Brands are Trees

Since the beginning of 2020, a new phenomenon is happening. Large brands (think PepsiCo, Kraft Heinz, Nestle) are opening direct to consumer websites. The same brands remain committed to their wholesaling and retail partners. Why is DTC for these brands a big deal?

If the small upstart disrupts the large incumbent its worth a lot of PR yet an incumbent can be nimble its panic. What is going on here?

Source: Whisper

The forest of brands are dense

I often say that I do not want to be a brand manager in the current age of commerce. Why? There are many moving parts, channels, and opportunities for things to go wrong. Brands are at the mercy of distributors, retailers, and consumers for revenue. The chain of command for a product to get into a store is almost the same as getting a product on a website. There are many more complexities for brands to sell to consumers.

Platforms such as Amazon arrived 25 years ago and changed retail into a soulless event. It evolved into a pay to play market which requires brands to be aware of many things to be profitable. Let me also add, there are millions of brands all looking for wallet share. Getting in front of consumers requires a variety of digital czars. They can make or break your business in seconds or in the case of trees remove their water, chop them down.

Reality

If you are not called Nike or Disney then marketplaces do not care about your brand. The number of unauthorized sellers, diversion of goods are all capital intensive problems. The opportunity for whack-a-mole management of offenders is real. It also requires access to talent which is not looking at joining brands.

Challenges brands face

  • Brands are also battling a group of consumers that are trying to understand the brand. What are its views on social matters?
  • Brands have had to deal with a black box that provides no insights in-store and online. Catalogs sent by mail also provides no insights and end in the trash.
  • The attribution between online advertising and in-store footfall is not solved. To be blunt its a lottery at best and as much as anyone wants us to believe its solved, it’s not.
  • Brands have had to deal with an increase in private labels from online and offline retailers.
  • Brands invest in above and below the line advertising which benefits partners. The lack of metrics to qualify this investment has boosted the need for brands to run their own websites.
  • The speed of product development has accelerated. Customer feedback is limited through traditional channels.

The rush for first-party data

Incumbent brands want access to the performance of their own products online. Marketplaces by enlarge do not share these metrics. These brands invest in their products. They use focus groups and other marketing tools to gather feedback. The development cycle is too long and thus the brand is at risk from more nimble smaller brands.

While these brands all say they expect the financial returns to be small. It’s about shortening the feedback loop and understanding what consumers want. Brands such as Oceanspray have been first movers in going online. The problem for all these brands is getting the product to the consumer. Challenges to understand:

  • How do you get your business online quickly?
  • What is the relevant average order value to break-even for free-shipping?
  • When do you collect feedback?
  • How do you collect the feedback? Special URL or a form that is only accessible via the data added by the shopper?
  • Is the feedback only on the product? Or is it about the consumer and the product? (I always recommend the second option)
  • How is the data aggregated and shared with the relevant stakeholders?
  • How deals with customer complaints and questions?
  • What is the optimal time frame to generate valuable feedback?
  • Do you reward the consumer for the feedback given?

Retailers and platforms – do better

If your business is not adding value to your partners – your business is under threat. Insights sharing, creating an environment where partners can learn from others is important.

So if your tree falls in a forest, will anyone hear it?