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September 16, 2020

Brands: Want to do Better Business with Your Brick-and-Mortar Channels? Take Control of Your Online Marketplace Sales

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Brick-and-mortar channels are under immense pressure. The exponential growth of Amazon and other online marketplaces has upended traditional distribution models, with virtually no product category insulated from online disruption. This paradigm shift has brought waves of conflict between eCommerce and brick-and-mortar channels, free-riding unauthorized sellers, and the showrooming phenomenon, among other forces highly damaging to traditional sales channels. eCommerce is booming.

The reality for most brands, however, is that a large majority of revenue will continue to be driven in brick-and-mortar channels for the foreseeable future. It is imperative for brands to take action to support the success of their brick-and-mortar distributors and retailers in this challenging environment. In today’s market, a brand’s ability to maintain online marketplace sales control will be a key component of brick-and-mortar channel health. Brand erosion quickly ensues when companies lose control over online marketplace sales, with numerous free-riding sellers offering listings. This erosion inevitably spills over into brick-and-mortar channels, with in-store shoppers engaging in showrooming behavior and demanding price matches. Channel conflict coupled with declining sales is forcing many retailers to insist on chargebacks, margin guarantees or a reduction of shelf space for brands lacking online sales control. This damaging cycle is demonstrated below.

Given the overall size and importance of the brick-and-mortar channel, the financial fallout from an uncontrolled online sales channel can be significant – disrupting key metrics across the entire business. Simply put, online marketplace sales control is a prerequisite for an optimized brick-and-mortar channel in today’s market.

Brands must take steps necessary to ensure that:

  • in the online marketplace channel, their invested, authorized seller or sellers are driving the overwhelming majority of sales;
  • they have established the legal foundation necessary to stop freeriding unauthorized sellers; and
  • they aggressively enforce against any unauthorized sellers that disrupt the stability of their online go-to-market strategy.

When only limited numbers of high quality, invested sellers in the online marketplace channel are winning sales, brick-and-mortar channel customers can have the confidence necessary to invest in and promote the brand. In physical locations, this can come in many forms, including optimized or expanded distribution, improved shelf placement, off-shelf (dual) placement and more. With omnichannel retailers, there may be additional opportunities to increase awareness and sales through product or brand features on site or in marketing campaigns, or enhanced search rankings. This has the potential to further increase sales in traditional channels and drive an optimized omnichannel brand experience. Compare the phone on the left and the phone on the right – the online marketplace picture necessary for overall brand health across all channels is quickly obvious.

The increasing shift to eCommerce is exciting and inevitable, but brands will be well served for the foreseeable future to ensure that they do not allow strong brick-and-mortar customers to be undercut in the process. Vorys eControl has helped hundreds of brands around the world to take control of online sales, stop unauthorized sales, eliminate channel conflict and preserve brand equity. If your brand is being harmed by an uncontrolled online marketplace environment, contact Daren Garcia at dsgarcia@vorys.com or 513.723.4076.­­­ Download our eBook: Achieving Brand Control and Stopping Unauthorized Sales Online.