For decades, relationship between brands and their retail channel were conducted within a highly professional and standardized framework. But in E-commerce there is still much left to do …
As a few examples show it. Nonetheless, we now know how brands take more control of their e-retail. Key factors are: expertise of best practices, tools to implement and drive them, and of course training and support of sales teams, because the human factor is paramount.
Retail as we know it today was born in France: the first hypermarket was opened in 1963 in Sainte-Geneviève-des-Bois outside of Paris and marked the beginning of a new era. With a surface of 2500 m2, enormous at the time, Carrefour launched the retail business that would, and will, quickly upset the traditional commerce (the word “disruption” did not even exist 50 years ago).
Consumers quickly adopted this new concept. The Companies who were selling their branded products in supermarkets had to adapt. Over time and through periods of high tension, manufacturers and distributors built a lasting relationship integrating all the components of their marketing and sales strategy.
Of course, prices, discounts and margin levels are at the core of this relationship and are the subject of tough negotiations. But beyond that, many parameters are taken into account: product placements in shelves (height and width), promotions on island displays, presence with flyers distributed in mailboxes…
The definition of partnership is accurate and agreed upon by both parties. Its execution by the retailer is subject to a review by the brand which sends employees to visit each hypermarket in order to ensure that the terms of the agreement are fulfilled.
Thus, in only a few decades, rational relationships have been established based on a common standard of good practices. Brands, who were disturbed by the emergence of large retailers, have gradually developed the same expertise as their retailers, in order to becoming able to challenge them effectively, including through regular store visits.
Surprisingly, this formalized relationship between brands and retailers doesn’t exist in the digital world, even though e-commerce was born 20 years ago. Good practices have changed: what is the equivalent of a “shelf” on a web page presenting a product category? What becomes of the “island display” in a merchant website?
Today, due to a lack of professionalism of Brands in the online business, e-retailers have dominance over merchandising and sales drivers. They are oblivious to the data and don’t have enough expertise in these domains. Brands have too often only one way to control, directly from the physical world: volume discounts. This is a dangerous lever, that can potentially destroy huge value. Indeed, since there are no borders on the Internet, how do you prevent a wholesaler in Country A from getting your products cheaper just by buying on a website in country B rather than directly from you?
Not challenged in any way by the brands it sells, and controlling its own online platform, the e-merchant sells to the consumer what it wants, to maximize its own profit. Regularly, we find that the brands accept some practices from their online retailers, often without knowing what really happens, that they would not let go in the physical world.
Here, at Marionnaud, a search for a specific product of a renowned brand, here «Arpege » for the fragrance Arpège de Lanvin, shows not only fragrances but also products from a competitor, Van Cleef & Arpels :
Why? Because Arpège and Arpels are homonyms, probably not correctly handled by the search engine on Marionnaud’s website. In other words, marketing efforts from Lanvin are partially destroyed by the defective digital infrastructure of its e-retailer…
Here on the product page of a Lafuma jacket, Zalando offers the consumer to discover products from premium brands competing against Lafuma, some of these products being cheaper!
Can you imagine that in a sports shop, a seller asks all customers who are interested at a Lafuma product to have a look on competing products? Of course not! We can assume here that Lafuma’s competitors led negotiations with Zalando to promote their products in cross-selling against Lafuma…
Last example, on Online Golf website: a user searching for “sand wedges” sees his attention immediately captured by a promotional banner for the Mizuno brand that offers a pack of 2 products at a very attractive price:
This is the equivalent on the website of an island display promotion in a large sports shop: it actually promotes sales of Mizuno brand, against its competitor, Cleveland, who is the market leader and yet provides 50% discount on the second product purchased, making it cheaper … But this, the consumer does not really see it on the web page!
Such examples occur on a daily basis, on all e-commerce websites and for products from every single brand. The reason for these anomalies may be a technical problem, a bad configuration of a merchandising module or simply a better negotiation of a competitor.
Don’t you think that brands should take action to not let their branding and marketing investments be cannibalized by their competitors? Should they let their e-retailers do as they wish, without any control?
We both know they would never! Failing to have the same capacity to act on these different causes, a brand must monitor its e-retailers to detect anomalies and bring them to the negotiating table. If it does nothing to take control back, either by ignorance or lack of resources to manage these problems, it will continue to be mistreated in a universe that is kind of lawless Wild West for brands.
Brands have adopted various kinds of organizations: by BU, by region, by segment… Are these operating models, tailored by the relations with traditional retail, really relevant for e-retail? Wouldn’t it be better to consider a “digital native” organization? What processes follow to efficiently control the e-retail? What kind of agility use to support the rapidly evolving market and e-commerce technologies?
Finding the answer to these questions often requires insights from experts. And organizational change is more effective if is accompanied by training and coaching.
People are the key of sales performance. However, BU managers and Key Account Managers who deal with e-retailers are not necessarily digital experts. To increase sales team efficiency, you need to accurately assess their web & mobile fluency… and measure their level of mastery in digital practices.
From that assessment, you will implement actions to fill up the gaps: recruitment, training and coaching, making these key positions perform better and be more demanding with your e-retailers.
How to better negotiate with an e-retailer if you don’t know exactly its positioning towards its competitors and the level of partnership you can establish?
Depending on the maturity of this partnership, you will act using the appropriate levers that will enhance the involvement of your digital retailers. You will precisely monitor and control the execution of merchandising and sales policy for each e-retailer. These continuous improvement processes involve reporting and steering tools driven by measurable KPIs!
E-commerce is a fast moving world: what works today will not necessarily work tomorrow, what is good in a country can be bad in another one. You need to challenge your opinions to build strong Key Beliefs. And you will have to check that on a day-to-day basis: Key Beliefs will change as your digital business evolves.
Let’s take the example of conversational commerce, a new trend which pops up new questions: how to adapt merchandising in the conversation that a “chatbot” will have with a consumer? Good practices are emerging and must be tested, and, in case of success, they must be quickly shared between BUs or geographical areas, taking into account local culture and business specificities.
Increasing the level of professionalism for brands in the e-retail is a process involving the whole company. Choosing a tool and deploying it rapidly is rarely enough, if the teams are not coached to adopt this profound change.
To make such a strategic project successful, it is key to select priority markets, according to objective criteria based on opportunities and constraints in each country or region of the world.
Then the project will be fully deployed by waves of countries with the adaptation of the organization, sales teams skilling up, tools setup along with training & coaching. Not to mention the animation and emulation around the “Test & Learn” approach which needs to keep its first impulse, otherwise the risk of failure is real.
Proven methodology and tools with coaching by experts guarantee to avoid waste energy and resources without tangible results, which reinforces the sense of helplessness and breaks the strongest motivations.
Global brands such as Danone and Mars are already engaged in this process. The first successes are here, and these pioneers of e-retail professionalization already measure the significant ROI of their projects.
The ballroom is wide open and the party is in full swing: will you keep sitting?