Thomas Lee of Process AG: Five Things You Need To Know To Run A Very Successful Amazon Business

As a part of my interview series about “Five non-intuitive things you need to know to run a very successful Amazon business, I had the pleasure of interviewing Thomas Lee.

Thomas Lee developed product solutions for Fortune 500 companies as well as start-up brands for more than two decades. Lee’s expertise has assisted Amazon/D2C Sellers to stabilize manufacturing, increase margins, grow revenue, and expand sales channels. Household names including Estee Lauder, Skullcandy, Goal Zero, Honest Company, and Adidas have relied on Lee and his team to expand products and stabilize for growth. In addition to his work as a consultant, Lee has funded, operated, and exited over a dozen consumer product brands. To support a broader customer base, Lee launched Process AG <https://processag.com/> a B2B business service group that helps consumer product companies with product development and manufacturing.

Thank you so much for doing this with us! Can you share with us the “backstory” about what brought you to this specific career path?

I started in traditional retail owning and operating a shop. Through that experience, I witnessed how so many brands struggle with product manufacturing and stabilization. I started assisting some of the brands I carried in my store and that opened the door to working with Fortune 500 companies through my agency Process AG. I have a passion for entrepreneurship which motivated me to own and exit over a dozen brands in my career. This experience has attracted me to working with Amazon and D2C Sellers. There is so much opportunity for selling consumer products on Amazon today, but fundamental missteps in terms of product design, manufacturing, sourcing, and management can really harm a brand’s trajectory.

Can you explain to our readers why you are an authority about selling on Amazon.com?

I have been working in the retail industry selling consumer products and companies for more than 25 years. Originally, I focused on helping brands expand into mass-market retail chains which dominated the last 30 years. More recently the pivot to digital platforms such as Amazon, Shopify, and social channels grew, our product offering expanded as well. The addition of direct-to-consumer products was a natural progression as brands and clients were simultaneously moving to launch and validate their products through D2C marketplaces such as Amazon.

Throughout my career, I have launched and exited more than a dozen product brands sold in both brick-and-mortar stores, Shopify, and Amazon. The product categories I have owned have varied from fashion and headwear to pet products and home goods. Every sales channel presents its own set of pros and cons. Today, I enjoy sharing these learnings with clients, helping businesses grow and find efficiencies and scalability.

Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lesson you learned from that?

I think the most humorous event of my career is the ironic progression of retail. Growing up, I had a passion for action sports. As a result, I launched a core specialty snowboard and skateboard shop in Salt Lake City, UT called Blindside very early in my career in the late 90s. Our business strategy was to build credibility and clientele by being the most core and authentic shop in the market. We did this by aligning with athletes and community influencers. This was WAY before anyone was talking about authenticity let alone influencer marketing.

At this same time, believe it or not, the internet was not considered cool. The idea of buying sports equipment from a website seemed very strange… we called it ‘selling out’ back then. The shop you chose to purchase your gear from was almost as important as the gear itself. It gave people a sense of community and they would adorn their gear with stickers from their local shops.

Fast forward 25 years, things could not be more different. Direct-to-consumer brands led by culture influencers with social credibility are owning and operating the most desirable products and controlling the marketplace and customers attention. The modern consumer wants to buy directly from a brand or person they trust and that is no longer the core old school retail store down the street.

To me, the way the retail industry has completely flipped on its head is the most entertaining thing that I have experienced in my career. It has been remarkable to watch this radical shift take over as the millennial generation moved into controlling the majority of purchasing power. Next will be how Gen Z will make their purchase decisions. Now, we are living on the precipice of the Amazon aggregator evolution where eCommerce brands are being acquired at unprecedented rates as high as 8x EBITDA. The lesson here is that this is the time to grow and sell your business. That said, improperly organized and structured brands will not be able to actualize their value in the form of a proper exit. That is where my team comes in to help brands add and strengthen value to their core fundamentals.

Are you working on any exciting projects now? How do you think that will help people?

What is meaningful and exciting in business to me is creating large scale impact, this can be done by solving problems. A common problem that should not exist is the significant lack of transparency in communications with manufacturing partners, facilities, and product COGS. Many Amazon Sellers overlook something as simple as understanding the equation of raw material COGS over labor expenses and the adjustable and manageable impact this has on your product grade and defensibility. Overall, it’s the ability to understand how it’s made and how to make it different. A transparent and dynamic relationship with your manufacturing partners can bridge an alignment where you are both incentivized towards a common goal.

My company, Process AG, is helping ecommerce brands with this challenge by removing boundaries created by distance, language, culture, middlemen and more. By solving the large gap in communication and understanding inefficacies not just for our brands and companies but for the overall marketplace. There is opportunity for improvement and differentiation in the Amazon marketplace. Small basic improvements will yield large impact which creates advantages and defensibility.

Ok. Let’s jump to the core of our discussion. You are a seasoned Amazon expert. Can you share with our readers five, non-intuitive, insider tips, to be as successful as possible on Amazon? Please share a story or example for each.

1. Think Long Term- This prevents short term mistakes and market pivots from taking you out. I cannot stress how many times I have seen this be a primary issue for Amazon Sellers. The pressure to be reactive when competing for the speed of sales is enormous on Amazon. Its ok to make short term decision so long as they are aligned with the long-term goals.
2. Give value to your customers- Make sure you are providing the right value in your product offerings. Value that consumers are not able to capture from another competitor, and this is not limited to price or quality. This can be achieved through communicating brand story and values through an unboxing packaging experience. Look to redefine the product itself, through communicating the origin story, or mission-vision-value content, perhaps increasing value through creating gift-ability in the product and package. Look at a brand like Tom’s Shoes for instance, the feeling a consumer gets that their purchase is helping others is an immeasurable value for the consumer.
3. Valuable partners- Identify which supply chain partners can bring or build significance to your company. This can be manufacturing, design, packaging, or capital partners. Firms like Process AG serve as ambassadors to help bridge alignment with your manufacturing vendors and supply chain partners. The resources and product expertise your manufacturing partners have is enormous and very few ecommerce brands effectively tap into that resource. Bigger brands know how to leverage factory engineers and manufacturing partners, and this becomes a key competitive advantage for them. There is no reason you shouldn’t utilize that resource as it has been built within your manufacturing partner to support your business.
4. Design and build something defensible into your product and business. At first many people think this is achieved in the form of a product patent, but it could also be a customer service protocol, or a marketing advantage. For example, Nordstrom is famous for their return policy. In their book “Made to Stick” Chip and Dan Heath tell the story of a Nordstrom salesperson accepting the return of snow tires even though the store doesn’t sell them. This may be an urban myth, but it is the result of Nordstrom’s conscious efforts to build a brand off the value of service. An aligned manufacturing partner can build in overrun inventory or mark downs to support a customer return budget. A 3PL can also be brought in preemptively into the business model to participate in how the return inventory is managed and resold.
5. Think Long Term- Yes, I’m saying it again! This point cannot be stressed enough. Building long-term value means avoiding short term gimmicks unless they help to invest in the big picture. If you plan to exit your business, you need to position long-term. If you plan to grow, you are thinking long term. Your buyer will see the value in the long-term set up of the business plan. You and your customers will benefit.

The best example here is to look at Amazon itself. Amazon as a company thinks long-term. Their investments are pointed long-term. There is no reason to deviate and fault to short term temptations.

Amazon sellers have a reputation for being great guerilla marketers. Do you use any clever and innovative marketing strategies that you think large legacy companies should consider adopting?

There’s always going to be a hot new marketing strategy that seems to work for a short period and fizzles out too quickly. Back to thinking long term by providing value — a long-term marketing strategy will create value for your customer and your brand. It won’t always be guerilla tactics, although those don’t hurt.

Longer-term marketing strategies are an investment into bridging the communications gap to your customers and the long-term approach will, in turn, create community. Innovation in Marketing today is sharing content with your customers who want to consume and participate with the brand. The content must be interesting enough that your customer seeks it out. A common term is user-generated social content (UGC), which goes the distance by providing value and ultimately creates engagement. There isn’t an easy button for this objective. Success requires thinking long and hard while doing the work to build a marketing program your customers want to consume.

If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? Think about what aspect of you/your brand has the potential to relate and influence the most people. You never know what your idea can trigger.

Relating this concept to success on Amazon, this new digital marketplace has created a level playing field for startups and anyone with a computer to challenge Fortune 500 companies. The barriers to entry to sell a product into traditional brick-and-mortar retailers have historically been so high, which has not put this within range for the average person or the average startup.

The digital eCommerce movement has more-or-less eliminated this barrier. This creates a window of opportunity allowing anyone to enter the market with a buy and sell opportunity. Barriers may still arise in time, just as they did for brick-and-mortar retail, but for now, there is an opportunity to compete with the broad marketplace. Therefore, it is so important to strategically invest in your long-term strategy and that most certainly includes your marketing plan.

Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?

I am starting to see the theme of my article emerge. Have you ever heard of the marshmallow test? Basically, young children are put in a room and given a marshmallow. A guardian tells them they are leaving the room but will be back soon. Then the guardian promises to give them two marshmallows if the first one is still there when they return. The kids wiggle and squirm as they try to avoid the temptation of eating the first marshmallow in the empty room. It’s just them verse the marshmallow. When the guardian returns those that did not eat the marshmallow get a second one effectively doubling their gains.

My quote would be, “Don’t fail the marshmallow test.”

Some of the biggest names in Business, VC funding, Sports, and Entertainment read this column. Is there a person in the world, or in the US with whom you would love to have a private breakfast or lunch with, and why? He or she might just see this if we tag them :-)

Well, I could really use a ride into space, so maybe one of those guys.

Thank you so much for these great insights. This was very enlightening!