The Future of Ecommerce: Brands Must Adapt or Perish

– Globalization in ecommerce is leading to the rise of private brands created by factories that already produce goods for other brands.
– These factories have better margins and relationships with shippers, giving them an advantage in the market.
– Brands need to focus on brand building and community building, as well as consider vertical integration or creating limited production goods to compete in the changing landscape.Focus on brand building and community building to differentiate yourself in the ecommerce market.Due to globalization in e-commerce, if your supplier doesn’t already have a private brand in the works, they will within the next few years. The dirty truth is that almost all e-commerce brands outsource production to one or a few factories. The factory makes money to supply the goods, but their margins are better than what they are providing for the brand. The factories also have better relationships with shippers, usually funneling work to people for a kickback. The one thing that a brand has over the factory is, well, the brand. The brand can’t control manufacturing pricing, material costs, shipping costs, or the majority of the things that matter from a quality perspective. From a brand’s perspective, the only thing they can do is find another factory. Most brands haven’t figured this out yet. Italic waded into this space to deliver goods that were from the same factories that make top-rated goods for brands. There’s not a lot really stopping factories from partnering with a few key players to create web properties and brands quickly. They have all of the above, plus they have money. Ivan Zhao and I have been talking about this for years, and we’re just starting to see what this looks like playing out recently. Here’s the model you’re going to see a lot of in the next few years. These factories can flip from concept to small production run within a week. They can prioritize their runs over other clients’ runs. They have zero inventory sitting in warehouses, little overhead, and can compete almost entirely on streamlined delivery of top-quality goods. What they don’t have is a brand or distribution. Yet… But as we head into an era where collaborations become the norm, sitting down with an influencer or person with a large enough audience will make it almost unfair for them to compete. Oh, and because their margins are better, they can cut that influencer in on a profit-sharing model that allows them to absorb that cost at the same amount as if someone was buying from them at wholesale. What influencer doesn’t want to be able to be part of designing things and profiting off their sales at the same time? It’s all upside for the factory and their new brand. As a brand today in e-commerce, you should be 100% focused on brand building and community building and a quality product. But remember time is running out to work with influencers because given the option to have their own line and collab v. pushing your product the former is always going to win. Prepare for what’s to come where you CAN’T compete on price or quality and you’re left only with only your name. To offset this you need to do one of two things, vertically integrate by owning your own factory or build a brand so sought after with limited production that you can spur an entire secondary market for your goods.#ecommerce #strategy

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