Growing Your Amazon Brand – How To Do It Right with Josh Dittrich

Andy Splichal 0:00

Welcome to the Make Each Click Count Podcast. This is your host, Andy Splichal. We're happy to welcome this week's guest to discuss today's topic, which is growing your Amazon brand how to do it right. Today's guest is an Amazon growth expert and author, the book aggregator navigator. This guest grew in built and sold his Amazon brand for $10 million in less than six years with zero investors, and is here today to share how you can do it to a big welcome to Josh Dittrich. Hi, Josh.

Josh Dittrich 0:30

Andy, Hey, how are you? Glad to be here. Thanks for having me.

Andy Splichal 0:34

We're excited to have you as a guest and hear your story. So what were a couple of the factors that led you to being able to grow a brand such a large sum $10 million in such a relatively short period of time, six years?

Josh Dittrich 0:51

Yeah. You know, I think that's a fair question. If you have zero experience, it would be hard probably to do that. Fortunately, for me, I came from more of like a corporate background, not only best by Fortune 50, but then into business that grew to over 100 employees in E commerce, you know, north of 50 million in sales. And we were one of the first groups to start doing private labeling and in our niche, and so it was much easier and much faster, you know, to get there. But I think that kind of alludes to the fact that it was the right time, that was really the main line, it's like, okay, well, we figured out that there's a large market on Amazon, and it's been underserved. Let's go after this thing. So we built a brand called essential values. And the model is really, how can we create a product that's better quality, less expensive than the competition, you know, and we were targeting brands that were more national. So I'd say the right time, and then picking the right products that have good margins. And this isn't just like margin percentage, we're talking about contribution margin return on investment. So buying something for $1. And then having your margins being at least two or three times your cost. And that generates real cash flow that you can invest in not have to worry about struggling. And that's how we're able to do it without, you know, getting investors getting the banks involved. And then a couple other just really simple tactics, we obviously a combination of FBA and FBM, there's a lot of things we have, we have a warehouse, 27,000 square feet, and in Minneapolis, and in a team. And because we had a warehouse, and especially through COVID years, you know, we had a great backup plan allowing for product to be fulfilled from our warehouse. So as stock ran out, you know, we never had any issues with our competitors, it didn't have FBM in place. So they were struggling. We leveraged with that FBM, seller fulfilled prime. And so that allowed us to really test products without having to send them in and FBA, especially when you're doing multi packs, you have to bundle them and kit them and assemble them. So we were able to test really fast get traction on multipacks. And then, you know, quickly on the next order, bring in finished goods of a, you know, a two pack or three pack bundle that would drive significantly higher ao V's. So and then the last couple of things were just really about being multichannel and international and because of our expertise is more around e commerce in general, as opposed to just Amazon. And obviously, it's a strong piece. It's, it's all of these factors and putting your product where the customer is shopping, including retail. So that's, you know, I think it's never one thing, right, Andy, it's never a silver bullet, it's a combination of these things, and that are tried and true and been done. So

Andy Splichal 3:40

What vertical were you selling in?

Josh Dittrich 3:44

Like a category, category category would be more like Home and Kitchen, you know, and the cool thing about essential values brand is that it opened into opening us up to really sell in any category, Home and Kitchen sporting goods, Home Improvement, beauty, or health and beauty. I mean, there's 150, you know, unique products across multiple categories. So the brand really stood for that model, you know, we can go in any category and simply undercut, you know, large brand.

Andy Splichal 4:17

And were you selling on your own website? Or was it exclusively Amazon?

Josh Dittrich 4:23

You know, by default, we were kind of in the midst of, hey, if you want to have brand registry 2.0 You really need to have a website, you know, or maybe it was the original I forget which order of operations it was but we only built a site simply for the fact of brand registry. And once we had the site up we're like well, I mean, is there an easy way to add products? Is there an opportunity to drive traffic to the site and maybe ranking organic or drive traffic and we did but our average selling price on our products is like 15 bucks, which makes it really hard to drive traffic on your own site. via Google, or even even social ads, right?

Andy Splichal 5:04

And what was the strategy on that we had a guest recently that talked about, they were sending all their traffic to Amazon just because the factor, you know how Amazon works, and they liked the outside traffic and they reward your, your pay certs on Amazon. Were you doing that because of that as well? Or were you send in some of that to your own website?

Josh Dittrich 5:28

Yeah, to be honest, that was that's fairly new, within a year, and, and so when we built that brand, we didn't really have any benefits to drive traffic to Amazon, besides maybe higher conversion rates. So for us, we were we were just kind of, alright, well turn the ads on well, we'll maximize sort of the ROI and but later on, and we're doing this with other brands now is absolutely, we're adding add, add to cart buttons, you know, by doing both buy, with prime on our website now, but also looking at ways to rather trade that traffic and send it to Amazon, because they're supporting, you know, with an attribution link a 10% credit because you're sending their own traffic. So absolutely, that makes a ton of sense. Absolutely. Amazon loves outside traffic, I think it's it really depends on on the model, it doesn't make sense to pay money to drive traffic to your site, and then to redirect in the Amazon, that's just not a good experience, right. But if you already have traffic coming to your site, organically or from whatever channels you have going, that makes a lot of sense to send that traffic to Amazon, when they're going to pay you 10% on that on deals that close, especially at a higher conversion rate. So it really is much more efficient. So that's really the fine line choosing, you know, ultimately, how do you maximize ROI, but be where what kind of brand are you really trying to build. And it's just some stigma, it's like, you know, long ago wasn't even that long ago, to be honest, brands that are just Amazon only weren't that interesting. And then we had the last year or two with aggregators really driving this whole market saying, hey, Amazon brands are very valuable. And you know, our multiple ended up being almost 7x times profit six to 7x. Because because of the competition and interest we had, and when we were selling our brand, and now that's again, kind of softening a little bit. So

Andy Splichal 7:20

Why did you so?

Josh Dittrich 7:25

you know, I look back now and the brand is still killing it like it did 1.5 million last month, and we still manage the brand for the company that bought it from us, we do three PL work for them, we do some planning inventory work for them. So it's, you know, it's like, okay, we're still touching it. But why did we sell

Andy Splichal 7:44

Doesn't it make it even harder?

Josh Dittrich 7:49

Yeah, absolutely.Especially when you see the numbers growing, right. But here's the here's the reality, Andy, like, if we were to go back, and each year, and yes, income went up, every year, sales went up every year, profit went up every year. But as a seller making, you know, net income on a business, it's highly, highly cash intensive for inventory. You really never pay yourself the amount that you pay taxes on. And so you know, if you make a million dollars a year, in EBIT, da, or Ste, whatever you want to describe it, you're not going to realize that full million dollars in your bank account like like you're an executive at UnitedHealthcare, who, who gets, you know, checks, w two checks written to him, you know, this massive salaries. But as a self employed person, you take a pretty small salary, you know, if you're an S corp, and then you pay yourself based on the cash flow. And so for us, it was like, Alright, there's some other things we want to do. We've had some success, the timing is right, it's time to maximize this, this deal. And let's sell it because I don't think we're gonna see multiply multiples this high, you know, in the coming years, and it's been true, it's a year later, the economy's soft, it's softer, the aggregators are struggling, there's been a lot of many of those that have just, you know, shut the doors or sold out, or, you know, are winding down. So I feel like it was the right time. And when you when someone looks at you with a huge chunk of cash, and then you see that actually show up in your bank account. It's pretty surreal. So that's, that was a lot of the reason and it's allowed us to do a lot of the things I've done now, which is becoming more of a passive investor, but also, you know, creating different investment vehicles that A will become assets to sell or be, you know, income producing assets that really just continue to drive cash. So it's been fun. It's been fun, but why do you sell you know, and now we're back in the same thing, we launched another brand right away and it's much harder. So still a mixed bag. I tell you, I'm gonna do it all over again. I did the exact same thing though. You walked away with with a good deal.

Andy Splichal 9:53

Now I also read in your bio where you had bought and another ecommerce business for 750,000 and You sold it for two and a half million in less than two years. Was that what you did after you sold the original business?

no, sorry, two part question. Go ahead. No, go ahead. It was not what we did. It was actually sort of in parallel, we started this brand of Rs essential values in 2016. Ish 2015 2016 and then sold in 21. And 2019, is when we bought this other business, it was a business that came to us through the relationship of our accountant. It was, you know, an employee and and a business that they had affiliation with that was struggling. It was ecommerce, they use the three PL and so they were getting gouged there. They used a marketing agency, and we're getting gouged there. And it didn't really seem like there's a clear strategy and their Amazon sales were done via vendor, the listings are terrible. And so yeah, I mean, a lot of the same principles apply. And this is really like what you would call a fix fixer up model. You know, the goal is to buy it as good of a deal as you can, and drive value. And fortunately, it was really great timing because again, COVID hit and when you're selling training products at home, and the whole world is at home because a COVID. And you're a hockey player, and your parents are saying, hey, it's time to get better. It was really easy to sell hockey training products at that season. So we built that grew that created some pretty unique methods and most of our sales in the on that business, were actually on our own Shopify site. So that was a little different model, but still probably 30 Some percent on Amazon, and then maybe 15%. b2b, would be like retail stores, hundreds of stores throughout North America, US and Canada.

Wow. So you've done done both ways, both Amazon and then on Shopify as well.

Yeah, yeah. And in the original business that I kind of grew up, seven years building, we sold water filters. And the original game back then was, you know, lots of products and SEO. And very quickly, as I joined that company, I realized there's a lot of ways to sell products where your customers are shopping. And that includes the stores. So absolutely. Whether it's a store Shopify, DTC, you know, Magento, like experience and all of that, but I think my favorite is just Amazon simply for the fact of, you know, less, less tools and in requirements, you know, to build and have a successful site.

Yeah, well, let's talk about Amazon, I have been working quite a bit on ways to increase your conversion on Amazon as well, Shopify, but we just recently released a white paper on 10 Things Every Amazon seller should know. And I'm curious, what are a few of your top ways to increase Amazon sales for a client? Or if on your own on your own stores?

Yeah, I mean, there's there's some basic ones. And obviously, a lot of it just starts with your baseline of conversion rate, what is your conversion rate, and over the last bit of time, Amazon's made some changes in how they calculate conversion rates. But But with that, they've also introduced the ability to test and so experiments for us are a great way, you know, to understand how we can drive more sales? And is it is it changing the main image is it changing the title, these types of things. And really, that's a greatest tool to a B test and understand long term, you know, which is the winner, but I think inside any business, it's never one thing. And as you mentioned, if there's 10 things, there's probably 10 More that other people are doing, but my favorite one is really actually diving into the brand analytics, specifically the market basket analysis report. And what we're trying to do with that report, in Drive conversion rates is focus on frequently bought together. And so using the data from brand Analytics, you can see where there already is affinity and associations between you and some other products, or your product and other products you may sell. And so what we've done is figured out how to go after other ASINs and other products and create a reciprocal, frequently bought together so if someone's frequently bought together with you, you should go after frequently bought together with them. And then you can go after competitors of that other of their particular product listing and go after those as well to create more frequently bought together. And so the importance of that is, you know, it's right along traffic and, you know, you it's one click to add to cart, your item, which is, you know, massively improves conversion rate, because you're driving sales and you're technically not even really getting a session on the product. So it's pretty powerful if you do it right. And then obviously, bottom line recommendation is really use every single tool Amazon gives you from, you know, ends side the coupons and giveaways through vine. It The list goes on and on, right. But ultimately, at the end of the day, the best thing to move the needle is going to be your images and your content. And so one thing we've really specialized in is just really having the best images, having really the right keywords in the right order. But really focusing on images that are like the big guys, do, you know, world class 3d renders lifestyles that don't look fake, really legit photography, right? To really be there with the other brands.

Here we are in in the middle of the holiday shopping season, when someone looks back in January, and they're trying to review how they did during shopping, season 2022. What are the important metrics they should look at? So they can improve moving forward?

Well sell through, you know, did you have enough stock? Did you have too much stock at the end of the year. And I think that's important as you build in forecast in those sellers that have very seasonal holiday products, absolutely a takeaway, but most of the brands we sell today are pretty evergreen, and that they don't really have a ton of impact. So it's not one of those things where we're like a massive Blitz to bring on inventory. And we've experienced that before. But after that, it's really the question of return rates, right. And so how on the front end, you can increase conversion rate, one thing that we did was really increased our return policy, right. And so really encouraging people to try it and buy it and then keep it and if they don't like it at all, for any reason, bringing it back. So that clearly has a positive on the front end, the question is unknown on the back end, if you know return rates go through the roof. It's it's a little too late and $1 short a day late and $1. Short as they say, but I think that's the biggest one. And he is is really understanding your return rates. And then obviously, when you break it down, it's it's about the ad spend, and I've seen folks that really spend all their money driving ads, we're going to drive sales, and then you look at the bottom line, and nothing actually flows to the bottom line. And so that can be really scary. So it's it's really, really about am I in a position to continue to grow profitably, as opposed to, you know, just buying my sales.

Now let's let's jump back a little bit, because a dream of of a lot of e commerce store owners is is to sell their business. And so a question that a lot of them have is how do you make your company more valuable? If you're looking to exit?

Yeah, I'd like to start with the the concept of working backwards, right or reverse engineer the end result? And, you know, for those that understand that it's really about what is what is the ultimate goal and working backwards, it was okay, well, we want to build a business that, you know, is valuable and can be sold. So when we started selling on Amazon, it wasn't, it wasn't like, Oh, hey, let's just do this thing. And hopefully it makes some money, hopefully, we can leave her job. And hopefully we can sell it. It was no, we're gonna build something that has value that we can sell. And so going into any business, and we've started, yeah, I've started a couple and sold a few and bought a couple. And so I've kind of looked at all the different angles, but selling is certainly the most fun. You're in the driver's seat, you know, and really the best time to sell is when you don't have to sell. So for us, it was like, Okay, this is something I've never done. This was the first transaction I've ever done on the sell side I've been involved in to buy transactions. And and so it was it was actually funny because we were listing a business through a broker, that hockey business I mentioned. And through that process of listing with a broker and paying a 10% commission on the two and a half million, you can see that there's a lot of money in the m&a space with brokers. So I was like okay, let's This is our first brand. This is the first deal selling let's use a broker, let's get a lot of different interests and let's watch the broker negotiate and do his magic. Well, as we were going through that process, we had a few buyers that were interested in our other brand. And it wasn't even for sale once they found out it was a you know, a seven figure, profit business. We got a lot of interest. And so we said well, maybe we should focus on selling this as well. So in this case, instead of hiring a broker for that business, I went out and found 30 different buyers aggregators, if you will found the list contacted all of them set up phone calls, ran a process, and eventually I sold that business creating my own process myself by getting In 23, interest 23 conversations going from 30 people I reached out to 13 were highly interested in, we end up getting six offers and chose one. And that's the thing we weren't even ready to sell. We weren't trying to sell, but it was the other business we were selling that turned us on to, hey, maybe it's the right time. So, at the end of the day, it came down to man, this offer. This offer is more than, you know, we expected and it's definitely an offer, we should not refuse. And we took it.

Yeah, no, that's that's a great story. Let me ask you on building it or selling business, I mean, are there any business books out there that you can attribute to your journey as an entrepreneur.

I'm not a super huge reader, unfortunately. But if I were to, if I were to sit down and tell you that there are books that I've listened to, I can, I can tell you about an app I use. Have you ever heard of Blinkist it's pretty amazing. But it's, I'm not much of a reader. So I put it on audio. And it's not just the book to read. It's basically CliffsNotes on audio. But that's how I can get through a lot of content. But if I go back, and were to look at the truly inspirational, like books that kind of taught me a lot about getting traction is traction, you know, the EOS business model entrepreneur operating system. And if you think about what traction is, if you think about a tire that's spinning and spinning and spinning, because it's in snow, or it's in mud, it's not getting traction, while the EOS process. Gino Wickman, wrote the book called Traction and then came up with this framework called EOS. And so between the book and actually putting the framework into practice is it was transformational building a business that got traction and were able to grow and sell. And I'm not sure if you're familiar with with that model, but you know, life changing because it really ordered around our people, our scorecards, our data and information. You know, it really is about all 678 prongs of what makes a business solid. So that prepared us but you know, the other one I would say is crucial conversations. And this is a book that really talks about critical key conversations that we all have, whether it's suppliers, employees, customers, that the kind that make your stomach hurt when you have to have those tough conversations really are about just being vulnerable and putting the facts out there. And you know, those are those are critical things as you're dealing with people that are interested in buying your brand specifically like how to negotiate with these folks that are, you know, future or past Wall Street, Wall Street deal, dealmakers and so those types of things, you know, for me, have come a long way. And of course, the Bible, if you if you look at the chat, the book of James the Bible for me is you know, James talks about being quick to listen and slow to speak and slow to get angry, the brother of Jesus. So for me, I've had an anger problem for a long time in my life. And it's really about understanding how I can have more fruit of the Spirit of Jesus. So you know that that, to me has been the number one game changer.

You know, I have I forgot what episode this is even 130 I think 131. But that's I asked this question in pretty much every episode. And I think that's the first time the Bible has been mentioned as a favorite business book

The number one best seller of all time. It's the first time it's been mentioned as a good business book.

It's awesome. It is. So today, um, I mean, you transitioned and you run brandedsellers.com. Tell us about branded sellers, what services you're offering clients, how you increase in their sales, etc.

Yeah, Brandon seller.com sort of came out of the experience of selling our businesses. And it was like, I had this idea when videos are really really popular. starting to come out on Amazon that, hey, you could advertise with videos. By the way. Another really simple conversion tactic is just getting your video out there, we noticed that the click through rates, the conversion rates, and impressions. Certainly people like video, and so we use video a lot. And we were trying to figure out after we spend $1,500 on a video how we're gonna do that for 100 products. And so I got creative and met some folks and you know, the original plan was let's scale this thing up. Not only do we have to do our own videos, but I'm sure there's lots of people going through the same problem. So we created $99 videos, well, let's be honest, like these are these are transactions. And at the time while I was starting that we were actually pretty involved in our other two brands. And so it didn't it didn't take off the way we hoped. Fast forward now, it's like, okay, we sold we built and sold brands, that's what we're good at, we understand how to build an infrastructure, how to build a strategy that is significantly larger than running a small mom and pop business. And my partner and I, we come from, like I said, a $50 million ecommerce business. And so we know what enterprise looks like, we know what inventory management looks like and accounting best practices. So Brandon seller, now is the done for you. Full Service three PL meets marketing agency growth accelerator. And so what that means is, whether you're an individual, one man band, or an aggregator a private equity group, those are our two buckets. So small, 1 million or less individual owners, and then you know, it's a 5 million plus enterprise business. And both of those are important because most folks want to grow. They don't necessarily know how they don't have the resources, the time or the effort. So we become sort of the bolt on partner without selling us your business without taking an equity partner, we become a real partner our program is we help you build a brand that you can sell. And so for our services, it's pretty cool. That's that's what we get to do literally relive what we just did, and that it's becoming a model now where we help brands get online or maximize their presence online, to eventually build a valuable brand. That's where something can be sold as an asset.

Now, those are two different sets of services, I would imagine the business owner, maybe even as a solopreneur, under a million compared to enterprise with other 5 million, what are the different services you're offering to each of those,

you know, and that's the cool part about it, it's ala cart, right? So if you have a business owner, that's just tired, that created something that wants to be with his family that wants to travel or take a little time off, not manage employees, whatever that is, right, that individual is already potentially burnt out, or has hit the ceiling, right. And so that particular individual might want us for three PL inventory planning, marketing, listing, creation, accounting, right, all things. And so we do all literally all things like you, we can show you once a month a p&l report and that that'd be for the small guy. And then for the big guys, it's really about honing in on where they need the most help. And because we have a building in an infrastructure, we can do things that are very simple and very convenient. The challenge with three pls if you've ever used one end is you have a massive disconnect between the business teams or the marketing teams and operations team. Three PL just do the work. The problem is if you have careful planning and careful strategy, the three PL should be an asset, but it's not if it's just a transaction partner. So the larger larger private equity groups really appreciate the fact that we can store the inventory pick Pack Ship for their small channels, pretty reasonably but then bring a level of of marketing gross services to it. And that could be very specific to listings. Or it can be very specific to ads. But we really like those that trust us with building their brand. And with the hope of exiting in mind, which is usually the smaller smaller guys.

And how can an interested listener, learn more about working with you guys?

I think the first stop is brandedseller.com. We just went through a site redesign, and it goes through, you know, sort of who we are, what we do, how we've done it the success we've had pretty excited about it really gives you the rundown on on how we create value for our clients. Take a look brands are.com. And happy to happy to connect with anyone on LinkedIn as well. Josh Dittrich, you can find me on LinkedIn/

This has been great. Is there anything else you would like to add before we wrap it up today?

No know I look forward to you know anyone that wants to chat. Our services are free consults to talk about, you know what it is you're trying to do, where it is you're trying to go and potentially how we can help. I love meeting sellers. So happy to connect with anyone out there that's looking to build a business of Value

Great. Thanks again for joining us today, Josh.

Thanks, Andy.

For listeners. Remember if you liked this episode, please go to Apple podcasts leave us an honest review. And if you're looking for more information on branded sellers or connecting with Josh you will find the links in the show notes below. In addition, if you're looking for more information on growing your business, check out our podcasts Resource Center available at podcast dot make each click count.com. We have compiled all of our different past guests by show topic and included each of their contact information. In case you would like more information any of the services I have discussed during previous episodes. But that's it for today. Remember to stay safe, keep healthy and happy marketing and I will talk to you in the next episode.