How to Transform a Traditional B2B Manufacturer to B2C on Amazon

This is an interview conducted by Reed Thompson in which he interviews William Tjernlund about Tjernlund Products Inc. Tjernlund Products is a traditional B2B manufacturer that transitioned their business to sell on and to Amazon. This interview covers the history of Tjernlund Products, selling on Seller Central, selling to Amazon through Vendor Central, and Will's transition to helping other brands and manufacturers succeed selling on Amazon.

History of Tjernlund Products

Tjernlund Manufacturing was started in the 1930’s by Emil Tjernlund (Will's great-grandfather). Emil had a sheet metal background and even designed and made some hand tools used by the trade. That morphed into designing and manufacturing forced air oil furnaces used in commercial establishments. Operations shut down during World War II and a new company was formed in 1947 which included Emil, his son Bob and Bob’s brother in-law, Ed. The market for larger furnaces expanded in post-war America. Customized rooftop mounted furnaces started taking over the commercial market in the 1950’s. In the mid-50’s a product that is the basis for our company today was created, the Draft Inducer. Draft inducers are high temperature fans that are installed in the chimney connector or main stack to boost the draft, enabling the burner to operate more efficiently and safely.  This product line addition did a number of things for Tjernlund Manufacturing:
Manufacturing custom built rooftop heating equipment was a feast or famine business with the resultant cash flow variations. The less cash intensive draft inducers had more predictable sales and a side benefit was in many cases scrap steel from the rooftop unit production was able to be utilized to make draft inducer components.
In the early 1970’s Tjernlund Manufacturing was facing pressure with a new trend of commercial spaces installing multiple stock manufactured rooftop units vs. large central units. The draft inducer business broke off into a separate company named Tjernlund Products. Within a few years the rooftop manufacturing company was sold.
Over the first 30 years the draft inducers and related specialty exhaust and ventilation products sold primarily to HVAC and plumbing distributors were the mainstay and focus for the company. Within this time frame there were a number of new products and new markets that kept sales consistent but stagnant. Continual process improvements starting in 2007 reduced labor hours by 50% over the next 5-year period. 

 Tjernlund Products’ factory at full capacity

Tjernlund Products’ factory at full capacity

Reed

So where should we start? At this time your dad is running Tjernlund Products and your brother has just started working there. Pick up from here

William

My uncle hands it off to my dad. My uncle has two sons who are also working in the business.  The business was keeping on the same trajectory until they hired my brother. They hired him to help change the culture and mentality.. They knew that he had some experience in e-commerce and had a fresh outlook on how business works.

Reed

What had the 10 years before that been like?

William

The last 10 years had been, like I was saying, getting into niches but still all fan-based stuff. They were still manufacturing the majority of what they were selling . They'd import maybe motors and certain circuit boards from China but the metal fabrication and assembly was still done at Tjernlund Products. The majority of people at Tjernlund Products were over the age of 45 and had been there 20 years on average. Everyone was kind of experts at their own specific job but they had never looked at anything from an outsider's or completely fresh point of view. That was the reason why my brother was brought in there. He had a more current business school degree and more advanced knowledge of internet based resources and sales. They called him College Boy when he first got there.

Reed

Who were they selling to at this time?

William

Most sales were to regional HVAC and plumbing distributors and to a few national distributors like Grainger. Smaller segments were sold to the engineering specification market and to specialty retailers.

Reed

How did your brothers background outside of college shape his thoughts of Tjernlund Products and the potential he saw?

William

My brother's background is very entrepreneurial. He started a bunch of small businesses throughout his time in high school and in college. He had been buying stuff from China via AliBaba for a few years at this point. He would sell the finished goods on eBay and Amazon. He already kind of had that mentality of, "Why don't we just buy a finished product and resell it for more money? Why are we trying to reinvent the wheel every time?" Trying to invent something from scratch, get patents, get trademarks, make sure that we have all the UL listing, make sure that everything is above board, we have the CE certification, those types of stuff. This all sounded like so much trouble to my brother for them to launch a product at Tjernlund Products that might do $200,000 a year in annual sales. Maybe $60,000 net profit. It was a much bigger pain than he was used to where he was just slapping a label on something from China and selling it for more money.

Reed

He basically thought instead of focusing on manufacturing, how do we just acquire finished goods easier and quicker, and sell them on e-commerce marketplaces?

William

Yes, he wanted to sell straight to consumers. Here is an example. Tjernlund Products has a product called an RB10 Register Booster Fan. It is a blower that you drop inside your register boot that boosts the amount of conditioned air entering that room. Now the fan inside of that is the same fan used for fireplaces to move the air. He saw that specific part that they're buying for $7 is going as a finished good on Amazon for $90. That's where I think the first idea came from. That's where the first thought of, "These somewhat unfinished products are actually finished products to other people."

 RB10 Register Booster versus a universal fireplace blower

RB10 Register Booster versus a universal fireplace blower

Reed

Depending on who the end consumer is.

William

Precisely. Another example is a computer fan that can be used for anything from cooling down your computer to cooling down Bitcoin mines. The actual fan when it comes down to it is the same as that fan and it goes for $5 and it sells for $20 retail. Even stuff like that where they were already buying 10,000 of these fans a year if we bought 11,000 I'm sure I can get rid of those last 1,000 and make almost pure profit.

Reed

Your brother is several years older than you. While he had spent maybe 5 years at Tjernlund Products before you came on what were you doing when he started at Tjernlund Products?

William

I think it took him to his fourth or fifth year for this light bulb to come on. In the meantime, he was kind of just doing business as usual, finding holes inside the business plan that he could use to grow the business and exploit it.  While he's doing this I'm in college. I'm going to the University of Minnesota Duluth. I'm getting an economics degree and I am slowly following in my brother's footsteps of importing a little bit of products here and there from China, selling them on eBay, Craigslist, and Amazon. Learning processes and making a few bucks.

Reed

Take a step back there. You were going to school, learning economics and basic business information. You were sourcing products from China and selling them on e-commerce, learning how importing works, how selling on marketplaces work, how internet marketing works.

William

I'd say the last half of my time in college was spent learning as much inside the classroom as outside the classroom. I learned a ton listening to e-marketing podcasts, listening to a podcast on how to build a brand, how to get backlinks, how to start a blog, how to drive traffic to that blog, how to monetize a blog. When I get interested in a topic, I will be completely be consumed and research every aspect of it. At every point I obviously can't help myself but apply it to what my online business I have now. "Oh, they say it's really good to have an email list and use MailChimp. Okay. What's MailChimp? Oh, it's a free program to send out emails to lots of people. Okay. How do I collect emails? Listen to three more podcasts on the collecting emails." It has always been very helpful for me always to listen to podcasts ,audio books and YouTube videos. I know that I'm slowly growing and slowly getting more use to the vocabulary that they were using and figuring out what they mean and how to install them into my business plan.

Situation of Tjernlund Products When William Arrived

Reed

Was it always the plan for you to work for Tjernlund Products after you graduated?

William

No. What happened was I was getting close to graduating and I'm talking to my father saying, "Hey, basically I've applied at these three jobs. I have two interviews lined up of these three jobs I've applied to. What's the deal with Tjernlund Products right now? Where are you guys at?" I really had no idea where they're were at in their business. I was like, "Where are you guys at? Do you guys have a job for me? Would it be a total pain to just try and insert me into a bunch of processes that make sense or do you have something that would be willing to hire me for? This would be the time to tell me. I don't want to go get a normal 9-5 and then three months into it you say you have a job for me because then it's kind of unfair to everyone." He said my brother was starting an Amazon arm of the business and that he may need some help. Then my brother talked to my dad, and I think my brother thought this was a match made in heaven. He knew he had someone he could trust, someone who he could speak candidly to and tell me exactly what he needs and not worry about feelings or anything because we are both on the same page. Our age gap is large enough apart where we never even got in fights as kids because he'd be 12 and I'd be 6. It would make no sense. Verbally and physically. We never had disagreements because the age gap was so large. He knew that this would be a perfect thing where I understand how e-commerce works, I understand how general business works, I'm young, hungry, ready to learn, and he's not going to find anyone with these kinds of qualifications and intangibles. My brother jumped at the opportunity to be able to hire me and I started working with my brother full-time then to start building out the Amazon side of the business. Starting December 2013, I was working full-time at Tjernlund Products

Reed

What does that look like as far as day to day work? What was your overall strategy?

William

At the time we had access already to some catalogs through my family's company of different parts and different companies. That was the lowest-hanging fruit in the beginning. We had a list of products that we had the option to sell on Amazon. We already had access to them. It was our job to go through the Amazon website and compare the products and basically we are looking for anything with reviews at this point. It was pretty rudimentary. We didn't have any third-party software or anything like that. We were looking, "Hey, this has 100 reviews. We need to buy this. This thing sells like crazy." Once they had fifty reviews they're probably doing pretty well. Even if it had five reviews we'd be like, "Okay, it's worth buying a couple of them."

Initial Pursuit of Selling on Amazon Through Seller Central

Reed

Was this on Seller Central? Did you utilize Amazon's Fulfilled by Amazon services?

William

Exactly. That's why we even had to test to see if it sold well and count the number of reviews because we obviously didn't want to buy anything that wouldn't sell. We were looking to take very small steps and if we could see that something sold $10,000 worth of product a month, we'd buy maybe $3000 to make sure we did not over extend ourselves. We were buying the products, taking possession of them. Basically a container would land with 26 pallets on it. We would take the pallets off the container. We would organize them into say three shipments that we'd already pre-created to send it to Amazon's fulfillment center. Label them with the proper labels, put them back on the pallets, wrap the pallets up, weigh the pallets, input that information into Amazon, and then Amazon would have their 3PL and freight come with semi and pick the pallets up later that day or maybe the next day. What a lot of my job was for like six months was unloading pallets, organizing them, labeling them, restacking them, and sending them back out.  For the first eight months of the business, of me and my brother working together, every single thing was just kept in our brains as just a, "Okay, take care of this shipment." Well, I would know to spread it this way, I would know that this size would go better this place, or keep these ones on a separate shipment.It eventually made training future employees tougher since we did not have anything standardized or in writing.

Reed

To take a step back, business kind of went on as normal for everybody else working at Tjernlund Products? They're still a manufacturing arm, they're still a, "Let's build out a certain furnace for Cowboys stadium" type of projects. It was you and your brother that were focusing on this Amazon channel?

William

We were rogue compared to everyone else. No one knew what we were doing. We had at one point I remember ... This is a fast-forward a little bit. We had done about $8 million in retail sales at this point and one of the engineers came back to the warehouse and saw me stacking boxes and said like, "Oh, yeah, I heard through the grapevine you guys are trying to sell stuff on Amazon or whatever. How's that going for you guys?" Trying to sell stuff on Amazon or whatever. How's that going for you guys?" So it was that disconnect with a company that traditionally had done $10 million a year revenue for the last 30 years straight. To now it was like double the revenue on just a new sales channel, and majority of the company had no idea what we were even up to.

Reed

Sure, and you don't, you can't physically see it happening utilizing the fulfilled by Amazon because the pallet would come in, you'd immediately send it back out, so you wouldn't actually see the picking and packing, or the shelves of inventory you held.

William

Yeah, we used to get yelled at by the warehouse workers saying, "Hey, you're taking up all of our space!" We would try to explain to them that like, "This literally will be here less than 12 hours. Just let us store it here for 12 hours. We'll be back out of your hair in no time, and just don't worry about it."

Reed

So then tell me about the time for the first year or two of doing that, so you did it scale immediately, quickly. Say you'd order 1,000 of a product, it would sell through, you'd reorder? How quickly did it scale?

William

It scaled very quickly because we had access to so much low hanging fruit. In the HVAC, the (heating, ventilation, air conditioning) niche, it's a very old school niche. It's a lot of older men usually who sell to their buddies through these convoluted systems where there's multiple middlemen, maybe three, four people who touch it before the end consumer touches it.

Reed

So talk to me about that. How is it such a long supply chain in this specific industry, which is applicable to other industries?

William

The biggest reseller of Tjernlund Products for the longest time is a company called Grainger. Grainger does billions of dollars in sales of heavy machinery and equipment, tools, everything you can imagine. So back in the day someone would come into a Grainger saying, "Hey, I got a warehouse in Forest Lake. My pump and fan is broken on my CNC machine and I need a new fan, get me one," Grainger could get that fan within two days to their warehouse for you to come pick it up. So for a fan that might cost $40 to make, they would charge $400 for it, because they know that without that fan your press isn't running, and when your press isn't running you lose $10,000 a day. It never made any sense for some megastore to hold one of every fan for every press that's in existence, because there would be way too much inventory and there'd have to be one in the in every major city in the US. There'd have to be so many locations with so much inventory in each one that it just physically wasn't possible. So they would just order the stuff too, Tjernlund Products would drop shipment for Grainger to their location, and they would sell it to the end customer. Before the internet that's how a company couldn't sell to the end consumer, because they didn't have access of distribution to them. There's no way that manufacturer, or there's no way that manufacturer with a broken fan could find Tjernlund Products, which needed you guys to go through a distributor like Grainger. The distributor would provide knowledge too. Where they could say, "Hey, yeah, those generic fans that they send your presses out with suck, you should buy a Tjernlund fan. This one, it'll fit in your same thing, all electrical will do it, but we can get this one faster and it'll be more reliable for the future."So you could even go in there and say, "Hey, my furnace broke. This is the part that I think it broke, I don't even know what this thing is. It just looks like a big motor to me," and they could figure out what the part was and educate you about it. For the longest time this made tons and tons of sense, and they had reps all over the country going to other people like Grainger who sold heavy machinery parts, saying, "Hey, here's Tjernlund's catalog, next time a customer comes in let them buy from our catalog too, and we'll drop ship anything for you."

Reed

Sure, so fast forward to now

William

Yes, someone takes the motor off their furnace, looks at the part number and Googles it, and buys it on Amazon. No questions asked.

Reed

So back to what you guys are doing then, is finding these products where it normally is sold at $400. You can get it for $50. You've got all of that margin to undercut the highest retail pricing and still have a really healthy margin to be able to sell directly to that customer. Cutting out all those middlemen, the Grainger distributor, the handyman, who all took their portion of the profits so then you guys directly sell to the end customer.

William

Yeah, and without getting too much into the Amazon weeds, one of the efficient and beneficial things that we had that really helped us grow quickly was we actually fulfilled things through Amazon, and so we always won the Buy Box. So all of these products were already being sold on Amazon one way or another, but they were being sold at high, normal retail prices, and they were all merchant fulfilled because no one wanted to actually go through their catalogs and figure out which ones they should stock and how many they should stock of each one. They don't mind drop shipping to each customer at the inflated retail price, but to figure out exactly how many you should send in to Amazon so they don't pay storage fees, but at the same time they don't run out of stock, is something they just were not willing to do. So we started from the top of the list. If someone already is buying ... they're buying and selling 10 of these dryer booster fans a week for this specific sized dryer booster, if it's Prime and free shipping then everyone's all about it. Then that's exactly what the customer's looking for, and you win the Buy Box 100%. So not only have you made the customer happy, but you take all the pre-existing sales too. So it's kind of a win-win and that allowed us to really ramp things up quickly.

Reed

Sure, so an ideal one that you'd identified too, is a high selling product that is merchant fulfilled, so it's not Prime, but you guys would purchase the product at wholesale prices, send it into Amazon FBA to be designated as Prime, which then would win the Buy Box for yours. Even though the listing already has a historical velocity, but yet a better offer.So you did this for several years of purchasing products from your different wholesale accounts. What's the next step in this story?

William

The next step was getting out of our comfort zone. We had for the longest time been just selling HVAC stuff because we knew that and it was the easiest one, we still could just contact them. It got to a point one day where every single HVAC product on Amazon, was either sourced and sold by us or we had contacted the company multiple times. So we started selling more products that were not within our core niche. We started selling products like 3D filming for 3D printers, knee scooters for people who injure their feet, or a pour over stand for people who want to make pour over coffee, or a home safe for people who want a safe in their house. We were selling, and importing all sorts of random stuff.

Reed

So the next step is expanding out and diversification? Or what did you do next?

William

Yup, and then here's where the story trails off and my brother could tell the next half of Tjernlund product’s story. So, 2015 rolls around, I'd been working with my brother for a little bit over a year. I'm getting burnt out after working long days in a dark warehouse up in Northern Minnesota. It's manual labor, and you get to work half of the year and it's dark, and you leave and it's dark. That kind of thing can really wear on you. Sales kept going up but it was like, "For what? We can grow sales to the moon, but what's the end goal? What do I really want?" For me, I wanted more of a lifestyle business. I wanted a business that I had 100% control over. My brother and I's business was just as we expanded, every time we expanded since we were just growing fast and breaking things, we were also putting out fires constantly. It wasn't really what I wanted to do. If I flash forward the next few years, I would have been doing the same exact thing. At the time I had been contacted by a bunch of different companies and media outlets, so I knew there was demand for the skills I had. There was one I remember in January 2015. The very first week I went out to Australia for a week for a consulting job. I came back to Minnesota for two days, and then I flew back out to Sonoma, wine country in Northern California, and did consulting for a week. Instead of spending January in Minnesota, I got to spend it in these beautiful tropical areas, learning new businesses, helping them out. It was exciting, fun, new for me, and so I thought, "Okay, this is really what I want to do." So I told my brother, "Hey, this is what I want to do. I want to phase myself out of the business. I'm in no real rush, let's give it six months or so." So the next six months was around the same time we started running out of liquid cash to keep growing our business. We were dipping into the Tjernlund Products piggy bank and their war chest that they built over the last 70 years of them putting cash in the Checking account. They had all this cash in the Checking account they had never really touched, and so that's where we were funding our growth to get to $10 million dollars annual run rate. We were getting to a point where it's like, "Okay, we can't grow anymore just by buying stuff and reselling it, we need to get a little bit more creative." So the last few months of my time at Tjernlund Products was spent changing the business model over from Seller Central to Vendor Central.

Transition to Vendor Central and Seller Central Hybrid Model

Reed

What is Vendor Central at a high level?

William

Vendor Central is selling to Amazon. So it's either you're selling on Amazon or to Amazon. Seller Central is when you are selling on Amazon as a third party merchant. You buy the inventory, you send it into Amazon, you cross your fingers hoping it sells, but you're 100% taking a risk and you're just using Amazon as the marketplace and a fulfillment method. Where Vendor Central is a totally different thing. It's the same as if you maybe sold a product to Walmart or Target, where you offer up your catalog of products  at the price you're willing to sell wholesale at, and Amazon will pick and choose based off their algorithm and their data what and how many products they want to buy and what products they don't want to buy.

Reed

To recap that, basically Amazon the company becomes your wholesale channel? So you sell the products to Amazon at wholesale prices and then they turn around and sell it to the end customer?

William

Yes, and instead of getting paid every two weeks like you do on Seller Central, generally you get paid every 60 days on Vendor Central. So from the outside it might seem like that would ruin our cash flow situation, but for us we found that it was really easy for us to get access to SKUs, but picking the winners, forecasting, and trying to order the right amount is where we tie up a bunch of cash buying the wrong products and getting stuck with that inventory. Being able to outsource that to Amazon, who has almost unlimited cash because they can buy whatever they want if the price is right, that made it really easy for us to keep growing. Now we were making less profit margin per unit because we were selling at wholesale prices, but we could sell many more units to Amazon, and we could grow our catalog that much bigger. So instead of selling 1,000 different products, which I think we peaked out at like 1,700 products on Seller Central, to now my brother sells hundreds of thousands of different products to Amazon because they just pick and choose what they want to buy. My brother then goes and orders it from the manufacturer or the brand, so he only orders exactly what he knows is paid for, and so he feels a lot more comfortable floating that cash in between because he knows every product he buys from the manufacturer, or the wholesaler, or the distributor, or the brand, is already bought by Amazon at a higher price. So it's a lot easier to scale on a limited cash flow budget without taking the risk.

Reed

So let me understand that. You would reach out to a brand, similar like you would do in Seller Central, but what you would do is again, ask for the wholesale prices, for what Tjernlund Products could purchase these products for. You'd get that for the whole catalog, turn around and make an offer to Amazon. Amazon would come back and say, "Yup, we want to order the whole catalog, or these products at this price." You would compare that with what you can buy it for, and if it's profitable you go back to that brand, order that product and fulfill it to Amazon when they make purchase orders. Is that summarizing it?

William

Yeah, a silly, easy-to-understand example would be say we were buying iPhones from Apple for $500 Seller Central and selling them for $1,000 dollars on Amazon. So we're making good money there, but we need to buy the right amount of iPhones, every time we're buying them we're risking that hopefully they don't come out with a new iPhone, and then we're also competing at the Buy Box against everyone else who had access to iPhones. So we're playing the same dirty game that everyone else is of trying to sell things for a penny lower than everyone else to win the Buy Box and all this micromanaging. Where instead we would buy an iPhone for $500 from Apple, we'd sell it to Amazon for $700 , so we'd only make $200 a unit instead of $500 a unit, but now since it's Amazon selling it, they win the Buy Box all the time and they buy the stuff exactly based off their forecasting and stats that they have internally. So then we get a steady flow of we know 10,000 iPhones are being ordered from us every week, we're making less money but it's guaranteed money, opposed to risking product, sending it into Amazon hoping it sells. Think of that mini example times 100,000 skus, and how on a case by case basis of that one skew if you're only selling that one skew, it might not make a ton of sense, but then if you extrapolate it over 100,000 skus it makes tons of sense.

Reed

And it allows you to focus on what it sounds like you guys are better at, which is seeking out brands, as opposed to guessing on how many you should purchase on inventory forecasting. Really you're a glorified sourcing agent on behalf of Amazon is what it sounded like.

William

Yeah, it's a pretty classic example of if you can't beat 'em, join 'em type of thing where, again, if you start looking at Amazon from a macro level and notice that Amazon's coming out with more and more private label brands, they're selling more things under their umbrella. You can see how Amazon products usually outrank the other private label on organic products and stuff, and so you can see where the market's going slowly but surely. So it was just us getting ahead of it saying, "Hey, why are we competing for Amazon in the Buy Box when they want to buy this product from us? Why don't we just sell this to Amazon, let them take care of everything else. Let Amazon handle that because they're the experts at eCommerce and let us handle what we're uniquely good at which is contacting brands."The reason why we exist and why Amazon just doesn't do what we want to do, or what we were doing, is certain companies don't trust Amazon. When my brother and I call them saying we're from a family business and we're giving the, "Aw shucks, like we're just trying to help you grow as we grow. We'll help you guys out, we won't make you sign any contracts, just let us buy some product from you, and hopefully we'll buy more product in the future," type of thing. People feel a lot more trusting of us, and want to work with us a lot more. Opposed to when Amazon calls up one of these mom-and-pop companies and says, "Hey, we want to carry your products. We want you to sign these contracts. We want to place a purchase order today, what can we do?" People get scared off by big, bad Amazon. They assume that they have some malicious intent, they just don't trust the big corporation because they've been burned in the past by bigger corporations. Something along the line doesn't mesh well with them trusting Amazon and feeling good about selling to Amazon. They'd feel a lot more comfortable using a third party like my brother as their Amazon liaison then dealing with Amazon themselves. We've had it before even with our consulting agency where Amazon will send over saying, "Hey, we want to do these three things," and they want us to translate it into normal people's speak. Like what's Amazon actually saying here? What are they really looking for? When people have no Amazon-domain specific experience, and Amazon contacts them out of the blue, they just naturally feel like uncomfortable. They see them as an easy sheep that the wolf's going to go after or something. They don't want to be the sheep so they don't want to deal with Amazon. That's where we fit in.

Reed

I'm sure that doesn't help with the headlines saying Amazon's destroying traditional retail brick and mortar, which is their sales channels for the last 60 years?

William

Oh exactly, and then you see these articles like, "BIRKENSTOCK no longer sells on Amazon because people are selling counterfeits under their brand name."

Reed

Sure, the anecdotal stories add up.

William

Exactly. If you're a business owner and three of those pop up within a course of a year, you just hear the terrible headline things. You don't hear about what I'm talking about today, where it's like a 70 year old, 80 year old family-based business pivots into Amazon and quadruples revenue within three years. You don't hear about those stories.

William

Yeah, you don't hear those stories nearly as much as you hear about, "I had a mom-and-pop shop that was selling different bars of soap I made by hand, and now people buy them on Amazon and I went out of business." It's like, "Well, I can kind of see where you're coming from. You had your chance to have someone like my brother or me inserted into your business and try to 21st century-ize your business to get it ready for the internet and the eCommerce world, and you missed your chance. Now you're paying the consequences. I feel bad for you, it's unfortunate, but it's also we can't stop the world moving forward because you want your soap business."

William Leaving Tjernlund Products to Start Goat Consulting

Reed

So going back to your story. You started doing freelance consulting jobs for the last six months that you were at Tjernlund Products. You were helping Tjernlund Products transition from Seller Central to Vendor Central, which is the strategy that they've continued onward to now. Tell me about the times when you transitioned from being a freelancer to starting Consulting?

William

I freelanced for about a year. In between there I was doing little things here and there. I built an Amazon community forum website and sold it. I was working with brands and manufacturers, locally and internationally, speaking at conferences, but not in a systematized way. Each project was unique. Around the summer of 2016, I had three larger companies contact me within a 48-hour span. One did a little under $1 billion in revenue the year before. They all basically said, "Hey, we don't really know anymore what we'd call the job offer or the job position, or if you're going to be an employee or an independent contractor, but we want your help on Amazon. We want you to manage our Amazon account. We want you to run our Amazon account." It seemed like a role that I basically would do the same job as I was working with my brother, but I wouldn't be working with my brother, which is the fun part, type of thing. I thought, "okay, these three companies that contacted me are all legitimate. I would love to work with all three of these companies, but I just don't have the bandwidth to run three different Amazon accounts for these large corporations. If I hire people and systemize this out, I would be able to actually take on all three of these clients, plus take on more clients in the future, and get the best of both worlds, where I'd have my own company, a decent income coming in, so I don't have to worry about going hungry, and I get to do what I want to do best, which is work with a bunch of different companies helping them become more efficient in the Amazon Marketplace.

Inefficiencies really bug me. Inefficient markets really, really bug me. Whenever things don't match up supply and demand-wise for some sort of reason, that really annoys me. Being able to go and work with these companies, help them out, really do what I do best, help them send their business off into the next few decades, and then from there I get to work with a new business, and constantly solving new problems, working with new teams, was exactly what I was looking for at this time in my life.I teamed up with Reed, and we hired our first employee, Eric. That was the genesis of Goat Consulting. That's how we got Goat Consulting going, was basically too much demand for our services.

Reed

Then what do you do now for Goat Consulting? What does Goat Consulting do?

William

First and foremost, when clients come to us,the first thing we have to do is a lot of organization. It's getting their catalog all in one place. It's getting the prices, the photos, everything in one place. From there, it's doing keyword research. It's looking up what keywords are searching to find these products. From there, we reconstruct their catalog by rewriting all their copywriting and doing it in a keyword-optimized fashion, and then using that keyword research to help us market and advertise the products throughout Amazon. We run advertising through Amazon Advertising services helping brands and manufactures spend their advertising budgets to generate the greatest amount of sales. We don't do anything off of Amazon. We don't help out with Shopify, or Instagram, or anything like that. We're really specialized in Amazon and helping people grow on the Amazon Marketplace. We eat, sleep, breathe only Amazon. Manufacturers and brands basically hear the story I just told you about my family's company and say, "Hey, we want you to do that with our company. We want you to take us online and expand our sales. Let's get everything organized and get everything set up for Amazon."

Reed

Do you work with both manufacturers who sell wholesale and brand owners that sell direct to consumer?

William

Yeah, we work with either one. It just depends. That's a perfect question for the first call we'd have with a potential client, saying, "Hey, what kind of business model do you have? Are you a brand owner with one SKU that you guys really market like crazy? Are you a manufacturer who has 10,000 SKUs? We'll see how we can work with you there. Any one of those business models, we can find  some way where we could help them on Amazon and help them on their Amazon journey and the Amazon Marketplace. For the most part, we would prefer to work with brands that are established, old-school brands that are great, people love them, and that they are kind of the Lamborghini of their niche. That would be my A+ preferred client. Where if you go into their specific niche, and you go to someone who is in that niche, and say, "Hey, I'm working with so-and-so company," they go, "Wow, I love their products." Part of our job is making it just easy to find the product and buy the product on Amazon. That's one of our underlying, most boring, easiest goals that we go after. If someone can't search your product's name and find it, where it has the proper photos, the proper pricing, and it describes the product properly in the copy, then we've already lost the battle.

Reed

It sounds like even when your uncle transitioned Tjernlund Products into manufacturing of accessories, that was a boom in the Tjernlund Products business, taking advantage of the change in the marketplace, seeing that it was super-competitive for manufacturing the large furnaces. It sounds like the next big thing was selling directly to consumers through Amazon, again taking your own situation and transitioning it to Vendor Central. Just being ahead of each of these both problems and opportunities have helped Tjernlund Products be successful selling on Amazon. Do you think that other manufacturing companies can copy your model, or utilize Amazon as a marketplace to be successful for themselves?

William

I think it comes down to, say, the manufacturer's, who is in a similar position, risk tolerance. For my brother and I, we had to do things in almost stealth mode, and kind of just do things and ask for forgiveness later. Because if we would have come up to my cousins, my dad, and unveiled this big business plan of, "Here's how we get to $10 million of sales in 18 months. We buy this many SKUs at this time. We resell them for this price." If we had it all extrapolated out and the math was perfect, that probably would have scared them off. They would have said, "No way I'm investing $1 million in cash to try to make $10 million." But if we did it in a slow, step-by-step process of us slowly doing it, buying it, proving ourselves, then we were able to still get to that point of saying, "Okay, yeah. We did end up risking $1 million over the last 18 months, but we did it in short, small segments. Every time, we made sure we got our money back before we invested again." That way, it was a little bit easier pill for them to swallow.If I walk into a manufacturing company saying, "Hey, you need to sell everything direct," probably the first thing they're going to say to me is that, "Hey, a lot of our distributors don't want us to sell direct." We go, "Okay, so that's maybe the first thing we should work on," is talking to the distributors and saying, "Why is that? How can we work together to make sure that we both money out of this selling direct thing. How can we make sure that we don't ruin your brand by underselling everyone direct, because you still want to sell things at these high retail prices to your supply chain?" It's talking to them there. The second one would be, "Okay, how much cash do you guys have to invest in new products that you're not currently sourcing? Because you guys have 10,000 products you could be sourcing, but you guys only buy these 50 products. That's all you need for your manufacturing plant. Which ones of these are you willing to take a risk on?" It really comes down to risk tolerance first and foremost. Are they willing to call up their suppliers and say, "Hey, we want to sell direct to Amazon"? A lot of them wouldn't even want to do that. If they're willing to do that, then okay, how much cash are you willing to risk? Working through the process, doing baby steps, and saying, "Okay, if you guys are as risky as possible, trying everything out, we can get you to X point. If you try half of these things out, maybe we can get you to Y point. If you guys want to keep business as normal, and just sell direct to consumer and keep continuing doing your B2B, this is putting a smaller Band-Aid on an open wound. The direct to consumer is only going to get bigger and bigger. You guys are kind of dipping your toe in it, but for the most part, you're not going to get the full benefits of it until you jump headfirst in."

Reed

So strategically, you can get everything right, but operationally, there's different ways to cut it. You can baby-step into it or jump right in, is what it sounds like.

William

Exactly, and it's just dealing with the culture of people saying ... I can't tell you how many times I've talked to business owners and they go, "But you don't know about the so-and-so industry. You don't know what the toy industry is like. You don't know what the scooter industry is like. You don't know what the X industry is like. We all know each other. We're all a small band of business owners and business partners who all work together. If one person screws one person over by trying to sell direct on Amazon, then their whole business is out of business, because then everyone's going to quit doing business with them." That seems to be a common theme between a lot of these niches we talk to. It's explaining to them that the sky is not going to fall if you sell directly. You're still a human being. They'll still contact you and talk to you. If you can explain how going direct to consumer is actually best for the consumer, best for the brand owner, and everyone wins you make money per product and the customer gets it at the lowest price and the fastest possible, then you can really explain that, "Hey, the people who add value in this world are actually getting the most profit money back, as opposed to a bunch of middlemen." My whole thesis for Goat Consulting, working with Tjernlund Products, everything, is how do we get rid of middlemen. If they're adding value, if they're keeping the product on a shelf in a store, if they're explaining to each customer why the product is different, if they're keeping the product in stock, saying, "Hey, here's what a yellow one looks like. Here's the green one. Here's what the 6foot looks like compares to the 10-foot," if they're doing all that kind of stuff, they're really providing value to the customer. They're letting them touch it. They're giving expertise about the product. They're explaining how the product works. That is amazing. If you can get a bunch of distributors like that or brick-and-mortar stores like that, that's amazing. In this day and age, that's becoming less and less common. You can go to any Target and start asking them technical questions about a dresser. There is a chance the employee might not know that much about that dresser. As retail stores keep less stuff in stock nowadays, as their employees know less expertise about the specific products, they're adding less and less value, and it makes more and more sense to buy directly from the brand owner, directly from the manufacturer.

Reed

Sure. That even goes back to your economics education. How do I make markets more efficient? Which irks you.

William

Yeah, exactly.

Reed

Which is something that motivates you. Tell me about, speaking of employees, Tjernlund Products now. Do you still have a manufacturing arm? Is it still just your brother working it? How does that transition happen?

William

My brother basically runs the majority of the company now, and it's a majority Amazon company. Maybe 80-20 Amazon to traditional manufacturing.

Reed

Is it still just him unloading trucks by himself?

William

No, he's got a full team now. I don't know off the top of my head. The last time I was there was a few weeks ago, and he maybe has 10, maybe 12 people working in a warehouse. Then he has two administrative people, one customer service person helping him in his office, and then one person who helps him write the copy and upload the listings onto Amazon. Then he has a small army of virtual assistants that help him with the super busy work of formatting spreadsheets and such. Overall, he might have a team of 14 people now.

Reed

Then it sounds like it wasn't, "We're going to start selling online, and we're going to fire the whole workforce." It sounds like everybody was cross-trained and retrained into helping out with this different thing.

William

Yeah, exactly. It was begrudgingly at first, when the boss's son comes in and says, "Hey, we're doing things differently now. I'm in charge. Here's what you're going to be doing for your job." They've been doing a different job the same way for 30 years, and then all of a sudden some young kid comes in and tries to boss them around. It was a little bit begrudgingly at first, but then slowly but surely, they understood that, "This is what the company does now. We're moving full-bore into Amazon. If you want to continue doing your job, we've got a million different things we can cross-train you into. We'd love to have you. We don't want to let anyone go if we don't have to, but if you're not willing to learn ..." We have one guy, I remember, I know specifically off the top of my head, who refused to help with Amazon. He no longer is with them, because he just said, "I'm not learning how. I'm not cross-training. I'm not going to do it." We said, "Hey, these are what jobs we have open now for people with your skills." He wouldn't do it, and so he is no longer with them. There were a few little bumps in the road here and there, but for the most part, people were pretty excited about being cross-trained, trying something new, and trying something that's a little bit different, learning new skills. Most people, after a little while, were actually pretty open to it, and now are excited about it.

Reed

There can be some cultural challenges with doing new business ventures, but it's needed sometimes to stay alive. If you guys didn't transition to this e-commerce Amazon, there may be a day where you'd have to close the doors on Tjernlund Products. It's that change mentality, but needing to adapt to it, basically.

William

Exactly. We have a unique workforce, where there is a decent amount of people who work in the factory at Tjernlund Products who don't have cell phones or Internet at home. That makes even just the simplest thing, training them on Amazon on a computer, that much more difficult. That was a little bit of a cultural change. Where of course you and I know to right-click gives us a lot more options than to left-click, but that might not be apparent to everyone else. Another example was watching someone in shipping write down a tracking number on a Post-It note and walking across the factory to give it to someone else to input for the customer. Something like that where it's like, "Oh, you just copy and paste it, and you send it right to the customer." You skip a step. You don't mess up writing the tracking down, all that kind of stuff. Little things like that, where you just would think were common sense, because you just want to use a computer, you want it to be easier, and quicker, and faster, and other people who their first mentality is to do things manually and not on their computer, how to just retrain their brain to go, "Okay, computers aren't that bad. Don't worry about it. This computer system actually works pretty well." Another problem we had at Tjernlund Products in the beginning was their inventory management system was 25 years old and had zero APIs you could hook up to it. Taking their super old-school EDI and inventory management system and retrofitting it to do finished products on Amazon was a little bit difficult. I can't really get into the weeds on that one, just because I don't know exactly what they had to do, but their traditional inventory management system would have this piece of sheet metal is part number 101. It's 101B once it's been bent twice, and once it's bent twice, it's 101C. 101C plus 102B together equals a crawlspace fan. They had it broken down parts, and then fabricated parts, and then finished goods. Trying to integrate that into just normal, finished goods, and importing and exporting stuff from Amazon, was a little bit difficult. The software is so old, you can't even use a mouse on it. You had to use everything via keystrokes. That was a little bit difficult. They're still having problems with it today, but for them to switch everything on the manufacturing side over would be nearly impossible now. I think they have to fully phase out the manufacturing side before they can change over that inventory management system.

Reed

There are cultural challenges, technological challenges, financial challenges, which is why you switched to Vendor Central, but it sounds like it's proving to be a successful and profitable channel for Tjernlund Products that could be repeatable for other manufacturers. Where do you see the future going for Tjernlund Products?

William

I think the future is to continue doing what they're doing, being kind of a glorified sourcing agent for Amazon.  Amazon now has vendor managers who tell them specifically, "Go contact these brands."  I think there's plenty of room to do that for at least the next five to 10 years. Then from there, we'll probably have thought of the next logical step for us to take. Today, I was on one of our consulting company's competitors' websites. They were saying they work with these five marketplaces, and one of the marketplaces I'd never heard of. It was called 21 liquid.com or something like that, something, a number and a noun. Instantly, I go and look at it, figure out how to sign up as a seller, look all around it. It's just that kind of stuff, where I need to know where the consumers are. I need to know who the next up-and-coming marketplaces are. I need to know what consumer behavior is like in the 21st century. I need to keep track of all of these things, and slowly do these calculations in my brain to know that, "Hey, Amazon isn't the future. We should all be selling on Jet.com and Wish.com," and knowing those things a few years ahead of everyone else so I can guide my family's company in the right direction, guide the companies that we work for in the right direction, and just guide our own agency in the right direction to make sure that we're being as efficient and being as cutting-edge as possible.

Reed

Perfect. Anything else that you want to tell?

William

No, besides that I hope I didn't scare anyone off. There are some things you need to deal with between the software, cultural, and risk-mitigation, but in the end, it was super beneficial for us. You can take each baby step along the way, and make sure that each step is provable and profitable before you take the next one.