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June 3, 2021

Has eCommerce Killed Brands?

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eBrandcast / Has eCommerce Killed Brands?

The rise of eCommerce has drastically changed the traditional retail market. With record store closings year-after-year, it seems obvious that eCommerce is signaling the end of brands. With more effective marketing tools, and more access to billions of consumers around the world, branding certainly feels like a print and TV ad relic of the past. And certainly, in the early days of eCommerce, it was easy to get away with rudimentary branding, but the market is changing rapidly.

With unprecedented levels of competition online, being able to identify and connect with your target customers is essential for survival. But this goes beyond audience targeting, it requires the emotional dynamics of a brand.

You'll Learn

Why you can’t rely on digital marketing alone

Why eCommerce isn’t as revolutionary as it seems

Why the disappearance of a “mass” market means consumers still need the guidance of brands online

Resources

Full Podcast Transcript

Hello Beings of Earth! I’m your host Neil Verma.

Welcome to eBrandCast, where we decode what branding truly is, so you can build a dominant eCom Brand.

In this episode, we’ll tackle one of the most common myths I hear among entrepreneurs, that eCommerce has killed branding.

And why this idea is not only wrong but may be actively sabotaging your business.

Ready? Let’s get into it.

Branding has always been a strategy to guide the buyer’s journey, and help consumers make purchase decisions.

But today, eCommerce has given consumers unprecedented access to information about brands and products, as well as the ability to easily compare them within seconds.

Consumers no longer need to rely on official messaging from brands, and can bypass it altogether by relying on recommendations and reviews.

Which raises the question: are brands now irrelevant?

There’s no question that the rise of eCommerce has radically changed the retail landscape, by transforming consumer behavior.

Consumers are no longer limited to the product selection physically available in local stores.

eCommerce has opened up unlimited options from all over the world.

The filters of store shelves are gone, and a consumer’s options are now only limited by their own patience to continue to search.

And with the rise of so many direct-to-consumer eCommerce companies, buyers are now fully aware of the “brand tax” they pay on most consumer products.

They’re happy to abandon those once familiar brands in favor of eCommerce’s cheaper alternatives.

The increased transparency of eCommerce has also brought to light the once hidden practice of a single manufacturer producing the same products for multiple brands.

Consumers have never been more empowered to make choices that aren’t shaped by million-dollar advertising campaigns, and instead look for the benefits most personally relevant to them.

In essence, the power is now firmly in the hands of individual consumers, who no longer need to accept mass market solutions to their personal needs.

But eCommerce hasn’t killed branding.

In fact, the profound transformations that eCommerce has brought to consumer behavior and preferences, has actually intensified the need for branding.

But, this isn’t immediately obvious, because while the importance of branding hasn’t changed, the role brand plays in the lives of consumers, has shifted dramatically.

This has blinded a lot of eCommerce entrepreneurs to the fact that tactics like content marketing, and audience segmentation, are actually extensions of branding.

But let’s back up a bit.

Branding has been such an integral part of business for more than a century, so we take for granted that we understand what it is.

Ask anyone to list some well-known brands, and only someone who’s lived under a rock their whole lives would struggle to answer you.

Companies like Apple, Nike, Samsung, Google, Twitter, CNN, Ford, GM, and McDonald’s are all names on the tip of everyone’s tongue.

We assume that a brand is a well-known company whose products we’re familiar with.

Brand helps us understand what a company does, and what it promises to its customers.

And we each have an opinion about a brand’s general reputation.

But the definition of a brand isn’t static.

Over a thousand years ago, a brand was a burn mark a farmer made on their cattle to identify members of their herd.

This mark indicated ownership and was meant to deter theft.

The Industrial Revolution introduced mass-produced consumers products to the market.

So it’s at this point branding shifted away from filling the role of just identifying the manufacturer

Instead, brands helped companies differentiate their products from others, and they started to make unique promises of quality to customers.

In the 50’s, with the rise of TV commercials, brands started to make more emotional appeals to consumers.

Consumers didn’t just buy a brand because it assured quality, but because they believed it would help them feel a certain way.

Then right before the disruption of eCommerce in the 80’s and 90’s, brands became tools with which customers could both express and create a desired identity.

You could buy happiness, sexiness, and self-assurance – a long way from branding cattle.

The trick is, eCommerce wasn’t just another evolution of branding, it was a whole new channel, a new medium.

eCommerce reintroduced retail, advertising, browsing and buying in a totally new context.

So, branding online didn’t just pick-up where it had left off in-stores.

Branding in eCommerce was a hard reboot.

And since the mid-90’s until today, it has retraced the same path retail branding has since the Industrial Revolution.

The primary job early eCommerce brands had was building trust.

Consumers were nervous about putting personal information on the web without knowing where it was going, or who could see it.

Product shipping was a leap of faith, too.

You just had to trust that the seller had shipped your items, and you wouldn’t know if your purchase was legitimate until possibly several weeks later, when your order arrived in the mail.

The more emotional aspects of branding that consumers expected from regular retailers and products were irrelevant.

Convenience was also a strong driver of eCommerce in the early years.

Once buyers jumped the trust hurdle, consumers flocked to emerging players like Amazon and eBay, because they could find unique items that were difficult, or impossible, to find locally.

What you wanted to buy, was thus much more important than the brand you bought it from.

At this stage, more options and basic trust was enough to fuel eCommerce success.

But as consumer comfort with ordering online flourished, competitors flooded the online marketplace.

It then became necessary for eCommerce retailers to start differentiating from each other, and communicate their unique benefits to consumers.

For instance, when every online store offers the convenience of shopping 24/7 and promises a basic level of trust.

Additional benefits like faster or cheaper shipping options became critical to help brands stand out.

Today, free shipping is becoming standardized.

With more competitors coming online every day, nearly every category is hitting peak saturation, and countless retailers are buying from the same suppliers, making many product lines interchangeable.

Recently, many of these suppliers are starting to sell directly to consumers themselves, especially through marketplaces like Amazon.

In 2018, of the 1,029,528 new sellers that signed up, 250,000 were former suppliers, most of whom are located in China.

The difference is, these sellers have the ability to undercut your prices, as well.

And although digital marketing is a critical element of any eCommerce business, it can’t, alone, save you.

Consider Amazon, where so many former suppliers are setting up.

In 2018, their advertising division was its fastest-growing department.

Until very recently, the trend of rising advertising costs was skyrocketing everywhere from Amazon to Facebook.

In light of the pandemic, this has changed somewhat.

Costs are starting to level out and even dip.

However, there are new challenges.

For one thing, lower customer acquisition costs won’t contribute to your growth unless you’re bringing in high quality leads.

And with social distancing measures closing retail locations and malls, there’s been a rush of new consumers online.

But they’re going to be naturally drawn to brands they already trust.

And frankly, the old model of marketing just isn’t going to cut it.

With so much economic uncertainty, consumers are not especially open to direct offers and sales pitches right now.

That’s not to say that retail therapy isn’t helping to boost eCommerce orders across the board, but what’s working today are more organic methods.

Word of mouth, content marketing, omni presence and availability, and customer relationship management.

So although it’s easier to out-spend competitors, unless you have something to say beyond an offer, it’s not going to help you.

The other trend the pandemic has accelerated is the closure of retail stores.

Although the list of familiar legacy brands now going out of business has been growing for years, it was also true that brands who found a way to innovate with the in-store experience were winning big.

So while we all talked about the retail apocalypse, it wasn’t exactly true.

It was only retailers with outdated business models who were being punished.

The pandemic has shifted this dynamic drastically.

With so many stores closed due to social distancing, any that were in trouble are unlikely to recover.

Even those that were doing well may be in trouble.

Social distancing is going to be in place for months to come, and operating at 25-50% capacity in stores for many is going to mean that it’s more expensive to open than to stay closed.

Unfortunately, I can’t predict where this is all going to end up, but the rate of retail bankruptcies is speeding up drastically.

So the dramatic increase in retailers going under right now can’t be wholly blamed on eCommerce in the same way it could a year or two ago.

But this isn’t an entirely new situation.

This trend of closures due to changing consumer behavior has happened before.

Throughout the 80’s and 90’s, the retail landscape was being capsized by the growing popularity of superstores, like Wal-mart and Target.

At the time, the market saw an average increase of total retail square footage by 40%, but sales only rose 8%.

Superstores weren’t generating more sales, they were sniping the sales from local retailers because they were able to profoundly undercut prices, and offer consumers a new level of convenience.

Research at the time found that for every new Wal-mart opened, the revenue of local businesses would plummet by an average of 25%.

This phenomenon was so worrying to small towns and local business communities, it even inspired the plot of a South Park episode, called “Something Wall-mart This Way Comes.”

If you were to substitute Amazon for Wal-mart, you wouldn’t need to change many details of the episode.

And actually, South Park has an episode, called “Unfulfilled,” that takes Amazon down, too, though more for the poor conditions in their fulfillment centres, as opposed to its impact on the retail market.

When it became clear superstores were here to stay, brands simply readjusted their strategy.

They responded by shifting the majority of their advertising budgets to “trade spending,” meaning they bought advertising space in a superstore’s flyer, or they focused on getting branded displays in-store.

It wasn’t long before sales in these stores accounted for most of many brands’ revenues.

The superstore was simply a new, dominant distribution channel, and not unlike eCommerce today, it caused such an uproar at the time, because it effectively changed consumer behavior and preference.

There’s another insight we can glean from this history lesson, too.

First of all, I hope this episode illustrates that branding has always gone through fluctuations, and moments when its purpose is redefined.

At some points, trust and promises of quality are at the forefront, at others, indicators of value and convenience, at still others the emotional trapping of a brand needs to be emphasized in order to appeal to customers.

Market conditions are always changing, too, because of generational turnover.

As each generation enters the workforce and gains buying power, new brands and channels emerge.

Each generation of consumers is driven by new priorities and values, as well as new buying preferences and habits.

Branding has never gone away, and it’s still a vital strategy today, because branding has always evolved to continually meet the needs of consumers.

And needs are constantly shifting.

Today, Millennials are the largest section of the North American population, and as a group, they do 60% of their shopping online.

They also represent 54% of all purchases made online.

This market reality is leading the latest transformation of branding.

Just as in the 80’s and 90’s in traditional retail, brand choice has again become a way to express and achieve a desired identity.

Today, millennials are also using their wallets to vote.

The difference, however, is that millennials want the brands they buy from, to reflect their personal values.

They’re looking for brands who aren’t just out to reap profits, but who also have a purpose, and a sense of responsibility to support their communities.

Consider that one of the defining events to profoundly shape the millennial generation is the financial crash of 2008.

Just as many millennials were entering the workforce for the first time, the markets crashed.

Many were left unemployed and saddled by student-loan debt.

While many millennials managed to land jobs eventually, the recession froze wages.

And even some professional positions, to this day, don’t pay enough to support a comfortable lifestyle and school-debt repayment.

The loss of several of their most productive years means many experts predict millennials will never “catch up,” to where Gen-Xers and their parents were at the same age.

End of sociology lesson – but I mention it because it has a profound impact on millennials’ buying behavior.

And this isn’t even accounting for the changes being wrought by the pandemic.

First, seeing the financial crash as being motivated by greed, many millennials are disenchanted with consumer culture.

They aren’t as interested, or persuaded, as previous generations that “buying happiness” is even possible.

And at the same time, they are hyper-sensitive to whether or not brands have ethical business practices.

Struggling to support themselves has instilled a strong sense of social awareness: millennials care that factory workers earn a living wage and are treated respectfully.

They care about making sure the whole community prospers together, as opposed to the sharpening divide in the wealth gap.

Right now, during the COVID crisis, they are particularly sensitive to whether big companies are protecting the health of their workers, 

and whether staff are being supported to work from home or shelter in place without having to worry about losing their job.

They also appreciate that ultimately, the language all businesses understand is profit, 

and that if they support an unethical business with their wallets, they’re incentivizing that business to continue its shady practices.

Seeing the interconnection between the quality of your employer and the health of the wider community, 

millennials see supporting ethical businesses as a way to address social ills and express their own values.

Appealing to this sense of responsibility is not a job for a digital marketing campaign.

This kind of larger purpose – if it’s to be authentic – requires a brand.

Take Ivory Ella as an example, they’re a for-profit clothing brand that’s partnered with Save the Elephants, an organization that’s dedicated to the conservation of wild elephants and their habitat.

Almost all of their designs include an illustration of an elephant.

They also regularly partner with other charities, like their Save the Arctic line which donates 50% of profits to Polar Bears International.

But the point here isn’t just that Ivory Ella champions a cause.

Rather, the brand feels authentic because the heart of the brand is rooted in a love and respect for elephants.

The brand’s values are those elephants represent: comfort, compassion, and consciousness.

As they say on their About page, elephants are “more than a spirit animal,” and the brand 

“embraces the elephant as a symbol, a cause, and a portal to a better world for all living beings… 

By engaging directly with the plight of elephants and championing their cause, we become profoundly aware of the fragile nature and the interconnectedness of all our fates.”

This mission touched everything the brand does and is, from their brand name, to their product designs, business model, and messaging.

Granted, Ivory Ella looks and behaves differently than many legacy brands, but their appeal is founded in strong branding, nonetheless.

This kind of integrated, purpose-led brand is the new threshold for building a brand people trust.

Especially now, because in such uncertain times, consumer trust is the driver of purchase decisions.

But having a core business purpose that goes beyond profitability, is just one of those demands.

The millennial skepticism of consumerism has led to a kind of rejection of the limitless choices eCommerce offers.

When you think about today’s leading online brands, like Casper, Harry’s, and BarkBox, eliminating choice with a sparse product line has become a sign of brand prestige.

Less choice means less opportunity to second-guess or regret the decision, and with a strong supporting brand identity around it, consumers are confident that they made the right choice.

Tortuga, a travel backpack brand, has a fairly limited product range.

They offer 3 lines, their top-line Outbreaker, mid-tier Setout, and budget-friendly Prelude.

Color and design options are limited to black and dark grey, and large and medium sizes in both men’s and women’s models.

It’s the right balance between the ability to personalize the bag’s physical fit, your budget constraints, and the amount of features you need, all without being overwhelming.

But just like Ivory Ella, this minimalist approach isn’t confined to their product line, it’s a brand value that organizes everything they do.

The bags themselves are designed to allow travelers to pack their essentials in a carry-on size bag in order to avoid the cost and time consumption of checking a bag while travelling.

The bag features are all about better organizing your stuff so you can access it quickly and easily while travelling, giving you less frustration and greater freedom.

And the brand also targets their product at “pro” travelers who want to minimize friction for a better travelling experience.

They’re also aimed at people who are blurring the lines between home and travel, people who can work from anywhere in a location independent world.

Minimalism becomes an emotional benefit, the ability to value the experience over your stuff, which attracts those “pro traveler” and location independent customers like a beacon. 

And all strong brands are creating signals that the company exists to serve an audience’s specific needs.

Businesses sell products, but brands offer relationships.

With a relationship, the buyer’s journey isn’t just a matter of completing a transaction, it’s a whole experience.

The prioritization of experience is another millennial quirk.

Millennials are suspicious of old brand claims that a product you buy is a building block of your identity.

Instead, they have an innate sense that your satisfaction comes from the memories and experiences that product facilitates, not the product itself.

The specific experience of the brand and its buyer’s journey is the starting point of that experience.

And everything your brand does – from its social media posts, to its on-site experience, through customer service – sets up the customer’s expectations of the product, and the role it will play in their lives.

Building a brand that creates long-term meaning in a customer’s life, is what inspires and captures loyalty.

It’s why so many eCommerce brands host in-person events, or create pop-up and permanent retail locations that aren’t just shopping destinations.

For example, one of Casper’s early in-store attractions was the Dreamery.

For $25, customers could take a 45-minute nap inside a sleeping pod complete with its own Casper mattress and other sleep accessories.

It was an in-depth product demo, but also offered its New York City customers a temporary escape from their hectic lives.

Increased rest and comfort being integral Casper brand values, so the experience was not only unique, but fully brand aligned.

And this is really the key insight.

When you get it right, branding creates the thread of purpose that aligns every element of your business into a coherent whole.

It’s only with this guiding thread, that customer’s will be able to make sense of your brand’s decisions, offers, messaging, and intentions.

Brand weaves everything together and ensures you’re attracting the right customers, and keeping them for a lifetime.

Because most of us think of the mega-consumer brands when we hear the word ‘brand,’ we mistakenly associate branding with the mass market.

We think brand as something you need only if you’re trying to appeal to the largest base of consumers possible.

We assume it’s an expensive process in terms of time and money to build, and so it’s only relevant to businesses who are trying to attract mainstream buy-in.

In truth, this is actually the polar opposite of what brand means.

As I just mentioned, branding allows you to build a business tailored to a specific segment of customers.

Certainly, legacy retailers have had to build brands that have mass appeal.

But eCommerce brands have the distinct advantage of being able to build 7-figure plus businesses with a niche interest since they can reach consumers all over the world.

One of Amazon’s largest 3rd-party seller success stories is Amify, who today pulls in $33 million a year.

But they started out as Pickleball Direct, a company exclusively selling pickleball equipment.

I don’t know about you, but I had no idea what pickleball was, which speaks to how niche eCommerce has allowed brands to get.

And the more niche your segment, the more critical branding is to identify your target audience, and speak to them in a way that makes your brand their obvious choice.

This is where digital marketing comes in.

Its unparalleled ability to help you segment and target an audience is what makes it so powerful and effective, but without branding, you won’t know who to target, or what to say to them.

This is the essential advantage that eCommerce offers consumers today: personalization.

“Mainstream” is barely a coherent concept these days.

There is no longer a mass market in the traditional sense.

Consider, HBO’s Game of Thrones, which was one of TV’s most popular shows when it aired.

It peaked at 11.9 million live viewers, globally, in its final season.

The finale of Seinfeld in 1998, by contrast, was seen live by over 76 million viewers in the US market alone.

Today, markets for everything, whether it’s TV shows or consumer products, are smaller and more diverse.

But a smaller audience often means a more devoted one.

And because eCommerce empowers entrepreneurs with the tools to collect an intense amount of data about their customers.

This devotion can be fueled long-term, by using those insights to increasingly personalize your customer experience.

Not just to a customer segment, but down to the individual.

And this is, really, where branded transactions become relationships, and buying preferences become loyalty.

For example, 2 of the most profitable stores on Etsy, are PlannerKate1, and Beadboat1.

PlannerKate sells, you guessed it, journaling and planner supplies like stickers and printable shopping lists.

The store has over 1.3 million sales, despite serving a micro-niche.

Similarly, Beadboat sells over 7,000 different kinds of beads, of all shapes, colors, and material.

They have over 800,000 sales.

How many people do you know that buy beads, and yet it’s a big enough market online to support a business.

The internet may have made the world smaller, but it has made it easier for everyone to find the exact right solution for them.

The point is that although we tend to think of branding as corporate manipulation of consumer desires and needs, brands have always been incredibly personal.

Just listen to how people talk about them.

We describe brands as if they are human beings: they have personalities, a sense of humor, a point of view.

We agree with some, disagree with others.

We love them or hate them.

When we have a bad experience, we take it personally and ascribe intent to the brand.

Don’t believe me?

Mention Verizon or Comcast in a crowded room and it will be hard to tell whether someone’s talking about a cable provider, or the ex that stole their dog.

And why shouldn’t brands feel personal?

They’re part of our daily experience, and they have a profound impact on the quality of our life.

eCommerce is simply taking this to the next level.

So as an eCommerce entrepreneur, you must be intentionally building a brand that cares about its customers.

One that sends a clear, consistent message to consumers, and that reliably stands for values and causes its audience identifies with.

Sure, smart digital marketing can get you more traffic and might drive a few more sales, but you won’t have a real business until you have a brand that’s relevant and meaningful to an audience.

There are just too many other options online, to think the newest Facebook Ads hack will deliver a sustainable revenue.

eCommerce has certainly changed how and why customers prefer one brand over another, but it hasn’t altered the fact that branding remains the single best strategy to create a long-term business online.

Has eCommerce killed brands?

No.

It has only amplified them.

You’ve been listening to ebrandcast, where we decode what branding truly is, so you can build a dominant eCom brand.

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