When Web Retailer first spoke to Will Tjernlund back in April 2015, he was working with his brother Andrew, running a business selling private label products alongside established brands, mainly through Amazon.
Their Lean Startup approach saw profits grow dramatically, and they were at the stage of looking to hire more employees. Meanwhile, Will’s aim was to become location independent – so he could work from anywhere in the world.
Then the situation changed, almost immediately after the interview was published.
Will decides against the 40-hour workweek
In July 2015, Will decided to leave the business he ran with Andrew. Will’s desire for location independence, and to escape the forty-hour working lifestyle, conflicted with the demands of the business.
“I was looking at the business my brother and I had, and doing the corner office test: if everything goes perfect in the next ten years, what am I going to be doing? I fast forward ten years and it just kept being me talking to Chinese suppliers and managing warehouse workers. It didn’t seem alluring.”
“It’s that clichéd millennial thing of ‘I just don’t want to work in general’. One of the reasons I got into Amazon was because at college I read The 4-Hour Workweek and I was dead set on doing that thing, and living location-independent. For me I hate the idea of 40 hours a week, I think it’s just an arbitrary number.”
Will had also been testing the water in consulting during his final few months working with Andrew, spending time in Australia and Sonoma, California. These travels proved to be a key element in his decision to go solo.
“It cemented it so much more in my head that, man, I’m making good money and I get a free trip to Australia,” he laughed. “This sounds way better than being in Northern Minnesota at a warehouse telling people ‘Hey, make sure we get these boxes out on time’.”
After leaving the business in July 2015, Will spent his summer “putzing about” with FBA Mastermind, a $20 a month private online forum. It provided handy recurring income for Will between consulting jobs, but he decided to sell the website in October 2015 after he heard a talk by Empire Flippers.
“So we got out to Asia and I go to a conference while I’m out there. I listen to the Empire Flippers talk and they’re saying how they buy and sell websites. So, on the spot I tell them, ‘Hey I want to sell FBA Mastermind’ and they say ‘Here’s the price we’re thinking’.”
“I go, ‘Wow that’s crazy, who would ever pay that?’ and they say, ‘We’ve got people waiting right now’. I basically sold it right there on the spot. So then, again, I was like, ‘What do I do now?’”
Back in Minnesota
Andrew continued without Will, but his business model underwent some fundamental changes, largely unrelated to Will’s departure. Andrew’s focus began to shift from FBA to Vendor Central, as he looked to scale the business further.
“Will had done a great job of helping us scale up, figuring out which software programs to use. But what I realized was that I was spending six figures on different software, and they did help us reach a certain level, but they weren’t helping me get to the next level.”
“The manual work that was involved in maintaining the software meant that it was not that much easier to scale from $5 million to $10 million. So I made the decision to switch to Vendor Central, as I could save tens to hundreds of thousands of dollars by selling direct to Amazon. By outsourcing the selling aspect, I don’t need software like repricers. It simplifies the whole thing.”
Vendor Central was not a new concept to Andrew, who had often offloaded “problem products” to Amazon, when he believed the only way to make the first page was via the “juice” Amazon gives to products they are selling themselves. At the time Vendor Central only accounted for around 10% of his Amazon sales, with FBA accounting for the rest.
In February 2016, Andrew wrote a post for Web Retailer about his new Amazon sourcing strategy.
Will finds a different path
At the same time avenues both old and new were opening for Will. He had started a private labeling business with his business partner Reed Thompson, and also found himself in demand on the conference circuit as a speaker.
“It started in October 2015 when StartupBros gave me a chance, and from there everyone assumed I was an expert. They posted pictures of me speaking at their conference on Facebook, and people all of a sudden now associate me with being a public speaker. It’s like I’m only a speaker because I spoke once.”
As the fourth quarter of 2015 approached, Will and Reed’s private label business was running at full steam and the new year was soon upon them. Two months hanging out in Argentina proved to be the perfect start to 2016 for Will.
Then consulting really took off when Will arrived back in Minnesota in March 2016. A mixture of being a self-confessed “PR whore” and “dumb luck” caused an avalanche of calls from big companies asking him to help them sell on Amazon.
“I think it was three publicly traded companies who wanted me to help them get on Amazon within a 72-hour period. It’s weird. It’s like the second I tell people I only want to consult for big companies, and I only want to run big companies’ Amazon accounts, then all of a sudden everyone comes to me and says, ‘Hey I’ve got all these big companies that need Amazon accounts run, and I think you’re the guy for it!’ It’s like, wow, I just had to tell people this and they start throwing leads my way.”
“So from there me and my buddy Reed said, ‘Hey! We are selling this stuff on Amazon, it’s doing well, but at the same time we aren’t going to get filthy rich off it, we are just doing it on the side because we have nothing else to do’. So we decided to pivot and just sell off the brands that we had, because we just didn’t really want to deal with it anymore. We thought we should go full time into consulting and actually create a consulting agency.”
Will’s business is more hands-on than is usually the case with a consulting agency, as their role is not only advisory but educational.
“Our basic business theory is that we see brands who are the leading name in a sub-niche, that everyone within that niche knows. They’ve been the brand name for 50 years but they have an ageing workforce, or just don’t know Amazon. They should be the leader on Amazon, in this niche, but a whole bunch of private labels are leading because they know how to work the algorithm.”
“So, we work with the established brands because they are the ones buying in bulk, doing research and development, and marketing at a professional level. They just haven’t done the final 1% of marketing correctly on Amazon.”
“Our job as a consultant is as an educator first. We have to go in and explain how Vendor Central works, how fulfillment works etc, to help the people with money make more money.”
The transition from private labeling to being a service provider to big companies appears a big change, but Will believes the nature of his workload is not far removed from his time working with Andrew.
“For me, a lot of it is the exact same. I sign in with a different email address but then I treat the Amazon account basically as if it was my own.”
“As for private labeling, when I get ideas, I share them with one of the companies we consult with. They fly out to China later that week and start working with their factories to get it made. I get a percent of sales for any product I send their way. It’s the best of both worlds because they have all the resources, and do all the stuff I don’t want to do, and I just come up with private label ideas.”
“I also get to private label a bigger range of products. We’ve got a product coming out next week which is a private label furniture item. I know that I would never private label a piece of furniture myself, because it’s way too big and would be annoying. But for these guys who order 200 containers of inventory a year, another ten is no big deal, so now I can private label things I never have thought about before.”
Andrew continues moving to Vendor Central
In 2016, Andrew focused on shifting from FBA to Vendor Central. He would sell off the stock remaining at FBA or his own warehouse and, when it had gone, switch the products to Vendor Central. This was a strategic, gradual process as Andrew didn’t want Amazon to become a competitor while he still had his own stock to sell.
“We didn’t transition our bestselling items over to Amazon right away. We didn’t want to have say $20,000 of a specific product at Amazon FBA, and then make the product available to them as a vendor. They’d then be competing with us, and we wouldn’t have been able to liquidate our remaining products well.”
In retrospect, although it seemed difficult at the time, it was nothing in terms of the volume of inventory that Andrew now adds to Vendor Central every week. He plans to add 15,000 new products this month, largely due to a change he made to his sourcing methods in 2016, which saw him become a “glorified sourcing agent”.
“Instead of having to take on inventory ourselves, we modeled it so that we would get access to all the products from a specific supplier. Before we even order anything we will upload the entire catalog to Amazon, and this could be over 1,000 products.”
“We would then wait for Amazon to order and based on that, we would order from the supplier. So if Amazon ordered 83 of product XYZ, we would order 83 of product XYZ from the supplier. We’d fulfill the initial order and then wait every week for Amazon to place orders and do the same.”
“By doing that we got to scale quickly, because we didn’t focus on the best products. We could offer everything because we weren’t going to buy it until it sold. You could say we became a glorified sourcing agent, and our value is to find new lines, submit them to Amazon and then buy them as best as possible.”
In the internet age, the role of the middleman has been bypassed in many industries, but Andrew believes that his position between Amazon and the distributor is safe. Amazon need to operate at scale, and smaller distributors lack expertise, so his role between the two is vital.
“Amazon conceptually would like to go straight to the brand owner or manufacturer – at a certain level of scale. For instance, if I’m selling hundreds of millions of dollars and Amazon has access to it, they definitely will want to go direct. But it’s not scalable to set up every single brand that sells $50,000 a year. They would have to hire that many more vendor managers, and deal with that many more suppliers. I’ve only been bypassed by Amazon once, so it’s not a major concern.”
“In terms of being bypassed by distributors. Amazon has become a more complicated ecosystem and because of our scale we have access to a bunch of special programs that normal vendors aren’t going to be involved in.”
“We can act as an Amazon agent, just like in retail where you may have an agent that sells to Home Depot or Walmart, we do the same thing. Except we pay them, and they don’t have to pay us a dime. I buy from them, sell to Amazon, and manage that relationship for them. They get on the world’s biggest marketplace with zero effort on their part.”
The Tjernlunds in 2017
So far, 2017 has seen both brothers continue in their ventures. Will and Reed are still consulting, but the duo have developed more sophisticated contracts and made minor changes to the fees they charge.
Andrew meanwhile has continued to develop the way he sources products. He now uses “master distributors” in order to gain access to even more lines, even if this means buying at a higher price.
“By buying from master distributors we aren’t getting as good of a price as we could buying directly from the factory or brand owner. But we can get access to 100,000 products and we can get those on Amazon ASAP. Even if we aren’t getting the best price, we don’t really care. We just price it to Amazon based on what we’re comfortable charging.”
This philosophy of adding items in bulk at a higher cost is linked with Andrew’s belief that Amazon are prepared to make a long-term loss on products, if it means increasing the range they offer.
“Amazon have modeled it so they’d rather have 100,000 products at an OK price, than 1,000 products at a really good price. They aren’t trying to become traditionally profitable.”
“If Amazon have to sell a table saw at a significant loss, over and over again until 2020, to reach the point where the carpenter regularly buys his tools on Amazon because he’s got such a good deal in the past, they’re willing to do that.”
Something that both brothers have in common is their interest in the special programs that Amazon have to offer. Will has had businesses accepted to the Amazon Dash program and the new Amazon Samples program. He is also working with brands in the brand exclusive area of Amazon. Andrew too is moving more into the “Amazon thicket”, to sell even better to Amazon through Vendor Central.
Coming full circle?
It’s ironic that the pair share similar aims for 2017, as the businesses have developed quite differently since Andrew and Will went their separate ways two years ago. Andrew is the man that brands and distributors go to if they want to sell on Amazon with zero involvement. Will helps brands sell on Amazon while retaining full control for themselves.
Yet, they are both very successful in their chosen methods, and have the ability to start scaling operations from day one. Their adaptability too is remarkable. The Tjernlunds are not fazed by change: they almost feed off it to develop their businesses in an even more profitable way.
With Will’s consulting agency ever-popular, and Andrew’s business looking to turn over between $20 million and $30 million this year, the sky really is the limit for these two business-minded brothers.