This article was written before the COVID-19 pandemic. Some figures may have changed. To read more about how COVID-19 is influencing e-commerce, read COVID-19 and the Impacts on CPG or COVID-19 and the Impacts on Sports & Outdoors.
Saying that more and more customers are beginning to shop online is an understatement. Since 2010, e-commerce has grown from 4.2% to 11.2% of total US retail sales. Those numbers are likely on the conservative end, considering non-online sales include big-ticket items. It’s a percentage that continues to grow every year, and it shows that e-commerce is no longer just a good idea for brands — it’s an essential part of doing business.
Being proactive with e-commerce allows brands to grow with the continual uptrend instead of having it work against them. There are two main ways for brands to be proactive with their e-commerce efforts: by providing a great experience on DTC, and having an effective strategy for major e-commerce platforms like Amazon.
DTC and Amazon each present their own unique advantages and challenges, but they both play a vital role in a brand’s overall e-commerce strategy.
The Advantages & Challenges of DTC
In some ways, DTC gives brands the most control and largest margins. Because DTC doesn’t always involve a third-party, there are fewer moving parts, and a big cut of the profit often goes straight to the brand. There are many reasons why brands love DTC, with one giant caveat — sales are challenging to come by. It’s hard to convince shoppers to go directly to a brand’s website unless they know exactly what they’re looking for. According to a study performed by Publicis Sapient and Salesforce, only 19% of surveyed shoppers chose to originally purchase products directly from a brand, while 50% of shoppers said that they would purchase from a retailer, and 31% said they would purchase from a marketplace. Now take that 19% and split the difference between you and every other brand on earth. It’s increasingly clear that consumers are gravitating toward marketplaces like Amazon.
Online shoppers have a higher expectation than they used to when it comes to fulfillment. Convenience is king. Two-day shipping and minimal fees are the new normal — and shipping times are only getting slimmer. If brands aren’t able to meet increasingly demanding customer expectations through their DTC offerings, there’s a slew of competitors (and marketplaces) just a few clicks away that will.
The Advantages & Challenges of Amazon
According to eMarketer, Amazon accounted for nearly 50% of the total e-commerce market volume in 2018. Shoppers love it, and it’s easy to see why. Amazon is a familiar face that can meet all of a customer’s needs at the same time. Two-day shipping, their easy-to-navigate interface, and a seemingly endless supply of brand selections are all features that attract shoppers.
From a brand’s perspective, selling on Amazon requires less internal storage and logistic capabilities than DTC. Most importantly, Amazon provides access to a thriving customer base that’s already well-acquainted with how to find and purchase products. But marketplaces like Amazon also offer slimmer margins, and there are logistical challenges that will need to be addressed.
At the end of the day, it’s about being where customers shop — and most customers are on Amazon. Chances are, they’re even a Prime member. If brands ignore Amazon, they lose sales — it’s as simple as that.
DTC and Amazon, Under the Same Roof
To really take advantage of the e-commerce market, brands need to bring both DTC and Amazon into the fold. Having both strategies under the same roof can result in a host of benefits:
More Control in More Places – it’s crucial for brands to have a detailed picture of how they are being presented to customers — no matter where they are shopping. Choosing to ignore Amazon doesn’t work either. Brands who look the other way end up letting unknown third-parties define pricing, content, and experience. This can damage brick-and-mortar relationships and leave brands spinning.
More Sales – Brands need to meet customers where they shop. Ignoring marketplaces like Amazon is shrugging off visibility to a massive pool of potential customers.
Happier Customers – A customer’s experience defines their perception of a brand. If a business is only doing DTC, they are neglecting a large portion of their customer base and allowing their brand to be misrepresented on Amazon by unknown third parties.
A More Unified Brand – Brand consistency is a hard thing to maintain, especially when a brand isn’t being equally represented across all e-commerce channels. Unifying a brand’s e-commerce presence provides brand the ability to deliver a consistent experience in more places.
Bridging the gap between DTC and Amazon can seem like a daunting task. It takes dedicated planning and resources — and in many cases, will require external help — but is a necessity for brands navigating the modern retail landscape.