Sean Walsh: I think we have one of, if not the most data points on marketplaces in the world. I think the last count was around 39 trillion, which means that yellow box to buy it changes to a white one and essentially removes 98% of the sales that you would typically do. Amazon recently said to our CEO in the US what are you guys doing? You're growing brands twice as fast as we are. Like, what is your secret sauce?
[Voiceover]: Welcome to ADD to cart, Australia's leading e commerce podcast that express delivers all you need to know in the fast moving world of online retail.
Nathan Bush: Here's your host, Bushy. Welcome to ADD to cart, Australia's leading podcast for e commerce professionals who never stop learning. We bring you the insights from top operators, founders and experts across the country to help you drive results and grow your e commerce career. My name is Bushi, joining you from the land of the terrible People here in Brisbane, Australia think marketplaces are a nice little trend. Well, 2/3 of Aussies plan to shop on Amazon this year and if you're not playing in marketplaces, you could be leaving serious growth on the table. Today I am joined by Sean Walsh, director at Patent Australia, one of the world's biggest marketplace accelerators. Never heard of them. It's kind of the point. Patton Powers Marketplace sales behind the scenes for some of the biggest brands globally and and they're now the largest three piece seller on Amazon outside of Amazon itself. Sean and his team sit on over 39 trillion marketplace data points, giving them an unmatched view of what's working and what's not across Amazon, ebay, Walmart and more. In this chat, Sean shares the real state of marketplaces in Australia, including what's driving Amazon's surge and popularity, why temu's star may already be fading, and why CATCH collapsed while others scale. We also break down how to choose between 1P 3P and accelerator models, the margin and margin mindset you need to succeed in marketplaces and what to fix before jumping in. If you've ever wondered whether marketplaces are worth it for your business, this episode will help guide you to your answer. Before we jump into that conversation with Sean, I want to remind you of two big events that we've got coming up for ADD to cart. If you are heading to Retail Fest on the Gold coast on May 28th, do not miss our epic GC Bogan trivia night happening on the Thursday at Karrawa Surf Club. Spots are limited, secure your best e commerce friends. I'd go for the smartest ones and get your table now at Add to cart.com secondly, heard about the Trump tariffs. Yeah, I think you might have heard something. Well, if you are keen to explore what retail might look like in Southeast Asia, this is the time to jump on board NRF 2025 APAC in Singapore. We are taking a tour group, an ADD to CART tour group. Our very first one over to NRF 2025 APAC and we'd love you to come along. We've put together a great package which is actually less than the standard ticket price for Add to Cart listeners to come and join us. Head on over to add to cart.com and have a look at the NRF page there. Expressions of interest are open right now
[Voiceover]: for you to join us.
Nathan Bush: As always, a massive thanks to our partners at Shopify and Klaviyo for making this episode possible. Now, let's get into it. Let's learn all about marketplaces. Here's my chat with Sean Walsh from Pattern.
[Voiceover]: Sean, welcome to ADD to cart.
Sean Walsh: Great to be here. Thanks for having me.
[Voiceover]: Brilliant to have you here. We've been trying to line this up. I feel like I say this to everyone at the moment because we've got a lot of guests at the moment. I'm like, we've got to have that conversation. We've been talking about this for a long time now and your marketplace consumer report came out and that's not the reason you're here, but that was the point where I reached out to you and the team. I was like, guys, there's some good information in this. We've got to have the conversation. So I'm stoked that you're here.
Sean Walsh: Yeah, kudos to the team that pulls that together. It's an amazing report and I think there's a lot of good reports in the market, some which probably haven't been as good as they were historically, but there's a lot of data there for the brands and consumers to really understand what's happening.
[Voiceover]: All right, so we're going to get into that because we're talking all things marketplaces in Australia because we are seeing the rise and probably the. Not the emergence. We're, we're well past the emergence, but the integration of marketplaces into the retail landscape. There's no avoiding it anymore. It's not, not a will they come, it's a they're here. How do we handle it? So we're going to talk all about that because you are the go to expert in all things marketplaces in Australia. So before we get into it, can you give us an overview of your role at Pattern and what Pattern does for retailers and brands.
Sean Walsh: Yeah, sure, thanks for that. So Pattern, we position ourselves as a E commerce and marketplace accelerator. So what does that actually mean? So we partner with brands to grow their digital presence in whatever channel that might be. So that might be direct to consumer, that might be B2B, that might be marketplaces, sort of any sort of function that is required to grow a brand, we offer it. So we position that I guess in four separate buckets. So we have advisory services. So that might be, hey, we're doing 50 million, we need to go to 100 million. How do we get there? What's the pathway? What do we need from an investment people tech perspective? Then we have the digital agency services. So that's your traditional services around digital marketing channels, CM, CO, CRM, etc. We have marketplace acceleration which is part of the acquisition. So we were company called Practicology in other markets and then Patent acquired us in 2018. So we took on the model around marketplace acceleration. So that is where we I guess for our core model which is we will buy your products and be your exclusive partner across marketplaces directly working with the brands. And I think we'll touch on the marketplace piece a little bit more throughout today.
[Voiceover]: So you're an agency as well as a retailer?
Sean Walsh: We are, we are. We sort of like to call ourselves probably one of the world's largest retailers that no one knows about. Right. Because we partner with the brands and the experience on marketplaces that we deliver is actually a branded experience, it's not a patent experience. So we sort of sit behind the scenes and sort of grow the brands through their content, their experience, their sort of strategies.
[Voiceover]: Okay.
Sean Walsh: And then the last bucket is the sort of end to end direct to consumer offering. So for brands that actually don't have an E Commerce team, don't have a logistics arm, don't have a marketing team, we do the end to end. So for brands like thank you, thank you co. Yep. With the bottled water many years ago.
[Voiceover]: Yes.
Sean Walsh: We do everything for them. So if you go to their website, that's all us. We do all their advertising. We also do all of their fulfillment out of our logistics hub in Melbourne.
[Voiceover]: Gotcha. You're a busy person.
Sean Walsh: We are, we are a very busy team. But that's a good place to be. Right. E commerce is busy. Has been since what everyone sort of had something called Covid.
[Voiceover]: Yes, yes. But you what's always impressed me about patent and before that Practicology because I knew the team Back then as well is, is that you've always had this belief and I know marketplace is only part of your business and we're going to primarily talk about marketplaces today because I think there's some really interesting stuff there. But you've always been in the marketplace world and accepting that they're going to be a significant part of the e commerce landscape.
Sean Walsh: Yeah. If we think about the Australian e commerce landscape, marketplace is not a new thing. Ebay was one of the foundational parts of e commerce in Australia. Really. It's just shifted in terms of a couple of things. The ability for retailers to become marketplaces themselves through technology, but also the emergence of other marketplaces such as Amazon, Temu and others that are coming into the market and I guess delivering a different kind of marketplace to what the likes of an ebay was back in sort of the 2000s.
[Voiceover]: Yeah. And so your marketplaces report, the Marketplace consumer report was amazing because it obviously went into depth around Amazon's penetration into Australia, but also a comparison of all the other marketplaces in Australia, including the retailer led ones. I want to start with Amazon because it's on the tip of everyone's tongue at the moment, 63% of Australian customers intend to buy from Amazon in the next 12 months, up from 58% the year before. That's almost 2/3 of Aussies having an Amazon experience. What kind of impact do you think that that's having in the overall e commerce landscape for Australian retailers and brands?
Sean Walsh: Yeah, great question. So firstly, shout out to Katherine Coleman who leads the marketing initiatives here and has been running this report. I think it's the seventh year that we've been doing this and it seems like it builds on either the data for some of these marketplaces, but also the breadth of marketplaces as they are growing and how we get that information collated into something is, is, yeah, they do an amazing job.
[Voiceover]: And that's the thing, that's the beauty of it is because it is in that 70 years now you see the build year on year and it's the same questions in the same data. So you can actually see real change.
Sean Walsh: Yeah. And I think the team do it in November. So it's E commerce and shopping is on the tip of the tongue of all the consumers that we're talking to and it's a significant number of consumers that are polled and they have to have shopped online in the last 24 months. But no, it is, it is going from strength to strength. I think if you onto your question about Amazon, if we Boil it down to what makes marketplaces work. Like one of the things, one of the key things is selection, right. Amazon has have 200 million products. So I think when you talk about Amazon's launch in 2017, 2018, it was quite widely panned, right, in the media, being not as good as everyone expected.
[Voiceover]: Bit underwhelming.
Sean Walsh: Yeah, it was underwhelming. I think some of that came down to the selection was being, I guess, built out of other markets. So Amazon was shipping products from the us, from Europe, et cetera, into this market. So as a consumer, you've got expectations of a marketplace like an Amazon to have free, fast delivery, be able to get it same day, next day. And when the initial launch was three days, four days, five days, it sort of didn't hit the mark. From an expectation perspective, you could get the same product locally through all the retailers and brands faster and sometimes cheaper. So yeah, the initial few years was they didn't hit the mark from a selection perspective. But going back to that, that's changed and we'll talk about. But I think brands that consumers are looking for is a key part of marketplace success. So Amazon has that with 200 million products. The growth of local brands is obviously growing as well. So that's sort of helping with that. I think another thing is value. So value can be contextual, right? So it might mean that value is a cheaper price, so it's for a price conscious shopper, but it might be oceans, it might be loyalty. So how is the consumer deriving value from that marketplace? It can't just be a transactional play, it has to have more than that.
[Voiceover]: I think there's also the. Just to build on what you're saying there, the convenience play. It's like I could shop around, I could spend five to 10 minutes shopping around five to six different websites, but if I know it's on Amazon, I know it's going to be free delivery if it's there, if they've got what I need, I'm going to get it done in 30 seconds.
Sean Walsh: That's exactly right. I think the logistics play is obviously part of that convenience. But also there's a number of people that will shop from Amazon that you've placed an order on your phone. You just like, hang on, I've actually placed it. Rather than going through sort of, I mean, from a D2C perspective, you can have that outside of Shopify, who's obviously got an amazing checkout, you can have some friction in the checkout and people dropping off. It's really hard once you've added something to cart on Amazon to then not purchase because it's the yellow buttons right there in front of you.
[Voiceover]: Yeah.
Sean Walsh: And I think the other thing is talk about convenience but trust. So trust is built over time, both for the marketplace brand but also the trust in the products the marketplace sells. I think for a lot of people that don't work in the industry, but that might be a consumer, they think Amazon, you're buying from Amazon. Right. You're not buying from a brand or a reseller. You are buying from Amazon like you are buying from a David Jones or a my or a baby bunting or something like that. When it is a lot of the range, 60, 70% of range is from three piece sellers right now.
[Voiceover]: Yeah, gotcha.
Sean Walsh: So I think, yeah, trust is a big part of it and I think you would have seen maybe with the report, the emergence of temu, right? Yeah, I think trust is something that will be one of their bigger challenges. We've seen a really, really huge uptick starting to slow down in sort of consumer sentiment for the next 12 months in terms of we've tried it now, are we going to go back and continue to buy from that channel From a trust perspective, do you see?
[Voiceover]: Because the stats around TEMU in the report was that 43% of customers expect to shop there in the next 12 months, which is a little bit down on 63% of Amazon. But like you said, new player essentially. So it is a pretty monumental rise pretty quickly. But that is down from 46% last year. So gone backwards as you said, slightly. Do you foresee that the temu, the Sheins will continue to be a threat or do you see it as almost like a blip in time and it will just be a whole bunch of international marketplaces that will continue coming?
Sean Walsh: I think TEMU has a role to play. Their model is different. Again, how do you offer something that's unique, that consumers will go to that marketplace for something that's different? That's not just I'm buying a product and getting it shipped to me and it's this price point, temu. I was actually at a TEMU event earlier this week and they are definitely making a play into Australia. So from their launch they have been filling a lot of planes into Australia. But when you're shipping things in planes, you can't do anything that's dangerous goods. You can't do anything that's big and bulky. So they are definitely looking at sort of boots on the ground in Australia and building out Their own sort of capability and from that onboarding a number of local sellers. But I think to your point around, the numbers aren't as strong as they were in 2024. I think that goes to the. Everyone wanted to try it. Right. Everyone was talking about it. So everyone wanted to see what the experience was like and see if this was going to be a choice of channel for them. And I think that going back to the value thing, if you're paying $5 for something and you're getting it shipped for free and it's gamified and you're getting three things free, I don't think the expectations on the quality are going to be there like you would with an Amazon. But that might mean that that consumer expectation is. I'm not always shopping there because I'm shopping there for a need. That need might be 5% of my
[Voiceover]: consumer shopping at the TEMU event. And in your relationship with them, tell us what you can do. You see that they're going to try and address the trust and the quality issues.
Sean Walsh: Yeah. So they're definitely looking for western brands to be able to have that, I guess household brand names on their website. As I talked about, you need that for marketplace to be successful. When you think about fakes or gray market or anything like that, they are pretty good there. You have to be a brand authority to be able to sell. Right. So if you are, look, this will probably never happen. But if you're an Apple or a Sony or a Bose or a Sonos or something like that, you have to be able to prove that you are the brand that can sell that product. So it's not going to be a place where unauthorized resellers are probably going to have a lot of activity. It is quite locked down. So they're trying to build that trust. But right now the trust of the products you buy, you're probably buying a product versus a brand.
[Voiceover]: Yeah.
Sean Walsh: So the brand trust is something they're going to continue to have to build. How they do that, I mean, they're in 80 markets now. So how they build the sort of Western presence or those household brands is going to be interesting.
[Voiceover]: Yeah.
Sean Walsh: Because they haven't a lot of success there today.
Nathan Bush: Okay.
[Voiceover]: So not going anywhere.
Sean Walsh: No, I don't think so.
[Voiceover]: From a local perspective. You mentioned it earlier around retailers bringing on marketplaces. I think during COVID it definitely peaked. We had retailers such as Myer Barbecue galore. Whole bunch that I'm not thinking of right now. Do you feel that that's still a sustainable model for retailers to be integrating their own marketplaces.
Nathan Bush: Decuba's mission is to leave the world more amazing than we found it. So what does that look like? It means prioritising sustainable practices, empowering amazing people and sending less rubbish emails. With the help of Klaviyo Da Cuba have been able to do exactly that and achieve 34% growth in revenue from Klaviyo flows. With Klaviyo, Ducuba has been able to confidently send more emails knowing that they will be valuable by responding to omnichannel behaviors and targeting at risk and high intent shoppers differently and growing lookalike audiences. See the world doesn't need less email, just needs amazing email. To explore how Klaviyo can grow your e commerce business and to see more case studies like this, visit klaviyo.com au
Sean Walsh: I think there's a place for it I don't think there's a place for as many as we are looking likely to have. I think every sort of category leader has tried to do marketplaces Iconic surf stitch, baby bunting as you say Myer, there's a lot out there that are doing marketplaces internally. For them it might be a place incrementality for stocking range that they don't have. So they're like well our product range is going from X to Y, but is a consumer going to go to Bunnings for a suitcase? That's probably not a question I can answer, but it's probably not their first choice, right? So they may need to have a lot of media and activity around being able to get those new customers understand the play. But in practice that might be a little harder than is imagined.
[Voiceover]: It was funny, I was on Reddit the other day and there was a thread around most trusted retailers or something along those lines and it really Bunnings was up there. But the conversation quickly turned the focus of the conversation came to I just wish when I was online at Bunnings that I could just find the stuff that was in store and not get sold all this other shit that I ended up getting excited about and then adding to Cart and realizing that I have to wait weeks for it because it's not actually their stock. So I think there's still some education from a customer perspective and a UX experience to kind of differentiate the offerings.
Sean Walsh: Yeah, yeah, definitely. And I think again if they're going to compete with that product being available from a number of different either retailers or marketplaces, it can't just be a transactional play. It needs to be fast. It Needs to be free. That's. I mean, that's a staple for E commerce now. It needs to be a loyalty player. I need to be able to pay points. I need to be able to differentiate from Amazon because trying to compete with Amazon from a logistics play is going to be extremely difficult for some brands and retailers.
[Voiceover]: Yeah. Putting on the spot here while we're on local marketplaces, the Catch collapse, I'd love your take on it from a marketplace specialist perspective. Where do you think the downfall happened? Like, what did they get wrong and what does a good marketplace need to do as a foundation to avoid that?
Sean Walsh: Yeah, look, it's never good to talk about, I guess, marketplaces or brands or retailers that collapse in Australia. And I think unfortunately there's been a lot of activity in that space even as recently as yesterday. I think the team that obviously ran that and owned that prior to the acquisition were absolutely amazing at what they did. Right. Their selection was on point there, how they operated it. They were an E commerce business. Right. They knew about that. Then the acquisition, they're not going to talk too much about sort of the public sentiment around did they know what they were doing? But the guys were experts that started it, right?
[Voiceover]: Yep.
Sean Walsh: I think part of the challenge with Catch is the relationships they may or may not have with brands around the inventory that they're selling. So I know that some brands, their product would show up there through means that were unauthorized. And that's not a great experience. When you don't have that direct relationship with a brand. How are you building that brand on your platform? You're not. It's purely transactional and that's sort of where, I guess part of our growth is that we partner directly with the brands. There's a lot of businesses out there that will just take product, do the commercials and find ways to sell it across 50 different marketplaces. That's not us. We need a direct relationship with the brand to be able to say, well, what's your strategy for growth? Is it on this marketplace, Are you a price sensitive shopper from a consumer perspective, do you want to go international? Like everything that we do is tightly coupled with our relationship with the brand.
[Voiceover]: Awesome.
Nathan Bush: I'd love to unpack that with you
[Voiceover]: if you're all right with that. Because in this conversation it's going to be so important for us to differentiate between retailers and brands. A lot of the time in our add to cart we kind of combine the two because we're all selling online. But I think from a strategic perspective, we're going to have to differentiate between the two. So let's start because most of the conversation will be about brands, I've got a feeling. So let's start with retailers. Do you feel that there is significant marketplace opportunities for retailers, especially traditional retailers in online marketplaces such as Amazon?
Sean Walsh: There are, but it's a lot harder for a number of reasons. And the first one is commerciality. If you are a retailer, you're already buying at something at a wholesale price and you're trying to sell it on Amazon where they're taking 25% as well, right? 25 to 30%. So that makes it extremely difficult for brands. I think there's a number of models which makes sense. For those that sort of don't know how Amazon operates. There are different models to sell to a consumer. You can sell by 1p, which is you selling your product directly to Amazon and they're doing everything. You can sell 3P which is where you are directly selling to the consumer using the Amazon platform. So they're the two main ones. And then you can obviously use an accelerator like us, which is still the 3Pmodel, but instead of selling going to Amazon, you sell directly to patent and then you ship pallets to us and then we do everything else. Okay, so for some brands in certain categories, and I think it's one of the most hotly debated topics around what is the right model for Amazon. Specifically it might be a 1Pmodel. If you're in grocery, in FMCG, you've got a cheap product that's heavy. Anyone that works in e commerce knows that that's not a great combination for E commerce. Then you may need to go through a 1P relationship where Amazon, given their breadth and depth of selection and buying power, will have some things that'll be a loss leader to be able to get consumers through the door, which you could never do yourselves as a brand through a 3Pmodel.
[Voiceover]: In a 1Pmodel, does Amazon have to warehouse and fulfill the product that is
Sean Walsh: a requirement of going 1P? Yes. So FBM, FBA, SFP, which is sort of seller fulfilled prime. There's different ways to be able to get products to consumers. We are big advocates of FBA. We've got 50 warehouses right? Globally.
[Voiceover]: Oh wow.
Sean Walsh: We could do the same thing as some of the brands and retailers try to do on Amazon by saying, hey, I've already got this sunk expense over here from a warehouse perspective, I've got people, let's just take orders like all of the other marketplaces do from a drop ship perspective. And fulfill them to the consumer. Why do I want to pay Amazon for that? Well, if you do a side by side analysis, most of the time FBA will be cheaper. There's no, as I said, the logistics footprint of Amazon in Australia means it's a lot cheaper to move things around. So if you are shipping bulk into Amazon pallets, you might be doing it for X amount of cents per unit, but if you're shipping one unit from Sydney to Perth, it's going to be a very different commercial result. But also it's not just a logistics play. So FBA will be prioritized in all your search. It will be a requirement for taking participation in certain deal events like that. Amazon will always preference FBA over fbm.
[Voiceover]: What does FBA stand for?
Sean Walsh: Fulfilled by Merchant.
[Voiceover]: That's right.
Sean Walsh: So essentially you're taking the orders into your own WMS and then you're shipping it direct to consumer like you do on a lot of the other marketplaces in Australia. So, yeah, FBA is definitely something that just unlocks more growth. And I think Amazon won't tell you this, but they never lose money on a 3P sale via FBA. Right. Because it's commission based.
Nathan Bush: Yeah.
Sean Walsh: Okay.
[Voiceover]: It's commission based. They're not touching anything.
Sean Walsh: Yeah.
[Voiceover]: In the 1Pmodel, if a brand wants to get started there, does Amazon essentially have to accept them? Is there like a diligence process that they have to go through? Because I can imagine that there's a bit of risk for Amazon to be able to take on that stock and service the customer.
Sean Walsh: Yeah, you have to be invited. If you think about what Amazon, all of their pillars, the main one is selection. So if there is a gap in selection, they will find it. They will be pretty proactive about reaching out to brands. We had a number of brands that we speak to that have been speaking to 1P or have been contacted by 1P and for them they'll have direct relationships with brands and invite them or they will source it internationally. Like if they have a gap in the selection, and we know we speak to brands that have a 1P relationship in Australia and if the buying power of Amazon in the US is greater than the buying power here, which means I'm getting something cheaper, they will say the brand in Australia, I'm going to source this from the us unless you change prices. So yes, you have to be invited. But they're very good at getting selection if they, if they find a gap in their portfolio.
[Voiceover]: Yeah, gotcha.
Nathan Bush: Okay. So if you're getting tapped on the
[Voiceover]: shoulder by Amazon take it as a sign that there's a gap in the marketplace.
Sean Walsh: Yeah. And to be honest, there's a lot of Amazon product on Amazon Australia where there is a local brand presence and they don't actually know the products there. We've spoken to brand, we've sort of said, look, there's $20 million of GMV for your brand on Amazon Australia that you're not realizing because someone is selling it. Either you're selling a wholesale to them and they're on selling it or they're getting it from international markets.
[Voiceover]: Yeah, gotcha. What kind of research tools are you using to understand the market?
Sean Walsh: Yeah, so I think we have one of, if not most data points on marketplaces in the world. I think the last count was around 39 trillion. So that's a lot of zeros. We're in a unique position. We, from an Amazon perspective are the largest seller outside of Amazon on the platform globally. So we have access to quite a significant trove of data and an amazing team that actually turns that data into insights for us because it's great to sit on all this data, but if you actually can't unlock anything, that makes it a bit difficult. Tools in Australia are a little bit less mature just because of Amazon's investment in some of those tools in Australia. So if you're a three piece seller in the US or Europe, you get access to some pretty detailed category insights. So what's my share of voice? What's my conversion rate average in the market? In my category you get access to a lot, what people are searching for, where I show up in that search, who's showing up in sort of the first two or three spots. So that's not all that's available, but I think we've built some tools on top of that for this market that allows us to really get a good sense of what's happening in the market. Some of these tools are front end tools and we know with extreme data scraping tools they're not going to be 100% accurate. It's not a P&L or ERP or anything like that. But it does give us a really good guide on what's happening in the marketplace In Australia. We take that to our brands to be able to inform them.
[Voiceover]: Do Amazon see you as a friend or a competitor?
Sean Walsh: I think back to my point before, Amazon never loses money on a three piece sale. 70%, 75%, I think at the latest data points were three piece sellers globally on Amazon. So they know that 3P sellers enhance selection for them at a better rate than they can. And sometimes there's. Well, definitely over the Last sort of 12 months, there's been a bit of a consolidation of their 1P vendor accounts. So people might have seen there's been deletions of accounts. Hey, we're not going to stock your product anymore. You're going to have to find another way to sell it. So there might be a profitability play aligned with that as well. If you're doing sort of sub 10 million in the U.S. for example, look, Amazon, we have a really good relationship with Amazon in all markets. A really good relationship, especially in the US where we sort of where the business started. But also here in Australia, the brands we work with, building their presence on Amazon only helps Amazon. Yep.
[Voiceover]: And so for retailers, if they're hearing this and they're like, oh, I didn't know this option existed with Patent is the main difference, and I'm just working this through my head, is the main difference versus going 1P is that you can work strategically with them to pick and choose the right marketplace, that you're not just limited to Amazon, that you can then go and distribute and represent the product in all different types of marketplaces, depending on the brand and the strategy.
Sean Walsh: Yeah, that's right. And I think part of the acquisition in 2018 was patent was fairly big in the US already, but had no presence outside of the US. Right. So they continue to grow a business. You do need to diversify and that acquiring practicology, the business that we were back then, they got access to 100 people globally. There were E commerce people that could sort of fast track the growth internationally. So we are on auto, a number of other marketplaces in Europe, but we're also on Walmart, some of the ones in sort of Latin America. We do work with ebay here in Australia. We do have worked with cash historically as well. So if there is a strategic play and it's going to be a win for the brand to be on a marketplace, then that's definitely something of interest for us because, I mean, we win when our brands win.
[Voiceover]: Yeah. Awesome. All right, so let's talk about winning on marketplaces. The question that I had, as you were talking through the Amazon example, cast my mind back to the buy button because for a long time there was a lot of talk around winning the buy button because the Amazon prices were dynamic and you had to position yourself competitively to win that, because essentially they collated everyone offering the same product onto the same product page to win that buy button. Is that still the case?
Sean Walsh: It is, yeah. So used to be called buy box, it's now called featured offer. What it actually is is a mirror of your distribution. So you're right, it is one product page. There can be multiple sellers for it. The best customer experience will win that. Which boils down to a number of different factors that Amazon will talk about. But price, delivery, offer, they're kind of the main things. So if your product is available in E commerce in a lot of different places and Amazon finds prices that they think are a better consumer offer, they'll do what's called suppression of that featured offer, which means that yellow box to buy, it changes to a white one and essentially removes 98% of the sales that you would typically do.
Nathan Bush: Wow.
Sean Walsh: Or it pushes you below that because there might be other sellers on that listing. So distribution is foundational to all marketplace success. But specifically on Amazon where it is a mirror of your distribution. Because if they're. I think a common misconception with brands is Amazon's cheaper, it's not cheaper. You just don't know what. Retailers are showing that at a different price, which Amazon can't talk about price in Australia, but what Amazon thinks is a better customer experience and we present that to brands, we say, well, as part of this growth strategy, you need to think about what's happening over with these retailers. Because I'll look at Google Shopping and it'll be $10, $20, $30 cheaper. Which means Amazon saying that and saying, hey, we need to think about what we're doing here from a customer experience perspective.
[Voiceover]: Okay, so winning that exposure on Amazon isn't necessarily about the price. You've got to be competitive. When Amazon talks about customer experience, everyone has a different version of customer experience. From your perspective, do you think it's weighted towards delivery time frames, stock availability, post purchase, customer service? I know there's a lot of factors, but where do you think they hold the most weight?
Sean Walsh: Yeah, I don't think it's one thing. I think it's a combination of things. So we talked about selection. Not many people browse Amazon for inspiration or it's not like a direct to consumer website where you're pulled in from, from a content perspective, you're sort of engaging with a brand. It's really a lot more intent driven, bottom of the funnel. So it's I have a need. It's very much keyword driven, search driven. No one browses categories like you might do on a direct to consumer site. It's I have a need or I'VE been targeted with a promotion. I'm going sort of direct to consumer pages or product pages, which is why conversion rates on Amazon are significantly different. Right. So direct to consumer might be 2%, 3% in the beauty space. If you're doing quite well, it might be 6, 7, 8% on Amazon. You sort of hear more dealing with sort of 10 to 25% conversion rates.
[Voiceover]: Huge, isn't it?
Sean Walsh: Yeah, it's more intent driven. There's a purpose here. So I think from a selection perspective that's driving that. But also it is so easy from an ordering perspective. But also on that sort of post purchase piece, my Amazon account is a shared household account and I get a number of emails about how easy it is to return products that my wife might have purchased. So it is very easy, very low effort for consumers to sort of interact with that, which means there's limited risk, like the friction of the checkout, isn't there, where it is with others. But also I'm conscious that if I buy that this product and there's a problem, I'm not going to be sending emails back and forth for a month trying to get my money back.
[Voiceover]: Yeah, spot on. You mentioned the importance of keywords in discovery and the use of search, which is different from DTC brands. I could imagine that you and your team spend a hell of a lot of time on SEO and content for the brands that you're listing. 3 PL. Do you have any tips for others Maybe using the 3PL model on how to maximize products for keyword search?
Sean Walsh: Yeah, I think one of the benefits of sort of working with the Amazon ecosystem is the data that you have access to that Amazon provides. So if you were to try and get the Amazon data points from other marketplaces, it just doesn't exist. You'd probably speak to an account manager and say, hey, what are the top 20 keywords? What are all the keywords? Where I'm appearing on the digital shelf, you just can't get that. Whereas on Amazon, which we talk about a pattern, your digital shelf, how you appear in that is definitely keyword driven. So Amazon's a pay to play space. If you go to any search page, there's 70% of it is paid activity. So there's a brand ad, there's sponsored product, there's sponsored video, there is some organic positioning. So there's the top four slots which are where we try and win. Right. Because you don't want to continue to spend advertising dollars for something that you're going to win organically. You want to be quite about that. So we have a lot of technology that we have built as a business over time. Amazon recently said to our CEO in the us, what are you guys doing? You're growing brands twice as fast as we are. Like, what is your secret sauce? And obviously there's, it's not just one single thing, but our advertising tech is really, really bright and I come from a tech background, so coming into a business like this and saying this is just, yeah, it's mind blowing the sort of rate of change that the team are building. But yeah, we work with, I guess there's foundational things from a content perspective, right? There's what we call retail readiness, which is how many images you have, what's your title look like, what's your bullet points look like, what's your A plus content look like? That's the foundational stuff. And then there's building on that from a. Well, how do we get this in front of a consumer that's not potentially searching for this? What keywords are they searching for? A couple of things that we look at in our tech is how many keywords are we ranking for in the top four, which is the organic spots because that's where 80 plus percent of all the organic clicks go in the DTC world. Whereas where do you hide a dead body? Page two of Google, if you're not in those top four slots, you really going to struggle to get any sort of click through. But then page one is the next best bit. So there's trillions and trillions of digital shelves and what we call digital shelf is a keyword search that we can appear with one of our products and we need to be able to focus all our energy on winning the ones we can and then going after the incrementality on the ones that we haven't won and need to through content, advertising, et cetera.
[Voiceover]: Do you have any benchmarks on the percentage of sales that revenue that you actually should be reinvesting into marketing on the platform to make sure that that keeps growing?
Sean Walsh: I'm going to sound like a consultant here. It depends.
[Voiceover]: Yeah, I knew that was coming.
Sean Walsh: It depends on what the strategy is for the brand or the business. Right. If you are dominating in all of your categories in E commerce, outside of marketplaces and in brick and mortar retail, and that is you want to dominate your category on Amazon, but you're launching this year and Amazon's been live for seven years. It's going to cost you money to be able to gain that market share. Because the way Amazon Works. It's not like your direct to consumer site where if you want to push something you can put on the homepage, you can send an adm, you can, you can merchandise it up to sort of position one A can't do that on Amazon unless you want to pay for. It takes time for those organic rankings to feed the algorithm from a velocity perspective. So to start with, you do need to pay for it. If market share is something you want to go after, brands can invest significantly for I guess the first 12 months to do that. But other brands which have a more of a profit driven approach, some brands, it's 4% of GMV, they're spending 5% of GMV. But on the aggressive side we see brands that are sort of 30, 35% of their GMV is reinvested into marketing.
[Voiceover]: Okay, that's not a consultant answer. You actually gave us numbers.
Sean Walsh: But it's quite broad.
[Voiceover]: Yeah, that's the game, right? It is broader. You've got to do what's right for you in that moment. From an international perspective. For Australian brands looking to do to use Amazon to expand in other markets, especially the US we heard from Lou from Strapsicle, Lou and Ben and they raved about Amazon as a way to expand into the U.S. obviously their product is a little bit different because it is made for Kindles, which is an Amazon product, but that was their strategy is to jump on the marketplace and really invest in that as a way to grow into the US without huge overheads and a strong focus. Do you see that as a sustainable strategy for Australian brands looking to go beyond our shores?
Sean Walsh: Yeah, I think they've got an unfair advantage. We should talk about their ICP is literally shopping on there all the time. That's right. I know they've done an incredible job. So to answer your question, yes, we see brands seeing Amazon as an entry point into new markets because of the trust. So if you're going into the U.S. for example, if you are on Amazon, it opens doors to more conversations with brick and mortar retailers or with wholesale partnerships or e commerce partners in that market. If they see that you're on Amazon because building awareness where they haven't heard of you, it's hard for them to trust and engage and sort of write POS and big order quantities if they aren't seeing your product selling on Amazon. We see we work with a number of brands, Australian brands, international markets, so we've expanded them into the us, into the UK as well as working with them on Amazon Australia, we're also pretty Bullish about the home market as well. So some brands will say, I need to be in the us. Look at the numbers. Like, it's crazy. Yeah. But it's also really mature and really complex and it's going to cost you a lot of money to sort of get started. You can't just launch your product over there, have no marketing strategy and think that people are just going to know it and buy it if it's the first time you're in the market. So I think if marketplaces aside, if you're launching internationally, there needs to be a strategic investment in that market, otherwise you're going to pull back in 12 months and say it didn't work.
[Voiceover]: Yeah, great advice. Do you have any brands or retailers who come to you? And I bet you get a lot of very green brands who are like, oh, this marketplace thing, it's got something. I should probably be there. I'd need to be there in some form. It's all very complicated and confusing, but I know I need to do something. Do you ever get those initial conversations and you go, actually, no, just stick to D2C. This isn't ready for you yet. Like, what is the criteria that you. Like? You've got to have this in order to be suitable for marketplaces. Otherwise stick to D2C.
Sean Walsh: Yeah, that's a really great question. We do get a lot of brands coming with that exact question. Amazon's growing. There's 60 million page views or sessions a month. How do I get some of that? There's some categories that work better on Amazon than others and it's typically because it's a longer game you need to play. Amazon has a lot of fashion, apparel, etc. It's not as easy as other categories, and the reason it's not as easy as other categories is because you have to build the authority.
Nathan Bush: The market is shifting, costs are climbing
[Voiceover]: and the pressure to do more with less is real.
Nathan Bush: But when resources are tight, you can rely on Shopify, the platform that's consistently first with new capabilities. Shopify invests significantly in R and D and drops more than 150 updates every year, evolving with you and absorbing complexity
[Voiceover]: so you can focus on what moves your business forward from AI powered insights
Nathan Bush: to the world's best converting checkout. Shopify is designed for the next era of commerce, helping you sell more, scale faster and future proof your brand, build for what's next with Shopify. Visit Shopify for Enterprise to learn more.
Sean Walsh: So if you're doing seasonal drops and it's on sale for three months, 12 weeks, and then goes out of stock, you never sell it again. That's not going to really work on marketplaces. Well, it's going to be a lot harder to work on marketplaces. Whereas if it's evergreen, you're building up ratings and reviews, you're building the flywheel. So sort of 612 months after you've ramped up, it's always on and you own in the category and it never goes away. They're the categories that products will win versus those that are seasonal or limited drops which are there and then gone because you haven't fed the flywheel. So that visibility is just going to cost you to be able to show in front of the consumer.
[Voiceover]: That makes a lot of sense. And is there kind of a minimum gross margin that you go. Unless you're making this gross margin, don't even think about it.
Sean Walsh: There's some that are harder than others similar to the categories. So alcohol, for example, because our taxation in Australia is for alcohol, is quite high.
[Voiceover]: Yeah.
Sean Walsh: So if your COGS is 40%, it's going to be hard. So your landed cost, your cost to manufacture before you send it to Amazon and then spend 30% with Amazon, you're leaving a lot of wiggle room. So most brands outside of those sort of categories have quite a good cogs. Anything over sort of 35, 40%, you're going to be quite limited. These are percentages. Right. If you're a high ASP product, it might be totally fine because you're selling it for $1,000, $2,000.
[Voiceover]: Yeah. And then I can imagine if you haven't got your fulfillment and your customer service processes in order, just get that sorted first.
Sean Walsh: Yeah, that's just 101, E commerce. Right. Because you're going to be putting your product out to quite a significant amount of eyeballs. So you're only going to be showing a magnifying glass on something that's a poor process, if you haven't got that in in the right way for launch
[Voiceover]: and you get punished badly by Amazon.
Sean Walsh: Yeah. Ratings and reviews are pretty public.
[Voiceover]: So let's look ahead. So we've had so much change over the last five years in the marketplace and look, we've talked only about marketplaces. I know you are in a lot more of the world of E commerce than just marketplaces, but I think this is such a hot topic. If we look at what's happened in the last five years, and then we look ahead to the next five years and with your background in tech and the emergence of AI. Like even as you were talking about Amazon now I'm like, yeah, search is really important right now, but is it still going to be as important down the track as we have new experiences and new interactions? Where do you think marketplaces are going to go? How will they evolve?
Sean Walsh: It's interesting on that point around search. So in the consumer study that we do for the first time, sort of Google started going backwards from a where do I start my product search journey? So it was one of the biggest drop offs. So DTC websites was sort of down 13% as well as Google having a retraction, but it's still 50%. Right. So people are still a lot of them are starting their product search journey on Google. It took Amazon 20 years in the US to overtake Google from a product search perspective. 20 years?
[Voiceover]: Yeah.
Sean Walsh: We're only at year seven and it's growing. So Amazon 14, 15% but had sort of kind of 30% growth year on year. So there's definitely more consumers that are going there. From a first choice perspective, I think Amazon will grow, but I also think you touched on AI there. There's going to be emergence in sort of LLMs and those being a place of choice for product search. It's quite early to talk about that sort of thing, but I think there's going to be have to be a strategy for brands and retailers to understand how they can use those models to be able to show up from a product perspective. Because I think there's going to be some emergence there as well.
[Voiceover]: Oh, Shaun, you've got my head a buzzing. There is so much to it, isn't there, like. But you've done a really good job to break it down for us into some options. Even if you're at the starting point, even having someone like Patton taking it on for you if you're looking to navigate it or actually it's not for us right now, it's probably a good starting point to think about and you've done well to explain the differences between the two between all options. So thank you for doing that. Thank you for joining us on Add to cart. If people want to get in touch with you or the Pattern team, what's the best way for them to do that?
Sean Walsh: I'm pretty active on LinkedIn, so that's probably the best place to get me. But there's also ways to get access to the wider team and that's through auaten.com beautiful.
[Voiceover]: And we are going to put a link to the Marketplace Consumer Report in the show Notes. I strongly recommend you go and have
Nathan Bush: a look at that.
[Voiceover]: It's full of really good information. It's a staple for me. Like it's one that I look out for and I think you were alluding to it before. The Australia Post report is another one that I look out for. But let me down this year. You guys haven't let me down so far. It's a really good report.
Sean Walsh: Perfect. I'll pass that feedback onto the team.
[Voiceover]: Sean, thanks for joining us on Add to cart.
Sean Walsh: Thanks Bushy.
Nathan Bush: Wowee. That was a very quick ride. I feel like I was on a magic carpet ride through the world of marketplaces and all the options that are available to us there.
[Voiceover]: Thank you so much to Sean for
Nathan Bush: giving us the lay of the land. I feel like that is just the covering of the surface and there is a many deeper topics that we can go into with Sean around unpacking marketplaces, but that was the perfect place to start. Here are three super practical takeaways that I think you can take away from that as a starting point to action. Number one, distribution isn't just a sales strategy, it's a marketplace weapon. Your success on Amazon is a mirror of your broader distribution. If your product's cheaper somewhere else, Amazon will find it and we'll penalize you by suppressing your buy box. Fix your channel hygiene first. Align your pricing across wholesale and retail and audit where your stock is ending up. Then choose a model 1P 3P or a model like patterns based on your margin structure, logistics and your appetite for control. Maybe even start by running a Google Shopping search on your own product and see how many price points come up. If it's more than three, it's time to clean house. Number two, Evergreen beats hype every time in marketplaces. Consistency wins. You might be doing massive seasonal drops on your D2C site, but that same approach is likely to fall flat on Amazon. Why? The algorithm rewards history, reviews and stock continuity. Marketplace growth is a compounding game, not a campaign game and that means prioritizing Evergreen skewed that you can keep in stock and keep improving over time. Think about your top three high margin, high volume products and ask could I keep this live year round? If not, it might be a better fit for D2C or retail rather than marketplace. And number three, don't underestimate content and search. Amazon is less a store and more of a search engine. We've been hearing about this this for a long time from the US and is starting to be true here in Australia. Shoppers don't browse they search, compare and buy. That's why ranking in the top four organic slots is everything. Sean's team uses 39 trillion data points to map keyword performance and digital shelf share. But even without that firepower, you can start by identifying your top 10 keywords and checking where you rank, tighten your profile, product titles, upgrade your images, and test a content to lift conversion. If you're not sure where to begin, search your top product on Amazon and compare your listing to the top result. What are they doing that you're not? Now, if you enjoyed that chat, share with someone on your team or in your network who might be Marketplace curious. This is such a brilliant place to start if you want to ignite some of those conversations. If you have a moment, please don't forget to review a subscribe on Spotify or Apple podcasts. It really makes a difference. And as always, a huge thanks to our partners at Shopify and Klaviyo for making this podcast possible.
[Voiceover]: Thanks again for listening. And until next time, keep those customers adding to cartoon.
