CMOs considering other options to sell brands may be wise to consider the advice of a digital expert. Senior Fellow at USC’s Center for the Digital Future said: “Content is king but distribution is queen. And she wears the pants.”
Brands selling in digital marketplaces have a potentially tremendous reach. Alibaba ended last year with a record high 824 million monthly active users. Amazon Prime alone has more than 150 million MAUs.
An eBay survey last year showed that 44% of small businesses reported that participation in digital marketplaces supplied them with the income to keep their physical locations open. Of those polled, 69% of small and medium-sized businesses disclosed that revenue increased with more than half saying that the marketplaces expanded their sales to represent their major revenue sources.
No one can debate the appeal and success of such marketplaces. In last November 11th’s annual Global Shopping Festival, Alibaba sold more than 175 million items and racked up more than $38 billion in sales, an increase of 26% over 2018. Amazon, alone, accounts for nearly 60% of all digital marketplace sales and sold more than a billion items during the last holiday season.
While the allure of reaching millions of potential consumers is strong, one of the biggest drawbacks to marketplaces like Amazon and Alibaba is the loss of customer relationships. Another is the lack of enough content and advice that consumers are seeking before buying certain products. Yet another is the possibility of fake products, particularly with higher end luxury items.
Before the pandemic, and perhaps in response to this, Amazon announced plans to launch a special platform for luxury brands. The big difference is that brands would maintain complete control over their space, prices, merchandise, etc. There have been no updates about the announcement in recent weeks.
Recognition of these other important factors created opportunities for competition and the entry of competing marketplaces that sought to offer and combine content and information between brands and consumers. In fact, more than half the number of digital marketplaces today were launched in the last seven years.
Sites like Poshmark seek to instill consumer confidence. It not only displays products but also includes information about the brand or seller as well as followers. And besides offering a 30-day refund policy, the company also guarantees the authenticity of luxury products.
Despite these changes and improvements, digital marketplaces are not for every brand. Brands considering entry have much to consider besides the counterfeiting and consumer relationship issues. Most marketplaces require that participating merchant prices be at or less than those offered by other companies on any channel.
Platforms like Amazon also encourage manufacturers to impose MAP (minimum advertised price) policies for their products as a way of preventing erosion of prices by authorized and even unauthorized sellers. Is this important? Only 20% of retailers comply with MAP and almost 40% never do according to research by the Kellogg School of Management at Northwestern University.
Regardless of which platform a brand uses, determining the right pricing can produce good returns and results. One would include reaching top spots in “buy” boxes and “best offer” placement on results pages. CMOs can address real-time demand by quickly adapting and adjusting prices through monitoring consumer behavior and trends. They will also have a greater ability to amplify their promotional efforts.