Margin of Opportunity

What is the best way to increase your margins as a merchant? Sell your own merchandise. Quartz as an interesting piece on Amazon’s “secret” plans for private merchandise:

Trawling through over 800 trademarks that Amazon has either been awarded or applied for through the US Patent and Trademark Office (USPTO), Quartz identified 19 brands that are owned by Amazon and sell products or have product pages on amazon.com.

The key strategy behind private label brands is this however:

Perhaps what Amazon is trying to do as it rapidly expands into new businesses—especially business areas where it might not have forged partnerships with well-known brands—is to give the impression to customers that there are tons of options to choose from, when in fact, they’re really just choosing between different Amazon brands. “Consumers pay a premium for a brand, that’s why they’re not store-generic,” DiMassimo suggested.

Retailers have long adopted a multifaceted brand approach to retailing – think Zara plus Massimo Dutti, Oyosho, Bershka etc or HM plus COS, Cheap Monday or indeed pretty much any other major retailer these days. As above, it’s about generating margin whilst at the same time, presenting a feeling of choice.

Read the full piece

B2W

3rd Party Brands Online is Almost Mission Impossible

The WSJ has another interesting piece on the hotly covered ecommerce startup Jet.com. If you’re selling third party brands online you’ll know this but if you’re thinking about it please read on:

Over the summer, the company said it would spend $100 million on ads in the first 12 months after the site opened. In the recent plan, that total had grown to nearly $300 million. The money is fueling television spots, subway posters and online ads—including nearly $10 million spent on Google in October, according to people familiar with the figure.

It takes $300 million to market a third party branded ecommerce website in 2015. Ouch.

Putting aside the fact Jet is a large, venture back outfit, the costs for any startup doing the same will still be very steep. This is what killed Webvan and caused the dotcom bubble. In essence, competition in ecommerce has the same economic factors as physical offline commerce. Sometimes people forget to be rational with customer acquisition.

So how do you compete other than paid media? One answer is social media aka word of mouth and arguably it’s is the best route to market today for online ecommerce startups. It’s also something Jet will be hoping to rely on in the future (as Amazon does) to avoid becoming another Webvan.

Searching For Products Online

A interesting piece by Fool notes just how powerful and influential Amazon is in the product search funnel. They mention a recent survey result:

Nonetheless, a recent survey commissioned by BloomReach found that 44% of online shoppers in the U.S. began their product searches on Amazon.com. Just 34% use search engines such as Google, and the rest use other retailers’ websites. That’s a pretty poor position for the Alphabet company, which relies on product-related searches for a big chunk of advertising. What’s more, the prospects are good that Amazon will continue to gobble up product-search share.

Interesting stuff, read more here.

The question in my mind is; will mobile help Google i.e can they innovate in voice (Google Now) or visual (Glass) so Amazon is less relevant or perhaps will mobile make Google less important in product search?

The answer not only affects Google but almost every merchant and marketer on the planet.

Future of Ecommerce According to Bill Gurley

Prominent VC BIll Gurley comments on the future of ecommerce at the Sailthru conference. In their words:

In this chat, Bill examines the future of ecommerce and provides his perspective on the future of the unicorn market, how “funnel reversal” is impacting marketer’s focus on google, and why retention is critical to profitability over acquisition’s hold on growth.

Worth watching this video if you’re thinking about your site, third party marketplaces and so-on.