Episode 14: Brand Building Insights Part Three
Today we finish out our 3 part series on brand building. If you haven’t listened to parts 1 and 2 we really encourage you to go back and give those a listen. We have covered what kind of products work well on an e-platform and how to bootstrap your brand with sites like Amazon. We’ve also covered trademarking and registering a brand. Today we’re going to discuss the why of having your own brand.
Having your own brand is all about control. If you hold the reigns on a product you can better serve your customer in terms of quality, customer service, and overall business decisions. We discuss this with these points:
- Owning your brand puts more money in your pocket, not a third party.
- Creating a brand can lead to your own personal platform.
- You are able to make a personal connection with your audience.
- Public interactions like contests are easier.
- Resellers have to consider the market more frequently.
That completes our series on building your own brand. We hope you got some great information from it and are inspired to rethink your own business strategy. Remember ecommerce is a rapid changing industry and we want to see you succeed! And if you missed parts 1 and 2 go back a couple episodes on our site or iTunes.
Mentioned During Today’s Episode:
If you have any questions or anything you’d like us to discuss on the podcast please go to ecomcrew.com and fill out the contact form. Also we would really appreciate if you would leave us a review on iTunes. Thanks for listening!
Full Audio Transcription
Mike: Hi, this is Mike.
Grant: And this is Grant.
Mike: And welcome to this week’s edition of the EcomCrew podcast. This is part three of three of How to Build a Brand and why it’s great. Hopefully you’ve enjoyed parts one and two. In parts one and two, we basically covered the basics of the types of items that you should try to get and the types of items you should sell based on things that we’ve learned over the past couple of years in ecommerce. And we also talked about, you know, getting your trademark and going through the brand registry at Amazon. So if you haven’t listened to parts one or two, we highly recommend going back and checking those out. There’s a lot of really good information in there. even if you’ve been selling stuff ecommerce-wise for a number of years, there’s, you know, a lot of tips in that that Grant and I have figured out the hard way on our own and definitely worth a listen to.
But for this week, for part three, kind of wrapping things up, we’re kind of assuming at this point in your life cycle, you’ve thought through what you’re going to sell and you’ve got your brand kind of up and running, and we’re going to talk about other reasons why having your own brand is awesome compared to selling third party products. So kind of wrapping up, going full circle here, and basically, first thing I want to talk about, you know, getting started here is just the control. We kind of talked about this before, but having the control to do whatever you want on your own website, you know, off of Amazon, having your own platform. In the case of our coloring books, you know, we have ColorIt.com and it’s something that we have full control over the whole experience. Obviously, you know, something like Ice Wraps, you know, we have the same control but we’re selling other people’s brands. So, you know, we don’t really have control over the price necessarily because we might have to adhere to MAP pricing and have to sell at a lower margin so we don’t have as much control there. We don’t have as much control over how we can advertise and the use experience and stuff like that. We don’t have any control at all over the product and what the product looks like and things of that nature.
So, you know, I think that control is a huge factor. And that control allows you to do all sorts of things that you wouldn’t be able to do, again, if you were doing just third party stuff. So, Grant, any other thoughts on just kind of control and the benefits with having your own brand afford you there?
Grant: Yeah, certainly. One of it is really just brand-building is all about self-perpetuating marketing. And when you control your own brand, you’re no longer just advertising for somebody else. Like a perfect example is when you buy your car and you go to a dealership. Over here in Seattle, for example, we’ve got a huge group called Barrier Motors that does almost all of the German cars around here and when you buy a car, obviously, they decide that they want to put a huge Barrier Motors license plate protector on your car. And most people just leave it on there and I’m one of those guys that will purposely go out and rip it off even if I don’t put any other plate protector on there. The reason is, you know, why do I want to be advertising for free for the guy that I just gave my money to? And really, when you’re selling another person’s brand, that’s what you’re doing. You’re advertising their brand for free. And sure, you make money, they make money, and a lot of times it’s a symbiotic relationship.
Some vendors are really good about it and they’ll do a lot of marketing on their own so really they do the marketing and you sell the product, you make money. In return, you do a little bit of marketing so everybody wins. But nowadays with Amazon and with a lot of the whole online distribution, there’s really that point of inflection down the road – maybe not today, maybe not tomorrow, but some point – where you guys are going to probably butt heads and I’ve had it happen to me, Mike’s had it happen to him, we’ve had it happen definitely on our last business. And at some point, you’ve got to start worrying about that, but with your own brand, you don’t have to worry about that anymore. And really, it becomes the opposite problem where, eventually, if you get big enough, somebody’s asking to buy your brand and sell it themselves and you’re kind of thinking, “Well, hey. If I’m doing all the marketing for my brand, why should they make any money off it?” So you want to be in the other position of wondering whether or not, you know, the brand that you’re marketing is going to stab you in the back one day.
Mike: Definitely. Definitely. And, you know, we were talking about getting away from Amazon, not having all of your eggs in the Amazon basket. I mean obviously having your own brand on Amazon is great because you’re not competing against other listings but, you know, I think it’s really important – we were talking in episode one and two about eventually not having Amazon be your biggest source of revenue, and we’re already working towards that goal with ColorIt.com. You know, Amazon still is our largest source of revenue. And we kind of talked about, you know, using Amazon to catapult or bootstrap your brand, which I think is a great method, but very quickly here we’re looking now that we’ve launched ColorIt.com and we’ve been selling on Amazon for a while, to slowly, you know, have Amazon become more of a 50/50 and then eventually have ColorIt become a bigger part of your brand so where if Amazon, you know, for some reason, were to kick us off the platform or change their rules, we have something to fall back on and actually have value that we’ve created and can support our brand and our lifestyle and our business through that platform.
And that’s the next thing I kind of want to talk about here, which is actually in the area of email marketing. You know, when you have your own brand and you have your own website and you’ve gotten away from Amazon, you go from Amazon owning the customer to you owning the customer. And Grant and I were just talking actually before this podcast. We’re actually up to the point now where we’re sending over 1,500 emails per day on ColorIt.com. And, you know, having our own website, having our own brand affords us the opportunity to do things that we just have never been able to do before, you know, when we’re on Amazon or when we’re even selling through IceWraps.com. We have all these different promotions that we’re running through direct response advertising, you know, either through Facebook ads, through Twitter ads, through Instagram, Pinterest, et cetera, and our goal is to use a thing like LeadPages, you know, LeadPages.net and capture email addresses and then, you know, have some carrot.
So, for instance, on ColorIt, we’re doing a promotion right now where we’re giving away four free drawings, four free ColorIt drawings. Now this costs us nothing because we’re not printing anything, we’re just sending them a PDF and in that PDF is a cover sheet that talks about our brand and, you know, what we’re all about and everything and they get to see it and experience our artwork and hopefully after they’ve drawn and colored in those four drawings, they become a customer. Again, you know, when you’re selling another company’s brand, it’s definitely doable. You know, we’ve definitely done that. For instance, we’re working on a promotion right now for baseball season, little league season. We sell pitcher’s kits for little league for kids that are out there pitching and they need to ice their shoulder and elbow afterwards. But, you know, our margin is a fraction of what it is on ColorIt, so we only have a fraction of the advertising budget and that’s really what’s important here. And then also, our lifetime value on something like that of a customer is going to be much lower because we’re not selling a consumable item.
So, you know, the real point here at the end of the day is that you get just so much more control. You have the ability to market to these customers, you own the email list, and as you release new products, as you have promotions or whatever you want to do, you own the email. And, you know, when you use a software like [Clabio? 07:59], which is basically the de facto giant in the ecommerce email marketing world, you have so much you can do with it. I mean we have all these different flows set up, you know, basically autoresponders, we have triggers, we have segmentation that we’re doing and getting, you know, really advanced with that and again, things that are really difficult to really take advantage of when you’re selling third party products. I mean obviously, you can do a great job with an ecommerce site where you’re selling third party products doing all the stuff, but without the margin that you are able to get with having your own brand, it’s really difficult.
So I’ve been kind of rambling about that for a little bit. Grant, do you have anything else to add to any of that?
Grant: Actually, I thought you did good job about that. I actually don’t have too much to add. I think that’s pretty good.
Mike: Cool. So I’ll move onto the next thing I have here, which is contests. It’s actually something that we’re going to be doing a future episode on, but it’s another thing that, you know, you just can’t do a really great job of without having your own brand. So what we’re doing right now – this month is actually the first month we’ve tried this in January and we’re running a contest for a free set of coloring pencils. It’s actually our newest item that we had gotten in January. That’s why we did that particular item. And I was like, “Okay, well let’s see what happens.” You know, again, we have our own brand. We’re giving away this item. It’s something unique to us and people can’t go buy it elsewhere I think is really the key. You know, I mean if you have something that you’re giving away and people can go find it someplace cheaper, that kind of sucks obviously for you. So if they’re going to buy the coloring pencil set whether they find it on Amazon or eBay or on ColorIt.com or anywhere else, it’s going to be something that we’re going to make a profit off of no matter what.
And before we started doing the contest, I mean we were concerned that we were going to get nothing but moochers and we weren’t going to really get any value out of it, but what it’s really turned out to be is one of the best things we’ve ever done and why we’re going to run a specific podcast episode about that here a couple months from now, once we have more data. But in the early going, I mean we’ve been able to generate about 7,000 new email addresses that we’ve gotten from this contest. We’ve generated over 5,000 new Facebook Likes and, you know, Fans on our Facebook page, and over 2,500 new Pinterest, Instagram, and Twitter followers, and that’s all in the first, you know, three weeks of January. And you might be thinking, “Okay, well, you know, what value does that have?” and obviously we don’t really know the long-term value yet of what all those different Fans and Followers have, but I can tell you that the engagement on our Facebook page and our other social media accounts has skyrocketed. It’s incredible. You know, when we post every day about the winner of the contest, we’re getting 50 to 100 comments or Likes or Shares.
When we post reviews – like we use Yotpo for our reviews and Yotpo has a pretty cool feature where it’s like a one-button push to social for your reviews so when we get a review in that we think that our community will enjoy, we publish that. Then we get a ridiculous amount of Shares and engagement with that, and obviously, anybody that’s engaging with that, it’s a pyramid scheme in reverse order. I mean everyone that Likes it, their friends see it, and if their friends Like it, their friends see it. So we get a lot of value out of that there and we’ve also gotten almost 100 orders directly from the contest. It’s actually incredible. I mean, now, with the contest, we give different point values and entries to each action and one of the actions is place an order. So we give a bunch of extra entries of that and, you know, it’s generating a bunch of business. And then off of our Flow – you know, through [Clabio? 11:32] they call it a Flow. Basically, it’s an autoresponder list. So we have basically a nine-part email series that goes out when someone joins this contest, and that’s generated an additional, what? Over $1,000 in revenue. And again, just a few weeks into this and what we’re hoping will happen is at the end of the contest, we have an ability to them offer anyone that hasn’t purchased yet a discount on our products and hopefully get them to become a customer and then, you know, if they don’t, then whatever’s left at the end of that, we’ll just scrub them from our email list and declare them to not have any value.
But again, doing this with like – actually, I’ll use an example of IceWraps.com. And let’s say we have that pitcher’s kit that I was mentioning that we’re giving away that maybe is a $80 value that we buy for $40, plus we have to pay for shipping to get it to us and get it to the customer. So, you know, but the time – our net profit margin’s really going to be more like 20%. You know, it’s really difficult to run a contest and get the value out of it that you need, versus when you have your own brand, I mean we’re buying those pencil sets for about $10, you know, the perceived value to the customer is $40 and we have just so much more leverage. And then when, you know, people start talking about that set, and we know when they go buy it elsewhere, that they’re coming back to us and not going to go buy it at the manufacturer’s website directly or buy it off of Amazon from some other third party seller. Just having that loop close, it’s kind of like Apple, you know, how they do the software and the hardware and everything and they’re controlling the whole process and, you know, having your own brand allows you to do that as well.
So, again, kind of been rambling about contests here. Grant, do you have anything else to kind of talk about on that?
Grant: Yeah. You know, we’ve done contests before on a number of different projects and, you know, everybody loves something that’s free. You can kind of say there’s no free lunch and so when you actually do legitimately give a free lunch, you know, you get people generally jumping on top of it because really, what’s the downside, you know? Send a little email, hit Like on Facebook. You know, it doesn’t cost anything more than a few seconds of your time. And that’s always, you know, one of the great hooks about a contest, like Mike said, which is getting those accounts. Now, Mike’s in a bit of a special place because ColorIt is such an emotional appeal type of purchase and we talked about that before, and the price point is perfect too. I always say the $20 price point. A lot of people in the DR industry (as in direct response industry) know that $20 is like just the magic number. It’s really that $19.99.
At that point, people are just willing to go, “Okay, sure. You know, whatever. I’ll go for it.” And the fact that it’s got some emotional appeal, too, makes it even better because somebody might go, “Well, you know, yeah, a coloring book. Sure. Like, well, $20. Why not? Seems like it’d be, you know, kind of fun or whatever,” and if they’re already signing up for the contest, the great part with Mike’s product on ColorIt is that, you know, they’re most likely already interested. If you put up a contest for, let’s say, a refrigerator, you’re going to get a lot of people that’ll probably sign up because, you know, they’re going to say, “Hey, maybe I want a free refrigerator. Why not?” But in order to keep them engaged afterward, that’s going to be a lot more difficult because a refrigerator’s not an impulse buy. It’s not $20 by any means. And it takes a lot more kind of careful grooming and follow up to even try to get that sale.
So it’s a very kind of special niche that Mike has. So, you know, if you’ve got your own type of products that has any kind of emotional appeal, a contest is a really great thing to do and the trick with marketing is really figuring out how to attach emotional appeal to the product that you have because not all products will have that special ability to really, you know, grab somebody’s attention. I always try to hark on like bleach and whatnot, and we actually had a response on our comments section on EcomCrew regarding, you know, somebody that says that if you’re a mom, you might have a good emotional attachment to bleach. And I always say that, as a guy, you know, I have no attachment to bleach whatever. So the hard part is if you’re a Clorox salesman, you know, how do you get somebody to be connected to your brand? So that’s really a lot of the trick on the marketing side, which is figuring out how to create the emotional appeal out of your brand. If you’re just starting up, it’s great because you can try to go into an industry or a product that does have an emotional appeal. If you don’t have that appeal, things get a lot harder but that’s really where the talent comes in, which is figuring out how to combine those two. So yeah, that’s kind of my thoughts on the emotional side of branding. So back to you, Mike.
Mike: Yup. Good comments for sure. So the last thing I have on my list here is just the brand control and, you know, innovativeness that you can attach to it, or whatever you want to call it. But I guess the theme of this episode’s really becoming control. And, you know, it’s something Grant and I were just talking about right before we recorded. You know, he was throwing a bunch of ideas at me for ColorIt of different marketing campaigns we could be running, different things we could be doing with the brand. And I’ll give you a for instance. I mean, for instance, with one of the ice wraps that we sell from a third party vendor, we constantly get the complaint about a strap, like a Velcro strap, on this particular product. And it’s one of our better selling products but there’s nothing we can do about it except take it back. And, you know, we’ve talked to the manufacturer about it and said, “Look, can you improve this strap here or there, whatever?” They’re a large company and at the end of the day, nothing every changes and it’s really, really frustrating.
But, as a for instance with our coloring pencils, you know, we just started selling colored pencils for ColorIt.com and we’ve gotten a few complaints or suggestions, constructive criticism, whatever you want to call it on the product so far. Now, I mean the product is actually still five stars on Amazon and on our site, so the positive reviews are way outweighing any negative. But the point is that negative or the constructive criticism comments we’ve gotten, we take them seriously and we’ve already been incorporating some fixes into our reorder that we’re going to be placing within the next couple of days because they’ve been selling very well and we’re about to place a reorder.
So, you know, to me, having that ability to enact change in your brand, and I have to go through some other company’s, you know, totem pole or whatever and R&D department or they just don’t even care one way or the other. We’ve actually had zero luck in getting any manufacturer to make any changes on the products that we’ve suggested. We’ve even stopped talking to them about it because it just seems like it goes in a black hole. So I mean having the ability to make those changes and, you know, for me, it’s not only fun and inspiring and personally gratifying in being able to actually do that, but the reality is is that, you know, we’ll go from being a 4.7-star kind of product to a 4.9-star product. And having a product that people love and never complain about and don’t do anything except say amazing things about is awesome. I mean it makes your life so much easier marketing.
I mean we have a whole tribe of people out there now that have become, you know, ambassadors for ColorIt. We’re not paying them anything to do it. You always hear about word-of-mouth advertising, how word-of-mouth advertising’s, you know, king. And that’s really true. When you own your own brand, you can leverage that because you can fix the product and do things to the product that you have zero control over and you don’t really have any motivation to become that ambassador some other third party brand because you’re not attached to their bottom line. Your interests are really, truly aligned versus when you have your own brand, that is the case.
And even as far as like, you know, doing marketing campaigns, Grant and I were just, like I said, talking about this right before this podcast and he threw at me like, I don’t know, five or six ideas that I jotted down that were just absolute gold and, you know, some of the require modifying the product, you know, attaching like a random number to the product or throwing an extra page in the back of the product to complete this marketing campaign and angle. Again, if it was something where we were talking to a third party manufacturer, zero ability to do any of that. And, you know, your crazy marketing ideas might not align with their marketing ideas or budget and I think that having all that control and being able to put the whole thing together yourself – you know, if you’re listening to this podcast, I mean most likely, your niche, your strength is online marketing, selling things online. You know, you’ve learned throughout the years what works, what doesn’t work, et cetera, et cetera versus a third party manufacturer. That’s not their strength. I mean their strength – I mean some of these third party manufactures don’t even have a website, which is kind of good for you if you’re selling third party manufacturer products.
But, you know, the ones that do, the vast majority of them are awful and they just don’t know how to market their product and they don’t really get when you tell them, “Hey, let’s do this, that, or the other.” They just don’t quite get it, versus, you know, if you own your own brand and you have it from soup to nuts, you really get the whole picture and can wrap marketing and other angles into your product and leverage that as a part of your own brand. So, again, I seem to ramble a lot this particular podcast, so I’ll turn it over to Grant, but that was kind of the last thing on my list as far as, you know, brand control and things like that and Grant might have some other ideas and thoughts on that.
Grant: Yeah. Just going to maybe take a little bit of a step back and kind of talk about, you know, why we’re focusing on the brand so much because it’s a little bit of a binary situation. You’re either selling your own brand or you’re not right now. And if you’re not selling your own brand, you’re kind of like, “Okay. Why is Mike telling me to sell my own brand? You know, maybe I’m an auto parts guy. Maybe I just sell auto parts for another company and I can’t do, you know, like Ted’s branded Honda equipment or anything like that. I just do OEM” And, you know, it’s a fair statement. There’s a lot of companies – I'd say the vast majority of companies out there that do not sell their own brands.
So that said, taking a step back, you know, why are you listening to this podcast? Why are Mike and I here? The reason that we’re really talking about this is because we don’t really look at things in the short-term. There’s always the ability to go out and make money and, you know, I call it the hustle mentality. If I wanted to go out right now and I wanted to make a few hundred dollars a day hustling, just legitimate industries, I can certainly figure out how to do that. And a lot of it is like arbitrage business and you’ve probably heard of like Amazon book scanners like the guys that go to Goodwill or library sales and just pick up a pile of books and they took a cut off the price difference between the retail and the wholesale and, you know, you can make a living out of that in terms of the short-term. What you can’t do is really rely on it for the long-term, and that’s really what it’s all about and that’s why we’re really stressing this because if you are a parts reseller, sure, you’ll probably have a pretty decent business.
There’s plenty of guys out there that are just making a business selling parts. Now, a lot of those guys are retail brick and mortar and they survive because there’s territory. If you simply have a good place on Main Street or downtown, people will go to you because they pass you by and they know to go to you. You’re just going to get a lot of eyeballs. If you’re in ecommerce, you’ve got this huge amount of competition because anybody with a brick and mortar can have an online presence as well. There’s going to be Amazon, there’s going to be other major, huge parts makers or distributors or resellers out there that you’re all going to be competing with. And at some point, you’re going to need that differential between you and them. And what I’m somewhat alluding to is really Mike and I’s, you know, personal theory that the lifespan of somebody that is not having something under their own control is going to be limited. And I’m not saying that all resellers are going to go the way of the dodo bird. That’s not going to be true.
But what I am saying is that if you’re small fry or if you’re medium fry and you can’t make your way to big fry, then you are in for serious trouble down the road. Consolidation is happening. We see the writing on the wall. Amazon has, you know, gotten their own freight forwarding status and everyone’s pretty much talking about direct imports for China at this point. Walmart has closed – you’ve probably heard this, Mike – what? Like 150 stores? 200 stores? Something like that.
Mike: I think it was even more than that. I mean I couldn’t believe that article when I saw it. I was actually on vacation in Mexico and I saw it and I like did one of these like double takes and it was, you know, some five figure number of employees they laid off, too, or are going to lay off.
Grant: Right. Like 20,000 employees and yeah, so Walmart is, you know, the leader of racing to the bottom. And when the bottom feeder decides that, you know, it’s no good, that means there’s a huge price pressure and they’ve already been pricing out their vendors and demanding all sorts of cuts and everything. So Walmart is having a very difficult time and we obviously know who their main competitor is, which is Amazon. So with all this price pressure that’s going to be happening, that’s really what the horizon has. And we’ve always kept hammering away at this point of, you know, we don’t want to be in the pricing game because that’s best left to somebody that knows exactly what they’re doing and has exacting tolerances down to a T. And it’s not a very good long-term solution because, you know, on some point, you can say, “Well, I have less overhead than Walmart.” And I can always say, “Maybe you do.” Maybe you can figure it out but there’s always going to be some guy in Montana or Idaho that’s willing to live in his parent’s basement or live in an RV or maybe even a tent and, you know, go to the library, move some stuff on AliBaba onto like a forwarding site over here, never take inventory and just work on pennies.
And so when you’ve got this kind of competition that’s ready to cost-cut you at every corner, it creates all sorts of kinds of issues. So, you know, the holistic view again is why are we talking about brand-building, which is that if you are in an industry where you are simply moving product for a better word, you’re just being a reseller or distributor, try to learn from what’s happening around you. Just see what’s there. Not all industries can be effective, of course. But if you’re in a commoditized industry, you should be taking a look at, you know, how you can adapt for what’s coming around the corner. The online cycle’s a very short cycle and in the brick and mortar, I think they normally talk about a seven-year cycle. The online cycle, I would say it’s a two-year cycle. I don’t know, Mike, what would you say the online cycle would be?
Mike: I mean that’s probably about right, I think. Yeah.
Grant: Yeah. So we just think every two years, like you should be kind of ready to flip the switch and reevaluate your direction. So yup, that’s all I really have to say about, you know, why we’re talking about this brand-building, so big, especially if you’re not really on board with it, just give you a little bit of reason why we’re talking about this so much.
Mike: Yup. Cool, well, thanks for the parting thoughts there on brand-building stuff, Grant. Hopefully everyone has really enjoyed this three-part series on how to build a brand, why it’s great, why you should be doing it, why you should be thinking about, if you are just getting started in ecommerce, going this direction, why you should be thinking about it if you’ve been selling ecommerce for a long time. I think it’s really for everyone. You know, I think that, as Grant was just saying, the reality is if you look at the life cycle in ecommerce, I mean first you had people making boatloads of money doing drop shipping and then you have, you know, people that are making boatloads of money being third party resellers and then, you know, I guess the final thing of the funnel is having your own brand. And the reality is is that those other two parts of that funnel being squeezed out. You know, drop shipping’s almost completely dead and there’s definitely still room for third party stuff but that’s being squeezed more and more.
I was just listening to a podcast yesterday – I think it was an eCommerceFuel podcast. They were talking about just, you know, how much Amazon’s grown over the last year. They’ve grown by 5 billion this year and the reality is is that they’re stealing basically $5 billion worth of sales from someone else; the economy’s not growing by that much. So, you know, unless you’re putting yourself in a position to, long-term, have all that control and have something at the end of the day, you know, you’re just going to be left when the musical chair stops with no chair. So definitely something to think about. Again, hopefully everyone enjoyed this three-part series. If you did, you know, please leave a comment for us over on iTunes. We’d really appreciate that. And hit the Subscribe button. That helps us out as well, gets us more visibility for our show. And if you have any comments, head on over to EcomCrew. Leave us a comment. If you have any questions you’d like answered on a future show, we’ve done that several times now and enjoy that quite a bit. So if you have anything that you’d like us to discuss on a future episode, please head over to EcomCrew. Hit us up on that contact form and we’d be happy to help you out. Until then, everyone have a great week and we’ll talk to you next time.
hi great episode. A question regarding ‘not having your eggs all in one basket’ i.e amazon. how do you guys feel about letting other retailers & e-commerce stores sell your product? like you said if you have put all the hard work in to marketing your brand and even if you are selling on your own brand website, why let others benefit from this? I’ve been approached by another retailer for me to wholesale my product to them and they sell on their store. For me this seems like a good idea (although I wouldn’t technically own the customer), it is some good free advertising and extra sales. however what other downsides would you see to this?
Mike and I might have different opinions here, but I am mostly against it. I think selling to retailers has been a tried and true strategy that has worked for well, the history of retail up until this point. I still think selling to retailers can still be very profitable. That said, the genie in the bottle is having your resellers undercut you, especially on Amazon. If you’re going to resell, then you need to give your retailers a chance at making a profit too, or a 100% mark-up. That leaves a ton of room for some unscrupulous seller to go haywire on Amazon to make 5% margin and piss off your other people. Or, it leaves enough room on the table for a competitor to come in and go direct and wipe the floor with you. It happens all the time now and I see it getting worse.
My 10 year vision is that Amazon wins retail, flat out. B&M gets almost completely sidelined except for niche, high end or utility stores. At that point, if you’ve put your eggs into the retail basket, now you’re going to start all over re-working your online efforts. Obviously you can do both at the same time, but why invest in a losing model? That said, this is all general speak, as some products WOULD do better in retail (utility products, “impulse” purchases, under $20 category, etc). But if you have a very brandable product or one that people will seek you out, then I think the whole point is to keep your margins high so you can continue feeding your marketing budget and continue a virtuous cycle.