Is the retail buyer becoming the seller?
The ultimate goal of a consumer brand owner has always been to get their products onto retailers’ shelves. As a result, retailers hold great power in dictating commercial terms, which products they range and the fee they charge for the space on shelf.
But consumers are changing.
There is an undeniable shift to online purchasing driven by e-commerce monsters like Amazon, but brands still need to create demand for the products so that people know what to search for. In the past, this demand has been created by products in stores. However, there are now so many other lower cost and lower risk alternative channels for creating demand. Facebook and Instagram ads have allowed new companies to pop up with a purely D2C (Direct to Consumer) model and have been very successful. Advertising options on Amazon itself allow brands to drive traffic to their product pages and even directly target their competitors.
My question is whether now the retail buyer needs to sell themselves to the brand rather than the other way around.
There are huge advantages to selling via online marketplaces. Firstly, you can control the content and the way that your products and brand are represented. It’s very tricky to achieve that in-store without a network of merchandisers. Secondly, the cost to supply marketplaces works out between 20-25% once you take into account shipping costs. Compare that to a bricks and mortar retailer who will ask for a minimum of 30% and will probably request that you supply through a distributor which adds another 8-10%.
And then there is the shelf space. It’s not unheard of for a retailer to request upwards of £1,000 for a half metre shelf in one store for a year. Let’s compare that to an investment in Amazon Product Display ads that allow you to directly target your competitors products. A typical cost per click (yes, you only pay when a customer actually visits your page) is around 10p. So for the price of the half metre bay in one store, you could have 10,000 customers visit your product page on Amazon, knowing they are already looking for a similar product.
Of course, there is still a real benefit to being listed in quality retailers that can add value to your brand, but it’s certainly no longer a necessity. It will be interesting to see how the role of the retail buyer changes over the next couple of years, and whether they indeed become the salesperson.