[00:00:00] Welcome to Unpacking the Digital Shelf, where we explore brand manufacturing in the digital age. Hey everyone, Peter Crosby here from the Digital Shelf Institute. Times of chaos and uncertainty do have an uncomfortable but necessary side effect of focusing one's mind both on what is important and what is within one's control.
[00:00:30] This is certainly true in the Zoom rooms and boardrooms of any company in commerce. For our guest, Colin Kaster, President of Strategy, Digital Advertising, and Operations at Equity Commerce, an e-commerce agency optimizing Amazon and omnichannel sales, much of these answers lie in understanding the real unit economics of every SKU you sell, and then optimizing your business around where the opportunities for maximum profitability lie. Lauren Levak-Gilbert and I peppered him with questions.
[00:01:01] Welcome to the podcast, Colin. We are so excited to have you on and dig into today's topic. Yeah, I really appreciate you having me. Because tariffs, on everyone's minds, the chaos, the uncertainty, the cost. And so I thought, you know, with your background in equity commerce, thinking about the unit economics of commerce,
[00:01:29] it seemed like a great opportunity for us to think about e-commerce and digital commerce in the context of tariffs. You know, we're not going to try and make predictions or even talk about what's happening right now, because by the time this podcast airs, it probably will be. I don't know what it will look like. But we do know that what best practices are in times of uncertainty. And you particularly, I think, bring a lot of great knowledge on that.
[00:01:58] So in order to just to dive right in, could you want to start with, first of all, just give us a little bit of background on on equity commerce and what your focus is? And then what are those sort of when you think about tariffs? What's what's coming down the pike just in terms of how our listeners should be thinking about, you know, navigating their way through this over the next six to 12 months? Yeah, absolutely. Appreciate it, Peter.
[00:02:25] And yeah, equity commerce really kind of focus on two primary pillars. There's one data and collecting data to, you know, leverage strategic decisions. And then two unit economics, really understanding profitability. And when we think about the economics piece, that's really where the name equity commerce originates from. But yeah, really with, you know, equity commerce, looking at data, looking at tech automations
[00:02:53] and tying it into today's kind of headliner, right? The tariffs and what that means for navigating things. And I think, you know, ultimately, when we look at this, you know, there's a couple things that are, you know, pretty much guaranteed. And there's a lot of things that are, you know, kind of debatable as well. So I just want to kind of first and foremost start off as, you know, I'm not an economist. And a lot of this is projection and expectations.
[00:03:19] But as far as price increases in supply chain, I think those are, you know, kind of the two main buckets, right? So as we look at, you know, cogs changing and supply chain established establishments and how different brands are vertically integrated, those are kind of the two pieces that are ultimately being looked at the most.
[00:03:40] And, you know, one of the biggest concerns I see, and, you know, I think a lot of people are hyper fixating on inflation and just general cogs and what that means for product listings. But I think at the same time, in stocks and supply chain need to equally be looked at, right? Because regardless if, you know, you're dealing with 20 to 25% increases on cogs and what that means for a list price position, if you don't have the inventory on hand,
[00:04:10] it doesn't really matter, right? So I think that's kind of a gap right now that needs to be kind of heavily weighed in at the same time. And just to explain the acronym for anybody listening who doesn't know, COGS, Cost of Goods Sold, for anybody who doesn't know that one. And the one thing I want to dig in on, Colin, because I've been hearing a lot about PO cancellations or, like, increase in POs to try to beat the tariffs.
[00:04:37] Like, are you seeing a lot of people, like, placing more POs to try and make sure that they're getting the products that they need before, like, everything changes and then some of those are being canceled? Like, are there any trends that you're seeing around that? Yeah, a little bit of both, right? So there's lots, you know, lots going on with Amazon canceling POs from China. But there's also, you know, at the same time, everybody's trying to get their hands in front load on inventory, just kind of knowing what's going on.
[00:05:07] And, you know, tying that back to the supply chain comment I made earlier, you know, when we look at gaps of POs coming through, let's say it's four to eight weeks, and you have five to eight weeks of inventory on hand, you know, that's going to deplete. And that's going to be a gap where there's, you know, inventory not available for purchase in the buy box or, you know, on the shelf at your brick and mortar retailers. But definitely a little bit of both. And it's definitely a scramble to, you know, when you start to think about, you know, third-party
[00:05:35] sellers and FBA, you know, when there is this push for everybody to front load inventory and get their hands on things with the expectation that there's going to be gaps, that's, you know, there's storage capacities that are not endless on Amazon's end, right? So what does that mean for sellers that, you know, either have newer products or just, you know, continuing to try to keep the storage capacities open for their, you know, full selection? I think there's definitely going to be some repercussions to some of the panic around securing
[00:06:05] a healthy in-stock position at a much higher week's supply than typical. But definitely a little bit of both on the cancellation side, as well as the front load side. Certainly, there's been a lot of news around the shipping container market volumes from China dropping between 30% to 40% in April. And it seems like some of the earnings reports, like from Maersk and others, seems to be saying that that seems like that's going to continue.
[00:06:34] And so it just seems like what we've got is volatility ahead. And so, you know, with that environment, sort of what are, you know, what are you thinking about what you're seeing happening? You know, you've talked about the inventory flow, but what's happening to brands on Amazon? Are they, you know, are they sticking around? Are they having trouble? You know, is their marketplace sort of shrinking at the moment? And what's going on with private label, et cetera?
[00:07:03] What are you seeing there? Yeah, absolutely. And good question. I think this is, again, one where everybody's kind of got their own opinions of what might take place. Me personally, I expect, you know, 25% or more of third-party sellers to potentially be closing, you know, doors altogether as far as their Amazon presence or even, you know, extreme rationalization of, you know, potentially 75% or more of the selection
[00:07:32] being removed with just core products being focused on. But when you look at, you know, what we do at Equity Commerce, the first thing that we dig into is what is your unit economics at the item level? And what does that mean as far as your general position and strategy capabilities? And, you know, it's an unfortunate thing to say, but more times than not, that initial
[00:07:55] audit, essentially, of brands on the 3P side in particular, digging in, the profitability is in such a slim position as far as margin that when you start to think about all those, you know, we'll call them below the line costs or, you know, incremental costs in the backend, essentially keep the lights on cost variables. There's just no way that it's profitable. And so, you know, thinking about that and just general experience of, you know, hundreds
[00:08:23] of audits that have been completed in the past, you start to build in some of these cost increases and general fluctuations and volatility. And, you know, it just kind of supports my thoughts here as far as how many sellers might be disappearing. And then what are the implications to those unit economics that you're talking about when you're talking about how brands are needing to recover margin?
[00:08:48] Like, how do they think about that and changing their strategy in this environment? Yeah. You know, there's a lot of different ways. And I think it's one of those things where, you know, there's a lot of bad, but I think it's going to surface a lot of metrics and opportunities for brands that weren't historically looked at. And a little bit of internal audit too, right? So I think, you know, ultimately there is going to be a skew of rationalization. Um, there's no loss leader hero products in the mix anymore, and there's going to be
[00:09:18] cost cutting on the media buy side of things. But to drill that down a little bit, um, you know, unit margin erosion due to some of the tariff implications, definitely forcing that rationalization. And, you know, I believe understanding exactly what your hero products are, um, and, and leveraging, you know, a reduced and more focused media buy and strategy is going to be kind
[00:09:43] of the general, more generic next steps for a lot of brands. Um, but going granular on that, if we think about, okay, we're looking at our marketing funnel and we look at top of funnel versus bottom funnel, we need to ultimately brands want to know, okay, what is our actual return on our spend? Because, you know, there's a lot of, of new to brand customer outreach and general, you know, casting a wide net essentially top of funnel.
[00:10:12] And I, I believe that's going to drill down a lot to more the bottom of the funnel, more, you know, specific KPIs that are able to be tied back to conversion and some of those core performance metrics. And then with that understanding how can we locate wasted ad spend? Um, you know, there's a ton of new cool reports with Amazon today, right? I mean, the, the big hype is SQP search query performance reporting, understanding, you know, really what, what percentage of your branded search do you own?
[00:10:40] Uh, some of those things, but I think establishing a really strong strategy around where do we have wasted ad spend and also where are we performing really well organically and ensuring that you're not investing in ad spend towards where you have that organic traffic that you're already capturing. Um, so kind of combination of some of those things, but really utilizing the data, understand how to free up cash and keep it focused on, on results and with conversion.
[00:11:08] I really like the SKU rationalization piece. And I think that that's an exercise I always tell brands to go through no matter what economic times you're going through, but, uh, 80% or excuse me, 20% of your products drive 80% of your profit, right? So what are the, what is that like magic quadrant where it's profitable and it's high growth or like where are the high growth SKUs that maybe you can help drive to more profitability? And then what are the SKUs that shouldn't even be selling online, right?
[00:11:37] So if brands listening, haven't done that SKU rationalization piece, I think I agree, Colin, I think that's a really, really important tactic. And then I'm also curious around fees and fines. So from a content perspective, from a shipping perspective, there's a lot of fines that brands just kind of accept, right? Like it's just a line item on the budget, whether something exploded, there's returns, it's inaccurate packaging information, like it's millions and millions of dollars, but
[00:12:06] have you seen brands really kind of hone in on or build dashboards or metrics around like, Hey, where are we getting the most fees and fines? And like, can we change the way this product is shipped or can we rethink our content or our packaging? Is that a priority or are you seeing brands shift to that at all? Yeah, absolutely. So to kind of start off with your first question, so with SKU rationalization, you know, I think
[00:12:33] there's a lot of metrics that in general aren't looked at in depth enough. And just kind of saying this, cause I see it a lot, but if you look at kind of your eight to 20 rule or, you know, what are those top performing items to focus on? I think those are already relatively established for brands. And when you start to think about, okay, where, where can we trim the fat a little bit and clean things up given, you know, some of the P and L focal points that we've come to with what's going on today.
[00:13:00] And if we look at just kind of general reports of what is overall traffic that we have at the item SKU level and what is conversion rates look like on that traffic. And I think when, when you kind of complete this assortment audit and vet through your catalog, it often surfaces a lot of products that perform extremely well and that have a lot of intent and opportunity where there's just not the right traffic being driven.
[00:13:28] And with that, I think it's really needs to be taken into consideration as far as what can we do that isn't going to drive additional investment. That's going to, you know, drive a return as far as our top line performance goes and just kind of pinpointing some of those, we'll call them sleeper items in a way. Um, I think that's going to be, you know, some serious low hanging fruit when it comes to rationalizing.
[00:13:51] Um, and then ultimately, if you think about just the basics, kind of going back to the core of things, how is the content? Are we fully optimized on the SEO, GEO side of things now, but going through and making sure that we're, we're looking at products and the basics to flywheel essentially, and we're not missing the mark anywhere, uh, again, just the low hanging fruit.
[00:14:17] And then they're moving into item level profitability and an overall conversion to slim things down. Colin, when, when you, uh, engage with your clients, are they already thinking about unit economics and, and, and thinking about from that perspective, or are you introducing a new rigor around it? I'd love to know sort of where your conversations usually start.
[00:14:43] What's the problem case that, that is bringing people to you and where you're able to, uh, introduce value. Yeah. So the way we look at it is at the item level. So item level unit economics tied back to typically pretty fragmented P and L's on the brand side. So tying that together. But when we look at unit economics at the item level, we're, we're also tying in actualized ad spend and, and real time cost variables. So we, we track everything.
[00:15:13] We automate that process. So we know, okay, here is the actual net profitability with last 30 day ad spend, all Amazon fees. It's, it's a true P and L rather than just kind of pulling in some, uh, placeholders. And then we're actually able to plug that in to how we optimize our ad spend. So we'll know exactly based on actualized unit economics at the item level. Here is performance. We need to see, let's use PPC ad campaigns on Amazon as an example.
[00:15:43] Here's the exact, uh, target performance benchmarks for multiple different metrics to know that we are meeting a margin, uh, requirement. So let's just say our margin requirement on Amazon is 10% for a given item. We can track specifically against that and know exactly what, uh, ACOS, TACOS, ROAS, some of those key metrics on the ad side need to be so that we're continuing to meet those margin requirements. That's fascinating. Thank you.
[00:16:11] Um, so, you know, uh, sort of tamping down our, uh, tariff panic or concerns for a moment, no matter what kind of, if you were offering two to three things that, that brands can do to focus on keeping their business healthy and remain relevant and valuable, uh, in a time like this, you know, what are the things at the top of your list that you would advise? Yeah. Uh, generically said, uh, make smart decisions.
[00:16:41] Um, oh, thanks for the tip. In life and business. Well, and that's your podcast folks. Great to connect and, uh, best of luck. Yes, exactly. Um, no, I think, uh, you know, right now, uh, just kind of going out that, that general statement, um, you know, when it comes to skew rationalization, a core assortment in stocks,
[00:17:08] knowing your supply chain, contingency planning, kind of everything that goes into the basic brand, brand management side of things. Uh, given where things are at and the changes, it only take a few, a few different strategic shift and decisions, uh, for brands in the small to mid size category. Um, I think to drive some pretty large negative repercussions and potentially even push them out of the marketplace altogether, as far as being able to maintain profitable and competitive.
[00:17:37] So I think it's, you know, right now, any, any major changes in primary growth objectives could be detrimental if everything isn't measured in the right way. And I know that's again, very generic, but ultimately I think with what's going on right now, major shifts and growth objectives and general strategies that are in place. Obviously these need to be fine tuned, um, as a result of the changes that are taking and, you know, you need to be flexible with things that are taking course.
[00:18:05] Um, but anything too rash and, and far fetched is, you know, definitely something that I think I would, I'd pull back on a little bit right now, depending on what it is. Um, but I think another thing, and again, this goes back to the rationalization side a lot. Brands often have, uh, you know, uh, assortment of products and a lot of those SKUs are major distractions.
[00:18:30] I mean, you start to think about tracking unit economics and strategy and add, you know, media by everything behind individual items and taking those lower performing items completely out of the mix. It truly does free up a lot of time for, you know, account managers and e-commerce teams to really hone in on top performing item performance metrics, looking at the data and continuing
[00:18:54] to optimize and grow incremental, um, you know, top end bottom line for those items, just given that it's all the distraction items are out of the way. Does that make sense? Yeah. Yeah, for sure. And, and when you think about the, for maybe even going, um, more fundamental opportunities, which might be more strategic, if you think about, uh, you know, the manufacturing, like
[00:19:20] where do you manufacture and where imports, you know, what are the opportunities for import brands maybe that, that can work, you know, are there, you know, are there, uh, thoughts that you would have around that focus? Yeah. I mean, I think, um, you know, in general, right. And any way you can avoid these import tariffs, you're going to be, uh, moving in the right direction, right?
[00:19:47] Cause that's the, the biggest issue here is prices will go up those, you know, those margins aren't just gonna come out of pocket on the backend within a company's cashflow. So there's domestic manufacturing capabilities. And I think overall, um, the diversification of sourcing and supply chains just in general, I think in the longterm is a good thing. Um, but I think, you know, fundamentally if there is domestic capabilities, you know, what
[00:20:15] other options from a sourcing perspective do you have best case scenario? You know, those are already in place. Um, and, and you can kind of pivot accordingly. Uh, but I think on top of that, uh, the incrementality of what is available today, uh, and are we leveraging it? So I'll use Amazon B2B as an example. Uh, obviously Amazon's been investing really, really heavily in that side of things.
[00:20:43] Uh, you continue to see different things roll out as far as programs for custom pricing with certain industry verticals and different programs that you can participate in for custom pricing quotes and even advertising specific to B2B, uh, customers and audiences now. I think that's a really large area. And it is another area where if you think about what is the optimized B2B case pack or size of
[00:21:09] products, you can really look at that as a opportunity to optimize how you're shipping products, right? If you're able to ship case packs of 12 and you look at the per unit discounts, you can apply for shipping in those quantities. The, you know, per unit cost is not a one for one for the increased case pack size that you're shipping in. You're going to be building margin, having those higher quantity offers and just shipping
[00:21:34] in those original case packs that are typically broken down and shipped individually to customers. So I think B2B is a really good opportunity where, um, you can kind of build some of those increased costs into the additional margin that you're going to be receiving on some of those bulk offers. And again, the, the data that Amazon's providing on the B2B side is, is pretty cool now. So it gives you some good context on, on where the opportunities are. That's interesting.
[00:22:00] So you think that perhaps, uh, you know, so often people are thinking about their business by channel and by, uh, B2C versus B2B, but they keep them separate. But for, if you're thinking about now, where are my overall company's most potentially lucrative opportunities, potentially profitable opportunities, it may be that in this period, if I'm reading
[00:22:26] you correctly, that some of those opportunities may shift from consumer over to your B2B business and look for opportunities across the business and put efforts into those places where your unit economics can get better in this time. Is that, am I, am I interpreting what you were saying correctly? Yeah, yeah, exactly. I mean, it's, it's, um, really just understanding that that intent and an opportunity is there.
[00:22:55] Uh, you know, a lot of brands, you kind of probe that initial question of what is your current B2B sales percentage, uh, to total. And, you know, there might be some, you know, usually you don't, you don't really get a firm answer and it's not really something that's prioritized. And by simply going in and understanding what levers can be pulled today on the B2B side, you'll immediately start gaining some of that, some of that traffic and an opportunity and
[00:23:22] start to see that B2B attributed sales, um, lift pretty quickly. Uh, so it's, it's more just understanding, you know, there's, there's low overhead costs associated with taking advantage of different programs that historically have just not been prioritized. So again, thinking about where we can kind of make up some of these gaps and where the opportunities lie. Uh, I really do see B2B being one of the core ones for a lot of brands. Obviously it's contingent on products and category nodes.
[00:23:50] Um, but there's definitely a lot of low hanging fruit there for a lot of brands. Yeah. I feel like for a lot of larger organizations too, it's easy for data and just analysis and connection points of looking at the full picture and the unit economics, it can fall through the cracks and it was kind of, I'm air quoting here. It was okay for a while because they saw growth and they were profitable and post COVID there
[00:24:16] was like a huge increase, but now they don't have the luxury of skipping some of those more detailed, uh, pieces that they need to focus on and understanding all their data points, how it hits the P and L, what the unit economics are like being brilliant at the basics. Like all of those things need to be in place in order for you to be successful. And you can't really skip anything anymore or overlook it. And I think that's going to be challenging, right? Because I'm, I don't know, Colin, when you work with organizations, you're probably talking
[00:24:45] to multiple people, right? In multiple different functions, trying to figure all of this out, not just one person. So it's going to take a lot of collaboration to really do what you're talking about effectively. Would you agree? Yep. A hundred percent. Correct. Absolutely. Lauren, from your experience, like where does that level of, in order for that, those practices
[00:25:09] to be instituted, like to start doing that kind of higher level review, is it, is it the sort of the chief revenue, you know, where does the, where would the kind of executive propulsion come for that? I mean, it's usually between sales and marketing or if you have a chief commercial officer or something, but if you have a revenue growth management team, an RGM team, a lot of this
[00:25:36] usually lives like that unit economics and like really understanding skew rationalization, they have a perfect seat to be able to understand that. And they can look at price and they can look at competition and they're really great places to start if you haven't engaged with them. But if you don't have an RGM team, it usually sits within sales and with each direct retail team. So like the Walmart team or the Amazon team. But the problem is to Colin's point, how is it reported on your P&L?
[00:26:04] Every organization is different and it might be really hard to understand how this one tactic or how e-commerce is hitting the overall P&L if you're not accounting for it. So I think that's where it becomes really challenging. And that's where you see a lot of organizations have shadow P&Ls to better understand how what they're doing online is really impacting their business. But one of the themes from an upcoming research project around omnichannel organizations is having
[00:26:30] a unified P&L because you can't just look at channels separately anymore. It's a collective approach around how you're getting to the consumer. And I think this is even a bigger call out that you need to look at your P&L as one because these tactics have to work. You know, you can't just be throwing spaghetti at a wall anymore. There's no luxury there. You have to really know like, am I doing this? Am I getting the ROI? How is it impacting my business? And have a really clear line of sight to that.
[00:27:00] Yeah. So, Colin. Oh, go ahead. I'll just say it. And just to kind of add to that. And there's obviously, you know, there's sometimes kind of a hierarchy to that as well. You have your total P&L. And then you have more of your really just use Amazon specifically as a marketplace. You know, that sub P&L that can be drilled down to the item level, which I think there's definitely the need. And there's some really cool tools out there. And I don't know if I can name drop any in particular how that works.
[00:27:28] But being able to tie that in and have somebody that and even, you know, again, just tying in this general conversation, more important than ever. I mean, it's daily, weekly reviews of what is the item level P&L look like based on some of the different initiatives that are in place and some of the different levers that are being pulled. And using that information to roll back up to that total P&L.
[00:27:51] Because a lot of times you see, you know, these more high level, you know, larger corporate P&Ls and has a branch back to Amazon. And understanding, you know, what can actually be executed on, on the back end, on the e-commerce side that will influence, you know, some of those line items on the P&L directly. So again, there's a lot of really cool tools out there today where you can plug into your 3P accounts and it tracks everything real time.
[00:28:17] And you can just kind of set your benchmarks and track things really quickly and easily. But again, having that data available and having that tracked is pretty monumental as far as having a grasp on how to influence some of those different metrics. Colin, if somebody listening did want to kind of get that list from you, is LinkedIn a good place to reach out? Or where, where might they extract that from your head? Yeah, LinkedIn's great.
[00:28:44] And again, you know, with equity commerce, we, we focus on automation. So my history goes back to another agency. You know, it's kind of very general as far as roles, responsibilities. And with equity commerce, we focus on how do we automate different tech solutions and have the data flowing together to where we can essentially look at a dashboard and make, you know, strategic decisions based off data immediately.
[00:29:09] But that, as a result, we've, we've talked and learned about a ton of different tech and automation tools out there. So pretty much every, every, every, every spoke on the flywheel, we've, we've got some pretty cool tools available. So I'm always open to talk through that. That's great. That's very generous. Thank you. Awesome. So Colin, how should brands be positioning themselves for success at this point? Like other than kind of what you shared, what do they do now?
[00:29:38] What should they have done differently to prepare for this? Like what, where would you have them center their focus? Yeah, I would say brands that have, you know, kind of utilized the Amazon exclusive assortment strategy. Historically, definitely, I think is starting to pay its dividends with things that are going on. You know, when you think about the price matching, you know, other resellers popping up and, and just the flexibility of having that Amazon unique assortment.
[00:30:09] I think it's really, really going to be a kind of pat on the back type situation for a lot of brands out there today. And, you know, you think about Amazon, you know, go back to buy box and price matching. There's going to be a lot of different terms in place for different retail channels. So if you start to look at some of your top performing products, if, if, if those are the same top performing products across retail channels and, you know, price increases are being approved of some and not others.
[00:30:38] There's, there's, there's definitely going to be some risk that brands see where there's suppressions. Vendor managers are asking for funding based on CP margin being negative for a duration of time. And, and ultimately products crapping out at the end of the day. CRIP can't realize a profit. Again, let's go into that acronym. Um, but yeah, I, I think that's one of the biggest ones.
[00:31:01] Um, and then brands that have really focused on item level, organic rank and, and specific item market share initiatives. Um, essentially just looking at ad attributed sales percentage to total. I think there's definitely a lot of brands that are 50, 60, 70% plus added attributed sales to total.
[00:31:27] And they're fully reliant on that where products that really have strong organic presence and are able to continue driving that organic top line, uh, attributed revenue. Those will definitely, um, definitely be again, kind of another pat on the back type of situation where those types of focal points, bestseller rank, owning top of search impression share for high volume. Relevant search terms, owning, you know, owning brand share, um, all of those is kind of some specific examples.
[00:31:57] And organic in conjunction with paid. I think that gets missed, right? Like paid media should not be your full focus. Like paid and organic are working off of each other. Like if you have organic rank, why are you paying for all of this paid media? Like it can be a collaborative kind of tactic, but oftentimes those teams sit in different functions.
[00:32:19] And they don't talk to each other, but that's a really good call out for brands to like use organic and paid together as one fundamental strategy rather than separate. Would you, would you agree? Yep, definitely. Um, yeah, just knowing what your, we'll go to like search term rank, knowing what you're organically ranking on, uh, and having a grasp on that. And having that be clearly communicated back to the PPC management team, um, and optimizing accordingly.
[00:32:47] I see it so often where you'll look up a high, high search volume, relevant search term for a specific product. Top of search impression share. You have your sponsored placement, scroll down, you know, maybe 10, 15 line items at most. And there's that product organically ranking as well. So understanding, you know, to your point, how are those, uh, strategized and monitored in conjunction? And Colin, where do you, oh, go ahead, Peter, go ahead.
[00:33:15] No, I was just going to say, uh, that's why I think your unit economics audit is such an interesting process because I think it does kind of takes the gut out of it and really probably exposes those cross-functional, uh, considerations that need to be brought to the surface, but it's brought through data, which is helpful to everyone. I think so that's what really grabs me about what you're describing here.
[00:33:43] Yep, absolutely. Peter. And with that being said, I mean, there's, if you start to look at even a lot of ad campaign structures, right, you've got, uh, similar products that are grouped together in ad campaign strategies and just general, um, campaigns. And in general, Amazon at the end of the day still has the power to say, okay, this item is going to earn that sponsor placement, uh, you know, specific ASIN level.
[00:34:13] And generally it's a top performing product, whether it's the best color or an ideal size of a product within a variation. Um, and not being able to understand that that item is owning, you know, 80% plus of total impression share for that sponsor placement, not being able to tie that back to the item level ad spend as a cost variable in your unit economics really, uh, kind of blinds you to what is the, you know, the true net profitability of that item.
[00:34:43] Cause you'll find when you do some of these audits, you know, there's a more, uh, holistic approach to, okay, total ad spend versus total sales. Well, when you kind of start drilling that down to item level, you'll see that ad, ad investment is primarily being attributed to a specific item. And from a net profitability possession, that item is actually not profitable because it's absorbing way more ad spend than you intended it for.
[00:35:09] And, um, you know, it kind of gives you some of those insights as far as, okay, we need to pull this specific skew out, create its own ad campaigns and its own budget and keep other products separate so that there's not, uh, over allocation of budget towards certain items that you're unaware of. That's awesome. No, I think every brand should go through that exercise. Uh, and, and Colin, I was just going to end by asking, where do you stay up to date on
[00:35:35] everything that's happening with Amazon happening with tariffs happening with like how it's affecting, um, manufacturers and such, do you have any place that you is your like go to, uh, to kind of gather all that information? Oh, all over the place, honestly. Um, you know, I found it, uh, you know, LinkedIn, obviously there's always tons of stuff rolling through and oftentimes, uh, you know, there's links and different articles that click through on that.
[00:36:02] Um, but one thing I've been kind of playing around with lately is if you utilize some of the different AI tools out there, perplexity, chat GPT, whatever it might be, everybody kind of has their preference. You can actually see where they're sourcing some of the things that you might prompt and you can go back and click in and look at those direct links. So I've found myself a lot, uh, you know, going in prompting specifics around things that have changed, uh, you know, how brands and manufacturers are diversifying supply chain, just relevant topics.
[00:36:31] And then I'll see how it scrapes for articles and I'll, I'll kind of do back research through that way. Um, which I've found, which is pretty cool. And I know the both of you obviously have been keeping up to date on things too. So I would actually like to reflect that back your way and see where, where you guys are keeping up on things. I think it's pretty relevant. I just asked Lauren. No, I'm kidding. Everybody listening.
[00:37:00] Uh, is Lauren is LinkedIn the best place? Great job, Colin. Great job. You should be a host. Uh, no, I love that idea about chat GPT, but I mean, I, I use LinkedIn if I'm being honest, like I actually schedule time to go through and just following the people in the industry that are talking about this, right? Like Russ Derringer from Strata League, Curie Masters on retail media. Like those, I follow like a bunch of people that are just, I think thought lead Andrew Lipsman
[00:37:27] for retail media, like a lot of people that are just thought leaders in the space. And I get so much more from my LinkedIn feed than anywhere else. Uh, so I know a lot of people don't like LinkedIn with another social media network, but it is a great way to get information and to stay up to date on stuff in a more condensed format than reading like a 20 page article because who has actually time for that? You know? So, uh, but I like your idea, Colin, of asking chat GPT and then looking at the sources, uh,
[00:37:56] because it's interesting. Yeah, I've been doing that recently with Gemini with their, um, deep research version and going in sort of a topic that I'm interested in. I, I sort of pitch it, I put a prompt in for it really just to see what it comes back with. Cause it's, it's search is so everywhere, you know, it's just sourcing from everywhere.
[00:38:20] And then, uh, even if I don't use the research though, to, to Colin's points, the citations lead me to places. And sometimes they're sad little citations from weird places that I don't really want to rely on. And that's sort of where, you know, the hallucinations and, or just what does it have? It's, but sometimes I uncover core sources that become very reliable. And so, yeah, it's great. Yeah. I've been finding myself, uh, digging in and even just, you know, reaching out to different
[00:38:50] individuals in my network just to get a gauge on, you know, as you start to look at what's taking place here and, um, you know, I'll call it panic buying, but there's definitely on the consumer side, some front loading taking place as well with the expectation that, you know, whether it's, um, you know, expensive, uh, kind of big ticket items or even everyday essentials, uh, there's kind of that expectation that prices will go up. And so, um, you know, essentially getting your hands on some bulk purchase today will save
[00:39:20] you some money long-term. And so if we think about, uh, quarterly earnings reports, you know, Amazon specifically use that as an example right now, being able to use those details, um, and take some of those things into consideration when we look at forecasting, uh, Q3 and Q4, right? Because I think there's going to be, you know, definitely some variables to keep top of mind as you start to look at, uh, you know, some of the data points that come out on what's taking place right now.
[00:39:49] Um, and how those can be, you know, potentially skewed a little bit with just some of the changes in purchase behavior and, uh, general consumer expectations. But I, I feel for all of the large, uh, the large, um, more legacy brand inventory analysts that are put in the position of projecting what exactly that's going to look like in Q3, Q4, even into next year. Uh, definitely, uh, a pretty tricky job to have. Yeah.
[00:40:16] To be trying to manage the holiday season right now. I, I, I just, uh, I feel for everyone on this podcast and in the world for all the uncertainty that's sort of been foisted upon us through various actors in the world. Uh, and so hopefully your advice today helps a little bit in helping folks, uh, focus on
[00:40:41] the areas that we do have some control over and how to get more and more diligent on finding, uh, those places where your unit economics need to change or where you should be doubling down. And so Colin, we really appreciate you coming on and giving us this mindset and your expertise on the way forward in these uncertain times. Absolutely. Well, I really appreciate you having me on and, um, you know, hopefully that was helpful. Thanks so much, Colin.
[00:41:09] Thanks to Colin for bringing some clarity and focus to a noisy time. More insights always to be had at digitalshelfinstitute.org. Swing on over and become a member. Thanks for being part of our community.