first licensed product. So as a point of entry going with kind of a smaller property, a smaller influencer is a really nice way to start.
CAMERON YODER:
Real quick, do you think that same process with kind of how you entered into licensing, do you think other people can do the same thing, or do you think that competition has kind of increased in this space where maybe it’s a little more difficult, or they have to find other avenues to enter into?
PAUL MILLER:
Well, I think it’s absolutely a great way to enter, and it does depend on your product whether or not something like, you know, a children’s book author or a character would work for your product. Licensing is dominated by children’s brands and entertainment brands, but it can also – you can also do licensing with an influencer, for example. So let’s say that you have a kitchen product and you have a high-level influencer in the cooking space. Well, that person may not be world-renowned, but also may have 100,000 folks on their YouTube channel. And if you basically license their brand or their name, put it on that product, they’re going to be incentivized to go out there and market your product for you.
CAMERON YODER:
Interesting. Now after your first licensing deal did everything just fall into place? Like did you continue to just do that same process over and over again, or did you find it to be more difficult?
PAUL MILLER:
The first licensing deal, as I mentioned, was kind of a smaller level deal. But it gave me a lot of experience, and it gave me some credibility in licensing. So when I was contacted later on by a major licensor, a major property owner, I could show this license that we already had as a case study. We didn’t end up doing a license with them, but just going through that negotiation process and understanding the different components helped me in my search for a better license. And that’s kind of how we got to the stage of speaking with Nickelodeon. It is a complex process, though, especially when you’re talking about, you know, working with a, you know, world-class company.
CASEY GAUSS:
So overall what would you say has been kind of the net effect or net benefit of licensing, in general? It sounds like a lot, but the more I guess you could quantify it the easier it will be, I think, or the more tangible it will be for like our listeners.
PAUL MILLER:
The reason I’m talking about licensing is because we, as Amazon sellers, are always looking for a way to protect our products, differentiate our products and then reach new audiences. So for me the net benefit is I have a unique product that has Nickelodeon characters on it, which even though I don’t have an exclusive, no one else can do that product without the license. So competition-wise it makes for very good differentiation. And again, it helps that audience who likes those products relate to my product. And also from an IP protection standpoint, while people may have been willing to knock off my product from a little-known brand, they’re going to be much more leery of trying to knock off a product, you know, held by Nickelodeon.
CASEY GAUSS:
For sure. And so can you kind of talk through what, you know, the launch process is on these products? Like I just, from my perspective, if you have Nickelodeon characters on, you know, whatever it is that you’re selling, it’s got to be so much easier to drive sales. It’s got to be so much easier to, you know, get these products off the ground and really start moving them. Would you say that’s the case?
PAUL MILLER:
Yes, I would say that’s the case. Now while I love Viral Launch, it wasn’t necessary for this Nickelodeon product. I actually was able to take, to launch the Nickelodeon product as variations of my well-selling products and just by having the visibility next to my, you know, Page 1-ranked products, they took off. I was on Page 1 within a couple of weeks.
CASEY GAUSS:
Geez.
CAMERON YODER:
Wow.
CASEY GAUSS:
Nice.
CAMERON YODER:
So during the Amazon seller journey would you say there is a point in time for a seller when he or she should most consider entering into something like licensing, or do you think anyone can start or enter into a licensing agreement at any point in time, like beginner to advanced? Should they wait until a specific time, or can they even start thinking about potentially licensing with their first product? What are your thoughts?
PAUL MILLER:
I think understanding licensing from the beginning is good to have in your pocket so that you know as you’re, you know, going through your Amazon journey that that’s one route that you can go. But a licensor is looking for someone who has sales. It’s going to be very unlikely that as a new seller, someone that doesn’t have sales on a product that you’ll be able to obtain a license because they are – they don’t want to tie up that property for someone who is already unproven. So I would say the time to consider licensing is after you really are doing well in the marketplace and you have something unique because the licensors are always looking for that unique product to team their property with.
CASEY GAUSS:
So is there like a specific sales mark that means that you’re doing well enough to talk to this brand or whoever, or is there like, you know, you have to be number one in your market?
PAUL MILLER:
I would say that no, you certainly don’t have to be number one in your market. And I think the level of sales that are required by the licensor depends on who you’re talking to. Again, the folks who maybe have smaller brands or smaller properties are going to be much more willing to work with you than some giant. I started working with Nickelodeon when we had about $2 million in sales.
CASEY GAUSS:
Gotcha. $2 million in sales annual, over the course of a year, or in total?
PAUL MILLER:
That was about a year’s worth of sales.
CASEY GAUSS:
Okay, but you’re saying you don’t necessarily have to be at that level. So if someone is doing $10,000 a month, let’s say, is that enough for them to now start talking with maybe some smaller brands, some maybe YouTube influencers like you had mentioned?
PAUL MILLER:
I would say absolutely, yes, and depending on who you’re working with on the licensor side, and you know, we spoke with Disney, Hasbro and Nickelodeon, the folks at Nickelodeon were much more entrepreneurial, and they could see the opportunity, and they were willing to embrace a unique product. And they could really get the vision of, you know, what it would look like to combine their property with our product. So it also depends on who you’re working with.
CAMERON YODER:
Has your experience as a whole with licensing, with licensees, been overall positive? Like you talked about the difference between Nickelodeon and Disney, but even with smaller licensees, maybe in even your beginning, the beginning of your journey, would you say that everyone has been somewhat easy to work with or people are kind of gung-ho about it, or it’s just generally a mixture of appeal?
PAUL MILLER:
Well, for me it’s been an amazing, amazing story. Even from – I still have a relationship with the author, Michelle, who we probably chat a couple times a week, and she really enjoys it when I send her a big fat royalty check. And I really enjoy it when she’s promoting my brand to her audience. So that has been amazing. On the Nickelodeon side it really has opened up new doors for me. Just to give you an example, very soon after our relationship, when our products were still in development, Nickelodeon invited me to an event out in Bentonville, Arkansas, you know, which you probably know is the home of Walmart. And you know, we got to participate in this Walmart presentation, which was absolutely amazing for me. How would I have been able to get to Walmart at that level without that license? The licensors have an incentive to help you do well. So a lot of times they’ll have teams who support Walmart, Target and big retailers, and their job is basically to try to get you into the door. That’s pretty amazing.
CASEY GAUSS:
Yeah, yeah. Oh, yeah.
CAMERON YODER:
Now what – let’s say – I mean we have a lot of different sellers at different points in their journey, right? Different levels of selling on Amazon, so beginner to advanced level, right? What information would you say, would you want to tell them to consider to decide whether licensing is right for them? What information do people really need to know to consider licensing in general?
PAUL MILLER:
Well, you really need to understand the pros and cons before you jump in and spend a lot of time and energy because there is definitely a tremendous benefit to it, but there’s also a cost. So on the cost side you have your time and energy, which is very important, shouldn’t be undervalued, but you also have attorneys’ time. You have a completely different development cycle that you have to go through with approval of products. Many times you’re going to have to – you may or may not have to hire a licensing consultant to help you along with that. And you may even need some specialized design work. So you need to understand both the benefits, as we talked about, and the costs that come along with it.
CAMERON YODER:
And where they’re at, their resources, their time, opportunity costs, right?
PAUL MILLER:
Exactly.
CAMERON YODER:
Yeah.
CASEY GAUSS:
So is there – maybe in your experience you’ve run into this. Obviously you yourself have had a great experience. Is licensing for everyone, or are there, you know, particular, I don’t know, categories, types of products, types of sellers where this just doesn’t make sense?
PAUL MILLER:
One of the ways that I teach people to think about licensing is take a walk through the store in your category. Go to a big box store. If you’re in outdoor, for example, walk the outdoor aisle and see what licenses are there. And you’ll be surprised to see how many products in your category already have licenses on them. So that’s one way to find out. But there are some categories, certainly, that would be much more difficult to add a license to. As I mentioned before, the, you know, children’s, entertainment is very big. I think kitchen is also very big. One of the pieces that I talk about in my course is the George Foreman grill, for example. You know, kind of a really great example of a licensed product. We all know that George doesn’t really make grills, but he does endorse them and put his name on them, and that’s, you know, that’s a famous, big licensing deal.
CASEY GAUSS:
Yeah, yeah.
CAMERON YODER:
Under what circumstances would you discourage someone from entering into licensing?
PAUL MILLER:
I would say that if you’re just getting started or if you’re really thin on resources it’s not really a good time to get started in licensing because, as I mentioned, it does take some other costs. You really should have an attorney review your agreement. One of the components of a license is a minimum guarantee, and that minimum guarantee is enforceable whether you sell zero products or a million products.
CAMERON YODER:
If listeners are listening and are feeling overwhelmed, because that is a lot, like licensing is an incredible opportunity, that’s a lot of – those are a lot of factors to consider for getting into licensing.
CASEY GAUSS:
Not to mention capital needed.
CAMERON YODER:
Of course, right, capital needed and everything else that goes with it.
PAUL MILLER:
Exactly.
CAMERON YODER:
If someone is feeling overwhelmed and just heard all of those things to take into consideration and just instantly says that’s too much; I can’t do it, what would you tell them if someone’s feeling overwhelmed?
PAUL MILLER:
I’d just say send a text message to Casey. No, no, you know, it’s like anything else. I didn’t know anything about licensing when I started, zero. I showed up at the first Licensing Expo with not a clue. In fact, I’m quite sure that some of the licensors that I talked to probably shook their head as I walked away going that guy doesn’t have a clue. So I would say, you know, enter the world, jump in the water and start learning. And you can learn by going to the Licensing Expo. You can take my free course, which I’ll be happy to give you the URL to, start digging around, do some Google research. It’s not that hard. It gets more complicated as you go up the ladder of licensing with the big properties. But again, starting out simple may be a great way to start.
CAMERON YODER:
Got it. Paul, is there anything else that you would like to tell our listeners?
PAUL MILLER:
I would just go back and say that, once again, don’t be intimidated by it. Look at the opportunity, understand the opportunity, and try to make a decision of whether or not that’s a good direction for your business to go in and see if it fits. Understand the pros and cons before you take the commitment.
CASEY GAUSS:
Yeah, and off of that – I think Paul has mentioned this – you know, one thing that I don’t want to happen is that there’s always that get rich quick scheme just over the hill, right? And so this is that, but isn’t that, and so in such that there is plenty of opportunity in licensing, but it may not be for everybody, or it is at the least not for everybody in their current state. So please don’t see this as a hey, I’m going to get rich quick opportunity, but at the same time it may be just that. So I think that it’s worth at least considering looking into and learning a lot more about. But don’t, you know, if there’s – you have terrible photos, you know, you have a bad listing, you’re not ranking for you know any keywords, this is not going to be your saving grace.
PAUL MILLER:
I’m going to back you up on that 100%, Casey. This is an advanced move, I would say, and not for the beginner and not for someone who is working on a shoestring. It’s more of a strategic business move than anything else.
CASEY GAUSS:
Yeah, and you know, Paul had done like $2 million in a year on his product before he went through this. So yeah. Paul, thanks so much.
CAMERON YODER:
Yeah, thank you so much, Paul.
CASEY GAUSS:
And so you know, I want our listeners to know – I had forgotten that you had a course. For those that may be interested in checking it out, you know, we’re obviously not getting any commissions nor would I want any commissions, but I do think it is a cool opportunity, so if people wanted to like learn more about the course, where would they do that?
PAUL MILLER:
Well, thanks. Well, we don’t have to worry about commissions because I don’t have anything for sale yet.
CASEY GAUSS:
Okay.
PAUL MILLER:
But I have been asked by so many folks in our sector, and you and I talked the other day about friends of ours who went with me to the licensing show last year and came out and actually executed licenses right out of the show. And that was Liran Hirschkorn and Andy Slamans. And you know, they really encouraged me to put a course together, so I did put together basically an intro to licensing completely free. You will get on my emailing list, so when I do have something to sell I will hit you up. But it’s at nextlevellicensing.com/followthedata.
CASEY GAUSS:
Oh, nice. He was prepared.
PAUL MILLER:
How do you like that? So we made a special landing page for you guys.
CASEY GAUSS:
Nice.
CAMERON YODER:
Awesome.
PAUL MILLER:
And just check it out. It really is, I believe, licensing is the next level of private label, and that’s why we called it that. I also have, you know, once you finish the course we have a private Facebook group where we’re putting together licensing people with product people, just trying to make people aware of the opportunity. When you do sign up I’ll probably put some emails out about the licensing show, so looking forward to meeting a bunch of folks out there. That’s coming up in about the middle of May. And look forward to seeing people out there.
CAMERON YODER:
That sounds great. We’ll put the link to that, to the course, in our show page, but hey, thanks, Paul, for being here, for answering questions, just for being available.
PAUL MILLER:
I appreciate it, guys. Thanks a lot.
CASEY GAUSS:
All right. Thanks, Paul. Take care.
CAMERON YODER:
Thanks, Paul.
What’s up, everybody? I hope you enjoyed that conversation with Paul. I was actually pretty interested to dive into the conversation of licensing since I haven’t heard many other sellers even talking about it. For any questions that you have for Paul or for us around licensing, we would love to hear from you feedback around licensing or feedback from the show. To submit any questions or responses that you have, feel free to hit us up on Facebook to shoot us a direct message and/or you can also leave us a voicemail. Our number is 317-721-6590. We’ll answer a couple of the questions, or maybe even on the next show in next week’s episode or the week after. Your feedback is super important to us, too, and if you’re listening on Apple Podcasts please feel free to leave us a review and/or rating. We love to hear from you guys. All you’ve got to do is head to our show page, scroll down to where it says ratings and reviews and tap the star rating you think that the show deserves. Then if you’ve got a minute leave us a review and tell us what you think of the show. And if you know a fellow seller who might be interested in licensing send them this episode and tell them about the show. We want to be a resource for those people, for you, for sellers and the information source in this space specifically, so please tell your friends, spread the word and share the show. Thanks again for listening. Really, we appreciate all of you and appreciate your time. Until next time, remember, the data is out there.
Follow the Data Episode 13: Taking Your Business International with Lucy Marshall from World First
Amazon Europe is as big as Amazon US. Could going international be the next great move for your FBA business? Join Viral Launch CEO Casey Gauss and co-host Cameron Yoder as they talk with Lucy Marshall from World First about incredible opportunity that is Amazon international and how to make the most out of overseas earnings.
CAMERON YODER:
Hey, everybody. Cameron here with Viral Launch. We’re here in Austin, Texas, recording a special episode. Today we are going to talk about internationalization, and it’s internationalization involved with a company called World First. And we’re going to get into a lot of different things today involved with internationalization. But for now I guess I’ll just pass the mic around the table for some introductions.
CASEY GAUSS:
Hey, guys. Casey here. Yeah, hopefully we can bring you guys some decent value as you look to expand internationally. Or maybe you’re an international seller looking to sell in the US. Or maybe you already are. We just want to help make sure that you are being as efficient as possible, making sure you have as much capital as possible to drive success behind your business.
LUCY MARSHALL:
And hi, I’m Lucy Marshall over at World First. I work on our e-commerce team here working with sellers directly to help them take advantage of new marketplaces and have worked previously for private label brands, so kind of understanding from both the brand perspective and the payments international end of that, how to make your brand successful overseas.
CAMERON YODER:
So like Casey touched on a little bit before, we’re trying to provide value for you, whether you’re expanding into international markets, or you’re thinking about expanding into international markets, or just even with your consideration in expanding your private label business in general. We’re going to talk a lot today about kind of everything having to do with those ideas. Part of that will be really having Lucy here explain what World First is and how sellers can prepare for something like expanding into international markets when it comes to what World First provides. So let’s get started.
Lucy, can you explain, just to everyone, give a basic overview of what World First is, like just simple as that?
LUCY MARSHALL:
Absolutely. So what we are is an international payment solution, and we work with corporations and e-commerce sellers to help them send and receive money globally.
We were founded in the UK back in 2004, and really our founder was working at Citibank and kind of saw an opportunity in the market for small- to medium-sized businesses to get better rates for their FX transfers. And that’s kind of blossomed the idea of World First and really being able to give those businesses better access to better rates than some of the larger banking platforms were. Our e-commerce solution really started coming into play in 2007 and coming truly to support the US market in 2014.
Now as we stand about to roll into 2018 we’ve worked with over 40,000 e-commerce sellers with offices worldwide. Whether you’re selling, you know, in China, Japan, Australia, UK, EU, US, Canada, we’ve got someone there to support you and really make sure your business is a success in that market.
CAMERON YODER:
So let’s say a – because you don’t only deal with private label sellers and Amazon, right? Like it’s businesses involved with international transactions, in general?
LUCY MARSHALL:
Absolutely, absolutely. I mean outside of Amazon itself, we’re compatible with 72 marketplaces globally, so it’s not strictly Amazon. Additionally, if you’re a company with an entity in the US and EU we’re able to send those funds back and forth. If you have suppliers overseas you need to make payments to, we can facilitate those payments as well. So it’s not strictly online businesses, but truly any business that needs to make payments or receive payments globally in different currencies.
CAMERON YODER:
So if a private label seller on Amazon comes to you and says – well, is just interested in what you do, what would you tell them, like specifically for them?
LUCY MARSHALL:
So for them what I would say is we’re an international payment solution that will allow for you to set up receiving accounts worldwide. The benefit of being a private label business is you’ve worked to build this brand. Let’s say you want to take that brand to the UK without actually having to make an entity in the UK. We’re able to set up a receiving solution for you so that that way you can receive pounds or receive the local currency and send it back to your US account at about half the cost of what a marketplace would charge. So we’re automatically adding about 2% to your bottom line without any opening fees, monthly fees or closing fees, and it allows for you to move your money from those global markets worldwide.
CAMERON YODER:
So we talked – now that we, I think everyone kind of has a pretty general understanding of what World First is and, or where you guys came from, let’s touch on just internationalization in general, right. So can you tell us from your perspective and World First’s perspective, what are the advantages to selling internationally?
LUCY MARSHALL:
There are so many. I am like the world’s biggest advocate for selling outside of the US right now because I think there are so many fantastic opportunities even just looking at different selling opportunities. Like you’ve got Boxing Day in the UK, and that’s not something we have access to in the States. There is Singles Day in China. If you start selling in the new Australian market that launched you have seasonality, so if you have a summer product in the US and you want to sell that in Australia during the winter you have that opportunity to sell that worldwide. And so for me those are all those advantages, and especially taking advantage of newer markets, it’s less competition. It’s more opportunity. And then even with exchange rates, if you’re selling in the UK it’s often a higher price point, and so you’re getting more return as you’re converting those funds back and those sales back from the UK.
CASEY GAUSS:
Yeah, and building off of what Lucy is talking about, you know collectively – I think we’ve said this before – but collectively the Amazon EU is just as large as Amazon US. And like Lucy said, so much easier to drive success in these markets because competition is so much lower. Obviously there are some hurdles there, and World First is helping you kind of step over some of those. But there is so much opportunity international. We’re super bullish on internationalization and, you know, making sure you’re selling everywhere as much as possible. Amazon is really pushing Amazon EU markets, and so like, you know, Amazon EU is like getting into Amazon US two years ago, maybe three years ago, where competition is just a fraction of what it is now, and you get to essentially ride that wave of success as Amazon continues to grow their dominance in these markets. And so you know, we actually, here in Austin, at Capitalism Conference with Ryan Moran, we actually just met these two guys. After apparently eight months of taking Amazon successfully these guys just reached the $10 million mark.
CAMERON YODER:
They’re killing it.
CASEY GAUSS:
Which is absolutely insane, while going to college – one of them is going to college. And they don’t sell in the US. They’re only selling an international Amazon markets because there is so much opportunity. You know, one of the guys was saying just by the fact that they have a Spanish speaker write their listings for Amazon Spain they’ll get ranking because their keyword structure is so much better. Their listings are so much better written because they have – one of them is a native Spanish speaker. He’s from Venezuela. And he’s just able to write really great listings, and that allows them to rank. So competition is just like, you know, a shadow of what it is in the US, but the opportunity collectively is the same.
CAMERON YODER:
And they have a slight advantage over people in the US having grown up in Europe and kind of understanding the European market. That being said, that – I think their story really shows that’s a very tangible thing to tell you guys that hey, the European market, or the worldwide market is very much alive. Obviously that’s a lot of good opportunity that is there, and they’re not even selling in the US market.
CASEY GAUSS:
Those guys are super smart guys. Like they were going to Dartmouth, and then now he’s going to Cambridge studying mathematics and finance. So they are very smart guys.
CAMERON YODER:
It’s not like you can just pull a trigger and it just like magically happens.
CASEY GAUSS:
But there’s huge opportunity, for sure.
CAMERON YODER:
Okay, so let’s talk a little bit about the UK market specifically. So if someone – let’s say you have a seller in the US who wants to sell in the UK as maybe like their first step internationally. From your perspective and from what you’ve seen, what would be like a good kind of tangible first step leading to that?
LUCY MARSHALL:
So obviously I think first step looking into any market is looking how your product is going to perform in that market and making sure that you’re actually going to be able to make sales from that. No one wants to throw spaghetti against a wall and put their product in Amazon FBA and be like fingers crossed, hope this works. So again, I think that’s such a fantastic thing that Viral Launch can help you with and looking at what your product can do in that market. Next steps from there are a little bit more admin. Like do you have your VAT numbers, which is value-added tax? And Amazon has really been cracking down on that in the past year. I think the stat was they lost out on $1.28 billion in VAT fraud from Amazon sellers specifically not necessarily paying it. And so the UK government has been really upset with Amazon, which means Amazon is like yo, you’ve got to get your VAT numbers in because we will shut down your account. So getting those set up, making sure you have those implications in place ready to pay those taxes. Our service specifically can help you make those payments so that way you’re making a pound-to-pound payment and not having to bring those pounds back to dollars and then send the VAT payment in pounds again.
Next steps from there, shipping, and then translating your labels and your listings if you are private label and selling on those markets. Luckily UK is English-speaking, so not a ton of leg work there. A little bit of localization to make sure – let’s say if you’re selling pants, they become trousers on that marketplace, making sure things are finessed a bit to that space.
CASEY GAUSS:
I really think – well, there’s one area that I see a lot of people focus on when it comes to money, and that’s tax. Like a lot of people, when they think about expanding internationally they think oh, all I need to do, all I need to do is have my taxes, my tax system set up and set in place. They don’t often think about having like a bank set up –
LUCY MARSHALL:
Right.
CASEY GAUSS:
– right? Or this money transfer system set up in place. Do people need to have, need to have or should have like a bank set up in like the UK, or is that something that –?
LUCY MARSHALL:
You don’t necessarily need to have the banking account in the UK, and this is truly where our service comes into play, right? Like if you’re opening a physical bank account you have to pay fees, you have to have a business over there. You have to have a physical entity and then be paying taxes to that country and paying taxes on your business there. If you’re opening an account with us the beauty is we’re able to collect those funds in one of our virtual accounts. You have the banking and routing number and everything that goes along with that. And if you’re choosing to just use a marketplace to manage your FX transfer, they’re typically transferring that at a much higher rate, and they’re doing it biweekly, so that’s not giving you any control or transparency as to how or when to move your funds. If you’re using a platform like ours we can collect the funds, and then you have access to a platform much like your online banking platforms where you can facilitate a trade. You can watch the rates, be aware of what rate exactly you’re moving your funds at, and then we’re usually coming close to cutting those rates in half, so saving up to 2% on your bottom line. So if you are selling, say, 10,000 pounds a month, that’s saving you $200 on your transfers coming back. So that’s not a small fee by any stretch. And again, as you continue to grow your sales that becomes a much bigger chunk of your sales that you should be getting back because you’ve put in all this hard work to get to new markets. Make sure you’re taking the most home from those markets.
CAMERON YODER:
Is there a simple way to explain like, okay, let’s say we have a seller in the US again who sells in the UK. What does a simple process look like to get that money back into the United States? Like can you break that down a little bit?
LUCY MARSHALL:
Yeah, the flow of funds you mean?
CAMERON YODER:
Yeah, yeah, yeah.
LUCY MARSHALL:
Yeah, so what – right now if you were a US seller selling into the UK you would be putting your US bank account into that space. You would put our routing account numbers in there, and that’s in the name of your business. So Amazon now deposits funds into that account, and then we move that back when you’re ready. It’s either an automatic transfer, or you can transfer that online when you’re ready to. If you are a rate watcher and want to see, hey, I saw this go up to, you know, 1.3 today. I’d like to do it at that rate. So there’s really no difference in terms of timing or flow of funds. It’s just Amazon deposits to us, and then we move that back to your US account.
CAMERON YODER:
Okay. What do you see as like maybe the number one or maybe even top couple mistakes that people are making when it comes to like, I don’t know, money transfer and/or sales internationally?
LUCY MARSHALL:
It’s a complete lack of awareness. I think really one of our biggest hurdles as we’re talking to new sellers is they’re not aware that this FX transfer is occurring, and they’re not aware of what rate that that’s happening at. So to me if you’re not watching your bottom line as a seller, like that’s a problem. You need to be making sure that you are getting the most of your sales home. So we’re able to kind of calculate that, and you can look at, say, a daily rate of when Amazon’s transferring your funds and then you know, dividing that by the amount you’re getting back. And usually you can figure out what that daily rate is and through a percent change calculation see, oh, that’s roughly maybe like 4% of my bottom line. And that’s not necessarily super competitive. And also you have no control over it, so that stinks, too. Like you should be in charge of your own money and how and when that’s being moved back.
CAMERON YODER:
Talking about like money saved, right, because this – so this whole process, the goal is to really help sellers save money through a process that maybe they’re not even aware of.
LUCY MARSHALL:
Right.
CAMERON YODER:
How – do you know how much a typical seller will save after like becoming aware of something like this and getting involved with these transactions?
LUCY MARSHALL:
Yeah, and typically that depends on size of the seller, how much you’re moving back. But I would say on average, again, if you’re at that 10,000 pound mark we’re saving about $200 on every transfer. So that’s kind of our best rule of thumb. Obviously if you’re selling like 10 million pounds or something in that range yearly that’s a much, much bigger number. So that does vary depending on the size of the seller and how much you’re bringing home.
CASEY GAUSS:
Yeah, and so how long does it take to set up this whole World First process?
LUCY MARSHALL:
It’s super easy. It’s really only four documents that we need to get you set up. As long as those come in we can have your account set up in a matter of hours, and then the accounts are able to allocate immediately. We have RMs, relationship managers, in-house that can walk you through where and how to put this in on Amazon so everything is done correctly, it’s Amazon-compliant, and then they will walk you through your first trade as well. So it’s really helpful to actually have a voice on the phone and someone to actually talk to rather than, you know, screaming at a computer. I feel like we all do that enough in our day-to-day lives that don’t have to do it on the banking end of things as well.
CASEY GAUSS:
Yeah, so I mean just to break it down, I know everybody’s always so crunched for time. I mean apparently, you know, this is something that you can do in a matter of hours, let’s say, at the most, and you will save hundreds to thousands of dollars a month, which just really adds up over the course of a year, especially when you’re talking about being able to purchase more inventory, get a little bit cheaper rates on your inventory, so you save more money there. And you can – it really just compounds. And so as long as it’s quick, 2% really adds up, especially when you start getting into volume and you add that up over time.
CAMERON YODER:
Right. This is something that not many people know about, especially when it comes to international stuff. I think one thing that is kind of at fault with US sellers is just awareness with all the systems in place, like in VATs. And the story of the guys that we talked about before, the thing about them is that they, again, grew up in that area. And so they definitely have – they’re smart guys, number one, but number two, they do have a pretty good understanding of the space and the area that they’re in, which is Europe. And that definitely has an advantage. And so being aware of something like this, as well as being able to save money to put towards your other resources, like something like this is something that not a lot of people are aware of that we want to provide value to you by making you aware of or having you be aware of it. So Lucy, talking specifically about World First, what unique perspective does World First offer sellers on Amazon?
LUCY MARSHALL:
It’s really the perspective of smartly managing your finance. I mean we are – we really focus on that payments end of it and making sure we’re creating a solution where not only if you’re selling on the UK, but if you’re selling on China, if you’re selling on Japan, if you’re figuring out how to take advantage of that new Australian market, we want to put the pieces in place for you to be able to manage those different aspects of your business and be smart about it financially. In addition to that we do have a very vast partner network. So if you do need help figuring that out we’re kind of a jack of all trades, masters of none outside of that payment space. So we’re really able to figure out where to connect you there, and I just think there’s so much opportunity outside of the domestic US market to go take advantage of that and then really make sure you’re savvy with both your receiving payments from Amazon, but also paying for, and suppliers paying for, and employees, and making sure you have a frictionless way to move your money globally.
CAMERON YODER:
So if, let’s say some of our listeners are even just a little curious about what you’re talking about. What resources would you have for them to even just point them in a specific direction or to get in touch?
LUCY MARSHALL:
Yeah, and there are a couple of different ways. You can just go sign up online. I mean I will give you all my email to post after this. Please reach out directly. I’m more than happy to field calls or answer questions about something. Really our biggest resource are our people. Everyone’s highly educated, not only in the world of FX, but in e-commerce, as well. So I would put ourselves forward as our best resource to do that in addition to, you know, the content we’re putting out on our blog, as well.
CAMERON YODER:
Yeah, gotcha.
LUCY MARSHALL:
Recently we’ve been working not only with sellers that have already expanded to the international markets, but really looking at how we can support those that want to take advantage of it as well. And so we’ve really relied on partners in the field of VAT, shipping, logistics and translation to help kind of those admin pieces of like where do I start to figure out to get my product overseas and get my listings set up and make sure you’re government-compliant with everything that’s happening in the UK and EU as well. So truly I feel like you all are the best first stop for our clients because you’re able to figure out where in the market does someone’s product fit, and will that be successful? And then we can kind of help through the nuts and bolts in terms of figuring out VAT, shipping and the payments piece of it as how you figure out how to manage your global payments.
CAMERON YODER:
Got it.
Thank you guys so much for tuning in. Again, if you have any questions feel free to shoot us an email. We’ll provide all of the content from this podcast in the description.
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