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“There are reasons for brands to proceed with caution into marketplace selling, but it's still a very wise investment for most brands as long as they go into it with a plan around assortment for each channel and realistic expectations around their own costs.”— Emily Pfeiffer, Principal Analyst at Forrester
From marketplaces and direct-to-consumer (DTC) to retail, brands now invest in a variety of channels.
Wringing as much value as possible from these investments is one of the biggest riddles brands will need to solve in 2023 — and beyond. Thankfully, Emily Pfeiffer, principal analyst at Forrester Research, has several actionable strategies and insights to help brands unpack the next steps.
Pfeiffer appeared on a recent episode of the “Unpacking the Digital Shelf” podcast, “Make the Most of the Marketplace Opportunity in 2023,” to share best practices for how companies can improve brand experience management across channels and forge better partnerships with retailers. Here are her key takeaways.
Marketplaces have become an integral part of the online shopping experience. Only 18% of U.S. consumers under age 65 haven’t purchased from an online marketplace, says Pfeiffer, citing Forrester data.
Pfeiffer says Forrester's research also indicates that online marketplaces have helped consumers find products they wouldn’t otherwise be able to access. What the research suggests is that marketplaces are a growing part of the omnichannel shopping experience, and brands need to continually refine their selling strategy on this channel.
“There are reasons for brands to proceed with caution into marketplace selling, but it's still a very wise investment for most brands as long as they go into it with a plan around assortment for each channel and realistic expectations around their own costs,” Pfeiffer says.
To that point, Pfeiffer says brands need to better manage their profit and loss (P&L) statement for each channel. She gives the example of Amazon, where brands know the company will take a 15% cut of everything they sell. There are also advertising costs and potential shipping costs with Fulfillment by Amazon (FBA) they must factor in.
Establishing this cost transparency across channels is important. Pfeiffer says it may be best for brands to look at a blended margin, where they mark up certain products to boost profits and take a smaller margin on others just to move the inventory and increase consumers’ exposure to their products.
“A blended margin can be a healthy way to look at the profit, but it's just terribly important not to lose sight of the bottom line in these channels,” she says.
Many companies use dropshipping to deliver goods to consumers, but this approach comes with certain considerations.
Dropshipping is when a merchant, such as a marketplace or a retailer, sells an item they don't physically own and then passes the order to a supplier or brand that dropships the item directly to the customer. Though marketplace selling is dropshipping, there are several differences between a traditional dropshipping model and marketplace selling, Pfeiffer says.
First, brands can usually set their own prices when they sell on a marketplace. However, brands that are selling to retailers have less control over price. Pfeiffer adds that dropshipping has certain legal implications. On a marketplace like Amazon, there’s more transparency between buyers and sellers, and sellers bear the responsibility if they sell counterfeits.
“That protection is in place for marketplaces and not so for retailers who have dropship suppliers, because they don't have that level of transparency,” she says, adding that brand protection is key for brands as the number of channels they invest in continues to grow. “It is really important for brands to use some form of e-control and make sure they're keeping an eye on what's out there because protecting the value in the brand is everything.”
Brands also need to fine-tune their assortment strategy across channels.
Pfeiffer says it’s important for brands to “find uniqueness in each channel,” whether that means offering bundles or certain product combinations on specific retailer sites or marketplaces.
Brands also should consider the audience on each channel. This may require some experimentation at the beginning, but over time you’ll be able to see what products resonate on each site and the best-selling products on each channel. This will help you curate a better assortment and optimize brand experience management on each channel.
Pfeiffer adds that brands also shouldn’t be afraid to broaden their assortment on each channel, especially if they have a handle on their fulfillment and dropshipping processes.
“It's not a bad idea to cram as much as you can into some of these channels as appropriate for the audience because you have a better chance at moving volume and at using the channels as a testing ground and gathering volumes of data,” she says.
For brands that employ this approach, the key is to track what’s offered on each channel very carefully, order cautiously, and make adjustments based on what the data tells you.
To get the right products in front of the right consumers at the right time, brands need to fully leverage both product and customer data.
“One of the most important things they [brands] can do is have really rich product data that's fully populated with product attributes that hopefully work well with the system they're being sold on, so the products can be surfaced when appropriate using, hopefully, very smart technology that the retailer or marketplace has in place,” Pfeiffer says.
She adds that although this advice may seem obvious, brands also need to be better about sending product data in the right format to different retailers and marketplaces — whether it’s abiding by a specific image format or content description details.
“Every channel has its own requirements, so know them and don't make them remind you. Really try to stay up on it.” — Emily Pfeiffer, Principal Analyst at Forrester
Brands and retailers also need to fulfill orders as promised, even though they're giving up some portion of the end customer's experience.
“For a brand, what you're outsourcing is that online experience, the purchasing experience,” she says. “But to a retailer, they're outsourcing to you the fulfillment, and they need to trust you. They need to know that it will go as promised.”
For brands, proactive communication with retailers is key if they know they won’t meet their service-level agreements (SLAs). At the same time, retailers also need to do a better job of providing data that helps brands improve.
Retailers have access to so much data on product performance to help brands better understand upcoming trends, how a brand is performing compared to their competitors, and what’s working well and what’s not. Sharing this information could help both retailers and brands deliver a better experience.
When it comes to data, retailers also could do a better job of getting operational data on inventory availability and delivery timing closer to consumers. Pfeiffer says this is crucial because 70% of consumers say an order confirmation with specific delivery or pickup information after the purchase is important. However, Forrester’s research shows that most retailers aren’t yet focused on this part of the post-purchase experience.
“Getting all that operational stuff closer to the customer, it's very important,” she says. “Consumers are getting much less patient with all of that. I think that's going to be one of the things that's a huge differentiator in the next year or two.”
Pfeiffer says in 2023 and beyond, delivering a better brand experience likely will mean brands and retailers have to reshape consumer expectations around what they offer.
It isn’t sustainable — especially in uncertain economic times — for any company to offer lifetime guarantees, free and fast shipping, price matching, or even the huge discounts consumers have become accustomed to. Instead, they’ll need to focus on their core competencies, reset expectations, and show up for customers in a much different way.
Being clear about expectations and delivering on them every time will allow brands and retailers to engender greater consumer trust and loyalty — and create the best brand experience possible regardless of channel.
To hear more of Pfeiffer’s insights on improving brand experience management, listen to the full episode of "Unpacking the Digital Shelf."
