Vendor Summit | MoR: A Smarter Vendor Model?

Session Transcript

Paul Sonneveld
Next, we are turning to the Merchant of Record Model with Paola Marzario from the Brandon Group. So Paola is actually chairwoman of Brandon Group, and she's one of Europe's most respected marketplace leaders. There she is. She's going to help us. 

Paola Marzario
Hi, Paul.

Paul Sonneveld
Hi, Paola. Paola's going to help us understand when the Merchant of Record Model really simplifies operations, when it complicates them, and when it's right for your business. And I think before I hand over to Paola, I wanted to just link it back to day one, because on day one, we spoke a lot about thinking about hybrid models when your profitability is under pressure. We spoke a lot about hybrid models when you're at risk of account closure and all those things, as well as international expansion. So I think this topic around the Merchant of Record Model or the 2P model, some of you will refer to that is actually a really great topic. segue and extension of some of the discussions we started yesterday, so very much look forward to this session, Paola and I'll hand over to you.

Paola Marzario
Thank Paul. So, it's a really a real pleasure to be here and yeah thanks to sharing my yes exactly thanks to sharing my slide. Okay, so Hi, good morning, everyone. So I'm Paola Marzario, founder and CEO of Brandon Group. And for the past fifteen years, I have been scaling brands across the European marketplace ecosystem. So Amazon Vendor, 1P, Amazon 3P, Zalando, Media Market, Leroy Merlin, Kaufland, Decathlon, Shein, Temu, you name it. And there is one tool I see every day. Brands love the predictability of Vendor Central and the operation of Vendor Central because it's a B2B moment, it's a B2B business. But the moment they try to scale behind Amazon, everything breaks. 

Yeah, so actually it's, we are in Europe. We are mainly focused in the European market. Why? The reason why is because we are union. So we are in a European union, but each country, the market is really fragmented. So each country has a different language, different VAT rule, different culture, different marketplace ecosystem in each region. And so the complexity are really, really growing as soon as you want to go live in multiple marketplace in multiple country. So, today I want to show you how the Merchant of Record Model can extend the vendor logic outside Amazon and could simplify the process to be live in parallel, in different marketplace, in different country. So, yeah. 

As I explained, the vendor model today means that we can have some predictable forecasts and plans. And Amazon can control pricing, invoicing and logistics. So it means that all this kind, all the process, the workflow, the operational process across the value chain of an order is mainly controlled by Amazon. But unfortunately, it's hard to scale this kind of workflow behind Amazon. So Vendor Central is one of the most sophisticated retail systems in the world, but obviously this is the key, but it's built for Amazon, so for the Amazon environment, not for all the marketplace work at large. 

So, why do we need something smarter? Okay. Today, the brands don't live on one platform anymore. So, especially if we look at category where the market is more mature, like for example, in electronics, kitchenware, or maybe books or maybe toys or as well beauty. So they live in a fragmented multi-market and high complexity ecosystem in Europe. Why? Because there isn't only Amazon with the vendor business model, operational model. The three major pain points are, as I explained before, is the multi-market chaos. 

So every platform has its own rule and backend and advertising console, for example, API or API logic, return setup or financial cycle, fulfillment model. So nothing is standardised. Two, we have limited operational control outside Amazon. So Vendor Central gives the brand clarity of the stock that is managed by Amazon in the Amazon Fulfillment Center, in the Amazon warehouse. But other platforms, so often they give them ambiguity. Not all the not all the platform has the fulfillment center. So if you want if for example looks at ebay so they haven't fulfillment center and three, and the third pain point is the high operational cost. 

So, each new marketplace requires new VAT registration, especially if you are in Europe. So, you need a different VAT for each country. So, the Netherlands, Germany, France, Spain, Italy, UK, Poland, Romania, and so on. And so obviously, new APR registration. So for example, or battery registration, for example, for the packaging. New return workflow, because you need to provide the best customer experience that you can. And so you need to give access to the customer to return the goods in the local country. And maybe as well also the new reconciliation logic. So, talking about financially speaking. 

So Brand asked us the same question over and over. So, can we scale like a vendor? So because it's easier obviously in the B2B, but outside Amazon. And the answer is yes. So we can, but we need to adopt the Merchant of Record Model. Called import of record if the brand is outside Europe. So, what we can do the Merchant of Record can import the goods from your country to European for example brandon is a European region perimeter. So yeah. The mission of the Merchant of Record is simplify the process to go live in multi-marketplace, multi-country. 

So, in order to speed up the activities that you can put in place, obviously going live in a different marketplace. I say that the Merchant of Record Model is obviously really, really precious, not only for the brand, but especially also for the agency. Why? Because if the brand are not able to go to go and publish the product, to go live and publish the products in the different marketplace, obviously, the agency, they can deliver and they can offer services in other market in other marketplace. So, they can manage services for catalogue or maybe managing the accounting or maybe they can manage advertising as well. 

So it's really important this model not only for the for the brand but as well also for the agents in order to propose and to offer their services in new platform. And so they can boost their revenue. So yeah, here how it works. So the Merchant of Record becomes one legal and financial entity. So selling on all the marketplace. The brand sell in a B2B way to the Merchant of Record, his goods and the Merchant of Record sell to B2C, so to the end user. And so I think so now you are raising a lot of questions into the chat. So first of all, I think so, but you buy or you work on time. So maybe I can leave the question, the answer to at the last ten minutes. So in the Q&A. 

So, yeah, in this case, for the brand is exactly like in Vendor. So he will receive the brand receiver PO. Depending on the frequency set initially of the relationship. And so weekly, daily, weekly, monthly. So, depending on how fast is able to deliver the goods and the minimum value order. So exactly like Amazon Raise PO in Vendor Central. Regarding the activities that Merchant of Record can handle, so obviously it's handle the VAT payment, compliance and return on behalf of the brand. This is really, really important because in this case, you have a sort of intermediary who sells your product without losing the ownership of your commercial strategy. 

So the brands could decide the commercial policy, obviously, differently in each country or in each marketplace, in each, yeah, by EIN level, OK, by EIN, SKU. So the brand has access in full transparency, the MerchantSpring dashboard in which they can track everything. So stock, traffic, pricing, impression, advertising campaigns, all the data that you are used to see in your MerchantSpring dashboard. You will track everything from one unique point and you can see. So you can select the country, you can select the marketplace and you can see everything. 

Also, if the VAT is not yours, but you will have access to everything your specific account. And this is really important because we think that it is a relationship between two partners and who has to collaborate in order to grow and to scale and to rock into the different marketplace, not only in Amazon vendor. Obviously, this is really important also because we are revenue share driven. And so if you obviously sell, we earn. Otherwise, it's a loss for both. So the Merchant of Record, just to simplify, absorb everything that makes scaling hard. So VAT, payment, compliance, returns, risk, and reconciliation of the payment. Meanwhile, the brand or the agency's strategy, pricing governance, content, advertising, and assortment decisions. So selection, obviously. The output, so it's really simple. The brand gets a vendor-like experience outside Amazon. One invoice, one process, one counterpart across many marketplace. 

So, yeah. So, let's exactly, so let's try now to simplify and to to to explain again. You sell once and we replicate and we distribute your products everywhere you sell to one legal entity and your process is exactly like with Amazon we raise PO, you donate to our warehouse, we have seven warehouses in Europe, plus one in the UK, and one reconciliation. So with a certain certainty of the payment, so just one time per month. And same simplicity of Vendor Central. Yeah, more simplicity, sorry, of Vendor Central. So we are not so many sophisticated. So much more simple across all marketplaces. 

So let's see the two ways to use Merchant of Record. So we have the vendor style and the seller style. So the vendor style, so you work with us as a Merchant of Record, exactly by replicating the vendor logic. And the seller style, we can sell to the different end user just selling your products to the end user in 3P without using our warehouse, but with the same vendor simplicity. Okay, so I would love to take some examples. So, for example, for the brand A, we have just an extension of the vendor model behind Amazon and we simplify their flow and we can give access to this brand a really big brand to different marketplace in parallel in the different country where the marketplace is live in the MediaMarkt, Leroy Merlin, in Cdiscount, in Kaufland at the same time.

So, obviously in parallel with Amazon managing the activities in Amazon 1P vendor, but as well also in Amazon 3P at the same time, just with the Nibri strategy. At the same time, thanks to MerchantSpring, they have access at a centralised dashboard in order to have all the KPI into the same report. They can manage pricing, and they can see as well also the status of the compliance. The case B, on the other hand, is a smart seller model. So in this case, the merchant, they want to use the Merchant of Record Model just to manage the 3P.

So the seller model and the seller side complex. In this case, for example, we have the fashion brand where they are not so satisfied by Amazon revenue. And so they decide to go to a much more dedicated and focused fashion platform. For example, for Zalando and in this case, the brand and as well also the agency that is working on their catalogue and advertising activities, they manage and own the strategy, the catalogue and the advertising as well. And in this case, we are managing on behalf of them the legal rule, for example, signing the TNC of the different marketplace, the tax, the payment, and as well also the fulfillment of the order, respecting the rule and the performance requested by the marketplace. 

So I talk about a perfect match, so about agency and Merchant of Record. Why? Because we leave the agency keeping the client relationship is really important because thanks to the dashboard that we can provide to the agency, they can B, they can manage the relationship with the client. They could face the client and update in real time with all the data that they need. They can be focused on the agency in the catalogue and advertising, delivering all the requests in terms of editing and creating the assets required by, for example, TikTok shop or maybe asset like digital content for example creating a brand store in Zalando. And as well also managing the advertising console. So, we are for example, with TikTok Shop or Zalando Console, Allegro, or bol.com. And so in this case, they can expand their services to other wider list of marketplace. 

In this case, obviously, we manage all the boring activities. So across the process, so the compliance, the TNC agreement, invoicing and the customer service. Together, so we can provide a full service to the different brands and a three-sixty degree. We can manage together, and we can provide to the brand a real good service. As I explained to you, our mission is simplify. Simplify the complexity behind a fragmented market that is not so union as the name could describe. So union European is Europe is union but not so union because as i explained, each country has different vit rule different legal rule, different logistic requirements and different different culture, different language.

And so for this reason, if you are a UK brand or maybe a Netherlands brand, but you want to go live in other markets, obviously, you need to face some complexity in terms of translation of the catalogue, culture, because maybe they want to see the selection in bundle and kit, or maybe the certification that they need, the certificate that they need, for example, in Germany about APR or maybe about battery or food or supplements. So, mandatory in some regions, so you have the certificate. In this case, there are many complexities, but you know that differently from the US markets, in each country, there is not only Amazon, there are many vertical marketplaces, dedicated to a specific category, for example, like Zalando or maybe like Leroy Merlin or Decathlon or Douglas. And it's not like in US where you have Amazon, Walmart, eBay, TikTok shop, and you have English.

So here you have each country has a top leader marketplace and depending on category subcategory, depending on the on the country as well. And in this case you can go live not only on Amazon if you are able to manage the B2B process, but you can go live also to the 3Pi with an hybrid strategy. And you can go live obviously in multi marketplace, and you can also try to decrease the power of Amazon in your Yeah, the incidence of the percentage of the revenue of Amazon in your turnover. It's really, really important. Also in order to address your products to other audience. 

Yes, here just in one name. So with Ariston Thermo Group, we start as an Amazon vendor, and because ideally they don't want to manage the relationship with Amazon and so they raise a vendor code, but we change the pay code with our VAT, and so we manage in an automated way the full complexity behind also the activities in Vendor Central. So, for example, just to mention, we have a tool, a bot, who raises disputes independently of the value of the dispute, because we raise all the disputes for chargeback, mortgage claim, or price claim or EPUB. Everything is disputed by our bot, and we have a ninety three percent of success in recovering the money. So it's really important, especially for the cash flow. 

And in this case, we extend after two years as soon as the market of the water heater in Amazon become more mature. So we extend, we need to do some extra effort and budget for forecast for the next year. And so for this reason, we decide to extend with the Merchant of Record Model, other marketplace where they are not able the delivery to the end user and the invoicing to the end user and the different logic. Let's imagine, for example, there are some obligation just for example delivering the good, the delivering the product at the floor or booking an appointment or maybe just asking for a used product. And we so for this reason specifically for that in France for example, we need to collect all the used products as soon as we deliver the new one. 

So one invoice, so Ariston has just one invoice per month and one partner, but five marketplaces at the same time, so more a million of new audience, yeah, consumer. But we replicate the vendor logic. As I mentioned before, the Merchant of Record Model is obviously the name of Europe to Europe. If we are talking about US or UK brands expanding into EU, we are talking about import of record because in this case we act as an importer and we manage all the activities across the custom. We work with the US agency as well, bringing the brands to Europe. So in this case, they manage their relationship with the brand, and we manage, obviously, they can provide new services, and we manage just the activities across the value chain. 

So the formula is vendor plus Merchant of Record Model, so equal to Smarter Commerce. So we can act with the vendor logic in order to have the stability for the brand, but exactly like a seller plan in order to provide flexibility to the brand and to the agency. And so the Merchant of Record is intelligence and scalability. So the collaboration and the partnership is the key. Brand, agency, and Merchant of Record. This is exactly the best formula. So just to recap, three message to remember and to underline. Merchant of Record extend in this process is exactly the vendor logic across marketplace. We simplify the complexity, but we don't lose the control of the governance of the marketplace and of the pricing. And we empower the agency and the brand to scale faster. Thank you. So, yeah, let's talk. Exactly. 

Paul Sonneveld
Thank you so much, Paola. It's such a, for those of you who are not too familiar with this model, what Paola and her team have done, at the Brandon Group is really sort of take the idea that Patton has done very successfully in the United States and other markets, but really taking that and build something very, you know, something that deals with the complexities that you find in Europe and all the challenges, but also the opportunities in terms of the breadth of marketplaces that you need. Like, for example, if you want to be in fashion in Europe, you have to be on Zalando, right? 

Paola Marzario
Yes. 

Paul Sonneveld
Amazon vendor is great, but Paola has really built an amazing solution there with the help of her team, of course, to do that. So thank you so much for giving us a glimpse and trying to demystify this Merchant of Record. As you can imagine, there are lots of layers to this. It's a complex thing, but the whole point of it is to keep it as simple as possible. 

Paola Marzario
Yes. 

Paul Sonneveld
So we don't have a lot of time left, but I do want to see if I can maybe squeeze in a couple of our audience questions here. Let me just flag them here, and then I'll bring them up. Let me pick one here. Very practical one around cash flow timing. So on the Merchant of Record Model, how does the cashflow timing differ? Do we get paid faster than Amazon standard term, or is there an added delay? 

Paola Marzario
No, usually, we pay as soon as we have a, we can set up a net thirty days. It's just a matter of negotiation with us. So yes. We can pay earlier, or we can pay at the same time of Amazon. It depends on the negotiation. It's just a commercial policy. 

Paul Sonneveld
I hear there is flexibility on your part. 

Paola Marzario
Yes, absolutely. 

Paul Sonneveld
All right. Second question under the Merchant of Record Model, who actually owns like the customer data and the reviews? How does that work under the Merchant of Record? 

Paola Marzario
So, you know the feedback is under the product page so is linked to the ASIN. So obviously, the customer data and the review are owned by the brand. You know, the customer, we haven't so many customer data that we can use because there are many restrictions from the marketplace. But in our model, everything is under its owner for the brand. Yeah, owned by the brand. 

Paul Sonneveld
And just my follow-up question, this may not be applying to all marketplaces that you manage, but on the big ones like Amazon, do you apply for brand registry on behalf of the brands that you serve through your personal record model? 

Paola Marzario
Yeah, we can do the brand registry for the brand, but the admin is the brand, and we are only the authorised. 

Paul Sonneveld
Yes. Yeah, that makes sense. 

Paola Marzario
So the vendor code is owned by the brand, but we own the pay code. We change only that. 

Paul Sonneveld
Yeah, makes sense. Okay. Last question here from Gabriela. It's a very sort of specific one relating to the delivery. In order to resolve a dispute over undelivered items, what is the best way to do that, since disputing and sending everything necessary to justify delivery is sometimes not enough? So I think particularly pressing in Christmas season here. 

Paola Marzario
Yeah. Are we talking about shortage claim? Because if we are talking about undelivered item to the warehouse, the fulfillment of Amazon, it's not necessary to justify the delivery to the Amazon. So we can dispute without having any proof. But if we are talking in 3P,, in this case, we need the tracking number, and we need to show that the product has been delivered to the end user. This is the proof that you can use to dispute, and you can win. 

Paul Sonneveld
The tracking number, yeah. 

Paola Marzario
Yes, you have to put the tracking number into the management system of the carrier, and you can do a screenshot if the product is delivered to the end user. If you want to dispute the and to ask for an invoice. But it depends obviously, on the marketplace where you are having this dispute. Because each marketplace has different situation and policy. In some case are easier than other.

Paul Sonneveld
Sure I understand. Okay, we are out of time. Thank you so much, Paola. I really appreciate you coming on and helping us really demystify this Merchant of Record Model, especially within the European context. So thank you so much. Really appreciate it. And hope to see you later this afternoon as part of our panel discussion. 

Paola Marzario
Yeah, with pleasure. See you later. Thank you. Bye-bye.