Seller Beware – The Risks of Using Third-Party Platforms
This brings us to the risks that come with using these third-party platforms. The biggest danger with using any of these platforms is that they own the data of all the customers or followers that engage with or buy from a business via that platform. This might not seem like too big of an issue when things are going well, but the truth is that any of these platforms can undergo massive changes or become outdated by the ‘next big thing’, or something could happen that results in a business losing its presence on that platform.
Some examples include:
Competition can increase on selling platforms such as Amazon and eBay. But because the platforms limit your ability to provide much in the way of ‘brand presence’, it can be very difficult to differentiate.
Your business may be banned from a platform, for factors that may be outside of your control (such as customer complaints, policy violations, etc.).
Amazon could start selling the same product at a cheaper price (this happens!). Amazon tracks product sales data volumes and if they calculate a high profitability, will often enter the market as a competitor. In most cases, there is nothing the original brand can do about it, as Amazon controls everything.
So if we go back to our example of The Aussie Hat Co., what happens to their business if Amazon starts selling hats that are a replica of their products at a lower cost? They start to see a massive drop in their sales coming through from Amazon. With only $600,000 of their $6 million annual revenue coming from their own website, they are suddenly in a lot of trouble. They can’t email their loyal Amazon customers, because Amazon owns the customer data, and there is not a lot that they can do to promote their products more competitively on Amazon – unless they lower their prices, which eats at their profit margins and puts them in a race to the bottom, which is not where they want to be.
Preventative Measures – Protect and Grow Your Brand
So what could The Aussie Hat Co. have done to protect itself from this particular scenario? Ultimately, they were at Risk because Amazon was in control of the platform and owned the customer data, that was responsible for most of the business’ revenue. Having too many eggs in one basket is always a big risk, especially when you don’t own the basket.
The ideal scenario is to drive customers to The Aussie Hat Co.’s own website, to be able to capture their data and start retargeting them using ads, in an attempt to convert them to buy directly from the brand. As a customer engages with the brand’s website, there should be low barrier conversion opportunities that are targeted at capturing their email address. Then, as soon as The Aussie Hat Co. has the customer’s email address, they can reach them more directly (if they have opted in) via email, or use the customer database to find lookalike audiences for online ads.
The Moral of the Story…
To summarise, in order to protect and grow your brand, you shouldn’t rely too heavily on any third-party platform and you should do what you can to build and grow your own customer database.
These platforms can be beneficial as part of your broader eCommerce strategy, but you should have a plan to bring them to your own online store and engage and nurture them through channels that you have greater ownership and/or control over. Ensure you have a sound, multi-channel marketing strategy in place, diversifying your customer/brand touchpoints.
Too Reliant on Third-Party Platforms and Need Help?
If you have found yourself relying heavily on the likes of Amazon or eBay, you’re not alone. But, as you are likely very much aware of, you need to diversify and work towards growing sales through your owned channels. This can be a daunting undertaking, we get it! If you’d like some advice or need some help with this, give us a shout, we’ll be happy to help you out.