Navigating the relationship between DTC and online marketplaces is a difficult undertaking, but with the right approach, you carve out a successful path in today’s fragmented omnichannel retail landscape.
A solid ecommerce strategy starts with a strong customer focus. This means you need to be where your customers want to shop, whether it's on your website or through a marketplace. Bear in mind that a whopping 63% of product searches start on Amazon.
Bobsled's Tamra Fisher has shared many tips about how you can improve the relationship between DTC and marketplaces below, starting with how each channel works.
How do online marketplaces work?
A marketplace acts as a digital middleman, connecting buyers and sellers to conduct transactions through a website or application. There are many benefits to selling on marketplaces, such as increasing brand recognition and utilizing the marketplace as a source of new customer acquisition. However, marketplaces charge fees to sell on their platform – be prepared to pay a recurring monthly selling plan fee in addition to 5% to 30% of your sales.
💡 Check out The Complete Guide to FBA Fees
Amazon is the largest global online marketplace with over 5.2 billion visits each month, over 300 million active customer accounts across more than 180 countries, and over 150 million Prime members worldwide. Given this size, reach, and distribution, most brands start with Amazon when planning their omnichannel strategy.
Here are the nuts and bolts of selling on Amazon:
- If you have an Amazon Vendor Central account, Amazon buys products directly through you and resells them to their customers.
- The Amazon Marketplace allows third-party sellers to use Amazon.com as a platform to sell products and recoup a percentage of the profits. Amazon Seller Central users sell their products directly to Amazon's customers.
- Amazon Multi-Channel Fulfillment (MCF) helps simplify your operations and provides reliable fulfillment. MCF can connect all of your ecommerce sales channels, making it easy to fulfill orders. All eCommerce orders are funneled through and fulfilled by Amazon when using MCF. This gives you access to the world’s largest fulfillment network and ensures Prime-like fulfillment and shipping efficiency.
Although Amazon is the largest online marketplace by a huge margin, it’s wise to diversify and build your presence on other burgeoning online marketplaces that fit your brand’s profile, such as Instacart and Walmart. This ensures that even if there’s an issue with your Amazon presence (i.e. temporary stock-out) online shoppers can still find and buy your products.
💡Read more about Bobsled's Omnichannel Playbook
How does DTC work?
DTC (direct-to-consumer) is the process where you as the brand sell directly to consumers via your online channels i.e. your ecommerce website. This option can be more profitable than selling on marketplaces because you bypass any third-party middleman, such as wholesalers or retailers, but it certainly comes with its own set of challenges. The brand is responsible for all phases of product creation, consumer engagement, marketing, sales, customer service, and the fulfillment of product orders.
Here are the main things brands should be considering as they build out their DTC strategy:
- The main benefit of a DTC (Direct-to-Consumer) website is that brands can foster direct relationships with customers. This is different from major marketplaces, which limit the amount of customer data brands can access.
- A core DTC challenge, especially for small-to-medium-sized companies, is building up enough trust with consumers to complete a transaction through a DTC website vs a tried and tested online marketplace such as Amazon.
- Influencer marketing is a common way brands tackle the trust issue. Influencers can be very effective because they generally have built up a lot of goodwill with their audience. Influencers can send traffic wherever you wish, but many brands opt for DTC because they can achieve better per order profit margins on their own website versus marketplaces such as Amazon and Walmart. Learn more – Working With Influencers
- Brands typically rely on Google and Facebook advertising to drive traffic to DTC websites. Interestingly, brands can now harness Amazon DSP customer data to send qualified traffic too. Learn more – Use Amazon DSP To Direct Shoppers To Your DTC Website
Best practices for optimizing marketplaces and DTC concurrently
Here are a few things to keep in mind as you attempt to harmonize DTC and marketplaces:
1) Launching a ‘new’ product on Amazon can power the entire digital flywheel. Build a marketing strategy to drive off Amazon traffic to Amazon to improve your ranking in the algorithm and jumpstart your success. Utilize all digital marketing channels like Google Ads, Paid Social Media Ads, Organic Social Media, Amazon PPC Advertising, and any other digital ad campaigns to drive traffic to your listings on Amazon. Some brands even put ‘available on Amazon’ or include a link to Amazon from their DTC. This can help achieve a nice bump on Amazon over the short term, and win over a lot of new customers who may start following your brand on social media and/or start buying from your DTC website or other marketplaces in the future.
2) Start thinking about ‘internal’ and ‘external’ traffic. Internal traffic are users who are already browsing within marketplaces (high purchase intent). External traffic are users that are outside of a marketplace (lower purchase intent). Brands need to ensure they have efficient PPC campaigns in place to convert as internal traffic as possible. External traffic is higher up the funnel, so you should be trying to reach these users with compelling brand awareness display ad campaigns, and carefully decide whether it’s better to send these clicks to your DTC website or a marketplace.
3) Multi-Channel Fulfillment (MCF) is a great way to streamline your orders. With MCF you only need to manage a single inventory source to fulfill orders from any platform. MCF improves your customer experience across all platforms with fast shipping and upfront delivery promises to improve sales conversions by sharing Amazon-backed delivery dates. The costs are low and include only one fee to pick, pack, and ship products to your customer. Your brand enjoys simplified operations and fully trackable orders.
4) Figure out which products perform best on each platform. Having the wrong products on the wrong channels (or not enough range across all channels) will hurt your profitability and revenue.
Some guiding principles:
- Amazon bundles or Amazon exclusive products can create a sense of exclusivity with your product assortment. This strategy also helps you win the Buy Box.
- Experiment with case sizes and case packs. Smaller case size bundles can attract new customers that would like to try your products before committing to larger case sizes.
- Subscribe & Save can be a great option to increase customer loyalty and repeat purchases. The challenge here is making sure you have the inventory required to fulfill orders.
- DTC product exclusivity: Offer items on your eCommerce website that are not available on Amazon, like add-ons that are less profitable on Amazon or items that require personalization.
5) Is your price point consistent and competitive at all times? Private customer rewards programs are a different story, but when you run general DTC promotions, try to launch the same promotion on Amazon so the prices match. This will help you avoid losing the Buy Box or search suppression on Amazon Advertising. It also comes back to keeping your customer experience front of mind and helps them feel like they’re getting the best deal at all times on their preferred channel.
What’s your current position in the market?
Before you begin implementing these best practices, it’s vital to determine where your brand currently fits into the broader omnichannel landscape. Perform an analysis of the current state of DTC and your presence on marketplaces, and then develop a strategy for growth that fits your brand's goals. Emerging brands will likely have different immediate priorities compared to established household names. A great first step is a share of shelf report.
Identify where your target customers want to shop and what would bring them the most value on each platform. This will help you determine which strategies listed above will be most helpful to get DTC and marketplaces working in harmony.
If you need help getting started, get in touch with the Bobsled team below!