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Rationalising global brand go-to-market operations
As the global pandemic of Covid-19 continues to rage across the world, business are facing disruptions across all areas of business, forcing them to re-think their existing collaboration models and priorities both in short-term but more importantly in long term. After loosing physical retail traffic & revenue practically overnight, many consumer brands increasingly turned their adjustment activity focus towards the e-commerce channel.
Those who didn't have their own D2C outlet, increasingly focused on their e-Retail partnerships in hopes the new tidal wave of e-commerce buying would lift their boat too.
Those who didn't have their own D2C outlet, increasingly focused on their e-Retail partnerships in hopes the new tidal wave of e-commerce buying, would lift their boat too. But It just so happens that bad news never travel alone. Just couple of days into the official classification of the coronavirus outbreak as a global pandemic, new headline sent another type of shockwaves across the retail world - Amazon would be suspending the intake of 'non-essential goods'.
All your eggs in the Amazon basket
In a combination of demand surge management and provision of outbreak prevention measures within its own warehouse workforce, Amazon reported that it would suspending orders and intake of 'non-essential' to its warehouses. In US this measure refers mostly on 3rd party resellers which use Amazon marketplace to get their products to thousands of customers through "Fulfilment by Amazon" program. Initially communicated to last only until 5th of April, as situation escalates further it will most likely be extended. In France & Italy Amazon has stopped taking orders altogether while in other countries like in Spain, products that weren't deemed as essential are de-prioritised in handling & fulfilment.
Given that many brands became increasingly, if not solely, dependant on Amazon, blow will be much harder felt on the other side of this platform relationship
Third-party sellers account for over half of sales on platform, so the suspension measures will definitely have a negative impact on Amazon itself. But, given that many brands became increasingly, if not solely, dependant on Amazon, blow will be much harder felt on the other side of this platform relationship. Driven by alluring promise of revenue growth many brands solely focused their eRetail strategy around and on Amazon. The shine was so blinding that many also traded-off brand unique presence and representation, accepting Amazon's commoditising effect and strong product focus listing, for revenue growth perspective. Setting aside Amazon's brand commoditisation effect which we wrote about extensively, sudden loss of revenue from both physical retail & Amazon as major if not only eRetail partner may be a death blow to many.
Sudden loss of revenue from both physical retail & Amazon as major if not only eRetail partner may be a death blow to many.
Rethinking the eRetail Strategy & Execution
For those brands who've put most if not all of their eRetail revenue eggs in Amazon, coronavirus outbreak and suspension of service, if they live through it, should be a last wake-up call. Tying your revenue just to one source is never a good idea. While in the short-term betting just on the biggest and most obvious revenue & growth generator may have made sense, in long term it is a poor strategic choice. First, whenever there are asymmetric costs in a certain relationship there will be predatory behaviour incentives.
For those brands who've put most if not all of their eRetail revenue eggs in Amazon, coronavirus outbreak and suspension of service, if they live through it, should be a last wake-up call.
Namely, Amazon can always afford to cut ties with a certain brand as its costs of doing so would have minor effect on its revenue stream. On the other side, for majority of brands who have under-developed D2C or eRetail network, cutting ties with Amazon carries a significant cost. In practice, this incentive translates to Amazon first luring brands with growth rates only to later on squeeze their profitability on every SKU. The reports of brands learning this the hard way are discussed in e-commerce professional circles, although very few actually raised the issue publicly, hesitant of the response this type of criticism may invite from the retail giant.
Over-reliance on Amazon, aside of obvious revenue dependency, has had other negative externalities. Most notably it fostered negligence of other (potential) e-retail partners and debilitated the internal go-to-market architecture to service it. This is especially true for brand's internal capabilities to create and distribute digital brand content on scale as a prerequisite for e-retail traffic and revenue growth. Namely brands who took the Amazon route disregarded the need for digital brand content creation as most of the sales would flow without major investments from the sheer search traffic on the platform.
Over-reliance on Amazon, fostered negligence of other (potential or current) eRetail partners and debilitated the internal go-to-market capacity to service it
With strong product focus and bare boned brand presence page structure, success on Amazon did not directly require or allow for brand storytelling nor activities that would put the customer and his path-to-purchase - inspiration to conversion in focus. Creating engaging and relevant content that helps customer identify & solve their problems, while on the e-commerce environment or its related social properties simply wasn't necessary nor possible. As a consequence, those who overly relied on Amazon as a sales channel never gave it much thought nor invested in capabilities to do so. As they didn't invest in building business through other e-retail partners, their results would always lag behind Amazon, thus further undermining the need to look beyond it.
How can we help?
Diversifying your eRetail channel will require both strategic thinking and agile action. Backed by five year long experience working with Nike EMEA Brand Digital Wholesale.com team on operationalising digital brand strategy execution across the 14 Western Europe countries we bring both to your eRetail management table. Our teams' insights & advice relies on the knowledge on the network of cross-industry professional peers who each individually have more than 10 years of e-commerce & e-retail experience across Europe and US.
Our core strength lies in strategic design & implementation of structured organisational capacity and knowhow to go beyond the basics of brand representation on e-commerce platforms. Feel free to reach out directly or check out our website and section devoted to eRetail brand elevation.
Make sure to check some of our projects such as Jordan Flagship Store on Footlocker.eu but as well many other projects which showcase the successful brand content driven approach to driving eRetail growth.