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Segment 6: Tower Paddle Boards on Amazon

Below is an excerpt from our 2019 interview with Stephan Aarstol, the Founder & CEO of Tower Paddle Boards, who continues his conversation with Brad Kauffman of NoMiddleman.com. If you’d like to read or listen to the full interview, visit the Tower Paddle Boards blog post.


Brad: That makes sense. So I think what you’re speaking to is the cost of customer acquisition, and how when something becomes popular then everyone (all businesses) go there, and that drives up the cost (of acquiring customers).

For budding entrepreneurs, but also for consumers: what, in a nutshell, happened with Amazon? (The rising cost of Google’s) Adwords makes sense, it’s an auction; just more people bidding, and that drove up the price. But what happened at Amazon (to drive up costs)?

Stephan: In my opinion, Amazon started in books, right? The benefit of Amazon, over every other bookstore, is that they had unlimited inventory. If you go into a regular bookstore they might have 100,000 books, which is a lot. That’s why the mega-bookstores were so popular, because they had a lot of books.

Amazon, overnight, instantly had a million books, or two million books. They basically had every book on the planet, in one store. That was their advantage. Their advantage was selection… That is where Amazon was founded, that’s where they cut their teeth.

So then they started selling other products, and that was their thing. They wanted to have every brand on earth, of every product, basically. So they want selection. And now, you’ve got a bunch of brands. It’s getting easier and easier to create a brand, and then it’s easier and easier to sell on Amazon, and traditional brands are selling on there.

In the paddle board category, when we started, there was maybe only three or four paddle board brands there. Now there are maybe 200, 300 brands on there.

Brad: Wow! Just on Amazon?

Stephan: Yeah, on Amazon. And a lot of these brands are what I call “Chinese no-name brands”. They’re just transactional brands. There’s no branding behind it, it’s just XYZ company that is selling a paddle board, and it’s confusing now.

And then you have these internet marketing types that go on there and game the review system, because if you can get a lot of reviews, it looks like this is a legitimate thing, so that’s what everybody is doing.

You get some cheap no-name brand or Chinese factory, and then you plug in an internet marketer, and they get very good at transactional sales on Amazon without ever building a brand. So now you have this hyper-competitive marketplace with crappy brands and a lot of selection.

That’s what Amazon has become. And as a legitimate brand, if you want to be seen, you have to advertise. It used to be they were taking a 15% cut, and then maybe it was a 20% cut, and then maybe a 25% cut. And that was without advertising.

You add advertising in there, you’ve got to commit another 10, 15, 20, even 30% of your cost of sales toward advertising. So if you add 25% there, you’re at a 50% (total combined) cut for Amazon, which is basically back to retail. And Amazon has done this intentionally… they wanted the brands that were in the (retail) stores, (brands) that were used to giving 50% cut, who were fine with that. They just wanted to have all the brands. You go on to Amazon, buy anything from any brand, in one place, and it’s very convenient. That’s what Amazon has become, is a convenience store.

But what got lost along the way is, Amazon used to be a place you would go and get the cheapest stuff. It’s not anymore. So that’s what’s changed. And they’re now taking these, basically, retail store margins from buying stuff online, and they’ve become a convenience store.

Next: Disadvantages Of Amazon For DTC Brands Like Tower Paddle Boards

Amazon was good for direct to consumer businesses—until it wasn’t. In this segment, you’ll see the astronomical sales numbers Aarstol enjoyed in the early days, but also the growing challenges: disconnected customer service, increased return rates, and increased fees. Read more >>


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Full Interview: Tower Paddle Boards

If you’d like to skip ahead or go back for previous content, no problem! See below for links and summaries for every segment of our amazing interview with Tower Paddle Boards founder Stephan Aarstol.

Segment 1: Introduction To Tower Paddle Boards And Founder Stephan Aarstol

In this segment, we dive into where it all began for Tower Paddle Boards. We cover Aarstol’s background in online marketing, and how he pivoted away from his poker chip company to pursue his hunch that paddle boards would soon be mainstream. Read more >>

Segment 2: The Shark Tank Effect At Tower Paddle Boards

When Shark Tank came calling, Aarstol answered, and Tower Paddle Boards took off like a rocket ship. But it almost didn’t happen—Aarstol froze on stage, delivering what he calls “the worst pitch in Shark Tank history.” Learn how he crashed, recovered, and landed a deal with Mark Cuban. Read more >>

Segment 3: How Tower Paddle Boards Cut Out The Middlemen And Delivered More Value To Consumers

How did Aarstol figure out how to cut out the middlemen and deliver Tower Paddle Boards direct to consumer, for half of the retail price? In this segment, Aarstol explains how he overcame the price-fixing of the industry’s dominant players to bring consumers lower prices, higher quality, and better service. Read more >>

Segment 4: How Tower Paddle Boards Sourced Factories

When building a direct to consumer business, finding a dependable factory is a competitive advantage, Aarstol says. In this segment he reveals his best tools and tips in sourcing factories: how to find the best ones, how to avoid the scams, and why anti-competitive behaviors are a sign of bigger problems. Read more >>

Segment 5: The Retail Equation At Tower Paddle Boards

“We never want to be that company that just pads our direct-to-consumer margins so we can accommodate retail partners that are taking a 50% cut,” Aarstol explains. In this segment, you’ll learn how Tower Paddle Boards uses their core principles to evaluate retail opportunities. Read more >>

Segment 6: Tower Paddle Boards on Amazon

For direct to consumer brands, Amazon is the elephant in the room. In this segment, Aarstol explains how Amazon has become expensive for consumers and crowded for brands—and why he believes Amazon is merely an online convenience store, carrying the high markups of offline retail middlemen. Read more >>

Segment 7: Disadvantages Of Amazon For DTC Brands Like Tower Paddle Boards

Amazon was good for direct to consumer businesses—until it wasn’t. In this segment, you’ll see the astronomical sales numbers Aarstol enjoyed in the early days, but also the growing challenges: disconnected customer service, increased return rates, and increased fees. Read more >>

Segment 8: Will Tower Paddle Boards Walk Away From Amazon?

Is it time for direct to consumer brands to leave Amazon? How will they survive if so? In this segment, Aarstol explains the two consumer behaviors that he believes will not change in the future, and why that’s good news for brands like Tower—helping them survive without Amazon. Read more >>

Segment 9: On The Horizon At Tower Paddle Boards

What’s next for Tower Paddle Boards? In this segment, Aarstol reveals his perspective on the ideal balance between pricing and quality, and how keeping expenses low (and advertising minimal) impacts Tower’s ability to expand into popular products with exceptional value for consumers. Read more >>

Segment 10: What Informs New Product Ideas At Tower Paddle Boards

By living the beach lifestyle themselves, Aarstol’s team has insights into new products and quality design. “If a company out of New York is creating beach lifestyle products, they really don’t understand the market as well as we do,” Aarstol says. “Our brand has this authenticity, because we’re making products that we know.” Read more >>

Segment 11: What Tower Paddle Boards Is About (From A Value Standpoint)

Tower Paddle Boards went in two unique directions, when it comes to delivering value. Product development is focused on what the consumer needs (not what it costs), and team productivity is fueled by Aarstol’s revolutionary idea to live more by working less—with a five-hour workday. Learn the secrets behind Tower’s popular products and productive culture. Read more >>

Segment 12: Tower Beach Club Offers New Experience With Tower Paddle Boards

In this segment, you’ll learn how Tower Paddle Boards is taking the beach lifestyle experience to an entirely new level with the launch of Tower Beach Club in San Diego. Whether you’re a fan of Tower, or a direct to consumer brand exec, you’ll want to read the innovative retail plans and fun experience ahead for Tower customers and visitors. Read more >>

Segment 13: Connecting with Tower Paddle Boards

As we wrap up the interview, we provide links and information on connecting with your favorite Tower brands—from paddle boards to sunglasses to electric bikes—as well as how to reach out to Tower Founder & CEO, Stephan Aarstol. Read more >>

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