EPISODE 27

How To Sell Your Amazon FBA Business with Chris Bell of Perc‪h‬

Today we speak to Chris Bell, CEO and Founder of Perch, a technology-enabled consumer products company that acquires and operates Amazon FBA businesses.

Chris has dabbled in sales of office hardware and software at GE Healthcare, worked with fortune 500 companies on growth strategy at Bain & Company, and even designed and built the Wayfair Delivery Network for wayfair.com. His experience led him to found Perch, where he acquires high-quality Amazon products and brands with the help of an impressive technology platform.

A Diverse Background

Chris comes from a computer engineering background, where he started in a product manager role. When he realized he wanted to be closer to the customers, he jumped into sales. But, finding that sales was a tougher job than he anticipated, he eventually went back to business school.

After obtaining his business degree, Chris went on to spend six years at world famous management consulting firm, Bain & Company. There, he spent 1/3 of his time working with private equity groups and the other 2/3 working with retail and technology companies, focused on their organic growth.

After about six years with Bain, Chris realized he liked building things better than maintaining or growing and started looking to join a small company.

Wayfair, a small and growing company at the time, which sells furniture and home-goods, reached out to Chris and enlisted him to help build their Wayfair Delivery Network.

With his help, they soon became a three billion dollar supply chain.

When Chris joined the team it was taking an average of 27 days to get a large item delivered to the consumer and when Chris left the company they were delivering hot tubs, vanities, and couches in just two days, and customer satisfaction was way up.

Things were going smoothly, but Chris got the itch to build again.

At a conference, Chris met many Amazon FBA entrepreneurs and was very inspired. Thus Perch was born.

At Perch they aimed to build a technology platform where they could acquire winning products and brands to scale to the next level. Having received funding a year and a half ago, they have now acquired over 100 products.

Gaining The Attention of Perch

When it comes to catching the attention of Perch as an Amazon seller, its key to have winning products and brands. They want products that have great reviews, great ratings, and low return rates. Perch also likes to see at least 18 months of profitable history before they’ll consider an acquisition.

For it to be a good investment, they want to know that people will still be buying this product in 5-10 years. Chris thinks Amazon gets a bad rap but says they’ve created more entrepreneur opportunities than anyone else in the world, with Shopify and Walmart Marketplace now trying to do similar things.

Just ten years ago, a good idea wasn’t enough, you had to be able to afford TV ads and convince brick-and-mortar shops to carry your products. Today’s technology has leveled the playing field, and now anyone with a good idea can become an entrepreneur.

The Acquisition Process

Perch is always looking at the bestseller lists and reaching out about possible acquisitions. Chris says entrepreneurs are their customers so they always look to give them honest feedback, even if it’s not going to be a good fit. He describes Perch as friendly and not high pressure.

The way the acquisition process works begins with an initial conversation. Perch will ask to see the Amazon storefront to look at ratings, rankings, and reviews. At that point, Perch will decide if it’s interested in moving forward or not. If they decide to move forward, they will ask the party to sign an NDA and ask for access to the account. There, they will dig in further to see things like return rate and case history. At this juncture, Perch will also request to see any financial info.

After this Perch gives an offer range and submits a letter of intent to outline everything they’re talking about. Next, they go into a due diligence period and ask for 30 days of exclusivity. In that time they gather more financial information, look at invoices from manufacturers, etc.

Chris says their motto is ‘trust but verify’.

Perch makes sure they can build a PNL and is very transparent with the seller, sharing everything they’ve built back with them. Next comes a standard purchase agreement and they get everything set up with escrow. Typically they can close within a few days of an offer letter. They then start migration, sending Amazon an email to let them know they’re transferring the account, getting introduced to suppliers, and just generally making sure they know all the ins and outs of the business. Perch will ask the seller to still consider themselves full-time for the first two weeks of the acquisition as everything is transferred over. On average, escrow is released within a week of closing.

Leveraging Technology

In order to maintain all products and sales effectively you would think Perch would need a large team, instead they leverage technology to do more with less. Perch is building a technology platform that is a little on the diligence and M&A side, but mostly on the post-acquisition side, where the real complexity is managing hundreds of these products at scale. Chris says on their consumer products portfolio they’re building an engine that has visibility, productivity, and optimization. They need to be able to see everything easily in one place.

Knowing What You Know Now, What Would You Tell Yourself Ten Years Ago?

Chris says he would tell himself to take more risks. He says that in general if you’re a hard worker and relatively smart, you can get further by taking risks and betting on yourself rather than following the well worn path. He says it also makes life more fun when you go out on a limb from time to time.

Where To Learn More

If you’d like to learn more about what Perch is doing, visit them at perchhq.com or send an email to [email protected].

PODCAST TRANSCRIPT

Steve McGarry:

Hello and welcome to The Exit presented by Flippa. This is a 30 minute podcast featuring amazing entrepreneurs who have been there and they have done it. The Exit talks to operators who have bought and sold at businesses of all sizes. You’ll learn how they did it, why they did it and get exposure to the world of exits, a world occupied by a small few but accessible to many. On this special episode, I sit down with Chris Bell, the CEO of Perch. It’s an incredible business that is buying Amazon FBA businesses, and they are doing really awesome things with entrepreneurs all over, helping them get more exposure and helping them with various different resources and really, really fueling this era of Amazon FBA businesses.

Steve McGarry:

I think that this is a new frontier where you have business people all over the United States, as well as all over the world, operating these businesses on Amazon that have customers baked into it. And it’s a beautiful thing. We talk about a lot of different topics, but before we get into this episode be sure to listen to my previous episode with Riana Lynn from the FoodTrace acquisition, she’s a fantastic entrepreneur. So definitely check that out before you dive into this interview, but without further ado, let’s jump right into my interview here with Chris. What’s going on, everybody. I am here with Chris Bell, the CEO and founder of Perch. How you doing Chris?

Chris Bell:

Good. How are you, Steve?

Steve McGarry:

Doing great. Doing great. I’m excited to dig into Amazon FBA. So before we get into the nitty-gritty of Perch, let’s hear a little bit about your background. What was your origin story? How did you, how did you start Perch and what led you to start it?

Chris Bell:

Yeah, definitely. So way back when I was a computer engineer, so started my career at GE Healthcare in a product manager role. So designing, developing, and implementing software. And then after a little bit of doing that I wanted to go be closer to the customer so I got into sales, and I actually sold copiers and software for a couple of years. Very hard job anybody’s ever done sales I have a lot of respect for and then went to business school at Carnegie Mellon. After that I went to Bain and Company, which is what brought me to go to Boston, which is where I live now. And at Bain I spent six and a half years at Bain, I did about a third of my time there in the private equity group where I worked on over 40 transactions. And then the other two thirds of my time, I spent working with retail and technology companies almost entirely helping them drive organic growth.

Chris Bell:

So after being in sales I just loved customers and I loved growth. And so that was a whole variety of things from pricing, new product launches, new market entry, customer success. So growing market share, share a wallet with your customers things like that. And then I was a principal at Bain and thinking about… They’re talking to me about partnership and I realized I wanted to… I loved building things. I loved the thrill when I was in sales of building a business, I built a business there. And so I started looking around then to start something or joining a small company. And luckily for me, Wayfair found me and convinced me to come and join them. And they asked me to build their… what we call the Wayfair Delivery Network, which has the North America supply chain. And I had no supply chain experience.

Chris Bell:

So the fact that they were willing to come and ask me to build this was exciting, but also a little daunting. And obviously I said, yes, and I went and so in three a half years we opened 50 buildings across North America, 42 final mile sites, eight sort centers. It was about a $3 billion supply chain when I left, it was a tremendous experience it was a great company. They were growing really quickly, great people and we had a lot of fun. And my favorite faculty from there was when I joined Wayfair on average from when you click buy on Wayfair’s site to deliver when it was in your house for a heavy, bulky item, like a couch it 27 days on average, almost a full month. And when I left, we were doing two day delivery of hot tubs, vanities and couches, [crosstalk 00:04:12] Amazon Prime in the heavy bulky space, which as you might imagine conversion was way up, customer satisfaction was way up, cost was down, a lot of fun, it was a great experience.

Chris Bell:

And then near the end, same thing I had a lot of fun building the Wayfair Delivery Network and building that team. But as it was steady steady, I felt like I spent more time than I’d like in headquarters, pushing paper around and meetings, things like that. And so I started looking around at something else to go and build. Everybody from the outside, everybody always knows how big Amazon is, you hear about it but you don’t actually realize how gargantuan this is until you just jump in. And so I met a couple of entrepreneurs in this space. I went to a conference down in New York for third-party sellers and I just, every time, every interaction I was like, “This is so big, it’s growing so fast. There’s so much opportunity here.”

Chris Bell:

I also just frankly, loved the entrepreneurs I met, they were just true entrepreneurs. They did this with their own money in their apartment or in their home, bootstrapped it together. Just really inspiring stories that people who have built successful businesses. As I thought about my background and how I could best play in this space, a bunch of M&A experience from Bain, a bunch of building scale e-commerce and supply chain at Wayfair, and then early in my career all the technology. And so what we’re doing at Perch is combining all three of those things, where we’re building a technology platform, where we can acquire winning products and brands and take them to the next level of scale. And technology is really important in there because we went through this ourselves, it’s easy to buy three brands.

Chris Bell:

If you have enough money, you can go buy a few brands and you and a couple of friends can probably run them. But now that we’re… What? Are we over 25 at this point. We have hundreds of products, over 50 manufacturing relationships. As things scale, you need a way to keep your hands around this whole thing or it can explode pretty quickly. And so we’re building a technology platform that will enable us to lend all the benefits of scale of a Procter & Gamble or a big products company in terms of pricing optimization, advertising optimization, supply chain cost profile, in stock globally, but without needing the headcount model of somebody like Proctor & Gamble. The way that they succeed is they have hundreds of people in every single brand. And that just doesn’t work with most of these Amazon brands because most of the brands we buy are between one and call it 20 million in revenue is probably our general strike zone.

Chris Bell:

We go outside of that on both ends on occasion, but that’s most of our or acquisitions, so that’s what we’re doing. So we got some funding year and a half ago, or a little less actually maybe like 14 months ago and been a blast, we’re having a lot of fun.

Steve McGarry:

Excellent, excellent. People out there that are listening that let’s say they have crossed that seven figure mark with an Amazon FBA business. Maybe they bootstrapped it, like you said, with their own money, they’re doing it out of their house. And at a certain scale you have to get maybe a warehouse space or something like that. What would you say is the key ingredient or maybe key ingredients plural, that it would really take an entrepreneur to come to a company like Perch, that you guys would look at and say like, “Okay, these guys are very efficient. They’re running a tight balance sheet.” What type of things could someone really start now, if they’re seeing crazy growth, what could they do that was proactive to really become like a business on a silver platter, I guess, is the best way I could say it to a company like yours.

Chris Bell:

Absolutely. So what we look for is what we call winning products and brands. And so what we want more than anything, how tight your balance sheet is or your supply chain or anything like that is all secondary. The most important thing to us is that you’ve developed a product and a brand that has great reviews and great customer advocacy. We want good reviews by count and rating. We want good organic ranking on the most relevant keywords. We want a profitable product, I don’t want to say it’s easy to sell an unprofitable product, but we need to see that people are willing to pay for this product at a price point, decent margin, low return rates, no meaningful NCX issues. So at the end of the day, it really is about having a product that customers like, and they’re telling you that they’re like through the data and we can actually measure and we don’t buy things that are just getting started.

Chris Bell:

We get some pitches once in a while where people say, “I have a patent on this thing, and it’s going to be huge.” We’re very data-driven. I don’t think I can guess what’s going to be the next huge thing, and I think it’s hard for anybody else to guess as well. So we want to see typically at least 18 months, profitable history, where you’ve shown that you are gaining or holding share within your category and your customers are telling you through all the things I mentioned, reviews, ratings, return rates, all this stuff that they like your product. And they’re willing to tell other people that they like it, that’s the most important thing. Everything else, we sell all sorts of things. We see people that are really good at product sourcing and have great products that costs. And there’s almost no movement that we can get on those, but maybe they’re not as good at marketing and so their ad spend is all over the place.

Chris Bell:

And then we see the opposite, we see people who are amazing marketers and have really gotten this product to a great place in terms of top-line, but they’ve ignored the supply chain, when there’s opportunity on the supply chain side for us. That’s much less important than getting a product that customers love because that’s what we want. At the end of the day were paying people at multiple on their earnings. So we’re paying you more money today than you would get in the next few years. And so for us to make that a good investment, we have to believe that in five years, 10 years, maybe even people are still going to want to buy this product it’s a quality lasting product.

Steve McGarry:

I sat down and talked with Michele, the CEO of Clearbanc, and they’re doing like an investment into Shopify stores. So e-commerce specifically and if you’re making I think it was $10,000 a month they would give you an investment and everything is there available, all the data is there. And I think with something like Amazon, very similarly, it’s such a data-driven investment and acquisition that you guys are doing, that it really takes any let’s call it bias that could happen in an investment or an acquisition. Data wins all arguments. if somebody is selling an amazing product, it doesn’t matter who they are, what their background is or anything. It’s just the execution is what matters. And it’s a beautiful thing I think, in how it works.

Steve McGarry:

Hey guys, Steve here, taking a quick pause from the interview. I know that selling a business it can feel unattainable and just out of reach for everybody. But it’s definitely something that is very reachable for people that are listening to this podcast with Flippa. And I’ve mentioned that this show is presented by Flippa. They have over 3 million users on their platform who are looking to acquire everything from content sites to e-commerce stores, to SaaS platforms or even mobile applications. So if you’re curious and want to know more about what your business is worth, head to flippa.com/the exit for free valuations on your business. It takes a couple of minutes to literally go through and you can just go through the whole process without committing to anything at all. So once again, flippa.com/the exit, check it out, get a valuation on your business without any commitments and just see exactly what your valuation of your business is worth. So let’s dive into the interview.

Chris Bell:

It is, it’s amazing. I love both from our perspective, selfishly it’s easy for us to separate the winners and losers and see how you’ve been doing. But the other thing that I love about what we’re doing and the space that we’re playing is that Amazon gets a hard time sometimes it can get a bad rap. But they have, I believe created more entrepreneurship opportunities than anybody in the history of the world. There’s millions of entrepreneurs who have launched something on Amazon because on the platform and Shopify is doing something similar and Walmart’s marketplace. But all of these platforms 10 years ago, winning in consumer products, you had to be able to afford TV ads.

Chris Bell:

And you had to be able to convince brick and mortar retailers to carry your stuff, and you had to take on all the working capital requirements of those things. And so people with a good idea couldn’t do this. And I love that anybody with a great idea and a great product, and you have to have a little bit of money, but if you had a couple of thousand dollars to your name you can really create a product and create a business and it’s inspirational. It’s really cool to see how the playing field has been leveled for all of these entrepreneurs.

Steve McGarry:

Yeah. Well said, technology’s the equalizer that’s taking place. So with the understanding that people are putting together good products, good brands, they hit that seven figure mark, and you guys are willing to look at them. How does the process work when an entrepreneur comes to you and says, “Hey, I’ve built this over the past few years.” What is the process like on your end?

Chris Bell:

Yeah. Definitely. So typically they reach out to us or we reach out to them. So we’re constantly scraping Amazon looking at organic ranking and bestseller lists and reaching out to entrepreneurs. And one of the important things that I tell our M&A team that the entrepreneurs are our customers. So we very much always try to have their best interest in mind and give them fair, transparent, honest feedback, even if it’s not a fit for us. And I say that just to me mean, if anybody of our listeners ever wants to talk to us about the process or understand what we look for more in detail, or share their business with us, reach out you can go to our website. I know this isn’t the time for plugs, but perchhq.com or you can email info at perchhq.com and we’d be happy to talk in more specifics. So I’ll give you the overview, but just want to put that out there. That we’re friendly, we’re not high pressure just because we get on the phone with you we’re not going to try to push you into a corner and buy your business out from under you.

Chris Bell:

So typically the way it works is there’s an initial conversation we usually ask to see at least your storefront. If you don’t have an A+ storefront, you can just send us your seller page and we can see all your products and ratings. And usually we can see a lot about it there, we can almost not a 100% say yes, but we can pretty easily say we’re very interested or not at all of with it. Because you can see the ratings through a bunch of the third-party tools. We can see how you’re ranking on the most important organic keywords. And so we can read some reviews, we can tell a lot from the outside, we can pretty quickly tell you, “Yes, we’re very interested,” or “not a fit for our model.” And then the next step typically would be we’d sign an NDA and we would ask for access to your account.

Chris Bell:

So you give a secondary access to your account, and then we can dig in and see some of those things that you can’t see from the outside. We can see return rate. We can look at your case history, make sure there’s no ticking time bombs here that would just be a deal killer for us. And then we’ll typically also ask you for whatever financial information you have. If you have a P&L, great, most people don’t worry about it. We rebuild P&Ls anyway. Even if you have one we’re going to rebuild it anyway so that we know it’s all data we can trust. So don’t let that be a barrier. And typically what we do is we build you can call it a P&L light. We’ll pull all the information out of your Amazon account while you send us your landed cost or whatever you have, and we’ll create a rough view of what we think your business made over the last 12 months.

Chris Bell:

And based off of that, we’ll give you an offer range based on what we both… And if you have a better idea, we trust the seller quite a lot in these early conversations because they know their business more than we do. And we can say, “Here’s what an offer would look like. This much upfront this much as an earn-out.” And we can put that in what we call a letter of intent an LOI, it’s a nonbinding document. And so it’s just, it outlines what we think we’re talking about here. We jointly believe profitability to be about X therefore we’re willing to pay Y.

Chris Bell:

We usually ask for 30 days of exclusivity, if you agree to that because then we ended up spinning up a lot of work after that, We invest a lot of our time and energy into really getting deep into your business. And so we ask you to not take our offer and go shop it around to all other people while we’re spending that time and energy there. So we share the LOI, if you like it, if you’re excited, you think we’re good guys. We think all indications are positive. You sign that and then we go into the diligence period, which we ask for, like I said, 30 days of exclusivity, depending on the business and the complexity sometimes we can move much faster than that. Sometimes it takes the whole 30 days. Sometimes it goes a little bit beyond if you have an overly complex business or sometimes if you don’t have all the data we need, the biggest sometimes waiting period in that diligence is waiting for the seller to be able to share some of the data.

Chris Bell:

And in that time we will ask you for more financial information. And again, we can recreate the P&L so you don’t need to necessarily summarize it for us, but we want to see actual invoices from your manufacturers, invoices from your freight forwarders and customs brokers. We want to be able to validate we trust the sellers, trust but verify is the motto. And so we need to be able to understand actually what landed costs are, make sure that we can tie together and build a P&L that more accurately reflects your full cost. And so we’ll ask for some data, we’ll build that, one of our core ethos again is around treating the sellers like customers and being fair and transparent. And so we always share all of that back with you and say, “This is what you sent us. This is what we saw. Here is the P&L. Here’s how we tie it all together. Tell us what we missed.”

Chris Bell:

And sometimes it’s surprising. Sometimes even people who don’t have a detailed P&L they say, “I think my profits X, and we do all the math.” And we’re like, “Wow, your mental math is really strong. You were right on.” And sometimes there’s different. Sometimes it’s quite different and just throughout that whole process, we share with them… We also do deeper dives during that time into market share trends. We make sure you’re not rapidly losing share to a really low cost competitor or something like that that could cause this again to not be something that people are still buying in five years. And then near the end of that process, we have a standard asset purchase agreement and a standard trademark assignment agreement.

Chris Bell:

And we have an escrow agent that we work with a lot, if people have their own we’re happy to take suggestions but we’ve done this a lot. And so we have pretty standard and fair agreements that we typically send out. Most sellers, obviously every seller should have a lawyer read any agreement if you’re selling the business that’s giving you your income. We also have a list of lawyers and account… We have a whole network of people that we can recommend to sellers if they want. So if you don’t have a lawyer to represent you, we’re happy to send you somebody and we don’t pay them at all. We have no vested interest in sending you to these lawyers, except that we know that they know the space and therefore they’ll know day one what they’re talking about.

Chris Bell:

And so we’ll send you these agreements, have your lawyer look at them. And typically we can close and wire the money into escrow usually within a few days to a week of sending the agreements, lawyers need a couple of days to read. Sometimes there’s a couple of comments around the edges. So then money goes into escrow. The escrow agent sends a note to everybody with a screenshot, “Okay, we received your $2 million from Perch in escrow.” You can see that you’re like, “Yay, the money’s not in my account yet, but it’s in a holding pen.” And then we kick off migration. And so then we, again, we’ve done this many times. So we send an Amazon email, we let them know we’re going to be transferring the accounts or for just doing an ACM transfer we can do that, transfer brand registry and then do that over time.

Chris Bell:

You introduce us to your suppliers. We make sure we understand all the ins and outs of your business. Typically, we ask entrepreneurs to plan on basically still being full-time for the first two weeks post acquisition. Usually, it’s a lot of work the first few days and then it tails off. But just for expectation setting, you stay for two weeks post-close, pretend like it’s still your business and we’re going to be right next to you watching everything you do, to make sure nothing goes off. And then the two weeks after that, usually we switch then we’d go from passenger seat into the driver’s seat and we’re driving the bus. Sometimes if there’s something crazy going on it might be a few hours a day, but oftentimes it’s like an hour or less a day.

Chris Bell:

Sometimes you we won’t talk to you for a few days if things are just going swimmingly and then that’s it. And usually we release escrow to you well before that. So I think on average we release escrow to your account maybe about a week post-closing is probably a good average. And so once we have control of your Amazon account, once we’ve talked to all of your suppliers and those suppliers have agreed to give us the same terms and acknowledged that they are your supplier, that yes, this is the cost you paid. Once we have all those material things in PA in place, we can release escrow to your account and then we work together on the rest of the transition. I know it sounds like a lot, but typically we do most of the heavy lifting and it’s pretty seamless for the seller, especially because they know their business. It shouldn’t be hard hopefully for you to find an invoice from your last purchase and things like that. And if you can send those to us, we can do all the lifting from there.

Steve McGarry:

Yeah. Thanks for the overview. It was pretty in-depth sounds like around a month-ish is from end to end maybe a month and a half-ish on the higher end.

Chris Bell:

The fastest. We have had a first conversation to funding in 13 days. So we’ve done the whole end to end process in less than two weeks. And then we have some that stretch out maybe to more like six weeks, especially if there’s some complexity or the most common thing is a seller. We’ve had several sellers, we sign the LOI then they have something going on with their family. And they say, “Hey, I need two weeks to go dig this stuff up because I’m also moving my grandma to whatever.” And so we just wait, we just wait for you to get your stuff together and send it over to us [inaudible 00:23:06].

Steve McGarry:

Got it. Got it. And you mentioned earlier about Proctor & Gamble, and I think that that’s a really fascinating topic where it’s basically disruption with technology. Where Proctor & Gamble has hundreds, if not thousands of people in their suite of brands and you’re creating a platform, like you said. You’re building out technology that’s going to allow you to, I would assume maybe underwrite these companies faster. And so my question is, can you talk a little bit about what you’re building to really optimize this and how big is your team? Because this platform’s going to give you as many arms as Proctor & Gamble when you’re dealing with dozens of soon to be hundreds of companies.

Chris Bell:

Yep. Yep. So the technology platform is a little bit on the diligence and M&A side, but the real meat of it is on the post acquisition side. So the portfolio of brands and products that we run, that’s where most of our technology investment goes. So today on the M&A side, once we get access to your account, we can download your transaction files. We show them into our database, it pops out the P&L pretty rapidly so we can do that. But that’s fun and cool, it definitely speeds up our diligence process. But the real complexity is back to what I was saying earlier, managing tens and eventually hundreds of these businesses at scale, it’s really complex. It’s at least linearly complex, but not exponentially complex to manage… Going from managing 10 products, to managing a hundred products to a thousand products.

Chris Bell:

Immediately you start to see how… When you think about what the entrepreneurs do. So if I made this business in my apartment and a lot of the times the story we hear from the entrepreneurs, “Every morning I wake up, I look at every competitor, I see what they’ve done with their price. I see what they’re doing with ad spend, see if they have a lightning deal going on.” They have these really compelling cadences of what they do because it helps them be really tight on how to grow and how to maintain, share. And the challenge for us is to replicate all of that but without having to hire a full-time person to wake up every morning and look at every single product and every brand because that doesn’t scale super well.

Chris Bell:

And so what we’re doing on the B2C side, on our consumer products portfolio is building an engine that one, we think about it in three tranches, visibility, productivity, and an optimization. So on the visibility side, it’s about one just now that we’re running I don’t even know 21 or 22 seller accounts. Just having a platform where I can wake up every day and I can see the financial performance of every product and every brand like that. So we have that, that’s, that’s a core part. And then we have that across our supply chain, so we have over 800 products. We can see every product where the global inventory is, if it’s on order, if it’s on the water, if it’s in domestic location either US, you’re EU or UK but not yet in Amazon, if it’s in Amazon it’s still in transit. So again, if you have 10 products, you just log into every account every day and look at that.

Chris Bell:

But with hundreds of products, you need a way to be able to not just see them all because we don’t want to be scrolling through all of these, but have it automatically say, “These products are at risk of going out of stock.” And you have to be able to say that two to three months before they’re actually going to go out of stock because from order to sellable is at least two and a half months typically from production cycles, putting it on a boat, getting it to the local geography and then getting into Amazon. So that’s a really big part of what we’re building is first this visibility platform where we can see all of these things. We can know, for example, if we’re gaining share or losing share, we can see, we’re tracking over 7,000 keywords constantly, see where we’re trending on these keywords.

Chris Bell:

And then as we think about the productivity piece, it’s how do we start to recommend actions? So we’re losing share here to a lower price competitor. Having that pop up to the top, so a category manager can go and lower price and watch that into that hourly if needed. Same with ad optimization, same with supply chain. We have a forecast, are we hitting that forecast? And if we are, when are we going to go out of stock? When should we reorder? How do we do all those things? And then where it gets really fun and cool and we’re doing some of this in some cool areas now is on optimization side. So actually creating, for example, a pricing optimization capability. Where we say this product is in… Products behave differently, some products need to be priced really sharply to win.

Chris Bell:

So there’s a bunch of categories where price is the main decision or criteria. And so if you’re not priced slightly below your main competitor, we’ve seen this, we have a few products in this category where pricing up by 2% versus pricing down by 2%, you can get a three X in volume. Because maybe two or three years ago that was a aspirational category where people would pay for the best imagery. And the best copy and the most reviews. But over time, most products go through a lifecycle where eventually people like, “That’s just a thing.” There’s actually five competitors who all have 5,000 reviews. And so I’m going to go for the best price amongst those five. And so creating technology that can understand which products are price elastic and pricing them below competitors, then I’d say 85 or more percent of our portfolio today is more of what we call aspirational.

Chris Bell:

Where people are willing to pay more for something that either looks higher quality or has better reviews. And there we’re constantly testing, how high can we price? Can we price 15% higher than our competitors, 20% higher than our competitors and watching our share and our [BXR 00:28:47], as we do these pricing tests to say how do we maximize overall margin dollars over time.

Steve McGarry:

Got it. Very cool. So you guys are really leaning into the tech approach, which I love because you’re able to just plug into these stores and manage tens, if not hundreds in the near future. That’s very, very cool. So we’ve covered a lot of ground. We’ve gone over how it works. A lot of the intricacies here with Perch, but I think taking a step outside of Perch, the finale question that I like to ask everybody. Is knowing what you know now, what you’re doing at Perch, what would you tell Chris 10 years ago?

Chris Bell:

Yeah, I would say take more risks. I think that I’ve done some risky things in my life like quitting a place like GE that was a big blue chip company to go and sell copiers. But in general, if you’re a hard worker and you’re decently smart, you get a lot further in life by taking some risks and betting on yourself and then following the well-worn path. And also just life’s short, it makes life more fun when you go out on a limb and do something that maybe… Like when I started Perch I’d say luckily Spark our lead investor believed, but that was I had 50 investor meetings and 49 out of the 50 said, “That’s a weird idea. I don’t get it. It doesn’t make sense.” And so, having that conviction and taking that risk is paying off in spades. And also it’s just fun, we’re having a great time, we have a great team. We love it and that’s what life’s about.

Steve McGarry:

Well said, well said. Well, those are all the questions I have for you, Chris, where can people go and learn more about Perch?

Chris Bell:

Absolutely. perchhq.com or you can email us at [email protected]. And a whole group of us is on that email address and we’ll get back to you as soon as we can.

Steve McGarry:

Awesome. Awesome. Well, thank you so much for coming on the show Chris and sharing all of this in-depth information. We appreciate it very much.

Chris Bell:

Absolutely. Nice to meet you, Steve. Thanks.

Steve McGarry:

Thank you.

YOUR HOST

Steve McGarry

An entrepreneur, content creator, and investor based in sunny Tampa, Florida. In 2015, while living in San Francisco, Steve sold his first fintech startup LendLayer to Max Levchin’s (founder of PayPal) consumer finance company Affirm.

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