Marketplaces Give Brands a Greater Shot at DTC Success

Pepsi is one of the latest major CPGs to go DTC, with the debut in May 2020 of two sites: PantryShop.com and Snacks.com.

Reportedly developed in less than 30 days, these sites feature the best of PepsiCo’s iconic brands like Frito-Lay, Quaker and Gatorade. This, of course, is a direct response to the coronavirus pandemic which has triggered many brands to give their DTC approach more TLC.

With brick-and-mortar stores at a virtual standstill, what was once a passive channel for brands big and small is now the emergency escape door. Ecommerce offers a chance to revive sales, both now and in the foreseeable future.

A Renewed Focus on DTC

As plexiglass dividers and social distancing markers haunt the future of retail, ecommerce adoption rates are at an all-time high. One viral chart by 2 p.m., Inc. suggests that we’re basically living in the year 2030, with ecommerce penetration ahead by 10 years in the U.S.

This new reality is forcing brands to refocus their attention to DTC ecommerce with greater urgency. But as once-illustrious brands like Harry’s and Casper are experiencing, DTC ecommerce is not unequivocally set up to succeed.

Most brands won’t succeed by slapping up a new DTC webstore. Customers today are sticking to sites they already trust amid ongoing health concerns. They’re limiting their purchases and slashing their discretionary spending by record amounts. Some digital-first brands now face cash flow strains and customer retention issues; their ability to weather the storm depends on their ability to source and preserve capital while outside funding is scarce.

It’s an incredibly volatile time to be a seller. Yet, brands can’t afford to wait out the pandemic or its effects. To ensure longevity, they must lay down the pipes early and (still) look ten steps ahead. They’re challenged with finding a way forward even when traditional DTC models threaten to crack—and thinking outside the box to find the post-coronavirus formula for success.

Selling DTC Through Third-Party Marketplaces

Fortunately, selling DTC doesn’t exclusively mean focusing your attention on your own site. Marketplaces like Amazon, Walmart, eBay, Rakuten and many others offer a way in without exhausting as many resources and having to drive traffic from scratch. In fact, Harry’s and Casper can both be found on Amazon now.

Even in normal times, it’s recommended that you look beyond a single webstore. Amazon, for one, owns 55% of all product searches online—with nine out of every 10 shoppers reporting that they price check on the site. A study by Zentail also revealed that marketplace participation led to webstore growth for 92% of surveyed sellers, who saw anywhere between 2x-4x more webstore sales as a result of being discovered on marketplaces.

Marketplaces can ease the burden of traditional DTC selling by providing other benefits like:

  • Millions of monthly visitors
  • Loyalty programs that incentivize customers to make repeat purchases
  • Buyer trust: they are more willing to try new or lesser-known brands through marketplaces they frequent
  • AI-powered personalized shopping experiences that surface the most relevant products
  • Free marketing and remarketing, courtesy of the marketplace itself
  • High domain authority to help with ranking on search engines like Google
  • Seller services, including fulfillment, that can add an extra layer of convenience

Rather than making large marketing investments up front, you can test the waters with a smaller amount of inventory and listings. You can prime the pump for future, larger investments in DTC while still capitalizing on the current surge in online shopping.

A Word of Wisdom: Don’t Limit Yourself to Amazon

It’s worth calling out that if you expand first to Amazon (as many brands do), your distribution plan shouldn’t end there. Prior to the pandemic, a whopping 47% of Amazon sellers relied on Amazon for 81% to 100% of their annual revenue.

These same sellers are at high risk, if not already closed for business in the wake of the pandemic. Case in point: When Amazon faced supply chain disruptions, it froze its FBA services for thousands of sellers overnight. Sellers then got hit with news that Prime deliveries would be delayed weeks or months at a time, stunting their ability to capture sales during the mass migration to ecommerce.

“[Sellers] have lots of reason to complain,” said James Thomson, partner at Buy Box Experts and cofounder of Prosper Show. “But I do want to remind sellers that you made the choice to source everything out of one country. You made the choice to sell everything on one channel, and you made the choice to have only one company do fulfillment. So, if there’s variance in any of those different systems, it creates a big problem.”

“Quite frankly, we should have been doing the diversification discussion six months ago, 12 months ago,” he added.

Diversifying DTC Channels to Stand the Test of Time

It’s ever-more important for brands to revisit the conversation of channel diversification in DTC. The face of retail as we know it is changing, and fast. With ecommerce becoming even more lucrative than before, now’s the time for your brand to find value in marketplaces.

While there are precautions that every brand should take when launching to a third-party site, marketplaces can make remarkable growth tools. For small and large brands alike, they can help to build market share and let you go DTC without the traditional costs of launching a new webstore.

Daniel Sugarman is CEO of Zentail

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