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3 things eCommerce brands can learn from Amazon Prime Day

11/26/19 7:27 AM / by Fuse Inventory posted in supply chain, supply chain management, merchandise planning, inventory planning, supply chain optimization, demand forecasting, digitally native brands, ecommerce, inventory

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This year’s Amazon Prime Day was record breaking generating $1 bn in sales. Not only did Amazon beat it’s own Black Friday and Cyber Monday sales, but sales also increased 60% year over year relative to last year’s Prime Day. Amazon continues to dominate e-commerce and will continue to do so for the foreseeable future. But, as we said in our previous post, we definitely believe that there is room in the market for digitally native brands to succeed. They just need to compete on a different dimension rather than trying to beat Amazon at the game that it’s mastered - convenience.

As Amazon continues to grow and dominate, we think that Amazon Prime Day has valuable lessons for growing brands that they can apply to their own business models successfully.

1. The membership model works really really well if you’re fulfilling a real need

While subscriptions of one sort or another have long been in vogue for ecommerce companies, not all of these companies have been successful over the long-term. This year, a record number of customers signed up for Prime Day, demonstrating that the membership or subscription model can work really well, but it needs to have several key components. Namely that the benefits have to be unique, exclusive and drive significant value to the customer. 

The thing that makes Prime Day so special is that it is available to only Amazon Prime members. Most e-commerce subscription providers tend to provide a subscription for the sake of stabilizing their own revenue and cash flow and not necessarily because they offer something unique, exclusive and valuable to the customer. 

That being said, companies like Stitch Fix and Dia & Co. have been successful because they provide exactly that. In the case of a company like Dia, they’re meeting an untapped market need for plus size clothing and have a unique offering in a space where there’s a clear market gap. Literally the perfect use case for a membership model. 

2.  Don’t be afraid to run experiments

In a way, Prime Day is one big experiment for Amazon. The company has used it to test new product lines and releases or supply chain innovations with the focus shifting slightly each year. Once it becomes clear what worked and what didn’t, Amazon can use the plethora of data to improve throughout the remainder of the year. 

While most e-commerce brands do have a strong ethic of A/B testing whether it’s landing pages, marketing copy or other initiatives, it can be hard to run potentially game changing experiments and take big risks as a small company. But, that being said, what Amazon and other successful e-commerce players like Jet have taught us is that big bets can pay off. In an ecosystem where retail continues to be challenged, those who innovate successfully and take bold steps to reinvent their business models even when they seem to be working will be the ones who come out on top. 

3. Make sure your supply chain and logistics are in order before ramping up marketing

While in the past Amazon has had some technical snafus related to Prime Day, the company has certainly succeeded in making sure everything went smoothly this year. While Amazon has a particular strength in supply chain and logistics, the lessons from its past technical malfunctions can teach smaller brands a thing or two.

Similar to the Amazon example, you don’t want to spend a ton of time, effort and money driving traffic to your site when that traffic can’t convert due to a shopping cart glitch (back in 2016), or, on the supply chain side, when you’re out of the inventory you’re advertising. At Fuse, one of the most common problems we encounter is a lack of coordination between the marketing and the supply chain teams. 

While marketing may launch a meticulously planned, omni-channel campaign, too often we find that these campaigns don’t take into account critical questions like if the campaign has the desired impact, can the company actually fulfill the orders? Will there be enough inventory to satisfy demand? While it seems obvious in hindsight, it usually takes a crisis or two for e-commerce brands to streamline the coordination between functions. 

As your company grows and scales and focuses on putting these lessons into practice, Fuse is here to help you focus on your business, not your inventory.

 

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Why we believe in online-first brands

9/22/19 5:07 PM / by Fuse Inventory posted in digitally native brands, ecommerce, industry

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At Fuse, we are excited about the wave of online first brands that we’ve seen succeed over the past decade. In a recent post by Andy Dunn, he called these brands “digitally native vertical brands” and later, “v-commerce”.

Will digitally native e-commerce brands succeed?

We asked Matt Heiman, a consumer investor at Greylock to share his perspective: “My view is that vertically focused direct to consumer online brands are better positioned than pure 3rd party e-commerce concepts over the next few years. Particularly as Amazon approaches 40% of US e-commerce, competing with them is extremely difficult, so the idea of creating a new brand and owning your own customer experience is a better position. Some examples of brands I think have done this well are CasperDollar Shave Club and Warby Parker.”

We agree with Matt, and we think that the sale of Dollar Shave Club to Unilever earlier this year for $1 bn has convinced others that it’s possible to build a valuable brand that caters to a different kind of consumer online. Dollar Shave Club’s true value is in the company’s fantastic brand and it’s ability to appeal to and engage with Millennial consumers in an authentic way over social media and other digital marketing channels (1).

E-commerce platforms make it easy to build a brand

We’re seeing this trend first hand at Fuse. Our target customers are fast growing companies with at least 25 employees and anywhere from $10 - $100 million of revenue who are excelling at building their own online first brands. One company, Ipsy, knows all about brand building. Ipsy was started byMichelle Phan, who built her own personal brand as a make-up guru on YouTube. As the company has evolved, the brand which originally appealed to Michelle’s followers and the make-up obsessed, has started to reach more casual consumers looking to expand their horizons.

The good news for many of our customers is that it’s much easier to build a strong brand online today than it was five years ago. Due to the proliferation of front-end e-commerce platforms like Shopify,BigCommerce and Squarespace, it’s much easier to build a great brand with minimal upfront investment. With the emergence of Shopify Plus as an enterprise e-commerce platform for companies looking to scale, we expect this trend to continue.

Inventory management systems haven't kept up (until now)

Although this is good news for many aspiring brand builders, the unfortunate reality is that back-end tools and platforms haven’t necessarily kept up with the front-end. Shopify has done a great job building an ecosystem around its API, but there are still a lot of gaps on the back-end. That’s where we at Fuse come in. Our goal is to help simplify the inventory planning process to help companies answer the key question related to their biggest investment: “How much should I order?” We’re really excited about the growth of online first brands in the market, and are just as excited to be able to help those brands focus on their business, not their inventory.

 

(1) Source: Bloomberg

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