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March 24, 2020

Coronavirus Crisis Driving Increased eCommerce Demands – Brands Need To Adapt Accordingly

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As an ever-increasing number of consumers are forced into lock down, there has been a marked spike in the number of people turning to eCommerce as the channel of choice (and necessity) for their retail purchases.  More than 58% of Americans plan to distance themselves from the general population in the face of coronavirus.  With the “social distancing” timeline likely to expand to weeks or even months and the resulting decline in traffic within traditional brick-and-mortar channels, brands need to take action to ensure their preparedness for a dramatic expansion of eCommerce both in terms of sales volumes and strategic necessity. 

Tellingly, U.S. retailers experienced nearly a 52% increase in online spending in late February and early March of this year compared to the same period in 2019. With the flood of product volumes likely to shift to the eCommerce channel, brands without a clear plan to achieve control over online sales are much more likely to experience harms involving brand erosion, channel conflict and mass amounts of low quality products being peddled under their valuable trademarks.  Now more than ever, brands must devote considerable strategic thought around how they will successfully engage with and protect themselves on online marketplaces. In the absence of a sound plan, brands are much more likely to face a chaotic reseller environment with multiple unknown 3P sellers, poor-quality (and counterfeit) products and poor consumer experience in the channel.

As an initial step, brands should clearly define their online go to market strategy, and develop a specifically tailored eControl program both to support it and to harmonize their broader channel strategy.  For many companies, this will involve carefully defining and managing their authorized sellers across all channels to prevent a free-for-all online.  Brands must also be able to identify and have a basis for enforcing against unauthorized resellers in the marketplace channel.  Finally, brands should continuously monitor their channels to identify likely sources of diversion into the marketplace channels.  This channel diagnostic process will allow brands to understand whether their online issues are caused or exacerbated by violating distributors or retailers, promotional practices, international arbitrage, or some other business practice.  Once the appropriate diagnosis has been made, brands can evaluate whether any corrective actions are appropriate within their business – for example, limiting product to known violators, pulling back or recalibrating trade allowances, harmonizing sales incentives, adjusting international pricing corridors, among others.  This type of holistic approach – rather than a piecemeal effort relying on fragmented policies, scary letters or monitoring – is what is needed.

With many commentators predicting that the havoc wreaked by coronavirus will hasten the dominance of eCommerce and further weaken traditional channels, it is imperative that brands face this transformation head on, be able to approach it at an enterprise level from a controlled state and position themselves to succeed into the future.

Vorys eControl has helped hundreds of companies navigate the rise of eCommerce and position themselves to protect and grow their brands this ever-changing landscape.  

Additionally, Vorys attorneys and professionals are counseling our clients in the myriad issues related to the coronavirus (COVID-19) outbreak.  We have also established a comprehensive Coronavirus Task Force, which includes attorneys with deep experience in the niche disciplines that we have been and expect to continue receiving questions regarding coronavirus. Learn more and see the latest updates from the task force at vorys.com/coronavirus