According to Chad Rubin, there's a lot of reckless advice from "gurus" when it comes to pricing on Amazon.

Just raising your price because of inflation, might not be your optimal move. In some cases lowering your price, improving sell through, improving BSR can raise your total profits. But lowering your price could have devastating impact to your profits. So should you raise or lower your price? The short answer is - it depends. The key is to test, watch the data, and optimize.

Chad Rubin recently exited Skubana, Prosper Show and his own agency. He’s now the founder of Profasee a dynamic AI repricing tool for Amazon sellers to help you maximize profits without hurting your ranking on Amazon.

Here’s a look at what we cover:

• Prepping your business to sell and how Chad successfully exited Skubana.
• The fallacy of managing your Amazon ad spend to an ACoS goal.
• The art & science of Amazon pricing.
• How to price on other marketplaces so you maximize sales on amazon and preserve margin.
• Product assortment strategies on and off Amazon and where Chad would launch a new eComm brand if he started today.
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Mentioned In This Episode:

• Chad Rubin (LinkedIn)
• Chad Rubin (Twitter)
• Profasee (Website)
• Profasee (LinkedIn)
• Brett Curry (LinkedIn)
• Brett Curry (Twitter)

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Transcript:

Brett:

Well, hello and welcome to another edition of the E-Commerce Evolution Podcast. I'm your host, Brett Curry, CEO of OMG Commerce, and today we have a seasoned pro man with multiple exits, multiple multi-time successful entrepreneur, Mr. Chad Rubin. you may know him from the days at Skubana, which he exited, and we'll talk a little bit about that on the show today. Hopefully that successful exit. He was also a partner in Prosper Show, which to this day is one of the best Amazon shows on the planet. The team here at omg, we still attend. We're prepping to attend this year, which is awesome. And then Chad also had his own agency, which he exited, and now he's the founder of Profasee, and that's a unique spelling on link to the show notes, have Chad explain it in a second. But basically their mission is to maximize your profits.

It's an AI dynamic pricing tool to maximize profits without hurting your ranking at your BSR on Amazon. And so we're going to be dropping some Amazon Truth bombs today. We're going to be talking about the keys to pricing and profitability on Amazon because it doesn't, it's not worthy just to sell on Amazon and erode all your profits, which a lot of people unwittingly do. And so we're going to show you how to be profitable on how to build a brand on Amazon. So with that, Chad Ruben, how you doing, man? Thanks for Hey, taking the time. Good to see you, dude.

Chad:

Thanks for having me. Excited to be here.

Brett:

Yeah, man. So tell us a little bit about Profasee and explain how to spell it for those that are going to hear this and then Google it later. And then we're going to get into some juicy Amazon topics here. Maybe get into some healthy debates as we go, which is always fun. But yeah, talk about Profasee.

Chad:

Yeah, so Profasee, we are a dynamic AI driven repricer for Amazon brands. We change pricing to maximize for profitability without sacrificing your BSR and Amazon, your competitive positioning on Amazon. I've been doing this for about a year AI first. So before chat, G P T and AI was really a thing. I started focusing on AI because I thought that was the future. And certainly I feel really certain in my assumption that AI is the future. And so how do you spell Profasee? It's P R O F A S E E, Profasee Profits. You could see it's a planned words. After I sold Skubana, I stared at a tree for a bit and that name came to me and I was like, okay, it's predicting the future with a level of certainty. And what are we doing? We're predicting pricing with a level of certainty of how we're going to make you more money

Brett:

Profits, you see. And it is a Profasee because you can predict it. I love it. That's awesome. So let's, actually let's lead with this because I know this is something that I'm interested in. We're looking at acquiring some agencies and we've invested in some e-commerce brands and things, but a lot of my friends are in tip dipping their toe in the m and a waters, or they've had partial exits or fully sold. So let's just talk about this a little bit that we'll get into some juicy Amazon takes the Skubana exit. What was that like? Any learnings, any takeaways? Because we hear horror stories like M and as terrible, you're going to hate your life for a period of months, or it could be totally liberating or somewhere in between takeaways from that experience.

Chad:

I mean, so many takeaways. Where to begin first of all, there's hair on every deal that's out there. There's always going to be hair. And for me, I'm like a skeptical individual, so I always skeptical the entire time of the process. And luckily we sold, I think at the height of everything, which is April of 21, I couldn't have asked for a better time to sell totally. And so I think I did a lot of things to make sure that the deal went correctly with my business partner. We exited in the most beautiful and healthy way possible collectively. What else can I share with you about the deal? Yeah it was definitely painful. I would say, let's just say you're going through the process right now. I think it's an art around bringing the right inner circle of your company into the process. When is the right time to tell a few people in your inner circle of the company? And I think we did that and it's

Brett:

Up too soon. You'll be like, Hey, we're thinking about selling people panic. People worry about their jobs, they're freshening up their resumes, they fired out the door because they think I'm, I'm going to be on the chopping blocks, but you don't want to surprise them. So what are your nuggets about that?

Chad:

Well, I mean, I think there's an art around it and bring people in the right time. So I made a list of the people who are absolutely necessary to be in the know about this acquisition. I got them excited about it because, well, I was excited about it. They would also benefit from the process. So there's a certain level of self-interest there and

Brett:

Be everybody pulling on the rope in the same direction or rowing in the same direction type thing.

Chad:

Totally. I think setting up calls around marketing and sales and development I would make sure to get those questions in advance, 48 hours in advance of those phone calls so that we can prep and pre-process before those phone calls happen. So I want to make sure that we're nailing every question and come prepared. And so I think after the first time we had a call, we didn't get the questions in advance and I was like, okay, this is going to have the change going forward and making sure that me and my team are meeting on those and actively working on those, and we're managing the business and operating it and making sure you're operating extremely well while you're going through the process.

Brett:

And I know it's quite distracting those due diligence calls and the requests are numerous and you know, got to keep the business running for obvious reasons. You want to take care of customers and you got to keep revenues up, but it's also imperative to the deal, you can't be so distracted on the m and a portion of the deal that your profit slip or your revenue slip because then your business is less valuable and now you're getting less out of it as the deal goes on. So any tips there? Or was that just kind of disciplined being do and determined and keeping focused? How did you press ahead with m and a while still running the business day to day?

Chad:

Well, I think the beautiful thing was April of 20 leading up to April of 21, we had the shift of well bricks, the clicks with the pandemic. And we were directly in the epicenter of enabling people to sell online. And so we were capitalizing on the shift. On top of that, you had some acquisitions in our space like Stitch Labs and Trade Gecko, and we were consuming the clients off those platforms. And so again, it's just knowing when to hold 'em and knowing when to fold him. And I think we just timed extremely well in the grand SEMA things and totally, I

Brett:

Don't, was don't think it could've been any

Chad:

Better. Yeah, I was recently listening to a, I think it was definitely a podcast with Harry Stabbings and Jason Lempkin, and Jason was like, we will never see valuations ever again in the software space similar to 2021. And I was like, bam. Nailed it, right? <laugh>

Brett:

That. Yeah, it's amazing. Well, kudos to you guys. You put it, I mean obviously you couldn't have predicted that. You couldn't predict that when you started Cubana, but you did the right things. You had a valuable, successful company. You saw the trend, you picked the timing when you, the wave when saw it. And so kudos to you guys. Awesome.

Chad:

A lot of hard work, a lot of hair loss seven years of high highs and

Brett:

Low lows that every deal has hair on it. I almost made a bald joke. I was like, well, maybe you want those deals anyway. Yeah, but that's awesome. So kudos to you guys. And what do you think and again, I know we've got some Amazon topics, so if you, dear listener are not into m and a one, I think you should be thinking about it at least we'll get to Amazon in a minute, but where do you see m and a going here over the next year or two? Or are you removed from it and not thinking about it a whole lot?

Chad:

I mean, I think if you're building a product that people love and helps and enables people to flourish and you're creating value, inevitably someone will want to buy you over time. So I'm necessarily not at the stage where I'm already thinking about the sale, I'm always thinking about the sale, but simultaneously not thinking about the sale. I'm just thinking about how do I provide tremendous amount of value and create something that people absolutely love and over time will find, we'll, we'll get love from somebody else that wants to buy us.

Brett:

And I love the Jeff Bezos quote that in the long term, customer and shareholder interests are aligned. So I love the idea of thinking about a sale from the very beginning, whether that's your goal or not, because to get your business in a healthy financial state, growing in a healthy way that's good for the longevity of your business if you decide to keep it forever and pass it down to generations or whether you decide to sell it. So yeah, I love the process of thinking about selling right away and you're doing right by customers in the long run, help helps shareholders as well.

Chad:

So just two things on that. One is in our first seed deck, we did compile a list of potential acquirers and the company that bought us was not on that list. So it's never, I'm not saying never, but it's not usually who you think it is going to be. And I think that's an interesting takeaway that I wanted to share. And another takeaway I think is interesting is the acquirer or the suitor of Skubana that was manufactured luck. So I was looking into partnerships and trying to figure out new ways to scale quicker and faster and making it more impactful. And I had reached out to the CEO and we had this conversation and one thing led to another, and that's sort of what started this whole process.

Brett:

Nice. I love that. And I think there's something to be said though about, you know, prepared the deck. You thought about who would buy it. I think there's something healthy about that thought process to again, make the business attractive for that group or thinking through why would this be interesting or attractive? Well, the product has to be good for any of that to be true. But then yeah, manufactured luck. And another way I've heard this said Jim Collins talks about, he calls it return on luck. So the most successful people, the most successful companies aren't more lucky or less lucky, they just make the absolute most of the luck they've given. And that's what you did. You were out there, you built a great team and a great product, and you're talking to CEOs and you're thinking about strategically, how do we grow, expand, create mutual benefit, and then it open the door for an awesome acquisition. So that's fantastic. Really, really cool. Great. Any other parting where I know we can make the whole podcast about m and a, some people wouldn't like that, so we'll move on. But any final tips on m and a in terms of whether advisors or podcasts to listen to or any takeaways if

Chad:

Someone maximize shots on goal find people, surround yourself with people like a council, a Jedi council, people who are going to empower you and help lead you through and Sherpa you through the process of an m, m and a. I did that a great book to read's,

Brett:

Not something to go alone unless you're like seasoned M and a pro, probably not. You need the Sherpa, you need a team around you.

Chad:

I had a great C F O that I hired that led the way he's been through many edits and also making sure your financials are in order. I know it sounds like, hey, everyone has that, but we certainly didn't have it. I think many other companies don't have it even in sass, right? There's deferred revenues and bookings that happen, and getting that squared away is very important in the process.

Brett:

Yeah, yeah, totally, totally makes sense. Well, awesome. All right, let's talk about Amazon. And you know, guys help maximize profits without slowing down BSR and without losing your rankings. And it, it's a dance. We all know that we want to improve our rankings and capitalize on that organic growth and the behemoth that Amazon is in terms of generating traffic and buyers. But if all we're doing is giving money to Amazon, and I've seen a lot of PNLs from Amazon brands I know you have too, where you're like, well, the only person making money here is Amazon. And so we've got to have this structure in a way where you're building a brand and building it profitably. And so let's talk about that. What's kind of the art and science of pricing on Amazon?

Chad:

So I think firstly, the reason why I started Profasee was after years of spending time building Skubana and the Prosper Show and all these other things, I disregarded my e-comm company. We manufacture vacuum filters and coffee filters. So I wanted to revive that business. I mean, it was getting bad. We were getting copied. I wasn't putting a lot of time into it. I probably had the wrong team in place on top of it. So I got back into the game and I was trying to figure out how do I turn this business around? And there's a lot of, first of all, there's a lot of just reckless commentary around pricing from gurus in the Amazon world. And B, I don't think any seller or brand spends a lot of time thinking about pricing. And so they're making sub-optimal decisions around pricing and they're under monetizing their products. And I felt that with my own brand on Amazon and started dog fooding building Profasee for myself, and then started opening up for other people the same way I did. So I found an itch to itch, to stretch and started building it for other people. So, sorry, go ahead,

Brett:

Brett. Well, I was just going to say two things. One, I love a dog food reference. For those that don't know I think this is a Google term where they talked about well, they borrowed from Purina or something. But the idea is say, if you want to make your product better, you got to eat your own dog food. And I guess there are stories of a may, maybe it's Purina eating it, people eating the dog food in the boardroom, which would be really funny to observe. But yeah, it's the idea of we get the product doesn't fit us. If we don't like it, nobody else is going to like it either. So I like that. And then I do want to maybe key on this, and if you think this is better to talk about in a minute, that's totally fine, but what's some of the reckless advice? I love that you said that, and I totally agree with you. What's some of the reckless advice about pricing that you hear on Amazon?

Chad:

So pricing's easy to talk about, right? Everyone, but Oh, just raise your pricing. First one's

Brett:

Not your product. <laugh>, right? I just want to sound smart. You change your own price. Yeah, whatever.

Chad:

Yeah, so pricing isn't one size fits all. So you can say, okay, just raise your price, right? Inflation's here, raise your price. Just do it. Just go do it. And that's what I was hearing especially when I took over my e-com company in October. I was like, that's absurd. That's crazy. Doesn't price need to be calibrated to what the buyer wants? And don't people have different conversion rates and sessions at different times of the day? Why is pricing static? And so the reckless advice is like, Hey, just go ahead and raise it. But raising isn't necessarily the most optimal decision. It could be actually lowering the price, which increases your velocity, which means you have more unit sell through, which means you're generating more absolute profit dollars on the bottom line. So everyone's maintain these knee-jerk reactions, and most Amazon brands are just focusing on adjusting spent. And so if you're managing $10,000 of spend on Amazon today, you would never not optimize it. So why is nobody optimizing price? So that's really where I started to really question and ask why and build a discipline around this.

Brett:

Awesome. And so then I know your tool does this algorithmically and automatically, but what are some of the ways that you could be and should be optimizing price? And I really like the way that you point that out, that yes, sometimes raising the price is absolutely the right answer, but sometimes lowering it and increasing your yourself or in your BSR and improving your ranking and all those metrics change that's better for you. So how are you analyzing that? How's someone that doesn't have AI behind them analyze those things?

Chad:

So I think we all have to understand, and I think everyone that's deep in Amazon gets this, there's a knock on effect. So if you change pricing today, it affects your orders tomorrow. And so knowing that you have to actually really be super hyper focused on your Bryce. And so if you're doing this by yourself, if you're doing it manually, you would trade a spreadsheet for, and you'd have a tab for each asin and you would be looking at your current price, your impressions, your conversion rate your unit session percentage. You'd have your competitor, the top 10 maybe competitors in there with their price. And you'd essentially have your profit for every day on those prices. And you'd actually start making small tweets and start seeing what these small tweets have on your bottom line of profitability and also inputting in your bsr. So you're making these changes and when you make changes to pricing on Amazon, it's not in a vacuum. And so you make these changes, you're making decisions around changes, managing to a specific net margin and have a continuous process around those changes implemented internally at the company.

Brett:

Nice. And how often are you changing prices so as not to mess things up? Is it a multiple times a day?

Chad:

We're talking about Profasee in general or just

Brett:

In general and talk about Profasee too. But in general, if someone's doing this manually and tweaking and observing, what does that look like? And then what does Profasee do?

Chad:

So if you're doing this manually, I mean I think the depends on how many props you have, but if you're doing it on 10 products, you can probably do it manually maybe but I think you should be doing it once a day. And this is a fundamental step because it's the smallest lever that swings the biggest store of profitability. But then you should be having weekly meetings with your finance team and with management and speaking about, Hey, what are our target margins? What's happening based on these price changes? And really connect pricing as a discipline across your roadmap for product across your finance team, across marketing, across your ads team or your ad agency, whoever you're hiring to make sure that you're managing to expectations.

Brett:

Yeah, I like it. You talked about spend a minute ago and well, first of all what else do we need to think about with price? Any tips or mistakes people make when it comes to price on Amazon?

Chad:

Well, I think that first mistake that I shared, which is people don't know what the optimal price is, and the only way to know truly is to look at the data. So it's not just to raise price. And I think, and this is going to the next segue of the conversation is there's so much data to capture your price, your bsr, your conversion rate, your session rate. We do a reverse ace and lookup on all your competitors, and we ingest it all into a model. And the beautiful thing about a model is that a model is self-learning and continuously learns and improves 24 7. And the reason why I started building prop was I couldn't do that manually. And I also have a lot of stews. So before we did a stew rationalization at the company, I had about 500 something stu, private label skews, which is a lot to manage.

Brett:

Yeah, you pair that down then through analysis or have you

Chad:

Oh yeah, it's been paired down quite a bit 80 to 20 Pareto principle. We established criteria around what we want to keep and then liquidated the rest. So it's like, Hey, what's the age of this inventory? What are the turns like on the existing inventory? What are our net margins? And based on specific benchmarks that we made, we said anything over a specific timeframe or under a specific margin, we got rid of.

Brett:

Love it. I love it. So then as we kind of transition, because it's something we're talking about before we hit record, a lot of people that run Amazon businesses, they're either doing this or their agency is doing this, or marketing team managing to hit a cost goal, advertising cost of sales, and you have to consider a cost. It's an important metric. You have to look at it. I also like what you said though too about you're not going to have $10,000 in ad spend and not optimize it, but you don't optimize price. And when we're running Amazon ad campaigns, we're tweaking bids constantly. We do some manual and bulk work and software work and stuff too. But I love where you're going here actually. And so I'll chime in a minute, but why is optimizing for a cost goal a mistake or shortsighted?

Chad:

So a couple of things. It's a target and it doesn't actually account for profitability. And so in the past decade on Amazon, it's been this gold rush. We've all been able to capitalize it, and now we're moving into growing revenue profitably. And so as an agency, and I would love to know, you're an agency, you're a master at this, and I'm wondering if you guys collect this information, but most agencies that I talk to don't actually collect inventory on hand or no, what that looks like or know what your Len cost structure is. They're managing to a specific ACOs. And that ACOs, by the way, the ACOs equation is what you spend to what make, and they're only adjusting one part of the equation. It's almost like having a peanut butter sandwich with no jelly. It's like it's okay, it'll get you by, but it's much more delicious when you combine it together.

Brett:

Yeah, and we do. So look at, I think you've got to have a line of sight, whether it's an agency, your in-house team, a freelancer, whatever you're hiring clear line of sight to total sales and what is our total a cost? But that's still the same thing. It's still just a metric or a goal. We, we've had this discussion in our agency and our leadership team, we want to hit X percentage of profitability. Well that's cool, but we also want to think about total profits. We want to hit a number, we want to hit a profit number. So you got to think about that as well as the percentage. So yeah, these are one of those is one scenarios where you need to think about total profits and how does a shift in ACO impact your total profits? Because you're not taking ACO to the bank and you're not selling ACO to a potential buyer down the road. Its based on profit and

Chad:

Profitability. So ACOs doesn't tell the whole story, right? To me it's a metric, and I'm trying not to be mean about it, but it's almost a gospel metric. But the real God metric is your prophet.

Brett:

Yeah, yeah. It's so true. I actually just record a podcast, this is more on the D to C world, but with Rob Rayhill from Triple Whale, and I love what the guys at Triple Whale are doing but they were talking about, Hey, don't obsess over roaz. You got to know, obviously it's an important metric, you got to know it, but that's not the ultimate business metric and that's not your ultimate financial metric. It serves a purpose, but if you become too focused on it or if your agency or marketing person's like, well, ACO is good, so I don't know why you're upset, ACO is great. Well, that's not the God metric. Yeah, exactly. I like that. I like that. Cool. So how you, did you look at this in your business or how do you look at it or how do you coach people? And I know we've talked about it a little bit already, but how should we look at it? A cost versus profitability and EBITDA and all those things?

Chad:

Well, I know specifically for my business on Amazon, our God metric, if you know your God metric, you got to use it everywhere. And so for us, we're using contribution profit, absolute profit dollars. We're man, we're like, every time we meet in our L 10 meeting, we're looking at what our net margin, how it's trending over time. And we have a specific goal in mind of net margin to accomplish that we're trying to achieve. And I think a lot of just the agencies that I talked to don't, man, they're interested in capitalizing on your spent either a percentage of revenue, PPC revenue, sometimes it's the total revenue, sometimes it's your spend. And I had to really shift away from the agency that I was working with specifically because it's almost like we were worshiping a false, false shot

Brett:

And mean some of those models work and there's not a perfect pricing model, but as an agency we do the percentage of ad spend thing and in some cases percentage of sales. But the key though is you've got to have line of sight into the most important metrics and then you're really optimizing on those key metrics. So a cost keeps us within certain guardrails, and that's what we see most closely in the platform where the ads are. But it's that contribution margin and overall profit that that's really, we're our North star, that's where we're headed. And that's amazing. Yeah, I think that's a super important discussion to make. And when you are talking I would love to get your take on it because you said the business was a little bit back burner for a while as you're building and selling skubana and whatnot. But once you started talking about contribution margin and focusing on profitability at the highest level of leadership, what did that do for the rest of your team?

Chad:

So a few things though. I took over this business, it was a mess. It was really, and I didn't want to take it over. So

Brett:

Was this the family business, long time business or something? Or business you started a long time ago.

Chad:

My family business, my family had a vacuum retail store. I started private label in two really officially in 2009. And this is my own standalone business, private label on Amazon. Nice. And again, it hasn't gotten a lot of love. It didn't light me up. I really want to maximize my outcome. And for me, it was focusing on software that really lit me up that really got me excited. I know a lot of people love building products and launching on Amazon and doing that, and that just wasn't something that I wanted to focus on. So I had other people focusing on it not, and it's all about having the right butts in the right seat and I just lost sight of the business. So I tried hiring two other individuals and without going into too much detail, it didn't work out. And then I started implementing L 10 meetings, which is an EOS practice

Brett:

Just on traction, the book Traction,

Chad:

Yeah, yeah, I'm in EO as well with Gene. And just started focusing on where are the problems and how to assess those problems out. So one of the problems with price, another problem was the fact that we had too much inventory. We had a lot of stale inventory we were getting hit, and the other piece was like our listings were unoptimized, they were dusty. Like a listing of 2000 from 2012 is different from a listing of 2022 or 2023. So I started implementing that and we actually just had our first net profit, positive net profit, net margin of profitability in the month of December. And I think that's the first time. Congratulations. 18 months. Awesome.

Brett:

Yeah,

Chad:

So super

Brett:

Cool. That's a big deal. So pretty quick turnaround really when you think about it. And so that one, that traction system, which great book us is it Gene Wickman or Eugene Wickman. Anyway gene, yeah, yeah, gene, yeah, it's a great book. So check that out. But from that L 10 top level leadership meeting, identifying what needs to change, and you did that and now you are in the money, which is awesome. Very cool. So you dropped we teased out some truth bombs and we might be dropping on Amazon. And you said something, Chad we've been using some religious terms. You dropped something that was a bit like heresy, a bit like blasphemy. Earlier when we were on the talking, you said if you were starting a new brand today, you might not even launch on Amazon to begin with. So talk me through that. What has led you to that spot and unpack that for us a little bit.

Chad:

Yeah, I mean, I think it's having a criteria of what you're going to be. I mean, if you are going to launch a product on Amazon, and I do believe in the power of Amazon, by the way. Absolutely. I just think it's a, and I think you used the proper word early on and I, there's just so much saturation on Amazon. I dunno if you used that word, but essentially there's a lot of saturation. So I would be, shelves

Brett:

Are full, the shelves are full at Amazon.

Chad:

Yeah, shelves are full. I love that. I would establish criteria for how you're going to approach Amazon going forward. So I like to use, I EO and I experience shares. And so one of the reasons why I love AI is that it improves over time. Essentially becomes a highly differentiated product and has self-improvement. So if you can do that with software, you can likely do that with your product on Amazon. An example would be, I know this is a high level product, but essentially it's the Nest thermostat. It gets better over time. It takes years to copy that product because it gets better now. My Nest knows when I'm home and when I'm not home and adjusts my temperature accordingly. So I think this is amazing. There's establishing a new set of criteria to win on Amazon going forward because what got you to 2022 isn't going to take you to 2025 or 2026 and this, you've been in this team for a long time on Amazon Spires every three months.

Brett:

Totally.

Chad:

But if you build a foundation, right, if you build a product from the ground up, you build a highly differentiated product, there's some scarcity of supply, you have a product that improves over time, whatever that is, I, you come up with it yourself and you find sleepy verticals. And where if someone buys your product, for example, a nest, they're not going to buy the anchor nest for good reason. You become a lot more strategic in your process, in the way that you're building your product on Amazon.

Brett:

And it was interesting, I mentioned this to you before we hit record. I posted a poll on Twitter and on LinkedIn. And then quick plug, I would love to follow you guys on Twitter and on LinkedIn. I'm committing to at least the first half of this year going hard on social media, making connections, having fun. And I may continue, hopefully it'll continue. But for now you'll find me there. You'll find me on Twitter and LinkedIn. But I posed a question. If you were launching an e-commerce brand today, what would you do? Would you launch that on Shopify or other platform? Go d toc, drive traffic, build a brand, build demand, build like a following and then launch on Amazon, or would you launch on Amazon first and then look to go D two C later? And it was interesting, it was a heated debate. You can find it on LinkedIn, on Twitter, if you look at my profiles at Brett Curry, Twitter the Brett Curry on LinkedIn, but it was slightly in favor of Shopify, about 55%.

Something like that said go D toc first. I think the real answer is you probably got to understand your product. Is it more of a demand capture type thing where people are searching for it and you need that search traffic as Amazon is driven by search. It also depends on your skillset. What do you good at and what can you do? But I much prefer if we're talking about pricing optimization and profit maximization. I love driving traffic, building a brand off Amazon first because then when you launch on Amazon, you can likely better protect those profits. So yeah, what would be your take on that topic?

Chad:

So funny, you're just getting into social media and I'm also getting into it. So I just posted

Brett:

Dude check and you've got a good, I actually saw you got a good following on LinkedIn, man, I don't know what you're doing, but I'm

Chad:

Happy to share offline by the way. Want to. I can help.

Brett:

Let's do it.

Chad:

Okay, thanks. It's something I'm passionate about. So I just posted something about the Hoka exclusive monetization strategy on LinkedIn yesterday. And Amazon is a gateway drug to find high value customers for your brand.

And it's like 50 people start on Amazon and sometimes they never leave, but always a lot of people start on Amazon, it's not Google. And so it's never been easier to just create a seller account on Amazon. You build a product, you drive some traffic to it, you'll have far better return on ad spend and thus enhancing your profit on Amazon specifically. And so for me, I would start on Amazon and then once I have a good core heroes to you on Amazon, I would start building Amazon like exclusive, which is what Hoka does. They locked their exclusive products on their own website, but they have their generic ham nilly Vanilli product on amazon.com for social proof, for exploration, for discovery. If people just want the black ones and they get them on the second time purchase off of Amazon,

Brett:

I think that's smart too. And I think really regardless of where you begin or where you are now in your journey, cause I know most likely talk, as I interact with listeners at events and stuff, a lot of the people listening already have a business. So whether you start on Amazon or started off Amazon, I love that strategy of core products, hero products on Amazon, but exclusives, new releases, other things off Amazon. And I do think it comes down to your skillset, Amazon, how to crush it on Amazon. If there's somebody that understands Shopify and understands Facebook ads and YouTube ads and Google ads do that, but there's not a real right or wrong answer there. But one cool thing that's happened, we did this with Boom by Cindy Joseph Firestones company launched 'em on Amazon, they had not been on Amazon for years. Company had been around for maybe a decade or so.

We added 15% to the top line almost immediately. Profitable growth didn't diminish growth on other channels. There's also this group of of buyers and potentially our parents or grandparents or whoever they only want to buy on if they're going to buy online, they're buying on Amazon only. And if you are running traffic off Amazon, you're driving people to Amazon right now, whether you mean to or not. Cause that's just where people like to go to shop. And so yeah, no right or wrong answer there, but I think regardless of where you start or where you launch pricing strategy, product strategy. And so actually let's double click on that a little bit. And what else do you recommend there in terms of product strategy on Amazon versus off Amazon, and how does that tie in to pricing? Any of the thoughts there?

Chad:

Yeah, so I mean the thing is you want to have as lease channeled conflict as possible because Amazon, Amazon wants best pricing or price parity across the channels. Yes. So look, we've built suppression monitoring into our systems, but I'll give you an example. There's a cosmetic company that we are working with at Profasee, and they had a bigger issue. They were, the holy drill for them was like, let's get our product into Target. So Targets started buying their products and it became like 5% of their revenue. So Amazon's 95% target's now 5%. Well, the target collection at Amazon the target collection started to not do well. So Target wanted some concessions. So what does that mean? Target wants some concession that you have to lower your price on Amazon and it becomes, it's sort of target hijack the 5% of their revenue and now it's messing with the 95% of the revenue. So it's very important to calibrate and to really think about this before you get in. I know it's so awesome to be in Target or to be in Sephora and to see it on the shelf in the physical world, but at the same time it can have some devastating consequences and unintended that can really hurt your business.

Brett:

Yeah, yes. I'm thinking about that, minimizing that channel conflict. Any tips for that? How do we minimize channel conflict? And I know you did quite a bit of that with Skubana back in the day, but thought there.

Chad:

So a couple things you can have. Now, Amazon's not a little smart about this in the diaper category specifically, but if you can actually zoom out and do this in other categories, and it's not so significant, which is having different skews having a different collection. So for example, the Gap has their outlet and they make product specifically for the outlet than they do for gap.com, then in-store. And this J True does the same thing. So having a different collection and different bundle kit variation and even different ounces size specifically on different channels could prevent that from happening. That's just like one idea.

Brett:

Nice. And that's where, and a lot of manufacturers do that. They have the TV exclusives for Best Buy, right? You can only buy this particular version in Best Buy, and this is the version for Walmart. And we know the guts are probably pretty similar, but there's just enough changes to make it where it's exclusive to that retailer, whichever retailer wants.

Chad:

So another example would be like I think it's, is it Kia or Hyundai? I think it's, maybe Kia has the Genesis, right? Or Toyota has Lexus having two different types of, it doesn't have to be a different name. That's a little bit extreme. That means two different marketing budgets. But that's one thing if you do have channel conflict and you want to want to keep pricing a specific way, the price on Amazon becomes your floor. You give us your floor price, so you give us your floor price and your ceiling price, and those are the boundaries that we operate within to maximize profits for you. And Amazon

Brett:

Needs to be the floor. That's what they want, that's what they require. And if you don't do that, you're going to have trouble on it on

Chad:

Amazon. Exactly.

Brett:

Yeah. Makes sense. Chad, this has been amazing. So I want to talk about Profasee now because I know you built something really, really cool. Kind of sprinkled some nuggets here throughout talking about what it does. It's AI driven as dynamic pricing adjustments. But talk to us more about that. What's the quick explanation of here's who it's for, here's how it works, here's why you should consider it. Yeah,

Chad:

So we are four private label brands. There's tons of people that live and die by the buy box. We live and die by the ERP on Amazon. We believe that you can dynamically adjust price to maximize profit at different times of the day to maximize your profit without sacrificing your BSR on Amazon. So we predict the perfect price at the perfect moment for the perfect customer to make sure we're making you more money. We do that with ai. Why? Because there is a gold mine of information, both from amazon.com specifically from Seller Central and the API of ads along with a surplus of data that you mine from third parties and pull it into the model. So the model can actually be self-learning and learn from your data to figure out really what the Amazon algorithm wants, how your competitors react, and to constantly learn from those signals to maximize the outcome for your business.

Brett:

Yeah, very, very cool. And then we talked about, hey, you can do some stuff manually. You can build a spreadsheet, you can start calculating things, do stuff on a daily basis, but ain't got time for that, right? <laugh> like, and you're pulling data from lots of different places and then putting that into models and coming up with those prices. And so what are some of the things there that the algorithm's considering? Is it looking at competitive price and then it's looking at what conversion rates are and ads and things like that? And it's trying to find that optimal?

Chad:

I mean there's so many signals. So your own price, your reviews, the quality of your review reviews, the quantity of the reviews, your bsr what else your inventory position, if your FBA or not fba, we do a reverse ace and lookup on your competitors, suck in their price, suck in their reviews, pull in all the imaginable signals on those competitor PDPs, those pro detail pages. And we're doing that every single day doing that 24 7. So it's really all about boosting profits and going away from like, Hey, we're going to statically Uber surge. Uber has control surge pricing, which dynamically changes pricing. Most sellers are just guessing or slapping a margin on their product and statically leaving it there. It doesn't make any sense. And so in this fast place marketplace of Amazon, how do you be fast paced? You do it with ai.

Brett:

Yeah, yeah, totally makes sense. And so any case studies or examples that you can talk about, I know there's probably a lot I know in the Amazon world for those that are not in it, very secretive, very secretive, these Amazon sellers, they don't want their name out there in any way, shape or form, but in any case studies that you can share.

Chad:

Yeah, so there's one company that's on our website, one that was willing to speak, and there's going to be more coming up as we move into our next, we're still early, right? We're, we've been building in this model for the past year but one company called Wall Charmers, they do decor, they're in the decor category on Amazon and they were leaving some serious money on the table. We made them an extra 30% more in profits and which has an amazing effect, not just on their EBITDA but on, they want to sell at some point in the future. And so think about applying not just the increase of ebitda, but the EBITDA multiple, you get on that increase, that's huge.

Brett:

And you said, yeah, 30% increase in you multiply whatever that dollar amount is by three, four, up to seven or more depending on how healthy your business is and who the buyer is. So yeah, that's very significant. Chad, if people want to follow you on social, you're a great follow on LinkedIn. I know that for sure. How can they find you?

Chad:

You can follow me on LinkedIn Chad Rubin you can follow me on Twitter. I'm also, sorry, I'm new to Twitter. I'm definitely been involved in LinkedIn for quite a time, so I'm doing both now, similar to you you can follow Twitter, Chad Rubin, you email me and my personal email is Chad Profasee.com. Feel free to reach out if you're interested in talking price, if you're interested in talking to ppc, if you're interested in just talking about Amazon or need someone to bounce ideas off, I want to make sure I'm available to the community.

Brett:

Awesome. Really appreciate it, man. And it should be blatantly clear Now. Chad knows his stuff. He knows the game. He's been in a long time, very, very successful. So otherwise people can check out Profasee on the webs, on the interwebs. What's your address?

Chad:

It's just Profasee.com, P R O F A S E e.com.

Brett:

Awesome. And we will link to everything in the show notes, including your social, so people can check that out. If you forget, you can find that on omg commerce.com under the podcast will link to it. But Chad, there's been awesome, man. Thank you so much for taking the time enjoying Matt with you and talking dropping some Amazon truth bombs, talking m and a. Super, super fun. So thank you,

Chad:

Thank you.

Brett:

Awesome. And thank you for tuning in, really appreciate it. We'd love to hear from you. So if you've not done so, hey, we'd love that review on iTunes helps other people find the show makes my day. I may give you a shout out on the show if you leave a review on iTunes. And with that, until next time, thank you for listening.

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