DTC: The Newest E-Commerce Revolution

Introduction

Thanks for your interest in DTC: The Newest E-Commerce Revolution. As a full-service channel management marketplace agency that has helped DTC brands in many industries discover the power of online platforms, we’ve compiled this three-part collection as a brief introduction to the current state of e-commerce as it applies specifically to brands that sell direct-to-consumer.

By now, most brand owners are aware that a great shift toward e-commerce has taken place over the past year. More customers are turning to online platforms like Amazon and Walmart Marketplace for purchases — and they are not just retail consumers. E-commerce platforms have become a powerful marketplace for DTC brands to reach customers with the same scope and efficiency as individual shoppers.

In three brief sections, this guide outlines exactly why DTC brands are succeeding on platforms like Amazon and Walmart Marketplace, along with an overview of specific marketing levers these brands can use to reach new customers.

Why Your DTC Brand Should Sell On Amazon

Over the past few years, DTC brands have increasingly found Amazon to be a powerful channel for additional sales. Despite this, many are still hesitant to join the world’s largest online shopping platform due to a misunderstanding about how Amazon can benefit businesses that sell direct-to-consumer.

Today, Amazon is much more than an e-commerce marketplace. It has become the most popular platform for customers to discover new brands. According to reports, 66% of consumers begin their online shopping search on Amazon. With COVID-19 boosting e-commerce to record levels, Amazon has become an effective way for DTC brands to reach new customers. For example, the retail giant now offers an entire suite of tools designed specifically to help brand owners grow their audience base, including:

New to Brand Metrics

New-to-brand metrics determine whether an ad- attributed purchase was made by an existing customer or one buying a brand’s product on Amazon for the first time over the prior year.

Brand Stores

Stores allow you to showcase your brand and products in a multipage, immersive shopping experience on Amazon.

A+ Content

A+ Content enables brand owners to describe their product features in a different way by including a unique brand story, enhanced images, and text placements.

Sponsored Brand Ads

Sponsored Brands are cost-per-click (CPC) ads that feature your brand logo, a custom headline, and multiple products

Amazon Posts (beta)

Amazon Posts help drive brand and product discovery with curated posts that mimic the social media experience.

As a proven channel management agency that has helped generate nearly $500 million in Amazon sales, Channel Key works every day with DTC brands that want to increase sales. While most understand the popularity of the Amazon platform, many want to know the specific ways that Amazon can benefit their brand without cannibalizing sales from their own website. This is a perfectly fair question. After all, the goal is to grow your business. For this reason, Channel Key has compiled the top three advantages to selling on Amazon for DTC brands.

1.  Your Customers Are Shopping on Amazon Right Now

More than one out of three Americans are Amazon Prime members. These 126 million shoppers each pay $119/year for their membership. To get their money’s worth, they shop – a lot. Prime members spend on average over $1,000 each year. Not only that, but Prime members are also loyal. According to Forbes, 89% of consumers are more likely to buy from Amazon than anywhere else, including the most popular DTC brand websites in the world. At this very moment, Prime members are searching for products like yours who will purchase an item by the time you’re done reading this email. Put simply, selling on Amazon will help your DTC brand reach more customers.

2.  An Amazon Brand Store Can Boost Sales on Your Website 

As noted above, more than half of all product searches begin on Amazon. Even more important, about 95% of customers read reviews before making a purchase. This means shoppers are using Amazon to learn more about products they are interested in purchasing both on and off the platform. Building an Amazon presence for your DTC brand that includes positive reviews can influence customers who are in the research stage of their shopping journey. In short, positive reviews on your Amazon product pages can boost sales on your other channels, including your website.

3.  Selling on Amazon Can Lower Your Customer Acquisition Cost 

DTC website traffic often comes from paid marketing efforts on Google and social media channels. These campaigns target customers at each stage of the shopping journey. Amazon customers, on the other hand, are much closer to the bottom of the sales funnel. Therefore, your paid campaigns on Amazon will reach customers who are ready to make a purchase. In addition, since Amazon is essentially a massive search engine for shoppers, your brand store will benefit from organic traffic as well, which doesn’t cost you anything. All of this contributes to lower customer acquisition costs.

CHANNEL KEY TAKEAWAY 

The top reason why DTC brands should consider selling on Amazon is because over 200 million people shop there each month. Not only that, but many customers prefer Amazon. According to a 2020 report from digital commerce platform Scalefast and research firm YouGov, 43% of shoppers would choose Amazon over a DTC website because of the cheaper and/or free shipping options, while 33% would choose Amazon because of Prime membership perks. Instead of viewing Amazon as competition, DTC brands should consider the retail giant as a partner who can help them reach a greater audience. This doesn’t just apply to start-up or medium-sized companies. Powerhouse brands like Apple have shifted their focus to DTC sales and currently operate thriving stores on Amazon. Even with an established and loyal base of customers, they understand that the largest e-commerce marketplace in the world can help them reach an even wider audience of shoppers.

How To Win New-To-Brand Customers On Amazon

Eight out of ten customers are loyal to specific brands, according to the latest statistics on brand loyalty. Loyal customers buy more products from their favorite brands and are more likely to recommend them to their family and friends. For this reason, promoting your brand (and not just your products) is one of the most powerful ways to grow your sales.

As the largest online retailer in the world, Amazon provides a wide range of marketing and advertising tools to help brands target customers. Knowing which tools to use and how to use them can be challenging – especially as Amazon continues to add new marketing programs and make changes to existing ones. To help cut through the clutter, we’ve compiled some of the most effective tactics and strategies that have yielded the greatest success for our clients seeking to acquire new-to-brand customers on Amazon.

We can’t get into specific marketing tactics for attracting and converting new-to-brand customers without first covering the importance of registering your brand with Amazon. Once your brand is registered, other sellers are prohibited from selling your products. This effectively guarantees that you’ll win the buy box, which is essential to selling on Amazon. Registering your brand also gives you access to a host of benefits and tools not available to other sellers, including:

• Greater control over your product listings
• Amazon support for case management and resolutions
• Exclusive search and reporting tools
• Proactive brand protections
• Access to A+ content and Enhanced Brand Content
• Exclusive visibility options like Sponsored Brands, the Early Reviewer Program, and Vine
• A+ Content

One of the most important benefits of registering your brand is the ability to optimize your Amazon storefront with A+ content. This enables you to change the product descriptions of branded ASINs. Using this tool, you can describe your product features in a different way by including a unique brand story, enhanced images, and text placements. Adding A+ content to your product detail pages can result in higher conversion rates, increased traffic, and increased sales when used effectively. This feature is only available to sellers who have been approved as brand owners through the Amazon Brand Registry process, as well as emerging brand owners who are part of certain managed selling programs, such as Launchpad and Amazon Exclusives. After you’ve been approved, you’ll be able to add A+ to products that are part of your approved brand catalog.

Sponsored Brands and Sponsored Products Campaigns 

Once your Amazon storefront and product listings are fully optimized, it’s time to generate traffic. Amazon is a pay-to- play platform and targeting customers through a combination of Sponsored Brands and Sponsored Products campaigns are essential to winning new-to-brand customers.

Sponsored Brands are cost-per-click (CPC) ads that utilize keyword, product, and category targeting to help drive the discovery of your brand among customers shopping for products like yours. Sponsored Brands are only available to professional sellers enrolled in Amazon Brand Registry, vendors, book vendors, and agencies. Sponsored Brands help increase visibility and give you control over how you want to present your brand to customers. By linking Sponsored Brands with your Amazon storefront, you can engage shoppers in an immersive environment that’s all about your brand. Sponsored Brands also provides you the opportunity to introduce customers to your brand via the power of video. Learn more about best practices and optimization tips for Sponsored Brands video here.

Channel Key also helps brands attract new customers through Sponsored Products ads. By bidding on non-branded search terms, you can target customers who are searching for similar products but might not be aware of your brand. Sponsored Display ads are another effective advertising program that can help you reach new customers who recently purchased products from your competitors.

New-to-Brand Metrics

 Testing a combination of Sponsored Brands and Sponsored Products campaigns is only one half of the advertising solution that Channel Key uses to successfully win new customers for our clients. The other half is analyzing the results and making appropriate changes to maximize the performance of your campaigns.

One of the most valuable analytics tools that Amazon provides to brand owners are new-to-brand metrics. These analytics determine whether an ad-attributed purchase was made by an existing customer or one buying a brand’s product on Amazon for the first time over the prior year. With new-to-brand, advertisers receive campaign performance metrics such as total new-to-brand purchases and sales, new-to-brand order rate, and cost per new-to- brand customer. This information is helpful in estimating the cost of acquiring new customers on Amazon and identifying the most efficient channels and tactics to achieve their campaign goals. Currently, Amazon provides the following new-to-brand metrics:

• New-to-brand orders: The number of first-time orders for products within the brand over a one-year look-back window
• New-to-brand sales: The total sales of new-to-brand orders
• % of orders new-to-brand: The percentage of total orders that are new-to-brand orders
• % of sales new-to-brand: The total sales of new-to- brand purchases
• New-to-brand units: The number of units from first- time orders for products within the brand over a one- year look-back window
• % of units new-to-brand: The percentage of total units that are units from new-to-brand orders
• New-to-brand order rate: The number of new-to-brand orders relative to the number of clicks

CHANNEL KEY TAKEAWAY 

Consistently acquiring new customers who are loyal to your brand will elevate your sales exponentially. Unfortunately, it’s not easy to do and doesn’t happen overnight. The good news is: Channel Key has developed a proven formula for targeting and converting new- to-brand customers. As outlined above, implementing a calculated and customized marketing and advertising strategy that includes Brand Registry, A+ Content, Sponsored Brands campaigns, Sponsored Products campaigns, Display Ads campaigns, and new- to-brand metrics will help brands in virtually every category attract new customers. There are several more important tactics that can accelerate this process, but this proprietary information is revealed only to Channel Key clients. To learn more about how we can help your brand win new customers on Amazon, contact us today for a free consultation.

Should Your DTC Brand Sell On Walmart Marketplace?

To sell on Walmart Marketplace or not – that is the question for many DTC brands that currently sell on Amazon. Describing itself as the world’s largest omnichannel retailer, Walmart’s online platform has expanded considerably in 2020. According to Marketplace Pulse data, more than 25,000 sellers have joined Walmart Marketplace this year, bringing the total to around 60,000. This is only a fraction of Amazon’s 2.5+ million active sellers, but the recent growth spike along with Walmart’s well-established base of more than 265 million customers give Walmart Marketplace the potential to become a strong competitor. Below Channel Key highlights the key similarities and differences between the two platforms to help you decide whether Walmart Marketplace is a good e-commerce channel for your DTC brand.

Walmart Marketplace Overview

Walmart Marketplace is like Amazon in several ways. Sellers undergo an approval process, onboard their listings, choose a fulfillment option, utilize marketplace marketing and advertising programs, and get paid. Within this basic structure, however, there are several key differences. First, qualifying to become a Walmart Marketplace seller can be challenging. While Amazon allows just about anyone to open a digital storefront, Walmart is selective about the brands they choose to sell under its name. Until 2016, Walmart Marketplace was an invitation-only platform. Today, any brand can apply, but they will need to need to demonstrate a history of e-commerce experience on other platforms, reputable customer service, a compelling product assortment, and competitive pricing before being approved.

Walmart Marketplace offers several fulfillment options. Like Amazon’s Fulfilled by Merchant (FBM) program, sellers can opt to self-fulfill orders (upon qualification) through its Seller Center platform. Walmart Marketplace FBM sellers can display the “Free Two-Day Delivery” label on their approved listings, which is a core component to the retailer’s strategy against Amazon. Thanks to the latter, one-day and two-day shipping are now factored into the customer’s purchasing decision.

Walmart seems to acknowledge the new standards set by Amazon. In February of 2020, they introduced Walmart Fulfillment Services (WFS). Like Amazon’s Fulfillment by Amazon (FBA) option, WFS sellers store their inventory at Walmart fulfillment centers. When a customer places an order on Walmart.com, WFS picks, packs, and ships the item(s) on the seller’s behalf. WFS also handles all customer support and returns for these orders. The WFS end-to-end fulfillment experience comes with access to Walmart’s omnichannel capabilities such as its Free & Easy Returns program. Approved items will display the Free Two-Day Delivery and Fulfilled by Walmart tags for increased product visibility and improved conversion. Like FBA, the WFS cost structure includes a fixed monthly storage fee and a fulfillment price that is based on the item weight.

Unlike Amazon, Walmart Marketplace has partnered with a 3rd party fulfillment service to provide sellers with another option. Sellers can choose to fulfill orders through Deliverr, an e-commerce logistics service that integrates directly with Walmart Marketplace and provides pre-approved access to Free Two-Day Delivery.

Walmart+ vs. Amazon Prime 

Walmart and Amazon both offer subscription-based services that provide various benefits and perks to members. Launched in 2007, Amazon Prime boasts more than 150 million subscribers and is one of the most popular and appealing features of the Amazon platform. To counter, Walmart launched its own membership service called Walmart+ in September of 2020. Still in its infancy, Walmart+ is designed to provide similar benefits to the retail giant’s loyal base of customers that it has been growing for the past half a century. Below are the basic similarities and differences between the two membership programs.

Key Distinctions Between Walmart Marketplace and Amazon 

The primary selling point of joining Walmart Marketplace is gaining access to its established network of locations and customers. In addition to 11,500 brick-and-mortar stores frequented by 265 million customers each year, more than 100 million people visit Walmart.com each month (according to their data). This is about half of Amazon’s monthly search traffic. To compensate for this disadvantage, Walmart emphasizes other key distinctions that may be attractive to sellers:

• LESS COMPETITION With far less seller competition than Amazon, it can be much easier to stand out, gain brand exposure, build trust and authority, gain new leads, and convert sales on Walmart Marketplace.
• NO INVENTORY LIMITATIONS Unlike Amazon FBA, there are no SKU minimums or maximums with WFS, so you can list your entire catalog of eligible items on Walmart Marketplace or manage limited inventory with a fixed threshold setting.
• SIMPLE FEE STRUCTURE Walmart Marketplace provides a simpler fee structure than Amazon. The platform simply deducts a referral fee once a sale occurs (no setup, subscription, or monthly fees).
• EFFICIENT RETURNS AND CUSTOMER SERVICE Nine out of ten Americans live within 15 minutes of a Walmart store, which makes returns and customer service easy by leveraging the retail giant’s existing capabilities in its brick-and-mortar

CHANNEL KEY TAKEAWAY

There is no magic formula to determine whether your DTC brand should sell on Walmart Marketplace. While the platform has been around for more than a decade, it is still in its early stages. From a seller’s point-of-view, this provides both advantages and disadvantages when comparing it to Amazon. With only around 60,000 current sellers, it’s much easier to generate traffic to your listings than a platform with 2.5+ million competitors. On the other hand, its marketing and advertising capabilities are quite limited. Amazon has a much larger collection of consumer shopping data that it has used with the help of advanced technology to develop an increasingly expansive arsenal of tools to help sellers target customers. Regardless, one thing is certain: Walmart is aggressively ramping up efforts to compete with Amazon. Channel Key predicts the rivalry between the two online retailers will further intensify as Walmart explores every opportunity to establish itself as a convenient and valuable e-commerce platform for DTC brands.

A Message from the President/CEO

Thank you for reading DTC: The Newest E-Commerce Revolution. We hope this information has shed light on the complex and ever-evolving Amazon and Walmart Marketplace platforms, and how DTC brands can leverage both to reach new customers on a large scale.

As an agency that currently manages 145,000+ SKUs and has generated nearly $500 million in Amazon sales, Channel Key has compiled this information to help expedite your DTC brand’s e-commerce success.

In the interest of brevity, this guide presents a general overview, but there is a lot more to know about how Amazon and Walmart Marketplace can help grow your DTC brand.

For more information about Channel Key or to schedule a FREE Growth & Opportunity Report for your Amazon business, please contact corey.heim@channelkey.com.

Dan Brownsher President/CEO Channel Key