The Opportunity Costs of Not Controlling Your Brand Online

John LeBaron

December 7, 2020

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 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:

  1. Additional revenue
  2. Additional margin
  3. Brand equity
  4. 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.

Profit and Revenue Over Time Without Brand Control on Ecommerce | Pattern

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.

Pattern's Profitability Flywheel for Ecommerce Profit and Revenue Growth | Pattern

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:

  1. Rationalize your distribution on ecommerce
  2. Stabilize pricing
  3. 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.

**Stabilize pricing **

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.

**Get expertise **

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.

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Sept 6, 2022

Global Ecommerce Weekly News: 6th September 2022

Get up to date with this week's ecommerce headlines from around the globe. --- Amazon News --- Amazon announces new inventory and distribution service, AWD Amazon has launched Amazon Warehousing and Distribution (AWD), providing inventory and distribution services to its sellers as a means of addressing current supply chain issues. AWD is now available for sellers using Fulfilment by Amazon (FBA), i.e. outsourcing their fulfilment to the platform. Amazon has plans to expand the service outside the platform in 2023. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/02/amazon-introduces-new-service-to-help-solve-supply-chain-challenges/) Amazon Web Services (AWS) launches in the UAE AWS, Amazon’s cloud-computing platform offering, has launched its second region in the Middle East and now provides its services in the UAE. The move will now allow anyone in the UAE who utilises cloud technologies to harness AWS’s advanced platforms and APIs. An estimated $11 billion USD is expected to be added to the UAE’s GDP thanks to the implementation, with an average of 6,000 external vendor jobs to be created annually. AWS is now available in 87 zones across 27 regions, with sights set on expanding further across Australia, Canada, India, Israel, New Zealand, Spain, and Switzerland. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/08/30/amazon-web-services-launches-region-in-uae/) --- Other Marketplace News --- Lazada to launch in Europe Alibaba-owned ecommerce platform Lazada is set to launch in Europe, marking a refreshed internationalisation push from the company. The move follows toughening economic conditions and performance in Southeast Asia, advancing the need to tap overseas markets. In Europe, Lazada will face tough competition from giants like Amazon and Zalando. Lazada’s exact entry strategy is to be confirmed and will be reliant on macroeconomic and market conditions, according to Lazada CEO James Dong. [Read more on DigitalCommerce360](https://www.digitalcommerce360.com/2022/09/01/alibabas-lazada-to-take-on-amazon-zalando-in-europe-push/) Chinese ecommerce giant Pinduoduo to launch cross-border platform in the United States Pinduoduo, a Chinese ecommerce giant rivalling Alibaba and JD, has announced it will be launching a new cross-border ecommerce platform. The marketplace is set to launch in the United States next month, as part of the company’s larger push into new markets. Pinduoduo found success in China thanks to its rock-bottom price offerings and harnessing of social commerce marketing, emulating strategies similar to fast-fashion giant Shein. [Read more on Yahoo Finance](https://uk.finance.yahoo.com/news/pinduoduo-launch-international-e-commerce-034129263.html) Alibaba launches its biggest B2B sales event, ‘Super September’ China ecommerce giant, Alibaba, has now launched its month-long B2B sales event ‘Super September’. The event provides 40 million buyers and 200,000 suppliers with the ability to connect on the platform, showcasing a ‘virtually unlimited’ number of products. The event hopes to foster new cross-border business relationships to tackle supply chain challenges currently faced by businesses. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/01/alibaba-launches-super-september-b2b-sales-event/) --- Other Ecommerce News --- Klarna’s losses quadruple in first half of 2022 BNPL provider, Klarna, has reported losses of $581 million USD for the first half of 2022. This figure is almost four times larger than a year earlier, where $129 million USD in losses were reported. The company attributes the losses to employee costs, technology investments, and rising credit losses. Klarna’s figure reporting comes amidst worsening economic conditions, fresh legal and regulatory scrutiny, and pressure from Big Tech competitors. [Read more on The Financial Times](https://www.ft.com/content/483451db-9221-4ca4-83a6-b4ddc6bfcfbb) [Read more on the Guardian](https://www.theguardian.com/business/2022/aug/31/klarna-losses-more-than-triple-as-consumer-spending-slows) One fifth of Snap employees to be laid off amidst poor financial performance Social media platform Snap (‘Snapchat’) has announced it will be laying off 20% of its employees and closing out a number of projects following a year of poor financial results.The move will see 1,200 employees globally lose their jobs, saving the company an estimated $500 million USD in costs. Snap is currently valued at $20 billion, an 84% decrease from its valuation of $130 billion last year. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/01/snap-to-lay-off-20-of-its-workforce-and-wind-down-a-number-of-projects/)
Aug 30, 2022

Global Ecommerce Weekly News: 30th August 2022

Get up to date with this week's ecommerce headlines from around the globe. --- Amazon News --- Amazon set to shut down Amazon Care Amazon is closing its telehealth service, Amazon Care, which launched in 2019 as a trial program for its headquartered employees. Later the service was rolled out nationwide for employees and other companies. The ecommerce giant has now made the decision to move away from the healthcare space, believing it was not the right long-term solution for its enterprise customers. [Read more on CNBC](https://www.cnbc.com/2022/08/24/amazon-is-shutting-down-amazon-care-telehealth-service.html) Peloton closes new deal to sell on Amazon Following a recent deal, Amazon customers will soon be able to buy Peloton fitness equipment on the marketplace, marking Peleton’s first move outside a direct-to-consumer model. According to Peloton’s CCO, there are already around half a million searches on Amazon for Peloton products every month, despite having no presence on the marketplace. Some key products include the original Peloton Bike, retailing for $1,445 and Peloton Guide for $295. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/08/24/peloton-strikes-deal-to-sell-fitness-equipment-on-amazon/) --- Other Marketplace News --- 60% of Malaysians are buying from local sellers on Shopee A recent survey of nearly 3,500 respondents found that nearly half of the shoppers prefer to purchase from local sellers due to shorter delivery times. Other shoppers decide to shop locally due to the quality of the products made in Malaysia and an interest in keeping the economy running. As a result, smaller local merchants have been able to grow their businesses, and shoppers benefit from shorter delivery times, products of high quality and supporting local businesses. [Read more on The Malaysian Reserve](https://themalaysianreserve.com/2022/08/25/around-60-malaysians-are-buying-from-local-sellers-on-shopee/) Flipkart’s social commerce platform Shopsy crosses 100 million users Flipkart launched a social commerce arm, Shopsy, in July of last year, which has now surpassed 100 million users, ahead of its target timeline being the end of 2022. This acquisition of new users has made Shopsy one of the largest platforms of its kind in the country, and is expected to onboard a further 100 million by the end of 2023. The platform is centred around boosting local entrepreneurship and powering ecommerce for consumers across tier 2+ regions where users face challenges around trust and navigation when shopping online. [Read more on Business Standard](https://www.business-standard.com/article/companies/flipkart-s-social-commerce-platform-shopsy-hits-100-million-users-1220828006851.html) Meta joins Amazon and Walmart in bid for Indian ecommerce market Amazon mentioned earlier in the year that it would be building a logistics division in-house through its purchase of a 51% stake in Ecom Express, an end-to-end logistics firm, to make ecommerce deliveries more efficient in the country. Walmart operates Flipkart in India and is set to continue its investment in the marketplace. In an effort to compete in the Indian ecommerce market, Meta has partnered with Indian ecommerce company, JioMart, to offer customers a grocery shopping platform within its WhatsApp chat feature. [Read more on Pymnts](https://www.pymnts.com/news/retail/2022/meta-joins-amazon-walmart-indian-ecommerce-market/) --- Other Ecommerce News --- Ecommerce in Spain worth €57.7 billion in 2021 Spanish ecommerce saw 11.7% growth compared to last year, largely attributed to cross-border sales. In the final quarter of 2021, ecommerce sales in Spain were at €16.9 billion euros, at least 60% of which came from cross-border sales. Transactions from foreign locations to Spain generated a turnover of €1.56 billion in Q4, a growth of 27.7% compared to Q4 a year before. [Read more on Ecommerce News](https://ecommercenews.eu/ecommerce-in-spain-was-worth-e57-7-billion-in-2021/)
Aug 23, 2022

Global Ecommerce Weekly News: 23rd August 2022

Get up to date with this week's ecommerce headlines from around the globe. --- Amazon News --- Amazon to add mental health support to primary-care service Amazon is set to move into mental health therapy with its primary-care division, following its recent acquisition deal of One Medical. The plan is to partner with virtual behavioural therapy service, Ginger, to offer its Amazon Care users with on-demand access to mental health services, licensed therapists and psychiatrists. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/08/11/amazon-plans-to-add-mental-health-support-to-primary-care-service/) GMB union calls for £15 an hour minimum pay at UK Amazon warehouses Amazon recently offered its warehouse workers a 3% pay rise, which in comparison to the June inflation rate of 9.4% left employees disappointed. Following this, hundreds of Amazon warehouse workers stopped work last week, protesting against the minimal pay increase, seeking a minimum of £15 an hour. Recent protests consisting of employee walkouts and sit-ins aim to get a better offer out of Amazon. [Read more on The Guardian](https://www.theguardian.com/technology/2022/aug/09/gmb-calls-for-15-an-hour-minimum-pay-at-amazon-warehouses-in-uk) Amazon third-party sellers have received their first-ever holiday fee hike Amazon’s third-party marketplaces account for close to half of the company’s online sales. The company introduced a 5% fuel and inflation charge to its third-party sellers earlier this year, and has now implemented another inflation increase charge. Commencing 14 October, any seller who uses Amazon’s fulfilment service is subject to the price hike, which is set to be an additional 35 cents per item for products sold in the US and Canada. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/08/17/amazon-third-party-sellers-have-received-their-first-ever-holiday-fee-hike/) Amazon puts a pause on UK grocery shop roll-out as the cost of living increases Amazon has slowed down on its UK roll-out of till-free Amazon Fresh grocery stores following disappointing sales and the rise in cost of living. Allegedly, the company is no longer looking for potential sites to expand and if more stores are opened, they will likely no longer use a till-free system, as consumers become more cautious about spending. [Read more on The Telegraph](https://www.telegraph.co.uk/business/2022/08/21/amazon-pauses-uk-grocery-shop-roll-out-following-disappointing/) --- Other Marketplace News --- Shopee overtakes Alibaba across international markets Shopee has surpassed Alibaba and taken the top spot for sales outside of China. Singapore-based marketplace saw a year-on-year increase of 51.4% at the end of Q2 of this year, while Alibaba saw a 3% drop during the same time period. This can be seen as a promising development for start-ups and their ability to compete with some of the largest ecommerce giants in the market. [Read more on Exchange Wire](https://www.exchangewire.com/blog/2022/08/18/shopee-surpasses-alibaba-in-international-sales-amazon-searches-for-entertainment-exec/) H&M reopens its official store to Alibaba’s Tmall ecommerce platform It has been nearly 18 months since Alibaba removed H&M from its Tmall platform, following H&M’s criticism of human rights abuses in Xinjiang. It is estimated that over a million people, predominantly minorities in the area, have been unlawfully detained in camps across the city. Brands including Nike, Adidas, Burberry and Converse were swept up in the controversy, however H&M was one of the first to be targeted for speaking out about the issue. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/08/16/hm-returns-to-alibabas-tmall-platform-16-months-after-xinjiang-controversy/) Klarna launches new feature allowing UK consumers to view full online order history Buy-now-pay-later company, Klarna, has launched a new feature on its shopping app, which allows UK consumers to view their full online order history, regardless of whether they purchased the product using Klarna. The feature also shows delivery tracking and aids consumers in managing their online purchases more conveniently. [Read more on The Industry](https://www.theindustry.fashion/klarna-launches-new-feature-allowing-uk-consumers-to-view-full-online-order-history/) --- Other Ecommerce News --- Online marketplaces responsible for £280 billion business turnover in the UK Nearly 900,000 UK businesses are currently selling on online marketplaces, generating an estimated £282 billion worth of sales each year. This figure represents 6% of the UK’s annual business turnover, highlighting the notable contribution that marketplaces make to the UK economy, along with the potential for further growth in this area. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/08/09/online-marketplaces-responsible-for-280-billion-business-turnover-in-uk/)