Mr. Jassy, your NUTSAAKK is showing

Back in action this week after a brief hiatus with what I think of as the quintessential United States of Amazon story.

We’re also adding a new section— each edition from here on out will end with a cocktail recipe where I share whatever I’m drinking this week. In the words of our greatest American hero, Salute Mi Familia 

In real life, perfect microcosms do not exist. Searching for one is the folly of the mediocre writer looking for a crutch to get out of having to explain a massively complex problem such as say, how the most powerful civilian institution in America could ultimately wither away.

Or so I thought until the newsletter gods (ok three of my subscribers) blessed me with the serendipitous discovery of an Amazon brand called NUTSAAKK. Fire up the AC/DC while you read this incredible brand story below.

First off, despite the mountain of evidence, I refuse to believe that something this sublime is AI-generated. This is a genius bit from the funniest guy in Guangdong who knows exactly what he’s doing and giggles every time an order hits his Seller Central account. Everything about this copywriting is four dimensional chess. The blatant lie about the founding date (the brand’s sales history starts in 2023), the significance of the logo being shaped like a nut, and the adherence to innovation all read like a brand Jin-Yang would start to con Erlich. 

While NUTSAAKK is a particularly egregious example, it's decently microcosmic of the overall state of the Amazon marketplace which is awash in random strings of characters that add billions of dollars to Amazon’s bottom line. NUTSAAKK’s hero products have >100 five-star reviews, a decent proxy for showing they have a non trivial volume of sales. 

The brand’s execution isn’t bad. There’s halfway passable AI generated creative, a keyword jammed product title and PDP copy that is within the confines of standard English. If the brand’s landed costs are low enough (and coming right from China, they should be) and they have a decent command of PPC ads, the unit economics here work very well for this to be a highly profitable operation. Two years ago, spinning up passable creative, writing decent product titles and writing PDP copy within the confines of standard English were all barriers to entry that allowed American businesses to thrive selling Chinese goods. With every passing development in AI, those barriers fall further.

Despite meaning “strong and stable good products”, NUTSAAKK has no need to last long to fulfill its purpose. This is a simple in and out job. Presumably spun up on the back of some keyword arbitrage opportunity, NUTSAAKK will rise fast and cash out before the going gets hard. Its owners can make a quick buck, celebrate the Lunar New Year, wait out a short refractory period and then launch a line of laundry room accessories called  SCROOTUMM next spring. Such is the 2024 Amazon circle of life. 

It’s one thing when Temu lights money on fire to advertise unprofitably on Facebook— I joked in the last newsletter that it’s a $6B wealth transfer from Beijing to American 401k and pension holders. It’s another when indie Chinese private label sellers advertise directly on Amazon. Chinese factory operations and a $1T+ American hegemony growing at the expense of American small and medium sized businesses is….politically complicated. Furthermore, it’s a populist layup on the campaign trail for either Trump or Biden if they want to lob a few zingers and vaguely patriotic appeals to swing voters. 

For the first time, Amazon acknowledged how intertwined its gaudy Q4 numbers are with the growth of Chinese sellers on the platform:

The word “significant" is doing a gargantuan amount of work here. Estimates in the Amazon community range quite a bit but most observers feel that it is in the ballpark of 50%+ of overall third-party GMV and 25-30% of all Amazon marketplace dollars. 

I've long scoffed at the notion that Amazon is truly vulnerable. My opinion has always been that all of Jeff Bezos's talk that any business goes to zero on a long enough timeline was savvy PR bluster to head regulators off at the pass. Amazon's PR has always been incredibly good at paradoxically positioning the company as smaller and less powerful than it really is.

But for the first time in Amazon’s recent earnings numbers (a whopping $170B of overall Q4 sales and >$10B net income), I see the tiniest traces of existential risk. If more of Amazon's revenue comes from Chinese brands that are intentionally ephemeral, does Amazon itself risk fading towards ephemera? If Amazon’s market share is to meaningfully fade, it won’t come from external competition. It will come from flying too close to the sun and taking short term cash grabs from the NUTSAAKKs of the world. 

Amazon's doom story has been written before, almost religiously every six months by a writer at NY Mag or The Atlantic who has never worked a day in the ecosystem. It's the ads everywhere that are going to do Amazon in....or the random no name brands…..or the increasing Prime cost….or the favoring private label….or the sheer scale of Jeff Bezos’s ambition (what idiot wrote that piece?)  Amazon can resist any one or two of these variables and keep on chugging along. But ever so slowly, it’s starting to look less like a rogue wave and more like the perfect storm. 

Death by a thousand NUTSAAKKs

Amazonia 

My quick take on the week’s most interesting story in the Amazon ecosystem

Walmart is Buying Vizio: Once again, I choose to highlight a story that serves as confirmation bias for one of my core theses and proves that one of my previous pieces was correct. This is why you build your own newsletter and “own your audience.”

I don’t have much more analysis to add here. Retail media is huge and getting bigger, Walmart is thirsty to capture more of Amazon’s upper funnel media power and this deal makes a shit ton of sense (though should draw at least a little regulatory scrutiny.

As it happens, there’s another media business on the market for <10% of the price that a savvy retailer would be wise to snatch up. I wrote about this yesterday for Jacob Donnelly’s A Media Operator and may have more to say on it here next week 🙂 

Dispatches from America

A potpurri of vibes from across the land

The Wall Street Journal Discovers Vegas: Thankfully this piece is paywalled so you (hopefully) can’t read about a WSJ columnist finding out that you can in fact frivolously spend money in Las Vegas:

Slashing your DC bureau and shuttering the entire team covering US-China relations while publishing (and presumably covering the bill for)…..whatever this is…….is quite a look folks

How to Buy a Company: Congratulations to the “gigachads” who now own Children’s Place

Cocktail of the Week: The Tropical Cosmo

For readers that make it this far, we have a new treat…a weekly cocktail recipe. It’s cold in NY so I’ve been capturing the spirit of the islands with the ultra manly…..tropical cosmopolitan. If Carrie only knew about these, there woulda been a lot more sex in our city.

Here goes:

• 1.5 oz white rum (I like Wray & Nephew overproof but any rum will do)

• .5 oz Cointreau (Triple Sec is probably fine but I’m a snob here)

• .5 oz GOYA guava concentrate (more notes on this below)

• .25 oz Velvet Falernum

• The juice of half of a voluptuous lime (or 1 full lime if it isn’t as robust)

Shake vigoroulsy and enjoy. This drink is sweet and the complexity comes from the velvet falernum so no need to use your good rum here. Even Bacardi is fine.

These cartons of GOYA are an absolute mixology godsend. Essentially, they are concentrated fruit purees that are injected with liquid sugar for maximum flavor. Most importantly, they are not cut with other cheaper fruit juices like many store bought brands. At >35g of sugar per 8oz serving, it’s an absolute travesty that these are marketed and sold to children but they have no equal in drinks like this. Use sparingly, a little goes a long way.