Webinar Recap: Measuring the Financial Impact of Marketplace Control

Emilee Valken

April 2, 2021

Maintaining control of your brand on marketplaces is critical for your long-term growth. To maximize your brand’s health and profit, you need to regain control as quickly as possible. But what is the actual impact of marketplace control, and why should brand leaders care?

In this week’s Pattern webinar, we’re talking about what marketplace control is, why it’s so critical for your brand, and the financial impact it can ultimately have on your business.

What is marketplace control?

Having marketplace control means that your brand is being represented with integrity online, your product is being distributed via authorized sellers, and that product is being sold at authorized price points. Essentially, your ecommerce is a well-oiled machine across all channels.

Maintaining overall marketplace control requires control in three primary areas:

  • Pricing: price control is retained by enforcing a MAP policy, creating price parity across all channels, and adhering to national promos.
  • Branding: brand control is retained by ensuring the quality of your product images is consistent across channels, your copy is compliant, and your messaging is unified.
  • Distribution: distribution control is retained by only distributing through authorized sellers, meeting customer expectations for product quality, and aligning channel incentives.

Why does marketplace control matter?

Marketplace control matters because without it, every channel of your business suffers, including, and perhaps especially, your brick and mortar distributors.

Before the advent of marketplace ecommerce, brands were highly incentivized to use scaled distribution to get their product into as many hands as possible. With scarce ways to compare prices offline, scaled distribution worked really well. Marketplace ecommerce has completely flipped the script.

Marketplace ecommerce makes price matching instantaneous, because customers can see the price of a product from almost every single distributor who’s selling it, at the same time. That much access makes wide distribution a liability.

“Because there is so much transparency in the world today across retail environments, your success is really predicated on the degree to which you have very limited distribution and what we call selective distribution on your online channels,” said John LeBaron, Pattern’s Chief Revenue Officer.

Without pricing control, branding control, and distribution control, you open the door wide for unauthorized sellers to erode your pricing and harm your brand reputation by representing it poorly online.

Without control, an unauthorized seller can get their hands on your product, list it on Amazon for however much they want, and then markdown the price to get ahead on marketplaces and undercut authorized sellers, forcing other sellers to lower their prices in order to compete. Without control, these prices will continue to be lowered, and it will penalize your distributors who are trying to follow the rules. Pretty soon, your authorized sellers may drop your product altogether because—due to eroded prices online—they cannot afford the overhead to carry it, sell it, and price match.

These negative impacts are cyclical, particularly for your brick and mortar distributors. Without control, your brand will be caught in a profitability death spiral where you’ll consistently lose the Buy Box online—disincentivizing distributors from creating engaging and clean listings and fragmenting your ad strategy—and you’ll lose distributors who can’t afford to carry your product.

You’ll also watch your brand lose its value across all channels. According to LeBaron, the race to wholesale eats at your brand equity. With too-low prices, customers perceive your products as lower value. Lack of control on the distribution and branding fronts means that unauthorized sellers can easily misrepresent your brand in their listings and their interactions with customers, diminishing your equity further.

According to LeBaron, if brand equity is falling in one channel, it’s “certainly falling in other channels as well.”

The financial impact of no marketplace control

“Once you’re in that death spiral, it’s hard to turn it back around. You have to make certain changes to really recover from that,” said Jason Beesley, Pattern’s CFO.

Profitability Death Spiral

Tommie Copper is one example of a brand that didn’t address marketplace control immediately and were eventually significantly harmed by price erosion. Without control, Tommie Copper watched the pricing on their products plummet at the hands of unauthorized sellers, taking their margins with them.

Tommie Copper

Tommie Copper is just one example. LeBaron shared another example of a brand that sought out Pattern’s help to regain control of their business after price matching gutted their profits.

“We had a large retail consumer electronics brand that came to us, and they were paying Best Buy half a million dollars a month in price match guarantees just because they had 400 unauthorized sellers selling all of their products on Amazon, and they were just hemorrhaging profitability,” LeBaron said.

This brand didn’t know who the unauthorized sellers were, why they were dropping the price, or where they got the product because they lacked proper control.

“Not only does that price match guarantee really start to hurt,” added Scott Crandall, Pattern’s Head of Revenue Operations, “but you just lose credibility. You lose any leverage that you have with those retailers. They don’t want to have to deal with all of that, so they’re going to give shelf space to other people at some point who have that better price stability online.”

For some brands, having more control doesn’t necessarily provide significant gains, but it does act as a protective barrier helping your brand avoid scenarios like these later down the road.

“In some cases, getting control on ecommerce, even if it’s a net not loss or not gain from a pricing and margin perspective, is generally protecting or hopefully helping to reinvent and improve and turn around the profitability death spiral that’s happening in brick and mortar, which ultimately might be 80% or 70% of your sales, maybe higher than that,” LeBaron said.

The benefits of marketplace control

The equation for success in ecommerce is:

Revenue = Traffic x Conversion x Price

You need customers to see your listings in the right way at the right time, you need for them to be engaged enough to click, and you need pricing that is attractive and reasonable. Marketplace control, particularly distribution control, helps you maximize every element of the ecommerce equation, because single sellers have far more incentives to be the ones driving the traffic and the conversion and positively shaping your brand image online than a wide network of sellers.

“The issue in ecommerce isn’t getting to the end consumer. The marketplaces handle that wonderfully,” said Beesley. “The issue is more how you are doing that, and that’s why limiting your distribution really allows you to even further maximize that reach.”

Control on marketplaces protects your business and it speeds up profitability.

“As you have that selective distribution on Amazon, on these marketplaces, there’s really a great flywheel that starts to develop there, a really virtuous cycle,” Crandall said.

Your distributors are more invested in your brand’s image and success. They provide quality listings with dynamic copy. They focus on a better customer experience, and you have a more consistent, sharpened ad strategy that gives you higher rankings. Soon, instead of losing profits, you’re making long-term gains and really solidifying your brand presence.

To learn more about marketplace control, how Pattern can help you win on your ad strategy to further your brand’s growth, and what opportunities for growth are available to your brand, check out the rest of our conversation in this Pattern webinar or request your free demo.

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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/)