Ecommerce, it is not about selling only on your website.

Retailers focus on pushing sales on their own site, this is because they have a wide range of products to sell and a customer to them is worth far more than it is for a brand. As a retailer, margins are small, and basket value is large. For example, average order value in the UK is around £80. For a brand, it is very difficult to increase basket size to the same level. However, brands do benefit from higher margins.

Brands are competing for the same customers as retailers. However, for a retailer, the customer is worth more. Unless of course the brand is the type of brand that will be bought repeatedly (like Lego).

Where brands may have a natural disadvantage on their own website, they have an advantage on marketplaces. This is because they can control the supply.

If brands control the supply of product on online marketplaces (by selling direct rather than through resellers) they prevent price wars and increase market price (not to mention making added margins).

Evidence shows retailers don’t even stop stocking products if brands sell direct online. This is because retailers have their own ecommerce, that they are focusing on. This is left largely unaffected. Retailers are not going to throw this profit away because brands are selling online. Therefore, brands see incremental (and not cannibalistic) sales.

You can find out more information on how brands can control supply, and raise price online here.

There is also a concern by some brands that marketplaces damage the brand. One of the major reasons companies give for not selling on eBay, for example, is that they do not want to be associated with fakes. It is true that once upon a time eBay was awash with dodgy Rolexes and second hand junk. However, this is not the case anymore.

If you are concerned about fakes, there are companies like Snapdragon IP and Yellow Brand Protection, who can police e-marketplaces on your behalf.

The benefits of this e-marketplaces focused strategy are huge, because e-marketplaces provide access to customers.  They provide access without having to pay for customers in the way retailers do (although companies will pay a percentage for the privilege of access).  Subsequently, however, brands can generate higher ecommerce revenues.

For more info on the benefits of selling on eBay, look at this article.

All of this doesn’t mean that your website doesn’t have an important role to play, however, it shouldn’t form the basis of your entire strategy online. More information on how e-marketplaces and your website should fit together can be found here.

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