We will soon run out of weather metaphors to describe the eCommerce market. It's summer outside (for consumer spending) while the headlines are about the fall in eCommerce growth rates and the upcoming winter. I have been consuming news and numbers. So here are a few numbers, hypotheses, and questions in no particular order.
1. DTC brands are more omnichannel than we think. >40% of the DTC brands that make more than $10M have their own stores or retail presence. One-tenth of all brands have subscription offerings. Facebook ads may be nearly back to where they were in terms of conversion efficiency. The pandemic may have made America eCommerce-first. But brands have no illusion that eCommerce-exclusive is an idea past its time.
It's one thing to have this realization and another to be able to spend on channel expansion. There are 60000+ DTC brands that make less than a million dollars. The current economic cycle will test them the most. On the other side, big brands are going to outrun small brands on the DTC side. They are omnichannel by default and can withstand both the supply chain and attribution issues.
2. Small brands need influencers more than ever, I'd think. With supply chain costs and delays being where they are, local sourcing (a.k.a buying from BestBuy and selling via TikTok) is going to increase. It makes sense for small eCommerce firms and brands to not compete with established brands on Amazon and the aisles of Target. Good story and local followership as a combination will emerge as the most profitable channel than anything else. This is my hypothesis.
3. Shopify's Audiences product is a winner in this environment. Small DTC brands' survival depends on it.
Read more Shopify related articles.
4. The bull-whip effect is here. Given that the 'inventory-to-sales' ratio of most bigbox and apparel retailers is increasing (Macy's at 0.8 and The Gap at 0.75) there are going to be steep discounts this fall. Even Lowe's 'inventory-to-sales' ratio is high at 0.75 (0.5 - 0.6 is the usual band). How much will that soften inflation's impact on a typical household's expenses?
5. Elsewhere in the world, Amazon was forced to cut down its ownership of its own marketplace seller entity citing unfair competition. Cloudtail, the joint venture between Amazon and Catamaran Ventures shut down this month in India. Its downfall started after the Indian government put the cap on the maximum allowed GMV for a seller on any marketplace at 25% of the marketplace's GMV. S.2992 legislation in the US is in the same realm and it is up for a vote in the next few weeks. The legislation will have far-reaching implications for platform companies, which all happen to be 'Big Tech'.
That is all, folks.
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