Today we’ll explore the pros and cons of each model and see why rich content can be a game changer
The matter of interaction between brands and marketplaces is one of the most critical issues for the e-commerce industry today.
It’s no news that brands benefit from cooperation with marketplaces: the amount of traffic that comes to their pages is disproportionately larger than on their own platforms. And big traffic is big data, which opens up huge opportunities to study consumer behavior.
However, in reality, it’s not always so rosy, and brands often face serious restrictions from marketplaces. Sometimes they are not even allowed to decide what content to use to promote their products. At the same time, marketplaces are aimed at simplifying the terms of cooperation for brands, like allowing micro-sellers, e.g. from Instagram, to connect to the marketplace. Still, we can agree that neither small nor large companies can ignore marketplaces today.
Today we’ll talk about what D2C is, why it is so important, its pros, cons and how to work and get maximum benefit from marketplaces.
What is D2C?
In short, it means direct to customer sales with no intermediaries. In the midst of a retail apocalypse where the net amount of opened stores has been decreasing steadily since 2010, a process now accelerated by the pandemic, the D2C channel stands as the main alternative that everyone is exploring, with a big amount of companies avoiding their usual sales channels to establish direct relationships with shoppers.
Direct to consumer implies the possibility of completely owning the relationship with the customer, having access to data, creating unique experiences and developing customized products. Through it, you can reach a level of customer knowledge and satisfaction impossible to achieve without having absolute control of all touchpoints.
There are clear advantages for companies to analyze:
- Higher margins. The entire distribution margin, which often doubles or triples the price to the consumer, stays within the company, and the costs associated with the logistics of serving it disappear. Inefficiencies of all kinds are eliminated and that extra margin perfectly offsets the marketing investments needed to engage the consumer directly.
- Data ownership. Today the distribution channel is a black box where end-user data is out of reach for companies. Direct to consumer implies recovering the real relationship and building a more customer-oriented company. This relationship provides all the information you need: cross-selling, usage habits, trends, etc., as well as allowing the construction of user profiles and segments.
- Total control of the experience. Usually, a product appears anywhere in the point of sale with brands having no real control over the shopping experience, the location and the process. By owning the process, everything is taken care of to obtain a satisfaction impossible to achieve in other channels: every message, the packaging, details and communications.
- Implementation of performance marketing. In addition to increasing brand recognition and positioning, brands start working in the fields of transactional communication, SEM and ROI.
And yet the model is quite challenging. Let’s take a look at Allbirds, one of the most successful D2C brands out there.
Launched in 2017, in march of this year Allbirds officially filed to go public on the NASDAQ under the ticker BIRD. It grew from a modest shoe brand to an almost full-on sportswear brand that offers running shoes, slip ons, boat shoes, high tops, waterproof shoes, socks, underwear, activewear, hoodies and more with a valuation of 1,7 billion USD.
This classic direct to consumer playbook that Allbirds has deployed, that became popular in the mid-2010s, is proving to be potentially outdated. Scaling a retail brand, regardless of how vertically integrated it is, is just not the same as scaling a software brand. Marginal costs in retail are significant, and so are the costs of resources and production. Brands also need to constantly convince customers to spend money, whereas softwares, for example, have a recurring revenue with semiannual or annual contracts.
Growing your customer base and growing the lifetime value of your existing customers is another challenge. In order to grow the lifetime value of a customer, you need to launch adjacent product lines that are complimentary or serve the same customer psychographic or demographic. There’s also never been more pressure to launch new products as today, because the cost to acquire customers through paid marketing, Facebook ads, Instagram ads, has risen significantly over the last six years. It means that, in order to justify paying more to acquire a customer, your customer needs to be worth more to you.
There are also other barriers that can make an exclusively or mainly D2C model complicated, such as creating hotlines for customer service, expensive logistics, and big investments in technology (CRM’s, apps and websites).
The benefits of marketplaces
How can this be solved? The obvious answer is to study your customer’s behavior and diversify your sales channels accordingly. For example, big tech brands make 95% of sales through retailers, marketplaces and third-party online stores according to Forrester. And that’s not because they lack infrastructure (actually, most of them have their own online stores), but because users prefer to shop on platforms where they can compare and maximize their benefit.
The potential advantages to be gained by joining an online marketplace will vary between industries and businesses, and indeed between buyers and sellers. Still, to have a better understanding let’s have a look at the pros more in detail.
- Additional sales channel. Offering your products in a marketplace is a great option as a complementary sales channel, where you can sell out your stock or promote products you are not interested in selling on your own channel.
- Access to a broader audience. Marketplaces provide a very high volume of traffic, reaching audiences that would be very difficult to get to through your own channels.
- No need to have your own ecommerce. In marketplaces, you can sell your products or services without having to invest in the creation of your own website or online store. Instead, these platforms will charge you a monthly fee and/or a commission on sales.
- Increased credibility and trust on your brand. If you have just launched a new brand, selling your products through marketplaces will make shoppers trust you, and as soon as they get to know your brand, they will be more likely to search directly for your own website.
- Allows international sales. Marketplaces can be an export channel for brands who want to expand their geography, breaking the barriers of logistics, language, technical and legislative preparation, or even in finding a local partner.
- Positioning and promotion. Marketplaces are very well positioned in search engines because they invest a lot of resources on the SEO of the platform, so they can be easily found by both sellers and end customers. They invest a lot in publicity too, so they might as well promote your brand or product.
- Cross-selling with other brands. By being on the same platform with multiple brands that offer complementary products to yours, when a customer searches for such products your brand will appear as a suggestion.
- Comments and ratings. Because of their high volume of visits, marketplaces also tend to have a higher volume of comments and ratings, which generates more confidence among new customers when buying a product they have never purchased before.
However, although marketplaces are a very interesting option, they also have drawbacks, like having your competitors just a click away, lower margins (especially if your sales volume is high), each platform has its own requirements and regulations and lack of access to their client base to name a few.
Still, most of these drawbacks can be worked around and you can drive significant sales via these channels. Down below a list of what you can do to optimize your presence in marketplaces.
In marketplaces, more often than not product pages are the same for all sellers. This means that product content is the arena where it’s easiest to gain advantage.
For instance, most marketplaces allow brands to create so-called brandzones (also known as shop-in-shops), where they can easily and freely display products as they desire. Apple, for example, personalized the presentation of their iPad mini on Amazon, so users can get to know the product more in depth while also having a more unique experience.
For better results, we encourage you to automate content optimization. In 24TTL, you can export the information fields requested by a particular marketplace and keep the data updated automatically.
The power of video
In recent years, video has become one of the preferred content for users and, as we have noted in this article, it can increase the likelihood of purchase by 73% according to Animoto. Add on your page video reviews or tips of your most outstanding products and get a higher retention!
Provide an enhanced shopping experience
To increase loyalty, focus all your efforts on providing shoppers with a good shopping experience. As we said before, work on your product listings and make information clear, make sure you have a good stock of product, and that your shipping and purchasing conditions are as pleasant and effective as possible. And don’t forget to use enhanced content (according to TrueCommerce, brands can see an increased conversion rate of up to 20% with enhanced media).
Still have questions about what to do to increase effectiveness on marketplaces? Contact us! Our specialized teams can help you anytime.