Digital brand distribution has huge sales potential, but brands miss out on the growth opportunity. This article outlines how to achieve successful growth.
Internet marketplaces are the digital version of High Street shopping areas, but with increasing ‘footfall’. The Ecommerce Foundation estimates that by 2020, up to 40% of all online purchases will made via marketplaces. Can you afford to ignore 40% of the online market? (Ecommerce Foundation, 2015)
Why is that marketplaces are so successful? Because they are the best at online product presentation and search recommendation mechanisms, as well as the most advanced in online marketing. The have all the strategy ingredients needed to be competitive. Additionally, they offer lots of choice and are well integrated into the mobile shopping behaviours of consumers.
In the end digital marketplaces are similar to ‘downtown’ – it is where consumers expect your brand to be, therefore the digital marketplaces still grow and are a good channel to counterbalance continuous erosion in physical retail.
The question then is not if, but rather how to best integrate digital marketplaces into your distribution strategy and channel mix.
Each Type of Marketplace Deserves a Specific Role in Your Distribution Strategy
Whenever we are discussing digital brand distribution with clients, the following two main questions always come up (and rightfully so):
1) How can I best control my brand?
2) How do I avoid issues with my existing wholesale clients?
So what could a distribution strategy, one that includes e-commerce marketplaces, actually look like?
Tier 1: Your Digital ‘Full Price’ Stores
For current season products at full price, use the so called ‘closed marketplaces’ (e.g. Zalando, AboutYou, Otto, LaRedoute, Asos, Zappos, Sportscheck, etc.). Here you can best manage the presentation of your brand. Three business models are possible – you either sell to them in the traditional wholesale way, which means that the marketplace buyers make the product selection, take the inventory risk and also manage all aspects ‘in-season’. Or, with some of them, you can also sell direct to consumer. In this model, you keep the stock risk, but will typically achieve much better margins than via traditional wholesale and have better control over your assortment. Thirdly, you could combine the two approaches and maybe sell to them both as a wholesale client and also sell additional styles, sizes and colours direct to consumer. This is especially interesting if you are trying to meet production minimums and keep a well-rounded collection ‘alive’ at the same time.
Of course your own brand’s webshop (with its own domain name) also fits into this first tier of the strategy. Based on my experience, the revenue generated is often much smaller than initial expectations. In the end, the bottleneck (at least today) is the home screen of consumers’ smartphones. There is only so much space available on the home screen and it’s likely that your single-brand shopping app will not end up there but rather collect dust somewhere on screen page 3 or 4.
Tier 2: Your Digital ‘Outlet Stores’
This is where the large and highly competitive ‘open marketplaces’ come into play, namely Amazon but also eBay. The term ‘outlet’ is not to be confused with ‘cheap environment’. The brand shops on Amazon are clearly not cheap environments – but this means, that, due to the competitive environment and its dynamics on Amazon, it may make more sense to treat it like your physical ‘outlet stores’. Given the high level of competition of many sellers on open platforms, the price aspect is likely to be much more of a success factor here. It may make therefore more sense to focus your assortment on past season stock at reduced prices, than to try and sell your newest and hottest products at full price.
Tier 3: Your Digital ‘Stock Jobbers’
For stuff that still doesn’t sell, use the shopping club websites like vente-privee etc. They buy and sell at hard discount prices and also manage to do so in a smart way that is not too detrimental to the brand.
Will it result in potential conflict with your other channels? Did your last retail outlet stores create issues with your customers? Sure, but it all depends on how you balance your strategy and communicate to your wholesale customers.
Digital Brand Distribution via Marketplaces Offers Big Upsides
It’s nice that marketplaces offer a lot of revenue potential, but unfortunately it’s not potential that’s easy to reach. Electronic interfaces to each marketplace will cost time and money to implement, central stock visibility needs to be ensured, product descriptions and pictures need to conform to each platforms’ (ever changing) requirements and need to be in local language; international logistics processes, including returns handling and optimisation of logistics cost, as well as cross-border VAT and invoicing topics … the list goes on.
The main question you need to ask yourself is whether you want to do it yourself or whether it makes sense to outsource part, or all of the work. How did you start brand distribution in the old world, when you were trying to reach unknown markets? You selected a partner, so it may make sense to speak to a digital distribution agency that covers your specific points. Part of my current job is to grow a digital distribution strategy that focuses on enabling cross-border multi-marketplace management.
To sum things up – the opportunities to scale your business with marketplaces, also across borders, are great. Finally, there are three things that are crucial to get your digital brand distribution off to a good start, when thinking of selling on (multiple) e-commerce platforms:
- Embrace digital brand distribution strategy now – the growth of online will not go away.
- Make a strategic selection of the right channels for your brand.
- Team up with digital distributors that can help you to get into unknown markets.
About the Author:
Christoph Berendes came through the ranks as a consultant and brand manager in the bricks-&-mortar world. His passion and belief in the changes to come turned him into a digital manager. He currently assists in the growth of digital distribution agency onQuality. You can reach Christoph best by email.