The Future of E-Commerce: 3 predictions for brands

I have already written about my and Edmund Frey′s predictions for customers and retailers in other LinkedIn articles. Now lets talk about brands.

The future from the perspective of brands/manufacturers

They’re brands Jim, but not as we know them

High-street brands in the sense that we know them today are set to disappear – most likely for good. Once again, that isn’t because people don’t like them or want to buy them, but because typical advertising space for the creation and maintenance of these brands will disappear; moreover, most established brands will find it difficult to keep their place in a global environment in which manufacturers are competing for rankings on marketplaces.

Think back to the last time you searched for a new frying pan, a pair of headphones, or an HDMI cable on an online marketplace: you will have noticed that hardly any of the first 20 or so results came from what you or I would call a “real brand”. What is more, you might have noticed that you didn’t search for a brand at all, anyway. Like most users, you probably typed in “non-stick pan” rather than “Tefal non-stick pan”; you might have a brand preference for headphones, but did you type in “Philips headphones” or just “headphones”? And what was your favourite brand of HDMI cable again? That, right there, is why the years and millions Tefal, Philips and all the others spent wining and dining the buyers from John Lewis and House of Fraser now count for nothing.

So, like in retail, the brands that win out will be those with the best IT capabilities. In the current situation, that means automatic marketplace reviews management, production of smaller customised batches, agile advertising strategies and a range of other things that, unfortunately for Tefal, don’t have much to do with manufacturing excellent non-stick pans.

New direct-to-consumer brands are here (not to stay)

A plethora of producers out there is riding on this wave and creating new brands which they promote on digital channels – often using the extensive reach of networks like Instagram; others are simply specialising in sourcing own-brand stuff from China in a smarter, faster way and listing it on every marketplace going using automatic software solutions.

Essentially, these makes are flora and fauna of the marketplace ecosystem and it is unlikely that they have the potential to ever be taken seriously as brands outside of it – i.e. to get beyond competing on price. Commentators often alight on brands like Anker, which made its name in consumer electronics by selling power-banks on Amazon, to argue the contrary, but even a young, contemporary brand like Anker with several hundred million Euros of turnover faces a daily fight not to be dislodged from its place in the product listings by the (primarily Chinese) challenger du jour.

Then, of course, there are the celebrity and influencer brands, e.g. Kylie Cosmetics, which are currently something of a novelty. Expect to see plenty more of these in the next two or three years, though, in almost every conceivable category. They are set to do better than many established brands lacking direct access to end consumers.

Direct access to customers is decisive

This direct access to end consumers is going to be the crux of the coming years as, increasingly, manufacturers are faced with a stark choice: compete with the big platforms for access to the customer (via website, WhatsApp, or other channels) on the one hand, or surrender to big marketplaces and become tethered suppliers for them – with all of the drawbacks this entails.

In our view, opting for the latter can only lead to manufacturers being run out of their market on the medium-to-long term. It’s simple: the auction mechanism of big platforms does not leave any space for all but the largest manufacturers to survive. Any brand, any manufacturing business in full possession of its faculties will see that the only option is to devise a strategy with which they can build up their own contact to the most valuable element in the equation – the customer – and inspire lasting brand loyalty. The peak of the Corona crisis provided an unexpected demonstration of the importance of direct customer contact when Amazon suddenly ranked all sorts of products down in order to free up capacity for what were considered “essential goods”; manufacturers whose online strategy consisted of selling stuff through Amazon were given an object lesson in how vulnerable this makes them.

Before Corona, I would have predicted this dependency turning ugly in future. Now, of course, this isn’t a prediction, but rather a description of the already unpleasant reality of platform life in spring 2020.