In light of Nike’s latest news that it will avoid doing business directly with Amazon, I’ll gloat just a little. It reinforces what Forrester has been saying for years, which is that brands in the digital age will need to own more of their destiny and be very mindful of the pitfalls associated with eCommerce. In fact, brands of all shapes and sizes collectively seem to be awakening to these challenge, and are taking action by putting in place a new form of governance called eControl. eControl represents the standards and guidelines by which brands protect their equity and maintain safe, high-quality distribution online. Just last week, the Columbus, Ohio-based law firm Vorys, Sater, Seymour, and Pease held the first-of-its-kind eControl summit to educate the eCommerce industry about the myriad challenges and opportunities with digital distribution for brands.
The relationship between brands and retailers is changing drastically, of course, but I noticed a number of themes in the conversations I had with several companies attending the summit, all of which reinforced the ideas that brands have been telling us for many years:
- Sales teams at the most powerful global brands are losing influence because brands are finding that too much distribution is diluting their equity; direct-to-consumer and product innovation teams, however, are gaining more support. Years ago, Forrester called out the “Death Of A (B2B) Salesman,” and that is more true than ever in the world of B2B2C sales.
- Strong brands are reducing the depth, frequency, and breadth of their promotions to ensure brand consistency and messaging of their products online. Promotions are having unintended consequences for brands, as promotional prices are living longer online than brands intended or planned. One speaker talked of a rogue reseller getting dog food on sale and then selling it online long after the product’s expiration date in suboptimal warehouse conditions (e.g., rodent-infested and without temperature controls).
- Consumer confusion is rampant online because of the proliferation of items, imagery, sellers, and prices. The majority of shoppers can’t distinguish between authorized and unauthorized sellers, the latter of which generally have materially different (i.e., inferior) attributes (e.g., different warranties, guarantees, or product freshness) versus the authorized sellers. This creates customer service problems, which ultimately negatively affect customers and brands.
What I took away from the event (and Nike’s announcement this week) was that over time, marketplaces will have fewer listings from the most powerful brands. In the future, marketplaces will lose their ability to showcase just anything from any seller unless they are able to maintain a brand’s quality-control standards. Those marketplaces that do procure gray-market goods will either need to clearly demarcate “unauthorized seller, caveat emptor,” or they will face repercussions from consumer protection agencies. While the “first sale doctrine” has historically protected marketplaces, new legal precedents are shaping parameters that are protecting customers from unscrupulous resellers that are ever more prevalent in marketplaces. Amazon, in fact, has been anticipating just these actions. In its last SEC filing, it listed as its final risk factor “fraudulent or unlawful activities of sellers,” which, by Amazon’s own admission, could end with civil or criminal litigation.
For more on the importance of and roadmap to eControl, listen to this webinar (for Forrester clients only) that I recently did with the Vorys team.