ZQ Magazine - Issue 03 / March 2022 by ZQUARED

Table of

Contents Our Brands Brand Highlights

Informational Resources Advertising Costs On the Rise

MAP Agreements & the Amazon Marketplace

Enforcing MAP Agreements

ZQ Community

ZQ 101

Charlie’s Corner

Join Our Team

Get in Touch

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A letter from the CEO The end of the first quarter makes for an ideal time to pause and reflect on how 2022 has begun to take shape. Many plans have unfolded smoothly, but unexpected bumps in the road have also popped up along the way. While we find ourselves, like many others, facing challenges from rising raw material costs, extended lead times, shipping delays and inflation, ZQUARED has continued to forge ahead with strong growth. After 1Q22, our sales are trending towards an all time high. While we are far from the finish line, we are grateful for the effort put forth by our Brand Partners and the ZQUARED team to kick off the year with a strong trajectory. As the quarter draws to an end, we look forward to the spring sales season, enjoying warmer weather and, of course, the start of baseball!

Zach Cornett

Co-Founder & CEO, ZQUARED

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Our

Brands 5

Brand Highlights For the month of March, we’re highlighting Animal Nutritional Products, Bubba Rope, Daytona Helmets and GLC Direct. We’re honored to be a part of the journey alongside these incredible Brands.

Year Founded: 2001 Category: Pet & Animal Health

FUN FACT ANP’s top seller, UroMAXX™, is the #1 Most Purchased herbal supplement in the USA for the UTI issues of cats and dogs.

Year Founded: 2009 Category: Sports & Outdoors

FUN FACT 6

Bubba Rope’s Gator-Jaw® synthetic shackle won the 2015 SEMA Award for Best New Off-Road Product.

Doug Worswick, Jim Flowers and Amanda Caldwell of Bubba Rope with Director of Brand Partnerships Misty Molloy & Co-Founder and Executive Chairman Chad Cornett at the January SHOT Show.

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Year Founded: 1992 Category: Sports & Outdoors

FUN FACT Daytona Helmets is the proud maker of the smallest DOTapproved 3/4 shell helmet ever offered.

FUN FACT Year Founded: 1999 Category: Health & Wellness

GLC Direct is a member of the Natural Products Association, a proud participant in the NPA Truth in Labeling Program and a part of the NASC (National Animal Supplement Council).

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Informational

Resources 9

AMAZON News

Advertising Costs On the Rise Across Amazon, sellers and consumers alike are being hit with substantial price increases in Prime membership fees, Fulfillment by Amazon (FBA) expenses, and Amazon advertising costs. Extenuating circumstances continue to affect Amazon FBA rates. Namely, a dramatic increase in sellers on Amazon has led to supply chain bottlenecks, labor shortages, wage increases, logistical nightmares, warehousing shortages - and more. A jump in sellers has also driven up advertising costs as a result of increased competition. Though Amazon states advertising is optional, advertising on Amazon is an essential aspect of business. Without effective advertising campaigns, product listings can quickly become lost in an ever-deepening sea of competition. Amazon’s pay-to-play advertising model can be challenging for small- and mediumsized businesses that struggle to remain relevant in their target market, even if they have the best product at the best price. This issue is largely attributed to ad campaigns segmenting potential consumers based on interests, preferences, search results and product view history, and then providing targeted ads that drive click-through and conversion rates.

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In February 2022, Amazon reported the company earned $31.2 billion from ads in 2021, which is higher than ad revenue generated by YouTube and Snap, Inc. Amazon’s ad business is one of the company’s fastest-growing revenue streams and expanded 32% in 2021 Q4. The sheer number of sellers on Amazon leads to higher advertising costs as the competition for market share becomes increasingly fierce. Amazon uses an auction model when determining the price of ads; the more sellers are willing to pay for ad space, the higher spend climbs. Companies are reevaluating product offerings as a result of this dynamic due to the high cost of advertising, low product rank, and increased product density. On the consumer side, shoppers are likely to continue experiencing rising costs as sellers pass along higher expenses associated with advertising, FBA fees and supply chain shortages. Amazon is also well-known for penalizing sellers for offering products via other online retailers for lower prices. This practice reduces product price variance and diminishes the likelihood of shoppers being able to find better deals elsewhere. Amazon is a money-making machine focused on engaging the right customers at the right time for the right product at the right price. This focus drives revenue, and Amazon is constantly improving their ad capabilities, both through ad types and customercentric data that details customer purchasing habits. While these two aspects of Amazon advertising add value to both sellers and consumers alike, this value comes at a steep price. Though sellers can’t control most changes within the Amazon marketplace, they can optimize advertising campaigns by developing strategies and managing spend to drive maximum value.

THE ZQUARED ADVANTAGE ZQUARED collaborates with our Brand Partners to develop big picture plans, including advanced advertising strategies. We work together to set and assess key performance indicators (KPIs) that drive campaign measurement and optimization. Our primary goals are to provide better understanding of target markets, increase brand and product awareness, and, ultimately, grow sales and revenue. Strengthening all aspects of the Amazon platform for brands is a top priority. We work with our Brand Partners to develop end-to-end solutions that focus on growing sales through advanced brand optimization and marketing, strategy execution, proprietary technology, forecasting tools, logistical support, product distribution and more. To learn how ZQUARED can help you stay ahead in the Amazon game, request a comprehensive assessment of your Amazon channel from our Amazon Investment Partnership Team. You will receive audit results focused on your listings, category, competitors, reseller landscape and more with an individually-tailored strategic plan designed to capitalize on opportunities.

MAP Agreements & the Amazon Marketplace Establishing your brand on Amazon can be a difficult, daunting task in an ever-growing marketplace where marketability and differentiation is more essential than ever before. Creating a fair, competitive marketplace by requiring online resellers to adhere to an established minimum price is important for protecting and growing your brand. What Is Minimum Advertising Price (MAP)? Minimum Advertised Price (MAP) is the minimum price a manufacturer sets for product resale. Distributors and resellers are not permitted to advertise or resell products online for less than the manufacturer’s established MAP. When resellers agree to the terms outlined by the manufacturer, they sign a MAP agreement to ensure a level playing field and promote fair competition between all resellers. This agreement ultimately protects the brand. The Importance of MAP Agreements Undercutting established pricing is a common practice with the goal of achieving more sales and reviews. Because this predatory sales tactic can quickly damage a manufacturer’s reputation, MAP agreements are essential to maintaining brand image and credibility. MAP adherence is also essential for reducing the number of rogue resellers who can create a host of problems for manufacturers and brands. Rogue resellers are defined as any seller who is not transparent with manufacturers as to who they are as a company and who often violate guidelines set by the brand, especially MAP. Violating a brand’s MAP agreement can damage a brand’s image and reputation by creating issues regarding competition for distributors and resellers and marketplace uncertainty.

Why MAP Is Critical to Your Brand Consistent product pricing enhances brand identity and protects your reseller market. Strong MAP agreements help prevent “race to the bottom” pricing wars and promote balanced competition between small buyers and large companies who can afford to buy in bulk and offer lower prices. With the same products available across multiple retailers via mobile, online, or in-store, consumers often shop around for the best price and expect a frictionless shopping experience. MAP agreements allow for all resellers on Amazon to share the “Buy Box”. Essentially, MAP agreements ensure that all distributors and resellers are granted the same ability to earn healthy margins on goods sold. As distributors and resellers become savvier to the online space,

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inconsistent pricing leads to lower confidence in resellers’ ability to make sales. Ensuring MAP Adherence on Amazon Once a manufacturer creates and implements a MAP policy, devoting time and energy to enforcing it is critical. Ensuring pricing consistency across all channels and platforms builds reseller confidence in the manufacturer and helps protect the manufacturer’s brand image. If a manufacturer’s pricing policy is not upheld with swift action against those violating its policy, the MAP agreement loses credibility and can create long-term enforcement issues. MAP monitoring programs are available to help brands stay on top of MAP compliance.

Strengthening all aspects of the Amazon platform for brands is a top priority. We work with our Brand Partners to develop end-to-end solutions that focus on growing sales through advanced brand optimization and marketing, strategy execution, proprietary technology, forecasting tools, logistical support, product distribution and more. To learn how ZQUARED can help you stay ahead in the Amazon game, request a comprehensive assessment of your Amazon channel from our Amazon Investment Partnership Team. You will receive audit results focused on your listings, category, competitors, reseller landscape and more with an individually-tailored strategic plan designed to capitalize on opportunities.

Enforcing MAP Agreements on Amazon Minimum Advertised Price (MAP) is the minimum price a manufacturer sets for product resale. Distributors and resellers are not permitted to advertise or resell products online for less than the manufacturer’s established MAP. When resellers agree to the terms outlined by the manufacturer, they sign a MAP agreement to ensure a level playing field and promote fair competition between all resellers. Why Is MAP Enforcement Difficult to Manage on Amazon? Rogue resellers on Amazon are well-known for using shady practices to undercut the competition. Violating manufacturer MAP to win the “Buy Box” and sell more product is often the go-to tactic for controlling the marketplace. Monitoring MAP pricing can be a tedious and often overwhelming task, especially if a brand has numerous resellers. Being unaware of reseller MAP violations and struggling to enforce established policies creates uncertainty. Reputable distributors and resellers become understandably frustrated when manufacturers are unable to maintain profitable margins.

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Consequences of Not Enforcing MAP 1. Damage to Brand Image Possibly the most detrimental issue with failing to enforce MAP agreements is compromising brand image and reputation. Resellers who intentionally violate MAP agreements to achieve higher sales and revenue negatively impact a brand’s value – both to consumers and retailers alike. 2. Reduced Pricing Leads to Decreased Reseller Margins Rogue resellers create a cutthroat, aggressive marketplace by undercutting established product pricing. Commonly known as the “race to the bottom”, resellers continue to lower prices to win sales, driving down a brand’s value and overall profit margins. 3. “Buy Box” Issues MAP agreements allow for Amazon resellers to share the “Buy Box” by providing equal opportunity for consumers to purchase products across all vendors. Violating MAP agreements creates an uneven playing field rather than healthy competition. Most importantly, failure to stabilize MAP on other e-commerce platforms leads to Amazon listing suppression. Amazon’s ultimate goal is making money - and when cheaper prices are available elsewhere, they bury the listing and halt advertising in favor of brands with wellcontrolled MAP knowing they have a higher chance of making the sale.

How to Enforce MAP Agreements Once a manufacturer creates and implements a MAP policy, devoting time and energy to enforcing it is critical. To ensure proper enforcement, manufacturers should: 1. Enroll in Amazon Brand Registry Amazon Brand Registry allows manufacturers to register their brand and products with Amazon, which provides access to exclusive tools for managing product listings. These tools aid in finding and addressing changes and issues with product descriptions, images, trademarks and more that have been adjusted by resellers unauthorized to officially represent the brand. 2. Communicate MAP Policies to Resellers It’s never too late to establish and enforce a MAP policy. When implementing a MAP agreement, be sure to inform all approved distributors and resellers of the new policy. From there, the manufacturer is responsible for ensuring adherence to the policies set forth and agreed upon. 3. Monitor the Number of Approved Resellers Monitoring approved and unauthorized selling on Amazon and across all e-commerce marketplaces is crucial to maximizing brand success. Strategically managing the number of distribution partners allows for easier monitoring and enforcement. Manufacturers may need to take legal action to correct unauthorized reseller and MAP violation issues.

THE ZQUARED ADVANTAGE ZQUARED helps Brand Partners create, monitor and enforce MAP agreements with distributors and resellers on Amazon. We partner with brands to proactively and reactively ensure brand consistency, helping to identify and rectify issues with rogue resellers as needed. Strengthening all aspects of the Amazon platform for brands is a top priority. We work with our Brand Partners to develop end-to-end solutions that focus on growing sales through advanced brand optimization and marketing, strategy execution, proprietary technology, forecasting tools, logistical support, product distribution and more.

To learn how ZQUARED can help you stay ahead in the Amazon game, request a comprehensive assessment of your Amazon channel from our Amazon Investment Partnership Team. You will receive audit results focused on your listings, category, competitors, reseller landscape and more with an individuallytailored strategic plan designed to capitalize on opportunities.

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Community 17

Founded in 2010, ZQUARED is ranked as a top 125 AMAZON SELLER with over 75k reviews, 100% of which are positive over the last 12 months. OUR PURPOSE ZQUARED invests in brands who sell on Amazon and are poised and ready for growth. WE-COMMERCE Putting the “we” in e-commerce. ZQUARED, we are a team of professionals At who understand the opportunities, risks and challenges on Amazon. With nearly 40 years combined experience as Amazon sellers, our primary goal is helping you multiply your success by serving as an extension of your team to maximize results. From distribution to advertising strategies, we have solutions proven to grow your brand.

YOU GROW, WE GROW—TOGETHER Built on the belief that all boats rise with the tide, our services are based on this principle. ZQUARED invests time, money, effort and energy into brands poised for success with the expectation of a worthwhile result— because we go all-in, growing together and winning when you win.

OUR MISSION

Our mission is to invest in brands who sell on Amazon and are poised and ready for growth by forming partnerships built on trust and rooted in relationship to maximize value and achieve results.

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OUR VALUES UNPARALLELED CULTURE ZQUARED’s motto is “we—not me”, and we strive to build an unparalleled culture by incorporating this attitude into every aspect of our workplace, empowering a team built on communication and trust with a service-based mindset to get the job done. FIRST-RATE EXECUTION We strive to provide unmatched quality when servicing each of our Brand Partners. By intentionally being proactive, prepared, and in constant pursuit of improvement, our promise hinges on delivering top-quality results in all aspects of our work. ENTHUSIASM Our partnerships are more than transactions—we invest in people and brands who share our drive and enthusiasm, deepening partner relations while collaborating to execute expert-level growth strategies.

OUR HISTORY With more than a decade of experience, we’ve learned what it takes to win on Amazon: ultimately, people matter more than products, and investing in people first leads to growth and profitable Amazon brands.

2010

2011

2014

Originally named Advantage Nutrition, ZQUARED brothers and Co-Founders Chad and Zach Cornett set out to establish a brick-and-mortar retail company with an emphasis on health and wellness. They pivoted when they realized e-tail, particularly Amazon, was taking off, recognizing brands needed help navigating the everchanging e-commerce landscape.

Charlie Meyer was ZQUARED’s first official hire, and he’s been with us ever since. Our people are our foundation.

ZQUARED three time its origina basement footprint w and growi 50+.

WORKING OUT OF CHAD’S BASEMENT

HIRING OUR FIRST EMPLOYEE

PLANT IN ST.

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2019

D has moved es since leaving al spot in Chad’s t, doubling its with each move ing to a staff of

Inc. recognizes ZQUARED as one of the fastest-growing privatelyheld companies in the United States, while the St. Louis Business Journal names ZQUARED on its “Fast 50” list.

TING ROOTS LOUIS

HARD WORK PAYS OFF

2021

AND BEYOND

ZQUARED hires Jeff Bush as President, positioning the company for continued growth