Canada First: The 2P / Account-as-a-Service Model for Brands Entering Amazon North America

Paul Sonneveld
Welcome back to Marketplace Masters. I'm Paul Sonneveld, and today we're tackling a question that comes up in a lot of my conversations that I have with enterprise brands that are looking specifically at North America. Do we really need to do this ourselves? Now, I want to talk about Canada, but Canada is a fascinating market. Cheaper CPCs, less competition, real consumer demand, but it sits inside a regulatory and operational framework wrapper that scares a lot of brands off. So, today we're really digging into an alternative entry path, the 2P or account as a service model. 

Now, to help me unpack that day today, this topic, I'm joined by Sebastien Masson, founder of account as a service, who's helped brands navigate exactly this decision, whether to go with that specific model and more specifically, how to look at the Canadian market as well. So we're going to try and cover both of those topics in one go. First of all, Sebastien, so great to have you on the show today. Welcome. 

Sebastien Masson
Well, thank you. Thank you for receiving me. Good morning or good afternoon, depending wherever you are. 

Paul Sonneveld
Iwanted to just before we jump into the questions Sebastien, Ijust wanted to sort of let our audience know as Ialways do that if you are watching this live, you have the opportunity to ask us your direct questions it's one of the benefits a lot of downsides to doing things live but that's one of the benefits of doing things live so if you do have a question for us either now or during the course of this conversation pop it in the linkedin comment section or in the youtube comment section And Iwill pose the question to Sebastien and we'll try and get some answers for you. So don't hold back. All right, Sebastien, let's jump into it. I want to talk before we sort of get into the entire model. Let's talk about Canada. Can you make the case for Canada itself? From an enterprise brand that's eyeing North America, the U.S., why should Canada even be on the short list as a North American entry point? What do you think is the most common mistake brands make in dismissing it? 

Sebastien Masson
Yeah. Well, for Canada, Canada is a, is not as large a market as the U.S. obviously, but there's one thing, what does the song say? The song says, if I can make it there, I can make it anywhere. It is true in the US, if you can make it there, you can make it anywhere. But do you really want to try launching in the US? Well, you could launch in Canada. If you cannot make it in Canada, you will never be able to make it in the US. 

So if you're based in Europe and you plan on launching in America, I think that Canada is definitely an easier market to launch, and it will be cheaper. The Americans have now made exporting to the US pretty complicated, so it will be easier to export. So if you're based in the US, you might as well try Canada first, if you want to come to America. And if you're successful in Canada, and you'll start getting reviews, then you can use those reviews to launch in the US afterwards. If you go straight to the US and you fail, you'll never think of Canada. 

If you are based in the US and you wonder, should I go and start selling in Canada? Obviously, Canada is ten percent of the population of the US, and in Canada, we use less Amazon in comparison to the Americans. Therefore, you'll get probably eight percent of your sales coming from Canada. At the same time, the competition is much lower. Not that there's no competition, but you have way less competitors. And there is one collateral benefit that you get. Let's say that you're in the US, decide I'm going to sell in Canada. 

What's going to happen in the US, Amazon sends you, when you're a customer, you buy on Amazon, Amazon will send you messages to ask you to rate your purchases. But you can opt out of receiving emails from Amazon. In Canada, you cannot opt out. So for each sale that you make in Canada, you get more product reviews, more seller reviews than you get in the US. So let's say that in the US, you need to sell five hundred products and then you'll get one product review. 

In Canada, it's probably fifty products that you need to sell to get one product review. Now, those product reviews are shared with the US. So even if you sell less in Canada, you still get the benefits of all those reviews that you accumulate, and those will help you sell more in the US. So it's a I call it a collateral benefit. All the reviews Yeah, the reviews traction that you get from Canada. 

Paul Sonneveld
Yeah, that's a really great point. I mean, certainly we know from an engineering perspective or a developer perspective, you know, Amazon really operates really as one region in North America from a technical point of view. And some of the benefits are exactly that, right? With product reviews flowing down to the ASINs. And having the ability to build up a little bit of an asset, quote unquote, of course, in a market like Canada and then leverage that in the US. 

So for me, kind of doing a two-pronged strategy, maybe, you know, Canada first, then to the US, certainly, maybe from European brands seems like an interesting path to explore and certainly not easily dismissed. As you say, there are benefits. The size of the market might be one tenth, but we all know what profitability is like in North America or in the US right now, right? So I'm guessing here, but if profitability is one-fifth or double that in the US, I'm not saying it is, by the way, but I know we'll unpack some of that a little bit later, then it certainly becomes a really interesting conversation, particularly in the space where things get more pricey. 

Okay, so, the other thing we want to talk about today are these different models, right? I sort of threw out some lingo already, you know, 1P, 3P, 2P, you know, a lot of jargon around, you know, there's also a distributor model. We mentioned account as a service. I mean, obviously some of these are kind of know same different size of the same coin, but in plain english right? How would you explain each of these models, and where does your model sit? I'd love to sort of go a bit deeper in that.

Sebastien Masson
Yeah, yeah, so most of you are familiar with 1P and 3P. The way I see it is that it depends on who owns the inventory, and so when you own the inventory, you own the margins. And it depends on what platform, let's say. So who's selling? So 1P, Amazon owns the inventory. So you sell directly to Amazon. So you make, let's say, a fixed, not a fixed profit, but you know how much money you're going to make when you sell directly to Amazon. And then Amazon will sell to the consumers. So Amazon owns the margins. And if they sell at a lower price, they also own the negative margins, but they decide what price they sell for. So they own the margins, and they sell on their account, and they have the largest account ever. So that's a 1P model. 

The 3P model. So you own, so the brand owns the inventory. So the brand also owns the margins. But then the brand sells on its account. And sometimes it can be a small account. The 2P model is a distributor buying the inventory. So the brand knows exactly how much money they're gonna make when they sell to the distributor. Then the distributor owns the inventory. So the distributor owns the margins. The distributor will sell on his own on its own account it can be a large account or a small account depends. 

So we, we act as a 2P like this as we buy from brands. And so, and we own the margins, we decide the prices. So we always try to sell as high as we can. We never go higher than the competitive price. If the competitive price is below map, we don't do that. We don't sell below map, but we own the price difference between what we pay and what we sell for. So we own the margins, and we sell under our account. And our account in Canada is the tenth-largest seller account. So the metrics are just through the roof. 

So we've been selling for ten years, and we've been paying very close attention to all the little details. So today, the account has the best metrics. So if there's a brand, there are a few brands that sell alongside us, or we sell alongside them. So the brand sells under the brand's account. There's a 3P seller. We sell under our account as a 3P seller, and we get eighty percent of the buy box. Why is that Amazon prefers to that we sell than the brands because our metrics are better? 

Now, what's the account as a service account as a service is this, let's say a hybrid between those models it is the brand will own the margins, so we the brand sells the products through our account. So we ship the products to Amazon. We don't buy the products. They are under consignment. So they are owned by the brand. The brand decides what price the brand wants to sell for, decides the ad spend, the target ACOS, and all what's left from that operation is sent back to the brand minus a commission. 

So we are commission-based. The brand owns the inventory. The brand owns the margin. But instead of selling through there, the brand's account, that can be a smaller account. The brand sells through our account. That's the tenth-largest account in Canada. So what agency can say that? What agency can pretend to be using the tenth-largest account in Canada? And the other nine accounts that are above us don't sell. Don't use this service. Don't use this type of service. That's why it's an account as a service. You use our account to leverage the sales of your brand, and you keep the margins. 

Paul Sonneveld
Thank you. That is a great way of explaining that. I was, you know, I appreciate there's actually two different 2P models, obviously, there's the consignment model, and then there's the more of the distributor model, right? So I appreciate you clarifying that for us. I do want to go a bit deeper on some of those models. But before we do, let's get back to the Canadian market, because it's got some specific characteristics that I'd like to explore a little bit further, or even just true, test them if they're really true or not. So one of the things I wanted to kind of ask you was around this idea of things that the market is more profitable, right? Or on Amazon, you can be more profitable. 

I'm hearing as I was doing some research for this episode, I was hearing a lot of chatter around all the CPCs are not as high, they're significantly lower than in North America. You know, of course, that has a massive, you know, with advertising being such a large part of the cost base these days, that could have a material impact on the bottom line. I mean, is this still true? And what's your view on sustainability here? I mean, is this a structural advantage in Canada, or do you look at it differently?

Sebastien Masson
I can achieve sales at a way lower target ACOS, total ACOS than my fellow American sellers can do. You can drive serious sales with a fifteen percent total ACOS. Can you do that in the US? I'm not sure because there are less competitors. You can command higher prices and make more margins. I'm part of the million-dollar seller group, have several friends selling in the US, and some of them work with me to sell in Canada. They make more money selling in Canada than they make selling in the US, because the cost of advertising in the US is so high that at the end of the day the margins are erode completely. 

In Canada, they sell to me, and I sell on amazon so they know how much they're making, and I find a way to make money with the with their products, achieving uh decent total cost ACOS. Is this gonna last? Of course, Paul, it's not gonna last. So, we're probably like three years behind in Canada compared to the US. So, probably what you were able to do three years ago in the US, we can do today. So it's like in real estate, when is the best time to invest in real estate? The best time is today because tomorrow it's only goes one way. That's business consolidation. When there is money to be made, people jump in, and margins go thinner and thinner and thinner. 

So I think I have a few friends also, Sebastien. I'd like to sell in Canada, but I'm going to do it myself. And then five years later, they're not selling in Canada because it's not at the top of their priority list. It's at the very bottom. When we sell, it's at the top of our priority list. And if you are able to build momentum, because you all know that Amazon is momentum-based. Once your ASIN's got good momentum, positive momentum, it will sell and will keep selling. And you just need to feed it a little so it keeps selling. If it falls in a crack and it stops selling, then it's like trying to catch a piano falling from a skyscraper. 

You'll never be able to catch that, right? You need to build momentum. And the best time is today because you start building momentum today. Tomorrow it's going to be more expensive. So your competitors will come in. We'll try to compete against you, but it will be more expensive for them to grab sales from you. So just start today and benefit. Enjoy it while it lasts because it's not going to last. Nothing lasts. All those fees are increasing. Every day, it's more expensive to sell on Amazon. But, you know, my margins are thinner today than they were five years ago. But I sell X what I was selling five years ago. And in absolute numbers, I make way more money today than I was making five years ago. 

Paul Sonneveld
Sure. Yeah, I get that. And I guess, do you run anything in the U.S. store-wise? Or is your focus primarily on... 

Sebastien Masson
We do sell in the US as well, but we're not as strong in the US. We serve Canadian brands that want to be there. But because I work under a wholesale model, my margins are relatively small. I cannot afford a target ACOS of fifty percent in the US. I don't have those margins. So we serve the brands that we work with. And it's been, I would say, pretty challenging to cross the border in the past year. So now in the US, if you want to export to the US, you need to have an entity, a corporate entity in the US to act as importer. You can use your broker or... So, we just we had to set up an entity in the US to be able to cross the border. 

Paul Sonneveld 
Interesting. Actually, we've just got a question that's coming in from Steven here, which is actually usually I like to keep the questions to the end, but 

Sebastien Masson
Yeah, go ahead. 

Paul Sonneveld
Might just be worth throwing in because it's talking about cross-border logistics in North America. So I'm just going to put it up there. I'll read it out for you as well. Thanks for your question, Steven. Have you heard of the new Pan AM program for Amazon, where they physically move US FBA inventory to Canada for seller-based demand like AWD? I know this is a big deal in Europe. Amazon plays around with infantry all the time to the point where it drives everyone crazy. But yeah, any perspectives on the North American version of this program? 

Sebastien Masson
Yeah. We are mostly active in the supplements business and the grocery business. So it doesn't apply for us because Amazon will not cross the border, will not ship supplements and grocery across the border because of regulation. For other products, for electronics. So I'd be curious to see how this goes because there are regulations in canada it probably doesn't apply for all the products you need to have bilingual labelling instructions, and so I know it works in Mexico, but I turn it on in Mexico, but almost nothing can cross the border to Mexico and go to Mexico. 

So, but one thing I know is that it's way easier to export your product to Canada than it will be to export your product to the US. I'm surprised that we didn't have more with all the restrictions and the tariffs that they added in the US. Just export to Canada, we don't have those tariffs. You'll get the tariffs when you export from Canada to the US, depending on the country of origin. But exporting to Canada is just so much easier. 

Paul Sonneveld
Maybe the reluctance is because of my next question. Who knows? So let me throw it out there. And thank you for your question, by the way, Steven. Much appreciated. So I want to talk about language requirements because maybe this is the bit you were surprised that North American sellers are sort of taking advantage of the move up north. But what about bilingual listings, right? 

French requirements, GST registrations, and a Canadian business number. Like, you know, if I wanted to, I could paint a very kind of depressing picture of red tape and compliance and translation and all of that sort of stuff. You know, what would you say to that? And particularly your model obviously is geared for that as well. 

Sebastien Masson
Well, your question is twofold. There's a question of the listings and the question of the corporate entity, the corporate requirements. So let's check the listings first. Listings, you don't need to have bilingual listings. You set your listings in English. And if my profile is in French, and I'll see your same listing written in French, it's auto-translated. Where you have the bilingual requirements is, and this is everywhere in Canada. It's I know that Quebec is the French part. There are French-speaking Canadians everywhere in Canada, but Canada is a bilingual country. So the requirements is that you have bilingual instructions, bilingual labelling. 

For Europeans, it shouldn't be too much of an issue. How many languages do you handle on your products in Europe? Eight or twelve? So two shouldn't be too much of an issue. For Americans, you need to have bilingual packaging. Maybe that's an opportunity to review your labels, make it English and French for Canada and make them English and Spanish for the US. 

So, what we do, also we'll we can also do the a plus content directly in French so you'll have the a plus content in English and in French, but I mean this is not what's going to change. That's not necessarily what's going to move the needle. So yeah, you do have to adapt your products for Canada that is for sure. For some products, it is more complex than others. Grocery, for example, you need the ingredients list. And it's not just a question of the suffocating bag that you need to have in French. So that's for the listings. 

And now for the corporate structure. If you're to sell on your own in Canada, you need to have a corporation. You need to file your taxes. In some cases, you might have to file your taxes in each and every single province. If you work with a 2P model, if you work with us, you just export, and we'll import the products we sell on our account. So you don't need to file for GST, for the sales taxes that that's on us. So there's no, all the corporate burden is, is handled by us. We deal with that. It's, it's much easier. I mean, just, of course, of course, all the brands, especially, would say the legacy brands will tend to want to work on a 2P model, and the new trendy brands, they feel that they can do it on their own. So they usually try to do it on their own. 

In your title, the title of today's chat, you mentioned brands entering Canada. I have more and more brands that I already entered Canada, but just broke their neck, and now they're trying to find a way to make it work. So they reach out to us. So they're not necessarily entering, but this is usually a tough call because of the momentum. Once the ASIN is broken, it's harder to recover. The success will depend on the off-Amazon promotion. Anyway, that's a whole different story. 

Paul Sonneveld
Yeah, yeah. No, no, completely. I mean, I think your earlier point that you made around if you're Iguess more from a North American point of view, and you're trying to do Canada, and every day you're looking at your numbers, and you're going, the US is ten times the size of Canada. 
You always gravitate to putting all your effort and energy into kind of US operations, right? And then the Canadian part becomes like this sort of forgotten cousin, and then it just neglect kicks in, and then it starts to turn into a piano that pulls from a skyscraper. 

Sebastien Masson
If you look at the top line, it doesn't look super attractive, but I prefer looking at the bottom line. Don't grow your sales, grow your profits. If you get eight percent of your sales coming from Canada, but then you get twenty five percent of your profits coming from Canada, it becomes a different story. Plus, you get the traction of all those reviews. 

Paul Sonneveld
So let's go a little bit, I've got a few follow-up questions specifically about the model that you operate. And one of the question was served by the fact that you said, oh, some newer trendier brands like the, you know, do it themselves, take control, all of that. You know, and control is a big debate point, right? So in the 2P model, specifically, you know, the model that you operate, what does a brand actually keep control of? I'm thinking about like pricing, map, content, customer data, and advertising. What do they still control? What do they hand over to you? And where does the structure go wrong in terms of who does what and who owns what? 

Sebastien Masson
It's always tailor-made, so every agreement is tailor-made. But first, let's remove one thing, the customer data. We don't have access to the customer data in Canada, so there's no question who owns that. When you sell on Amazon, I think there are five verticals, okay? That's how I split it. And so you have the products themselves, the product listings. You have the prices. What price do you sell? You have the inventory management. How much do you send? How much do you produce? 

You have the advertising. And you have your cash flow. So those are all connected. But we have to establish who controls what. So some brands will want to keep control of their listings, the content. We're fine with that. We can also do it if we see that the content is not up to the task, and we are commission-based, right? So we make money when we sell. So if we see that the listings could need a little help, then we will jump in. We will suggest something to make them sell a little more. It can convert better. 

Prices, if it's the legacy 2P model where we buy the inventory, then we control the prices. We always respect MAP. That is very important because respecting MAP will be, you don't wanna collide against the retailers selling your products in regular retail stores. So MAP is super important. And MAP is also what protects our margins. But in the AAAS model account as a service, then the brands will decide what pricing they want to sell their products for. 

Inventory management that's on us, that's, we have all the tools to make sure that we have the precise amount of inventory available at Amazon to make sure that our metrics are through the roof. Advertising, when we sell under our account, product advertising, the sponsored product ads can only be managed by us, but we do a fairly awesome job. We have all the systems, all the AI we need to manage the sponsored ads. Sponsored brand ads can be managed by us, or it can be managed by the brand itself. If the brand wants to spend a little more on brand advertising, we won't complain. And cashflow, well, cashflow is on the brand. Cashflow is the consequence of everything else, right? So that's how we split the control. 

Paul Sonneveld
All right. So I'm nodding violently and speaking, but that was my one instance per episode where I keep myself on mute and start talking. No, that's very helpful. Thank you, Sebastien. Hey, last one, because we're at the thirty-minute mark. So it's gone quickly. I have more in my notes. OK, go, go, go. Last one. So, you know, we've reframed this conversation as, you know, focused on Canada, the 2P model, counter service and the like. But, you know, this model is kind of relevant maybe to other markets as well. 

I have seen other agencies do this in Germany, for example, but it certainly doesn't seem to exist everywhere or is not as prevalent. You've been at this for a while now. So I'm just wondering if you have people who are in your position, but maybe in different geographies, right, who are thinking about like this model, right? You know, what are maybe the two or three things that you wish you had known earlier? You know, what are some of the maybe the costly or invaluable learnings that you have learned as you have stood up this particular business model? 

Sebastien Masson
Well, one thing is a very selfish one, the first thing. If I had known the success that I would have had when I set up my businesses ten years ago, I would probably have used a different corporate structure and maybe have a lower tax burden. So I was just paying so much taxes. But this is very selfish. What I see, I think I've seen brands trying to use one partner to go global. And now I see the brands move away from that and try to go more local. 

So if one thing seems to be clear, you have to find the best in class partner in the country you want to launch into. I don't think that there's a partner now that can pretend to be an expert in all the markets in the world. So just find the right partner in whatever country you want to launch into. And finding the right partner will be the difference between success and failure. There are tons of... When I started, there were no agencies. Now there are so many agencies pretending to be able to do this and that and that and that. It is not rocket science today when you have all the tools. What is difficult to achieve are the metrics and have an account that drives sales. Doing AI images and revamping and doing the SEO, I mean, that's the minimum you should be able to do. But pretending to be able to sell more because your account has the perfect metrics, that's difficult to achieve. 

Paul Sonneveld
Yeah, ticking all the boxes doesn't generate the sales necessarily. There's the trading or the driving, you know, and that's where a little bit of the magic and experience and having one of the largest accounts in Canada with all of the kind of the ratings and the velocity behind it certainly gives you a leg up there as well. 

Sebastien Masson
Absolutely. There are so many things happening when you enter a keyword in that search box. It's incredible how many parameters Amazon takes into account before showing you the search results, and being a top seller is one of the parameters that help you show on the results, right? 

Paul Sonneveld
Yeah. Yeah. A hundred percent. Great. Well, we need to leave it there. So Sebastien, I want to just really thank you for your time. I think this afternoon, if you're watching us from North America or early in the morning, if you're like, Australia like me, you've been super generous, and I love some of those explanations. If there's anyone that's watching this live or on demand after, and maybe they want to pick up a conversation with you to learn more about the Canadian market, about your model, or maybe exploring some partnerships, whatever it might look like, what is the best way for them to get in touch with you? 

Sebastien Masson
Well, the, I guess you have, will you have my credentials somewhere? I think I have an email address. Yeah. Well, you have listings management. So that's my legacy agency, listingsmanagement.ca. And the AAAS account as a service model is aaas.ca, account as a service. And so just, oh. Look for you can search my name. No, triple A-S. 

Paul Sonneveld
I got this right. Triple A-S. All right. Let me just change that. Triple A-S. So that's your website, yeah? Yeah, that's the website for the account as a service. And you can... I hope that's right. Yeah, yeah, that's it. You got it. So A-A, triple A-S dot the A. There you go. That's the way to get all of you. Awesome. Yeah. Yep. Great. Well, it's been fantastic to talk about Canada. You have the 2P model. Thank you so much for your time. 
 
Sebastien Masson
Thanks to you. 

Paul Sonneveld
I look forward to doing this again. 

Sebastien Masson
All right. Thank you, Paul. Thank you. Take care.

Paul Sonneveld
All right. Take care. All right, everyone, that brings us, unfortunately, again, to the end of today's episode. I hope you've enjoyed that. If you tune in live or if you watch it on demand. Now, don't forget, we probably have over a hundred of these episodes covering lots of agency best practice topics and vendor topics, all available on our website. 

So make sure to head to merchantspring.io and access our free content library of great episodes like this one. All right, I'll say goodbye for now, but I look forward to catching up with you next week. We'll be talking about direct vendor fulfillment, obviously under the 1P banner, and specifically how to do it well from an operational point of view. I look forward to seeing you there. Take care.