Revenue growth on Amazon is not the hard part. Spencer Jacobs, Co-Founder and President of Neato, states the problem precisely: a brand with a great product will grow Amazon revenue reasonably simply, and growing that revenue profitably is a separate discipline most mid-market brands have not built. When a brand’s Amazon costs sit in fee categories that never appeared in its brick and mortar P&L, the executive team reads a growing top line against a deteriorating channel margin, and every additional investment in ad tech, software, people, and logistics lands on a P&L that already will not support it.
Glenn Gow, The Scaling Executive Coach and host of The Scaling Executive Podcast, pressed the point directly, describing the brand-side assumption that a CEO already understands cost of customer acquisition, supply chain costs, and delivery costs. Jacobs’s answer is that the assumption holds in traditional retail and breaks on Amazon. He spent over 15 years in global sourcing, retail sales, and supply chain management on the brand side for companies including Swerve Sweetener and TreeHouse Foods before co-founding Neato, which has made the Inc. 5000 list four times.
Who this episode is for: CEOs and division leaders at mid-market consumer brands whose Amazon revenue is growing while Amazon margin is not, and who cannot yet say which line items are responsible.
Key Takeaways
- Amazon revenue growth and Amazon profit growth are different problems with different solutions. Spencer Jacobs identifies profitable growth as the harder discipline and the one most mid-market brands have not built, even when the product is strong.
- The P&L failure is structural rather than a matter of competence. Jacobs is explicit that consumer packaged goods companies understand traditional retail economics extremely well, and that Amazon introduces fee and cost categories that do not land where a brick and mortar P&L expects them.
- Four specific cost questions go unanswered inside most mid-market Amazon P&Ls: where advertising lands, where promotions and trade funding land, where Prime Day spend lands, and where freight fees land.
- The channel structure a brand chooses changes which costs it carries. Jacobs draws the line between selling wholesale to Amazon as a retail customer and running a Seller Central third-party account, and treats the resulting fee exposure as different problems.
- Bandwidth, not strategy, produces the plateau. Jacobs describes mid-market e-commerce as a function typically rolled into sales or marketing, without the capacity to work ads, content, pricing comparisons, and catalog integrity every day.
Amazon Fee Structures Place Costs Where a Traditional Retail P&L Does Not Look for Them
Spencer Jacobs, Co-Founder and President of Neato, is careful not to frame the profitability problem as a finance skills gap. “I think in traditional retail and and you know consumer package goods, they understand that extremely well. It is w it is very well defined.” The gap opens when the same team applies a well-built retail model to a platform that assigns costs differently.
Jacobs names the questions a brand must be able to answer before it can claim to understand its Amazon P&L: “Where do ads land? Where does promotions and trade funding land? Where do you put Prime Day? What about freight fees?” Each one is a cost a brick and mortar P&L either does not carry or carries in a different place. A brand that has not resolved them is not reading an incomplete P&L. It is reading a confident P&L that is wrong.
| Cost question Jacobs names | Why it is hard to place on Amazon | Consequence when it is misplaced |
| Where do advertising costs land | Amazon advertising functions as a cost of sale rather than a marketing line, and it scales with volume rather than with budget | Gross margin looks intact while contribution margin erodes as revenue grows |
| Where do promotions and trade funding land | Trade funding logic built for retail buyers does not map cleanly to platform promotional mechanics | Promotional spend is treated as an investment when it is operating as a discount |
| Where does Prime Day spend land | Concentrated event spend crosses advertising, inventory, and fulfillment in the same window | A single event distorts the period and obscures the underlying run rate |
| Where do freight fees land | Inbound shipping to Amazon’s network carries its own cost structure separate from outbound retail freight | Logistics cost is understated, making the channel look more profitable than it is |
Jacobs also ties fee exposure to the selling structure itself. A brand selling wholesale to Amazon as a regular retail customer, with Amazon selling through to the consumer, carries a different cost profile than a brand running a Seller Central third-party account. His summary of the difference is direct: “There are fees and and costs that don’t necessarily hit that part of the P&L to truly understand.”
Mid-Market Brands Plateau on Amazon Because E-Commerce Bandwidth Never Matches the Daily Workload
Spencer Jacobs, Co-Founder and President of Neato, identifies the operational half of the profitability problem as team size and resourcing. In mid-market consumer brands, e-commerce is commonly rolled into an existing function. “it’s very common in in a mid market brand that e commerce is rolled into something else. Whether it’s sales or marketing.”
Even brands with a dedicated in-channel team hit the same wall, because Jacobs’s point is about bandwidth rather than the existence of a team. He describes sophisticated brands with their own e-commerce group that still lack the capacity to handle everything the channel demands. That daily workload includes:
- Optimizing advertising continuously rather than campaign to campaign
- Optimizing product content and listings
- Running pricing comparisons against category competitors
- Maintaining catalog back-end integrity
Jacobs frames the required coverage as a 24/7, 365 view of the channel, and connects the absence of that coverage to the outcome brands actually experience: “that’s where they start to see plateau or decline in competing with, you know, some of their category brands.”
The specialization gap explains why headcount alone does not close it. Neato operates 18 individual departments, each covering a specific skill set, which Jacobs identifies as a hard thing for a brand to replicate internally. A brand adding two e-commerce hires is not adding two of eighteen disciplines. It is asking two people to cover all of them.
Brands Choose Between In-House Amazon Teams and a Single-Partner Model by Measuring Operating Leverage
Spencer Jacobs, Co-Founder and President of Neato, does not argue that brands should never run Amazon internally. He argues the decision should be made on operating leverage rather than on capability or company size, and he acknowledges both outcomes exist among his own clients: some brands use Neato to bridge a gap until they reach a certain size or scale, and others stay in the third-party model indefinitely.
The disqualifying condition is fragmentation. Jacobs describes the recurring failure as disjointed team members combined with internal and external resources that brands are trying to navigate simultaneously, alongside the underlying issue that brands are trying to do too many things at once, both internally and externally.
His alternative structure collapses those relationships: “For us, it is one partner, one set of inventory, one P&L.” That framing is what makes the model comparable to an existing channel the brand already runs, whether Club, Walmart, or Kroger, as a standard buy-sell wholesale relationship where one partner owns the outcome.
Where the economics actually turn is inbound logistics. Amazon inventory does not move as single pallets into single fulfillment centers, and Jacobs describes the requirement as filling full truckloads to six regions around the country. A brand shipping its own volume rarely reaches that threshold. His conclusion for most brands, including large ones: “when you truly look at the margin, we are they are making more money working with us than if they are trying to do it themselves.”
| Decision factor | Points toward an in-house Amazon team | Points toward a single-partner wholesale model |
| Inbound freight volume | The brand independently fills full truckloads to multiple regional fulfillment centers | Volume produces partial loads, so shipping cost per unit stays high |
| Functional coverage | The brand can staff the full range of channel disciplines, not two or three of them | The brand cannot approach the 18 department coverage Jacobs runs at Neato |
| P&L clarity | Finance can already place advertising, promotions, event spend, and freight correctly | Amazon costs remain unallocated or misallocated against a retail model |
| Relationship structure | The brand can coordinate internal and external resources without fragmentation | Disjointed internal and external resources are already producing the plateau |
Principles Executives Can Apply From This Episode
| Principle | What it means in practice | Named evidence from this interview |
| Treat Amazon revenue growth and Amazon profit growth as separate problems | Assume the product will grow revenue and build a separate discipline around channel profitability, staffed and measured on its own terms | Jacobs identifies profitable growth as the tough part of the equation across a career that spans over 15 years on the brand side at companies including Swerve Sweetener and TreeHouse Foods and four Inc. 5000 appearances at Neato |
| Rebuild the P&L for the platform before increasing platform investment | Answer where advertising, promotions and trade funding, Prime Day, and freight fees actually land before committing more ad tech, software, people, or logistics spend | Jacobs observed mid-market brands committing heavy spend across ad tech, software, people, and logistics against a struggling P&L, which is what makes the necessary investment feel like a burden rather than a return |
| Measure the channel team against the daily workload, not the org chart | Compare the disciplines the channel requires every day against the number of people who actually cover them, rather than confirming a team exists | Neato runs 18 individual departments each covering a specific skill set, a level of specialization Jacobs identifies as a hard thing for a brand to replicate internally |
| Decide in-house versus partner on operating leverage | Test whether the brand’s own volume fills full truckloads to multiple regions before assuming internal execution is cheaper | Jacobs describes brands with the size and scale to bring Amazon in-house that make more money in the third-party model, including large brands that have stayed in the 2P space and that he does not expect to leave |
| Consolidate fragmented channel relationships into a single accountable structure | Replace multiple agencies, partners, and internal owners with one relationship carrying one set of inventory and one P&L | Jacobs built Neato’s model around one partner, one set of inventory, one P&L after seeing the same fragmentation pattern from the inside while calling on almost every major US retailer on the brand side |
Quotes From This Episode
- “You can grow revenue and you can grow it reasonably simple to some degree, as long as you have a great product. But growing it profitably is another beast to tame” — Spencer Jacobs, Co-Founder and President, Neato
- “Most mid-market brands are not truly understanding their P&L when they look at Amazon.” — Spencer Jacobs, Co-Founder and President, Neato
- “There are complexities to Amazon that simply don’t exist in traditional brick and mortar retail.” — Spencer Jacobs, Co-Founder and President, Neato
- “Where brands consistently struggle is they’re trying to do too many things at once, both internally and externally.” — Spencer Jacobs, Co-Founder and President, Neato
- “It is a lot of work to be in there every single day in the weeds trying to grow your brand, optimize ads, optimize content, you know, do pricing co comparisons, make sure the back end of your catalog is fixed” — Spencer Jacobs, Co-Founder and President, Neato
Frequently Asked Questions
Why is my brand not profitable on Amazon?
Spencer Jacobs, Co-Founder and President of Neato, attributes mid-market Amazon unprofitability to a P&L built for traditional retail being applied to a platform with a different cost structure. He is explicit that consumer packaged goods companies understand brick and mortar economics extremely well, and that Amazon introduces fees and costs that do not hit the part of the P&L a brand expects them to. The four questions he uses to test whether a brand understands its Amazon economics are where advertising lands, where promotions and trade funding land, where Prime Day spend lands, and where freight fees land. Glenn Gow, The Scaling Executive Coach, tested that claim directly against the assumption that a CEO already knows their customer acquisition, supply chain, and delivery costs.
Should a mid-market brand run Amazon in-house or use a partner?
Spencer Jacobs, Co-Founder and President of Neato, says both outcomes are legitimate and the deciding factor is operating leverage rather than company size. Shipping into Amazon requires filling full truckloads to six regions around the country rather than sending single pallets to a single fulfillment center, and brands that cannot generate that volume independently carry a higher cost per unit. Jacobs states that most brands, including some with the size and scale to bring the channel in-house, make more money in a wholesale partner model once margin is examined fully, and he has seen very large brands stay in the third-party space with no intention of leaving. Glenn Gow, The Scaling Executive Coach, asked whether fast-growing brands eventually take the channel back internally, and Jacobs confirmed some use the partnership as a bridge to scale.
Why do Amazon sales plateau at mid-market consumer brands?
Spencer Jacobs, Co-Founder and President of Neato, attributes the plateau to bandwidth rather than strategy. E-commerce at mid-market brands is commonly rolled into sales or marketing, and even brands with a dedicated in-channel team lack the capacity to work advertising optimization, content optimization, pricing comparisons, and catalog back-end integrity every day. Jacobs describes the required coverage as a 24/7, 365 view of the channel and connects its absence directly to brands seeing plateau or decline against category competitors. For contrast, Neato runs 18 individual departments each holding a specific skill set, a level of specialization Jacobs identifies as difficult for a brand to build internally.
CEOs Work With Glenn Gow to Scale Their Companies by Scaling Themselves First
Glenn Gow is The Scaling Executive Coach. He coaches ambitious executives into the CEO seat and CEOs into successful exits, drawing on 25 years as a CEO and 5 years in venture capital. If this conversation was useful, you can apply for executive coaching with Glenn Gow or apply to be a guest on The Scaling Executive Podcast.
