How Partnering with Amazon Can Make All the Difference for Some Small Businesses

SOMETHING’S AFOOT: Combat Flip Flops CEO Matt Griffin and customer service manager Jill Doherty sing the praises of their collaboration with Amazon. Photo by John Vicory.

This article appears in print as part of the cover story of the January 2018 issue. Click here for a free subscription.

This is one part of the January 2018 cover story. Read the full cover story here.

When it comes to market power, Amazon.com is truly Amazonian in size. Its growth has retailers around the globe running scared. But not all retailers are afraid.

Consider Combat Flip Flops. The Issaquah company racked up about $300,000 in sales in 2016, sports an inventory of about 170 products and has a mere four employees, including its co-owners. Although its flip flops and other military-themed products constitute a serious business, the company is but a blip in the retail universe.

The thing is, the tiny upstart and the giant of selling online are wound together in what may be one of the most powerful e-commerce engines running today. Combat Flip Flops and more than two million other sellers of all sizes and types make up an army of third-party merchants that sell their products under the ever-expanding Amazon umbrella.

With a couple million sellers on the Amazon Marketplace, the diversity of merchants is no doubt vast. Though it doesnt release a specific number of sellers in Washington state, the company includes them in a group of 90,000 authors, sellers and developers it counts that are growing their businesses and reaching new customers through Amazon.

The Amazon Marketplace has long been a feature of Amazon since 2000, in fact. Spokesperson Ted Cook says it was introduced to bring Amazon shoppers a much broader selection of goods from around the world, as well as to keep prices low. CEO Jeff Bezos identified the Marketplace as one the three pillars of the company, along with the Amazon Web Services cloud operation and Amazon Prime membership.

Under the third-party arrangement, sellers get to list their products on the Amazon website amid offerings from competitors and even Amazon itself. Amazon takes a commission on sales and, over the years, has added more features and niches. It provides sales and marketing help that gives merchants the ability to manage their accounts online. It has added new storefronts, including Amazon Handmade, which sells only artisan-crafted goods along the lines of the popular Etsy website.

One big addition has been Fulfillment by Amazon (FBA), a wide-ranging service under which, for an additional fee, Amazon will handle a merchants shipping and returns. It also confers Prime status on goods handled under FBA, giving those items the advantage of guaranteed two-day shipping at no charge to Prime members.

Scot Wingo, executive chairman of ChannelAdvisors and a noted e-commerce observer, figures the gross merchandise value of goods sold on Amazon will reach $270 billion this year, with third-party sales accounting for $170 billion of that total.

I think the seller business is what has funded Amazons growth for the last five to eight years, Wingo says. Without third-party, I doubt they would have been able to do Amazon Web Services, China, India and the FBA/fulfillment buildout.

For many small and emerging brands, this construct offers more hope for survival. Christine Boerner, who founded Cielo Pill Holders in Seattle four years ago, started out using her own website as her primary channel. Once she started selling on Amazon and could feature her brands story through the Amazon Exclusives program, she got more traction. Today, she attributes a large part of her businesss success to Amazon.

The benefit of Exclusives to Cielo, says Boerner, is almost immeasurable.

With such huge figures and the customer reach they imply, Amazon has become the must-have platform for online sellers. The platform is hardly problem free, of course, and has been known to strike fear among many merchants who worry Amazon will swoop in with its own competing products as soon as sales take off. But theres little doubt that Amazons market power is ineluctably attractive as well.

Amazon is the place to be, says Rachel Greer, who advises Amazon merchants at Cascadia Seller Solutions in Monroe.

For Combat Flip Flops, selling its footwear and gear on Amazon and a $300,000 investment it won from a 2016 appearance on the TV show Shark Tank provided a steroid shot to its business. The moves are putting the Issaquah maker of military-themed footwear and gear on track to reach $2 million in sales, according to CEO Matt Griffin.

Combat Flip Flops began after Griffin, a 2001 West Point graduate, served deployments to Afghanistan and Iraq and later as a government services manager in the Middle East. While in Afghanistan, he visited a combat-boot factory, where Griffin saw the sole of a combat boot decked out with flip flop gear on it a combat flip flop. Thinking it sounded like a good name for a website, he called army buddy Donald Lee, and Lee promptly registered it as a domain name.

Griffin, Lee and a third partner, Andy Sewrey (Griffins brother-in-law), worked on developing the idea, setting up a website, making retail channel connections, then marching off to trade shows. They put together a supply chain that includes manufacturing in places that are or were combat zones. From this start, the move to Amazon and Shark Tank changed the firms trajectory.

Combat Flip Flops has become part of the Amazon Exclusives program, selling exclusively through the Amazon website and its own. For a 15 percent commission, Amazon provides marketing assistance, an opportunity for financing from the Amazon Lending loan program, public relations help and appearances at shows.

One service Combat Flip Flops doesnt use is the much-ballyhooed Fulfillment by Amazon, under which Amazon handles the storage and shipping of a sellers products for a fee. Combat Flip Flops instead uses its own third-party fulfillment service, but would like to use FBA at some point. It doesnt work out financially right now and would require changes in how products are brought to market, cutting into the companys already low margins. Nevertheless, the company is bullish on its partnership.

From start to finish, Griffin says, Amazon has been fantastic to work with.

Tomofun began four years ago, after the Taiwanese companys husband-and-wife team, Victor and Maggie Chang, noticed their toy poodle Gobi had the saddest puppy eyes when they left him home alone. That led them to develop Tomofuns one product: the Furbo dog camera. The Internet of Things device allows dog owners to keep an eye on their pets remotely through cameras and sensors, even tossing the pet an occasional treat.

Tomofuns quantum leap came from a red-hot 2016 campaign on the Indiegogo crowdfunding website.

We blew past the $30,000 goal in the first hour, says CEO Victor Chang. It reached $500,000 over two months.

Amazon noticed. Shortly after the crowdfunding episode, Furbo got a coveted position on Amazons Prime Day lineup in July 2016. The promotion, which spotlights certain products, drew interest and sales.

Ever since we got on Amazon, weve been booming, Chang reports.

Since that start, Tomofun has continued to grow rapidly. The Furbo was again featured on this years Prime Day, recording 500 times the daily sales rate of the previous month, according to Chang. In all, Tomofun is looking to sell more than 100,000 of the $249 devices by years end.

All the business has pushed Tomofun to open an office in Bellevue to handle marketing and business development. The company wants the proximity to work more closely with Amazon. One way it helps is with discoverability techniques making the Furbo more visible on the site and through searches.

Chang also praises the FBA service, which he believes takes away lot of pain from logistics and allows the company to direct its attention and resources elsewhere, such as toward research and development.

Why has Amazon devoted so much attention to Furbo?

Chang thinks it may be tied to Amazons famous dog culture, which encourages employees to bring their dogs to work. Theres a common passion there, he says. The product is a dog camera for dog people.

LEATHERMEN: Michael, left, and Ryan Barrie started HArdmill to satisfy an urge to provide simple, traditional, rugged products, which they sell on Amazon Handmade. Photo by John Vicory

Hardmill, a Seattle maker of kitchenware and home goods, sells on Amazon Handmade. Its goods range from durable aprons and bags to knife cases and accessories.

The company was launched in May 2013 after cofounder Ryan Barrie, who had worked at a restaurant while in college in Moscow, Idaho, wanted a kitchen apron to use at home. He designed one himself and figured it might be something he, with his brothers help, could produce and sell commercially.

Hardmill sells through other channels as well, including its own website, on Etsy, and in retail outlets in Seattle and elsewhere. It also sells some of its products in the Starbucks Reserve Roastery & Tasting Room and provides aprons for employees there.

Though Amazon has become Hardmills largest online sales channel, Hardmill had been reluctant to sell there at first.

We were a little hesitant to put the brand on Amazon before Handmade was available, Barrie notes. We didnt want the handcrafted nature of our products to get lost on our customers.

Amazon, Barrie says, has helped his operation in a variety of ways, particularly by helping time product introductions so that they wont get lost in the mix. Being on Handmade has enabled Hardmill to have its own web page, and Amazon helps Hardmill optimize its product listings in search rankings. The e-commerce giant also works out public relations events involving Hardmill and provides data that help Hardmill understand its business better.

Too, Barrie also places a high value on Amazons FBA service. Though Hardmill fulfills its own sites orders, it is moving deeper into FBA. It takes [away] a lot of the stress of getting orders out, Barrie says.

For these merchants and others, the Amazon Marketplace has been a hard-core, solid business opportunity.

What I like best about it is that Amazons a serious marketplace for serious sellers, says Chris McCabe, a Boston-based consultant and former Amazon fraud investigator. Its a platform, he says, for people who want to run a business correctly.

While the marketplace is home to millions of sellers, the operation isnt for everyone. Greer, the consultant at Cascadia Seller Solutions in Monroe, says Amazon doesnt fit the business plans of liquidation companies, for instance, primarily because of the quality complaints that can come with that business. Some merchants at the other end those with high-end, high-quality products also refrain.

Amazon isnt really a flea market, but its not exactly a Nordstrom, Greer says. You can sell nice stuff on Amazon, but because the way the website works, where everything looks the same, its hard to provide a premium experience for your premium products.

The friction that comes with doing business can produce other challenges, reflecting the Wild West nature of e-commerce. Online forums teem with complaints and problems Amazon sellers encounter, and a cottage industry of consultants such as McCabe and Greer, a former Amazon employee, has emerged to help sellers navigate these issues.

Among the biggest challenges sellers face is the suspension of their accounts or removal of their listings, often without clear explanation. Typically, the action involves customer complaints. Such complaints can upset a sellers business and consultants agree that Amazon is likely to err on the side of the buyer rather than the seller but McCabe says he thinks sellers can learn to weather these complaints by communicating more effectively. The short-term pain that comes from addressing these complaints can lead to long-term success on the site, he says.

Another challenge involves the sudden appearance on the site of products, including counterfeits, that compete with a sellers brand. Its not unusual for would-be sellers, after noticing brands that sell well on Amazon, to come up with a cheaper and nearly identical competing product. In some cases, Amazon itself may start selling a competitor product, consultants say.

Rob Hampton experienced some of this downside. A music director at a Bothell church, Hampton had a business selling a private-label guitar pedal produced by a Chinese manufacturer (a common business plan of Amazon sellers). After more than a year in the business, he suddenly faced competition from a product selling for 35 percent less. He determined that the pedal was essentially a knockoff also produced in China. He complained to Amazon but didnt push it as hard as he might have, reasoning that Amazon wouldnt do much about it.

In 2014, as part of a research study, Upstream Commerce took a sample of 857 top brands in womens clothing sold by independent sellers, then flagged products from those brands as they were introduced through marketplace sellers. Within 12 weeks, 25 percent of these products got picked up and were sold directly by Amazon. Other stories corroborate this, including one in which AmazonBasics began selling a laptop stand remarkably like, and much less expensive than, its best-selling laptop stand, which is designed and sold by another brand.

Despite such travail, Amazon, remains the must-have, go-to sales arena for online sellers.

The people are there, they trust Amazon and, in many cases, theyre Prime members, so their shipping is free, says Jon Payne, who advises Amazon sellers at his Net Focus Media consultancy in Fort Mills, South Carolina.

Even Hampton is about to give it another go. Operating under Coda Music Technologies, he says he has developed a Bluetooth-equipped pedal that can work with a tablet or PC. He was planning to launch the product with a Kickstarter campaign followed by sales on what else? Amazon.

I think Amazon is a fantastic marketplace for nearly everything at this point, and its only going to grow and grow, he says. There are lots more pros than there are cons.

This is one part of the January 2018 cover story. Read the full cover story here.

This article appears in print as part of the cover story of the January 2018 issue. Click here for a free subscription.