2020.

This feels a little like therapy.

I managed to find an hour of solitude, during what has been an unusual and exhausting year and decided to capture my views on how the market has changed, how I think it will continue into 2021 and how I’ve found the challenge of steering a growing start-up through the madness.

I set up an Amazon agency called Molzi just under 4 years ago. We’ve grown from a team of 18 on March 23rd, Lockdown 1.0, to a team of 60 Molzians based across our offices in the UK, Spain, Hong Kong and Brazil. It’s really been a crash course in ‘being a CEO’ for me. Safe to say that the majority of what I have spent my time doing, was not included in the daydreams of starting my own business. But I’m certain that I’m a better CEO because of 2020.

I’ll take this opportunity to thank my colleagues for their support and their patience as we all get used to being a larger company, and the excitement and opportunity that that brings. And a huge thank you to all of our clients that challenge us every day and ensure that we get better as well as bigger.

The retail market

Traditional retail has been under pressure for many years now. The shift to ecommerce is rapid and unrelenting. There has often been talk that retailers needed to ‘create experiences’ in their stores to stem the tide, but consumers disagreed. Ultimately, consumers want choice and convenience. Step forward ecommerce.

The global lockdowns that were imposed as a result of the COVID-19 outbreak really couldn’t have been any worse for retail. Stores forced closed, but with parents panic buying trampolines and bakeware, online retailers like Amazon were busier than ever. Not only was retail being paused, but ecommerce was on fast forward. My own parents had been slight Amazon doubters previously, instead favouring the brand values of John Lewis. But the lockdown forced them onto Amazon, and they liked it. This is arguably more damaging to the retailers long term, than the store closures themselves.

‘Unprecedented’ became the 2020 buzz word, and there is no better use than to describe the uplift in sell out on Amazon in the spring. Brands were seeing April revenues far out stripping the previous Christmas period. But no element of the supply-chain was prepared for the surge, and brands started to experience stock shortages and massively reduced production capacity. My view is that, although most brands will have experienced double or triple digit Amazon growth in 2020, very few will have really captured the full potential had supply not been a challenge. This bodes well for 2021 though, as we all look at how the hell we match March and April 2020 revenues. On the assumption that the shift to ecommerce is permanent, it’s realistic to think that certainly the second half of 2021 should still be a big growth opportunity.

Why not the first half of 2021 you say, well read on…

The $9,000 container

Supply-chains have been playing catch up since the spring. But factories in China had been forced closed in January, meaning reduced production shipping out before Chinese New Year. At the time, many brands breathed a sigh of relief when they thought the upcoming pandemic would mean that they had over ordered. The reality was quite the opposite and demand was through the roof for most product categories, at varying stages of the lockdown. Chinese New Year was then extended due to China’s own lockdowns, further delaying new production for brands.

The supply-chain teams at brands were often used to quietly getting on with their jobs in the background, while the glamour of content creation and advertising took the glory. Suddenly this would be reversed, and the logistics and inventory teams became the heroes.

Top Amazon tip #1 – the biggest growth lever on Amazon isn’t advertising, content or keywords. It’s availability. Without it, you will not make the sale, guaranteed.

Top Amazon tip #2 – please please please make sure your Amazon Advertising campaigns are being managed by a person or agency that is involved in the operational performance of your account. Otherwise, you will waste a lot of money, and miss a lot of opportunity.

Now a new challenge for supply-chain teams, that will very quickly become an even bigger challenge for commercial teams. Shipping capacity shortages from Asia to Europe is leading to Uber-style surge pricing on containers. What was previously $700 a container is now up to $9,000. Our team in Hong Kong are hearing that this could be the case well into Q2. Imagine you ship 1,000 products in a container, suddenly their cost has increased by over $8. There aren’t many brands that can take that hit on margin. Price increases are coming. Brands will push them, retailers will reject them, but someone is going to have to pay that $8 and most likely it will be the consumer. 

Thrasio & co

One of the biggest trends of 2020 is the huge amount of money that is being thrown at a handful of companies that focus on buying FBA businesses. Thrasio made the concept famous by achieving a $1bn valuation so quickly. Every week there has been another company replicating the model, and despite in some cases just having an idea, are securing 8-figure sums to start making acquisitions.

I’ll be honest, I don’t get it. Clearly Thrasio has been successful at getting traction and growing their value. But I’m not sure it’s as easily replicated as simply raising money. These companies purchase businesses at pretty low EBITDA multiples that suits the existing owners. The holding companies can then raise money at higher valuations using larger multiples, thus funding the next acquisitions. But unless the acquiring company can grow, or at least maintain the performance of the FBA businesses then it seems like a big problem brewing.

Thrasio have almost 400 employees now. They are investing in teams that can grow the businesses that they buy. This element is much more difficult than buying the businesses. There are a lot of moving parts involved with running a successful Amazon business, and the Thrasio competitors seem to be rushing into forming teams that don’t seem fit for purpose.

My 2021 prediction is that Thrasio will thrive, and the others will disappear.

Summary

The whole world has earned a short break over the Christmas holiday to try and relax and recharge ready for 2021. Next year there will be challenges, some of which we can predict and some that are yet to show their face. But we’re hardier now, and adaptable and it will be a year filled with opportunities if you can unearth them.

Thanks for taking the time to read my ramblings and Merry Christmas to our brilliant LinkedIn network!