Third-party selling platforms such as Amazon, eBay, Etsy, and Groupon, have made it far easier to get your products in front of customers. These platforms have done the leg work of attracting customers to their sites, making it easier to get in front of people who have never heard of your brand or your products before.
Brands also build a lot of success off the back of growing their followings on social media platforms, such as Instagram and Facebook. These channels provide businesses with a way to reach and connect with customers, build communities or ‘tribes’ around their brand, and deliver value to their followers over time.
So we can see then, how easy it can be for a business to end up with a high reliance on these third-party platforms. For example, let’s say a business - we will call it The Aussie Hat Co. - is selling hats through Amazon as well as their own website, with 90% of their sales coming through Amazon (this equates to about $5.4 million per year in revenue). This same business has also built a following on Facebook and Instagram, with over 500,000 followers of their Facebook page and 750,000 followers on Instagram. The engagement with their content is high - and not just likes, they are getting a lot of positive comments on their posts, and a lot of 5-star Facebook reviews as well! This sounds like things are going pretty well for them, doesn't it? And it is… until it’s not.
This brings us to the risks that come with using these third-party platforms. The biggest danger with using any of these platforms is that they own the data of all the customers or followers that engage with or buy from a business via that platform. This might not seem like too big of an issue when things are going well, but the truth is that any of these platforms can undergo massive changes or become outdated by the 'next big thing’, or something could happen that results in a business losing its presence on that platform.
Some examples include:
Competition can increase on selling platforms such as Amazon and eBay. But because the platforms limit your ability to provide much in the way of ‘brand presence’, it can be very difficult to differentiate.
Your business may be banned from a platform, for factors that may be outside of your control (such as customer complaints, policy violations, etc.).
Amazon could start selling the same product at a cheaper price (this happens!). Amazon tracks product sales data volumes and if they calculate a high profitability, will often enter the market as a competitor. In most cases, there is nothing the original brand can do about it, as Amazon controls everything.
So if we go back to our example of The Aussie Hat Co., what happens to their business if Amazon starts selling hats that are a replica of their products at a lower cost? They start to see a massive drop in their sales coming through from Amazon. With only $600,000 of their $6 million annual revenue coming from their own website, they are suddenly in a lot of trouble. They can’t email their loyal Amazon customers, because Amazon owns the customer data, and there is not a lot that they can do to promote their products more competitively on Amazon - unless they lower their prices, which eats at their profit margins and puts them in a race to the bottom, which is not where they want to be.
So what could The Aussie Hat Co. have done to protect itself from this particular scenario? Ultimately, they were at Risk because Amazon was in control of the platform and owned the customer data, that was responsible for most of the business’ revenue. Having too many eggs in one basket is always a big risk, especially when you don’t own the basket.
The ideal scenario is to drive customers to The Aussie Hat Co.’s own website, to be able to capture their data and start retargeting them using ads, in an attempt to convert them to buy directly from the brand. As a customer engages with the brand’s website, there should be low barrier conversion opportunities that are targeted at capturing their email address. Then, as soon as The Aussie Hat Co. has the customer’s email address, they can reach them more directly (if they have opted in) via email, or use the customer database to find lookalike audiences for online ads.
To summarise, in order to protect and grow your brand, you shouldn’t rely too heavily on any third-party platform and you should do what you can to build and grow your own customer database.
These platforms can be beneficial as part of your broader eCommerce strategy, but you should have a plan to bring them to your own online store and engage and nurture them through channels that you have greater ownership and/or control over. Ensure you have a sound, multi-channel marketing strategy in place, diversifying your customer/brand touchpoints.
If you have found yourself relying heavily on the likes of Amazon or eBay, you’re not alone. But, as you are likely very much aware of, you need to diversify and work towards growing sales through your owned channels. This can be a daunting undertaking, we get it! If you’d like some advice or need some help with this, give us a shout, we’ll be happy to help you out.
Key speakers announced for the 2nd StripeCon APAC, the community run SilverStripe conference in the Asia-Pacific region. Get your tickets now to be the first to hear about the past, present and future SilverStripe developments directly from Silverstripers. As posted on Silverstripe website.
Last night was the first Gold Coast Shopify Meetup of 2020 and what a great way to kick off this year’s series of events! We invited along the Director of Dracakis Advisory, Peter Dracakis and Co-Founder of Luxey Cup, Sandra-Lea, to share their insights with a room packed full of Shopify Merchants, aspiring eCommerce entrepreneurs, and various industry partners.
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