The Changing Ecommerce Landscape

evolution-of-ecommerce.jpg
 

By Josh Walter, CEO
BrandJump

How retailers have built their own brands to dominate the online market

The relevant players in the home furnishings space online have shifted dramatically over the last 10 years. It started with a focus on convenience, depth of product offering, and optimization of customer search, but in the blink of an eye — or, perhaps more aptly, within a two-day shipping period — big retail names have capitalized on their own brand recognition to harness the power of ecommerce.

Those who have been successful have studied consumer behavior both on and offline, mastered branding principles, diversified their offerings, and invested heavily in technology and the customer experience. These brands have become some of the biggest names in home furnishings online, but 10 years ago, the landscape looked very different.

Although there have been standout stories worthy of their own discussions, currents trends can be traced to a progression marked by three distinct periods over the last decade.

Category Specific Sites and the Pre-Brand Era

When Internet Retailers first started selling home products, the who’s who was a combination of two extremely different types of retailers. There were small, independent brick and mortar retailers that had ancillary websites, who were passionate about product. And conversely there was an emergence of more technology focused pure-play internet retailers that were not product specialists, but were at the forefront of creating and converting demand online. Both types were successful in the early days.

While very different culturally, most had one common characteristic: each URL was narrowly focused on a particular product category. For example, consumers searching for TV stands may have found themselves shopping at racksandstands.com, or if shopping for chandeliers at lightingdirect.com or lightinguniverse.com. All three sites were category specific and were not “brands” themselves per se (yet). Rather, they were a means by which a consumer could search for a specific type of good, and their competitive advantage was vast selection and the convenience of avoiding an in-store experience.

Birth of the Brand

It didn’t take long for category-specific sites to see the value in branching out to multi-category offerings in order to create destinations for home-related products. These companies began rolling up numerous microsites and started heavily investing in the creation of their own brands, giving birth to brand names like Build and Wayfair.

As these brands built awareness and their market share grew, it became more challenging for mono-category sites to compete – and even harder for brick and mortar retailers with websites that didn’t understand how to scale with technology.

Giant Brick-and-Mortar Retailers Enter the Ring

As these pure-play brands emerged and began to take share of the home furnishings space online, other historically brick-and-mortar-focused (but well established and branded) retailers started taking notice. Names like Home Depot, Lowes, Pottery Barn, Target, Kohls, Walmart and the like had traditionally been primarily carrying private labeled goods that they inventoried. But with the evolution of the drop-ship model – which allowed for huge selection and an endless digital aisle without carrying inventory – they started throwing their hats into the ring.

Over the last few years these large retailers have been drop shipping products from branded manufacturers in the home furnishings space. Some of them made investments in technology to grow organically, and some of them decided to make acquisitions to help them accelerate their speed to market. Bed Bath and Beyond acquired One Kings Lane, Hudson’s Bay acquired Gilt (and recently sold Gilt to Rue La La), and Lowes acquired ATG Stores.

Regardless of the investment path, many of these branded, well known retailers became wildly successful selling other home furnishings manufacturer’s products. Because of their brand equity, it didn’t take long for these drop-ship businesses to catch fire.

This shift has also changed manufacturer brand visibility online. The emergence of white label over the last few years has created tremendous volume opportunity for manufacturers, but less of an opportunity to use their own brand awareness to convert, creating even more of a reliance upon the retailer’s brand to help the consumer find them.

Where it’s Headed

As established pure-play internet retailers and omnichannel powerhouses continue to expand their offerings — and thus their hold on the market — it’s clear that smaller internet retailers will have to evolve in their own ways to stay relevant and compete far beyond price and search. Their need to aggressively expand their marketplace strategies to ensure they continue to capitalize on online traffic is critical, particularly as some of their own URL traffic declines.

Manufacturers, by the same token, need to gear up for these changes. They need to constantly review the changing online landscape to understand where the consumer is shopping for their categories of product. They need to form partnerships with omnichannel retailers that are brands themselves – and because these larger retailers have more strict operational demands of their suppliers, it’s critical that manufacturers invest in customer service training and technology to help their internet retailers meet customer promises.

The team at BrandJump comes from this space – from Target, YDesign Group, Wayfair, One Kings Lane, and Amazon – we can help guide a brand with their ecommerce channel strategy, and then execute it on their behalf to ensure they’re maximizing their online opportunity.

 
Josh Walter