Want to know a secret? Successful ecommerce brand leaders aren’t focusing on revenue.
It seems counterintuitive, and in many ways it is. Traditionally, brand leaders focused on revenue at all costs to grow their business, but in ecommerce, that strategy is no longer effective. Those at the very top are breaking the status quo by focusing both on their top-line and bottom-line growth. And to do that, they’re getting in control of their brand online.
The truth is that in 2020, brand leaders can’t afford to not focus on control. It’s a key difference between massively successful brands and brands failing to make a profit, and it’s one of the most important things to ensure right now if you want your brand to thrive.
The opportunity costs of no brand control
There are four big opportunity costs of not getting your brand under control:
- Additional revenue
- Additional margin
- Brand equity
- Long-term sustainable growth
Additional revenue and margin costs
Let’s say you have no or little control of your brand online. Specifically, you aren’t limiting your distribution, you aren’t monitoring the brand experience across distributors, and you don’t have consistent advertising across channels. Without control, you may not initially have any problems. In fact, sometimes you end up with more revenue when you don’t have control because you have wider distribution. However, that ultimately ends up being a kind of mirage or temporary growth strategy.
Wholesale revenue is represented in blue, profit margin is represented in black.
Without control, even if your revenue is going up, your profit margin is going down. Why? Because by widening your distribution, you’re leaving the door wide open for price erosion.
Before the age of ecommerce, wide distribution was the gold standard. It was important to get your product in as many stores as possible because that was the only way to increase your revenue. Long-term profitability was practically guaranteed this way because there was less transparency in the shopping experience.
With the rapid rise of mobile shopping, however, this strategy has ceased to be effective. Consumers are constantly scouring the web for the lowest price they can find, and now they can compare prices from hundreds of distributors right in the palm of their hand. The more sellers you have distributing your product, the more options customers have to choose from, and in order to stand out in a packed lineup, sellers will start lowering their prices.
A dropped price is like a thrown gauntlet in ecommerce. Other sellers will be forced to lower their own prices to compete, including your brick-and-mortar sellers, and like a string of dominos, those prices will continue to be lowered to get ahead. Even if 20% of your business is eroding your pricing like this, it will impact every seller you have.
What happens next is that these sellers are left without margins. Maybe they purchased a product from you for $50 at wholesale and were selling it for $100 when an unauthorized seller got a hold of it and marked it down to $70. Suddenly, those authorized sellers are having to lower their price to $70 to compete and it’s eating up their own margins. So what do they do? They come to you and tell you they can only pay you $30 for your product. What began as lack of control or limitations over your distribution has now crunched into your own profit margins.
Brand equity and long-term growth
Lack of control online doesn’t just directly harm your revenue. It also indirectly harms your revenue by negatively impacting brand equity.
You may have a beautiful dot com site with high quality image stacks, engaging copy, and a responsive customer service arm to boot that draws shoppers to your product. When you cede control of your brand on other ecommerce platforms, however, you essentially give unauthorized sellers the freedom to represent your brand however they’d like, and given the chance, they rarely represent it faithfully.
Unauthorized sellers may use low-quality images to represent your brand or no images at all. They might provide bad descriptions of your product or very poor shipping options and customer service. Customers will see that and they will automatically associate it with your brand and brand experience. Your brand equity suffers as a result.
Without active steps to change course, lack of control can cause every one of your channels to become less profitable and ultimately cut into your long-term growth.
Control helps you capitalize on marketplace growth
Not only is control a key factor to your success as a business, it’s also the first step in capitalizing on marketplace growth. Once your pricing is under control and you have better brick-and-mortar performance as a result, you can devote more time and resources to things like making your advertising more consistent and powerful across channels, improving your product’s search rankings (which leads to more sales), and providing a thoughtful customer service experience across all channels that makes shoppers want to come back.
Gaining control gives you the space to really show up for your brand, and capitalizing on that will help you achieve a myriad of small wins that keep your growth sustainable. At Pattern, we call this process the Profitability Flywheel.
How to get in control of your brand
There are three main steps to start with that can help you get your brand under control:
- Rationalize your distribution on ecommerce
- Stabilize pricing
- Get expertise
Rationalizing your distribution on ecommerce
If you have many sellers, you’re going to need to start by scaling down your distribution. Less is much more when it comes to online control. Ideally, you should narrow your choices down to one to three sellers. This step may be difficult, but it’s critical to retain control.
Once you’ve scaled down your distribution, you need to have policies in place that can prevent sellers from eroding your prices. Be strict about enforcing MAP. Make sure your sellers are aware of what those policies are and don’t be afraid to cut out bad players who don’t play fair.
Once your pricing and distribution are under control, you can start focusing on growth. Find a partner who has the resources to help you improve your brand’s online presence, your advertising, and your customer service. Look for trustworthy partners who are familiar with your brand and have the dedication to help it succeed.
One option is Pattern. Pattern is an exclusive ecommerce seller who works side by side with brands to help them thrive. Our in-house Predict software can help you find and eliminate the distributors who are eroding your prices, provide you with the best keywords to improve your products’ organic ranking, as well as up-to-date analytics about your brand. We make sure your image stacks and copy are slick and informative, and we provide shoppers with an exceptional customer service experience reflective of the brand experience you want to offer.
To learn how Pattern can help you gain control of and grow your brand online, contact us today.