[ BDSN ] 📦 Amazon rule is costing sellers

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📦 AMAZON’S 5 BOX RULE COULD COST YOU 1000s!

The team at Carbon 6’s So Stocked says you’re about to get hosed on your inbound shipments if you don’t pay attention to the new "Five Identical Boxes" requirement Amazon has implemented.

What is the "Five Identical Boxes" Rule?

Amazon's updated policy now requires that, to qualify for the Amazon-optimized shipment splits option with no inbound fees, shipments must include at least five identical cartons or pallets per item.

Each of these cartons or pallets must contain the same quantity and item mix. This means that if you plan to send inventory to Amazon's fulfillment centers, you need to ensure that your shipment meets this five-box requirement to avoid inbound placement fees.

Implications of the Rule

1. Increased Costs for Non-Compliance: If your shipment does not meet the five identical cartons rule, you may incur inbound placement fees ranging from $0.21 to $0.68 per unit for standard-sized items and $2.16 to $6.00 for large bulky products. This can significantly affect profitability, especially for smaller sellers or those with diverse product lines who can't always meet the five-carton threshold.

2. Logistical Challenges for Small Sellers: Smaller sellers or those with limited inventory might struggle to meet this requirement. For instance, if you’re shipping a small batch of products, like 100 units, you’d need to pack them into five cartons, each containing 20 units, to avoid fees.

3. Impact on Sellers with Diverse Product Lines: For sellers with a wide range of products, it may be difficult to consolidate shipments into five identical cartons for each item. This could force you to either increase production or face higher fees due to partial or minimal shipment splits.

What to Do About It

1. Optimize Inventory Levels: Use detailed sales data analysis to ensure you're sending optimal quantities to Amazon.

2. Consolidate Shipments: Strategically group items to meet the five-carton requirement where possible.

3. Adjust Product Mix: If certain products frequently fail to meet the five-carton requirement, you might need to adjust your inventory strategy or consider phasing out less profitable items.

4. Explore Alternative Fulfillment Options: For products that consistently incur high inbound placement fees, explore options like Fulfilled by Merchant (FBM) or Seller Fulfilled Prime.

5. Leverage Inventory Management Tools: Utilize advanced inventory management solutions to streamline your shipping processes and reduce fees.

Specific Examples of Impact

• Example 1: High-Volume Product: If you are shipping 1,000 units of a popular item (e.g., a kitchen gadget), packing them into six identical cartons each with 150 units and one with 100 allows you to qualify for fee-free Amazon-optimized shipment splits.

• Example 2: Small Batch Seller: For a small seller shipping 500 units of phone cases packed into 10 cartons (50 units per carton), failing to meet the five-carton identicality requirement would result in partial or minimal shipment split fees, costing between $60 and $150 per shipment.

📈 SELLER EXIT MULTIPLES STABILIZING

As Scott Deetz of Northbound Group says, over 50% of the profit you ever make from running your business will come the day you sell it, not while you are running it. (Side note: Scott will be at Kevin’s Market Masters Think Tank next weekend in Austin personally advising a couple sellers looking to exit).

Sellside Partners reports the turbulence of the last few years is slowly easing and the e-commerce market is stabilixing again. Despite ongoing uncertainties, M&A activities are gradually picking up again.

Investors and buyers are becoming increasingly active, though they are approaching opportunities with more caution and selective criteria. They are focusing on brands with strong financials, clear competitive advantages, and resilience.

They recently examined Amazon-native (>50% Amazon share) and D2C brands (>50% shop share), as well as marketplaces and SaaS companies.

Amazon & D2C Brand Multiples

• Amazon Brands: Well-managed Amazon brands (over 50% Amazon sales) with stable financials are valued at 2.00x to 3.00x EBITDA, with a range from 1.00x to 4.50x depending on risk and growth potential. Smaller or less differentiated brands continue to struggle finding buyers.

• D2C Brands: Direct-to-consumer brands (over 50% sales from their own shop) command higher multiples, ranging from 2.50x to 7.50x EBITDA. The D2C model's direct customer relationship and brand control drive these higher valuations compared to Amazon-centric brands.

Marketplaces and SaaS Companies

• Marketplaces: Valuations are based on revenue multiples, ranging from 0.70x to 3.40x, with higher multiples for marketplaces showing strong growth or dominant positions. The "Rule of 40" (sales growth + profit margin should be above 40) is a key metric for evaluating attractiveness.

• SaaS Companies: SaaS companies, known for scalability and recurring revenue, have revenue multiples between 2.00x to 6.00x. Despite market volatility, SaaS models are valued higher due to robust growth potential and high margins.

Takeaways

• Amazon Brands: Multiples are stabilizing but still vary widely based on specific brand factors.

• D2C Brands: Higher multiples due to direct customer engagement and brand independence.

• Marketplaces vs. SaaS: SaaS companies achieve the highest valuations due to scalability and predictable revenue, while marketplaces also perform well with strong growth metrics.

Overall, the market has stabilized in the first half of 2024, with SaaS companies leading in valuation due to their scalable and recurring revenue models. For an Amazon-focused brand, achieving strong financial stability, clear differentiation, and aligning with investor criteria will be key to optimizing sale opportunities.

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🖥️ 3 TOP AI TOOLS YOU PROBABLY DON’T KNOW

If you are looking to sell your business within the next two years, I personally recommend you reach out to Quietlight. One of the original brokers, Joe Valley, is a BDSS Dream 100 member and the entire team is really good.

They recently shared several of the top AI tools both they and their clients use, and I bet many of you have never heard of three of them:

#1 MonkeyLearn (Medallia)

This is a leading text analysis AI tool that allows you to extract valuable customer insights from typed text.

The program can analyze reviews, emails, messages, and more to discover customer insights and preferences.

MonkeyLearn makes it easy to visualize insights in an understandable way, helping you draw accurate conclusions and optimize your operations accordingly.

#2 Kissmetrics

This is an AI software tool that allows you to gather and analyze customer data to gain valuable insights into behaviors, preferences, and actions.

This can help you calculate customer lifetime value, track churn rates, and identify revenue-generating products more easily. You can then use this information to optimize your marketing funnels and drive revenue.

#3 Dynamic Yield

Marketers have long sought to create personalized customer experiences. The more you can speak to each customer's needs, habits, and desires, the better you can connect with them. This, in turn, leads to more sales and higher profits.

Enter: Dynamic Yield. This tool harnesses AI technology to allow you to automatically match content, offers, and products to each customer's preferences.

It allows you to anticipate customer behavior on a number of different channels, driving revenue and creating customer loyalty.

📻 BEST of AMAZON SELLER PODCASTS

I trained a battalion of AI robots to listen to 50 Amazon-related podcasts every week and share just the good parts with you.

Here are some awesome nuggets from late August (do me a favor and reply to this email to let me know what you think of this new section I’m testing):

Want to be featured in this section? Use your referral link in this email to refer at least 10 active subscribers to get your event, course, webinar or tool “Shouted-Out” FREE to 11,100+ subscribers.

🧐 PEOPLE WON’T STOP BLOWING UP ATMS

You’re doing this all wrong! Blowing up ATMs is the fastest way to make cash, not selling on Amazon! Just joking, but blowing up ATMs really is becoming a popular way to grab cash.

ATM bombings are on the rise, particularly in Europe, where criminals are increasingly targeting cash machines with explosives. One failed attempt in the U.S. involved David Earl Ammons, who tried to blow up an ATM in South Carolina on Christmas Day 2021 but left empty-handed.

Ammons was later arrested and sentenced to 10 years in prison for each charge of second-degree burglary and using a bomb, running concurrently. In another case, Abdurrahim Jalal allegedly stole $88,000 from an ATM in Decatur, Georgia, and is currently appealing the charges.

In Europe, ATM bombings surged 24% between 2022 and 2023, causing an estimated $10 million in losses. These attacks often involve two methods: physically tearing ATMs from their mounts or using explosives to gain immediate access to cash.

In Germany, where ATM bombings are most frequent due to its fragmented banking system, two ATMs are destroyed every day.

The problem isn't limited to Europe; the U.S. also sees similar attacks, although at a lower frequency. In 2022, the FBI recorded 37 incidents involving explosives at banks, compared to 714 such attacks in the EU in 2023.

With American ATMs typically holding between $50,000 to $200,000, the payoff for successful attacks is substantial.

To counter these attacks, manufacturers and banks are employing several measures, such as installing gas protection systems, ATM body armor, and intelligence banknote neutralization systems (IBNS) that stain or glue cash, rendering it unusable.

✌🏼 See you Thursday – I’ll be in Dallas at Mr. Beast’s VidSummit.

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