Amazon's War on Wholesale: Why Every Brand Needs a “Direct-to-Consumer” Strategy

Direct2C - Consumers demand it, Technology enables it, and Incumbents will feel it. As consumers have moved online, so have wholesale businesses. And with channels like Facebook, Google Shopping, and of course Amazon – today, brands no longer solely rely on their distributors to stay in business.

According to Google 2017 data:

Direct2C disrupting Wholesale - With Amazon accounting for 45 percent - 50 percent of all online holiday retail sales in 2017 every brand has to have an Amazon strategy. And more importantly, with Amazon’s might accelerating there is no guarantee that traditional wholesale distributors are going to be around!

“...Wholesaler distributors control a brand’s price point - what happens when those 3rd party retailers start to fold..?”

Direct2C enabled by Online advertising - From a paid advertising perspective, brands need to identify and analyze their Top 20% of repeat purchasers. Why? About 20% of customers produce 80% of sales. However, if your brand is selling via wholesale only, your company probably does not know too much about the 20% of those repeat purchasers – yet.

• Who are the Top 20% of repeat customers for my brand?
• Which items & at what average order value are repeat customers purchasing?
• When & on which platform are my repeat customers making these purchases?

Moreover, consumers frequently abandon inadequate brand sites to research products on retail sites like Amazon where they are exposed to offers from the brand’s competitors. Almost a third of consumers report visiting a brand’s website in order to view the brand’s full product line, highlighting the advantage brands have over retailers who may stock only a portion of a brand’s products.

Red = low value customers; Amber = high value customers

Direct2C demanded by Consumers. Today, many of a brands’ core customers live in a digital world expecting digital convenience. And yet as an industry we still operate in an analog, 50-year-old business model. The next generation of brands will be built online, typically bypassing retailers, preferring a direct-to-consumer relationship which improves margins while reducing prices. This next generation of brands are able to do this because of new technology and consumer behavior that has emerged in the past ten years.

The last brand ever to have been built the old wholesale & retail "fashion" way (no pun intended) is Michael Kors, probably...! Affluent Millennials, especially female affluent Millennial in the US, do not want to shop that way anymore (e.g. affluent, female Millennials as consumers born between 1981-2000 representing a market of about #21m individuals in the US, entering their peak earning – and consuming – years with household incomes over $100K.)

Direct2C empowering better brand control - If brands keep solely relying on wholesale, they won’t be able to maintain control in the long term. Ultimately, brands need to take advantage of all channels that are available to them including Facebook, Google, Pinterest, and Amazon to remain competitive and survive:

1. Improved Brand Image. Arguably the biggest benefit of transitioning to a direct to consumer model is the ability to control brand image, pricing, and distribution methods: Placement of products (customer will not be looking at your products on the same screen as your competitors), Shopping narrative (compare two different styles of shirts, but in the end both shirts are your items) and, Ownership of the Shopping Experience (ability to remarket with coupled styles.)
2. Access to Detailed Customer Data. Through wholesale distributors, valuable data from a direct to consumer relationship is lost: Gender, demographics, Buying cycle, customer lifetime value, etc.
3. Direct Customer Relationship. Direct access to buying patterns helps to better understand how to re-engage with shoppers: Email or other remarketing tactics, how to build loyalty from a successful relationship and how to drive long term customer value through repeat purchases.
4. Implementation of Technology. Brands aim to create a cohesive link throughout the entire brand experience — from the marketing, to branding, the buying experience, the delivery, the product itself, and even to the final stage of its life. Avoiding fractured attempts at tactics—brands must have a comprehensive digital marketing strategy for search engines and social media to promote products and grow audiences and customer base.

Direct2C - Why should Brands Cut out the Middleman? By neglecting to implement an adequate Direct2C option, brands are squandering the opportunity to capture more sales and to solidify their relationship with the customer by providing a satisfying brand experience. With more shoppers now relying on search engines like Google as a starting point to research products, the need for brands to engage consumers with enticing brand content and quality SEA is more important than ever.

• 63 percent find shopping online with retailers to be highly satisfying, but only 43 percent feel the same way about shopping directly with brands
• 58 percent use a mobile device while shopping in-store to compare prices and research products, emphasizing the importance of a mobile-first experience
• 36 percent of online shopping starts on a search engine like Google

Search engines are the most popular option for mobile shopping, with consumers favoring them over retailers’ websites and apps, which includes Amazon’s. M-commerce is estimated to have grown from 19% of US e-commerce sales in 2016 to 23% in 2017, so search engines’ mobile advantage may be helping it gain on Amazon in product search. Mobile shopping is projected to make up nearly half of all US e-commerce by 2021, so search engines will continue to invest heavily in their mobile shopping search experience going forward.

Bottom line - Today, the industry is starting to recognize direct-to-consumer ecommerce as a path toward competitive advantage and growth. Almost all brands will need to implement digital marketing. In addition to traditional advertising campaigns, brands will need to hire an agency or internal team to experiment with paid search and comparison shopping strategies to drive traffic to your website.

?About agencyOS

agencyOS is a registered trademark of emarketing AG providing automated search engine technology. Google Premier Partner since 2014 – winning #1 International Premium Partner (Growth Champion 2015, EMEA ) and nominated for BEST CLIENT STORY of 2016 as well as BEST SHOPPING PERFORMANCE in 2016