On Amazon, You’re Either Growing or Dying
An Amazon seller says he competes on the platform despite being undercut by Amazon Basics and having to spend as much as $100,000 a month on advertising.
Good Morning!
Here are today’s highlights:
A restaurant specializes in hiring workers with disabilities.
There’s an “engagement gap,” and it’s affecting retail sales.
The SBA says it will work with EIDL borrowers who can’t pay back their loans.
Obituary: Stew Leonard Sr. built what has been called America’s best grocery chain—and pleaded guilty to tax fraud.
ECOMMERCE
An Amazon seller explains how his coffee grinder brand has achieved $10 million in lifetime sales on the platform: “My e-commerce success really started after I launched my coffee accessories brand, Kaffe, on Amazon in mid-2019. I wanted to get into the home and kitchen category because those items tend to be popular with Amazon shoppers. I picked Amazon to launch my brand because of its fulfillment capabilities and the sheer volume of customers it has. I launched Kaffe with a single product: a coffee grinder that came in only one color. I spent day and night thinking about the best way to position the coffee grinder so it would get to the top of Amazon's rankings.”
“Amazon has its own coffee grinder that it sells under its Amazon Basics private label, and it retails for a couple of dollars less than Kaffe's does. We also face competition from more established brands like Mr. Coffee, KitchenAid, and Black+Decker, many of which have a vendor relationship with Amazon, meaning they sell their products to Amazon at a wholesale price. Amazon can then sell those products at competitive prices directly.”
“The best way to grow your business on Amazon is to either launch new products under your existing brand or spend a lot on advertising. There are lots of ways you can do that: video ads, leaderboard ads, or even ads on your competitors' product listing pages. Kaffe typically spends between $75,000 and $100,000 a month on Amazon ads. That number has gone up quite a bit over the last three years and has sometimes hurt our margins.”
“Amazon aggregators — companies like Thrasio, Perch, and Heyday that raised millions to acquire Amazon sellers — have really professionalized the space. That's a good thing. But it has also made it impossible to sell on Amazon as a part-time gig as many do on other platforms like Etsy.”
“On Amazon, you're either growing, or you're really dying, and the fees will eat you alive if you're not doing any volume.” READ MORE
STARTUPS
Philadelphia-based Zenn Hair Care, which sells organic products for those with natural Black hair is pivoting back to ecommerce: “Each product is handmade in her Philadelphia production space using natural ingredients like aloe vera juice, shea butter, and oils from almonds, avocados, tea tree, lemons, and carrots. Products range from $25 to $55. The pomade remains a bestseller. She also offers a selection of accessories. More than creating an organic brand geared toward Black women, [Aurora] Teasley wanted to elevate the products through a clean aesthetic. Other products for those with natural hair, she said, were in bright, bold packaging that didn’t suit her taste. ‘I felt like Black women deserve packaging that's nice and minimal and sophisticated.’”
“The business started with e-commerce and remained that way for much of its first year. In 2021, Teasley started doing pop-ups before opening her first retail space at the Willow Grove Mall. She had a cart space there for three months from June to August of 2021 and then pursued a similar space at the King of Prussia Mall, which she took up last January.”
“Being at the King of Prussia Mall also introduced the brand to a slate of consumers she might not have gotten in front of otherwise. The mall, which spans nearly 3 million square feet, attracts over 20 million visitors annually, according to the latest report from King of Prussia District.”
“Since opening there, Teasley said she’s been able to quadruple revenue and is projecting doing so again in 2023. While it’s been a boon for business – about 90 percent of sales are retail today – Teasley wants to return to her e-commerce roots to grow Zenn Hair Care. Her lease at King of Prussia Mall is set to end in October, at which point she is considering phasing out that retail operation.” READ MORE
FINANCE
The SBA has a new plan for EIDL defaults: “The Small Business Administration has confirmed that it will begin accepting the so-called ‘offer in compromise’ as one of the last resorts for small businesses that default on their Covid EIDL loans. Previously, the agency has been silent on whether it would accept offers in compromise, which occurs when a borrower offers up some portion of payment toward a defaulted loan to settle the debt permanently and avoid litigation or future collections efforts. That left many Covid EIDL borrowers who couldn't pay the loans with few options beyond seeking bankruptcy.”
“The most prominent option for small-business owners who can’t make a payment is applying for a Hardship Accommodation Plan from the agency.”
“That will reduce the borrower’s payment to 10 percent of their monthly payment for six months, after which their regular monthly payment will resume unless they apply for, and receive, another six-month extension.”
“Loans under $200,000 can enroll in a hardship accommodation plan through their MySBA Loan Portal. For larger loans, they will need to call the Covid EIDL Servicing Center.” READ MORE
HUMAN RESOURCES
New data suggest workers are not necessarily more productive in the office: “It's yet another data point in the high-stakes debate over the future of work — a debate with significant implications for cities, real estate developers, small businesses, and many others. Before the pandemic, engineers who worked together in the same building received 23 percent more online feedback on their computer code than engineers whose teammates were not in the same building. After offices closed during Covid-19, the advantage shrank 17 percentage points. But there is a big trade-off when it comes to in-person work — everyone gets less done. The study found shared proximity reduced the number of programs written per month by 21 percent, with both senior and junior engineers writing less code.”
“‘This is driven by senior engineers who may write fewer programs when sitting near coworkers because they give more feedback to junior colleagues. However, very junior engineers also write fewer programs when sitting near their coworkers, consistent with needing to respond to more feedback,’ the study states.”
“The authors of the study also said they see a tradeoff on promotions — engineers who sit near their teammates are less likely to be promoted early but are more likely to be promoted down the road. ‘In the short run, proximity reduces programmers’ output, particularly for senior engineers. Yet, proximity increases on-the-job training, which is an input into longer-run productivity,’ according to the study.” READ MORE
A Philadelphia restaurant has a mission to hire workers with disabilities: “Peg Botto and her husband, Jerome, had a clear vision but no name for their proposed catering company back in 2000. They knew it would serve healthy fare, help sustain local farmers and purveyors, and provide on-the-job training for people who have developmental and intellectual disabilities — as they’d been doing for years as a prepared-food vendor at the Chestnut Hill Farmers Market. ‘We knew our company would be out of this world,’ said Peg. So they decided to call it Cosmic Catering.”
“Its patio, roof deck, and other amenities have a laid-back but lively vibe that attracts runners, rowers, cyclists, dog walkers, and tourists. The staff of 25 has a range of talents and includes 18 individuals with developmental or intellectual disabilities.”
“‘My son has special needs, so I appreciate Peg’s mission,’ said Darlene Martin, the cafe’s office manager. ‘Working here really works in my life.’”
“For most new workers, sweeping floors, clearing tables, and washing dishes are generally the starter tasks. Others can gradually become proficient at inventory, food preparation, and table service.” READ MORE
RESTAURANTS
The Boston Business Journal recently convened six restaurateurs to talk about what the pandemic has wrought:
Michael Serpa, owner of Select Oyster Bar, Atlantico, and Little Whale Oyster Bar: “What I see for us personally as the biggest effect of the leftover of the pandemic is the change in people's schedules with remote work. What used to be a busy period, Friday lunch, is not quite as busy as it used to be, and then Tuesday nights are busier.”
Kristin Canty, owner of Woods Hill Table, Adelita, Woods Hill Pier 4, and the Farm at Woods Hill: “My suburban restaurants are way busier than my city restaurant. My city restaurant opened in November of 2019 and it was open seven days a week from 11 a.m. to 9 p.m. Now, I can’t open for lunch. But, my restaurant in Concord, I can open for lunch easily.”
Will Gilson, chef/owner of Puritan & Company, Puritan Oyster Bar, The Lexington, Café Beatrice, Geppetto, and the Herb Lyceum: “We had a lot of inflation-based deals in January and February to try to like get people in. We did a neighborhood tasting menu that was $39 for three courses. We lost money, but we brought in a significant amount of people. We had to get creative to get a captive audience.”
Will Gilson: “We started sending out surveys from our email newsletter list and say, ‘We will give you a $20 gift card to come in if you fill out the survey.’ We could target the info that we had in those responses to make sure that we were understanding it the right way. And then we could see when they cashed in the gift card. And so, like, you're able to kind of track. I've never had more successful feedback than anything we've ever done.” READ MORE
RETAIL
There’s an engagement gap, and it’s affecting retail sales: “Jamie Singleton, Signet Jewelers' president and chief consumer officer, acknowledged the sales slump at the company's investor day last week, attributing the decline to dating reluctance and relationship rifts caused by pandemic lockdowns in 2020. Per Signet data, on average, most couples get married about 3.25 years into a relationship. ‘So what's happened over the past couple of years is what we anticipated and what we planned for,’ she said, according to CNN. ‘Engagement jewelry sales were lackluster in fiscal 2023, and we expect them to remain so for the balance of fiscal 2024.’”
“Singleton said that the market would have to grow about 25 percent by 2026 to return to pre-pandemic levels, a turnaround that Signet may depend on as 50 percent of the company's merchandise sales are from engagement jewelry, per CNN.”
“Jewelers aren't the only companies feeling the bridal slump. In early April, wedding dress retailer David's Bridal filed for bankruptcy for the second time in the last five years. The move left many brides-to-be wondering about the status of their orders, as the uncertain future of the company looms.” READ MORE
OBITUARY
Stew Leonard Sr. founded the “Disneyland of Dairy Stores”: “Mr. Leonard opened his original store in Norwalk, Conn., in 1969 as a destination that promised fresh milk because it was built around a bottling plant. ‘You’d have to own a cow to get it sooner,’ his advertisements proclaimed. Bryan Miller described it in The New York Times as the ‘Disneyland of Dairy Stores’; ‘Ripley’s Believe It or Not’ called it the ‘World’s Largest Dairy Store’; and it earned a place in the Guinness World Records for having the highest dollar sales per square foot of selling space. In 2015, Business Insider praised Kroger’s customer loyalty program and Wegmans’s walk-in beer locker, but it concluded that anyone who had ever set foot in Stew Leonard’s ‘knows it is miles above the rest.’”
“The magazine listed 13 reasons Stew Leonard’s was ‘truly America’s best grocery store.’ The first was its customer service policy: ‘Rule 1: The customer is always right. Rule 2: If the customer is ever wrong, reread Rule 1.’”
“More than 50 years after the first store opened, Stew Leonard’s has expanded to encompass seven locations earning $600 million annually, and it remains family-owned and operated with an enormously loyal customer base.”
“Mr. Leonard retired around 1990, but remained chairman emeritus of the company’s board. Three years later, he was sentenced to prison after pleading guilty to tax fraud for skimming more than $17 million in sales from the Norwalk store; at the time, it was the nation’s largest computer-driven tax evasion case on record.”
“Many of his devoted patrons who were interviewed afterward seemed more saddened or disappointed than angry. At his sentencing, Mr. Leonard, leaning on a metal cane after hip surgery, said, sobbing: ‘I’ve hurt my family. I’ve hurt my children. I’ve hurt my customers.’” READ MORE
THE 21 HATS PODCAST
When CEOs Behave Badly: This week, our conversation starts with Shawn Busse and Jay Goltz trying to understand why CEOs keep going viral for their misguided attempts to rally the troops. Shawn suspects CEO screeds have always existed—they just haven’t been recorded. He also thinks they tend to come more from public company CEOs who are beholden to shareholders. Jay thinks they’re just morons. “I really don't understand how someone could be smart enough to run a big company like that,” he says, “and be so completely ignorant. It's shocking to me.” Of course, CEOs of both publicly owned companies and privately owned companies do have to do unpleasant things sometimes, but Shawn and Jay say they’ve learned from their own experiences handling layoffs and recessions. “Do we have to go out of our way to be callous about it?” Jay asks. “I don't think so.” Plus: the very different ways Shawn and Jay manage their hiring processes.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren