Last month’s decision by Nike to stop selling through Amazon reflects how navigating eCommerce online marketplaces is a challenge for even the biggest brands. Changing consumer buying habits and evolving omnichannel platforms means every brand faces an element of trial and error as they try to find a sweet spot.
One major shift in e-commerce over the last few years is trust over price sensitivity, with users less inclined to use price comparison sites and putting more faith in the cyber security and convenience of the biggest marketplaces such as Amazon or Tmall.
Whether it’s Coolblue or Alibaba, shoppers get to know and trust their favourite retail destinations; they like the familiarity of the checkout experience; the way products are presented and reviewed; and they have confidence in how it’s delivered. They might even sign up to loyalty programmes to receive added benefits. Opting for a one-stop shop may also reflect concerns around personal data, with people more comfortable entrusting their details to a single domain, rather than create multiple retail accounts to save a few quid.
Power of the platforms
The power of these platforms was rammed home earlier this year in a Feedvisor survey where 66 percent of respondents said they started their product searches on Amazon, compared to only 20 percent who start on search engines like Google. All of this presents a conundrum for brands. The marketplaces are too powerful and crowded with competitors to ignore, but at the same time they risk getting lost in the noise.
The big retailers trade on this dilemma by supporting different levels of seller set-up. They can optimize the product page, but it is normally the brands that retain ownership of product content. Another option is to set-up as a third-party seller, where the brand creates its own product listing on the website but retains pricing, stock and shipping responsibilities.
A consequence of going with the first-party fulfilment is that you hand over price settings to the marketplace which will do it dynamically, informed by comparable products on-site and across retail competitors. There is a loss of control, but the primetime visibility also provides the opportunity to generate a sales volume that might make it worthwhile and compensate for the smaller margin on individual sales.
Going the third-party route allows for more control, not just of the RRP but also of the product range. It’s unlikely that a marketplace providing fulfillment will stock your entire product portfolio, which means you could struggle to push newer or more niche product categories, which might be a limitation to a brand’s strategy. The challenge is ensuring you have the logistical capability to support the do-it-yourself strategy. Brand damage could be catastrophic if a product starts to fly and there are shipping problems. You need skills and expertise, not just to predict demand but to build capabilities into the supply chain to deliver on it.
Plan a hybrid strategy
We advise our clients on a best-of-both-worlds approach, a hybrid strategy that mixes first and third-party fulfillment, depending on the product and target market. For low cost, high volume items, handing over fulfillment makes more sense. Similarly, new products that can take months or even years to gain traction in a market, so keeping exclusivity and control is crucial to ensuring price is not cannibalized; you ensure visibility and learn the best category placement.
There is no right or wrong way; sometimes it’s about testing the water. With ChannelSight analytics we can help you identify which products are converting the best and which categories need more work, allowing you to identify whether a first-party fulfillment strategy is actually the best route for your portfolio. In an online world where trading on big marketplaces can feel like a gamble, it’s a way of evening up the odds, keeping a degree of control, and providing a B-plan in the case of marketplace conflicts, like our dear friends at Nike.
How can we help?
ChannelSight has a team of experts that can help you understand your customers needs better and implement solutions that can help your eCommerce strategy. Contact us today to book a demo with our team of experts.
Head of Brand Performance