The Challenges and Future of Ecommerce for Brands

– Ecommerce is a challenging industry for most companies due to low margins, rising costs, and increased competition.
– Building a brand and creating awareness is expensive and often requires a community, which many brands struggle to establish.
– Small brands often struggle to break free from paid advertising and expand their product offerings, while websites tend to be transactional rather than inspiring.Focus on building a community and creating a brand experience rather than relying solely on paid advertising and expanding product offerings.I think e-commerce is likely a losing game for 95% of companies out there. First, margins are too low with rising costs across the entire supply chain. Second, the cost of ads and competition is rising faster than ever. Third, revenue does not equal profit. Fourth, owned channel technology is pretty poor. Fifth, building a brand is really expensive unless you have a community. And sixth, very few brands know how to build a community.

Some observations on this: First, the most recent successful brands have come from celebrities with built-in followings or a large amount of VC money, or both. This trend will continue as the audience is what matters. Second, awareness is the most expensive part of brand building, and there aren’t any shortcuts to building awareness while owning the brand narrative. Over-reliance on influencer awareness detracts from a founder-led story, which is often more impactful. Unless you’re using a paid spokesperson (like Michael Jordan, for example), it often serves as a disjointed impersonal experience with the brand.

Third, the future of brands is actually community, but not in the way that people have been creating them. The problem with community is that it’s a long-term play and requires a lot of investment to make work properly. Brands don’t have the budget and patience for that while chasing quarterly KPIs. Fourth, small brands don’t stand a chance. They get stuck in the paid advertising hamster wheel and can’t get off. I’ve seen this more than anything else, with targeting being harder, brands lack the data necessary to branch off of paid advertising in a meaningful way. Even internally, a lot of the time brands are focused on knowing what people want in relation to what they have, not around lifestyle and the future.

Fifth, niche works well until it doesn’t. Many brands falter when they try to expand their product offerings instead of focusing on their brand experience. Do one thing really well, then expand. It’s better to own a space rather than have your feet in multiple spaces. Even Nike left hardgoods in golf, yet they are still a dominant apparel brand every weekend. Sixth, websites are miserable to visit. They are all transactional. I can’t think of the last website I went to where I stopped and said, “This is actually pretty cool” that was selling a branded product. A pretty website it cool. A website that inspires is better. I don’t know what this looks like yet, but I’m waiting. So if it’s a losing game why is it a space we play in? I think that data unlocks a ton of insights and cost savings that allows paid media to work. I believe in experiences created for people that are actively interested in brands. I do believe in innovation and top quality products, but I know that we’re in for a big strategy change across the industry. Would I invest in an ecommerce company right now? No.Would I invest in companies that are supporting the new normal across the industry in specific niches? 100%. Focus on the long game even if the financials suck in the short.

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