Amazon vs. DTC and fuzzy slippers
I hit an important milestone in my life in 2021 which was, you guessed it, making my first purchase of bear paw slippers on Amazon. Here's a photo of them in their glory.
The events that transpired leading up to this were the following:
Two weeks before the party: realize my friend’s white elephant party is the following Saturday and I should purchase a gift
Intervening week: procrastinate
Monday: realize that I need to buy a gift immediately
Tuesday: remember the Happy Feet slippers I bought for a Secret Santa two years ago, all systems go (link is seriously worth a click, these things are amazing)
Tuesday night: frantically scan Amazon for a Happy Feet-like option that will arrive at my apartment in under 2 days and comply with the $25 maximum spend
And there you have it folks. Two days later, this majestic set arrived at my apartment. Not the Happy Feet brand, but close enough. Few good laughs at the party to keep me going.
Naturally my next thought was back to this chart. (Took the words right out of your mouth?) Amazon is a monster with 41% market share of the eCommerce market. No. Wonder.
Source: Statista
As a tech investor who has backed multiple businesses selling enablement software for DTC brands, has been known to chant “arm the rebels!!” every so now and then, and has also felt personally victimized by one-click checkout, as much as I give my money to Amazon, it scares me.
Here’s my hot take: my bear paw slipper experience is a short term win for said slipper the brand, while being a loss of long-term value (LTV). Amazon is not the place for a company to build a sustainable business. This is why:
Brands must continually compete for the top of page spot on Amazon. Best price in the shortest delivery time.
I heard today from the CEO of an Amazon aggregator that they see 25%+ conversion rates for their brands advertising on Amazon vs. ~3% when those brands try to go DTC or sell through another marketplace. This makes a ton of sense to me. A brand can do absolutely nothing beyond listing their product at a low price and benefit from the organic traffic that the site is already seeing, which amounted to 2.9 billion (!) visits in November 2021 (Similarweb).
As I think back to my own experience, the brand needs to maintain that efficiency in order to win their share of traffic. They can’t raise their prices much more than competitors and must maintain fast shipping times. Additionally, most customer data is a black box, limiting the seller’s ability to retarget and retain best fit customers.
Building a direct-to-consumer business allows a company to develop relationships with their customer and build solid brand identity over time. This allows flexibility to increase prices, cross-sell, and ultimately build a sustainable business.