For years, I’ve worked with drop shipping companies, helping them with their e-commerce growth – first with my dad’s drop shipping companies growing up, then on the agency side managing search, shopping, and social campaigns of drop shipping companies. On both sides some very basic things get overlooked. One of those things is that profitability, revenue, and growth are all tied to the brands that the drop shipping company carries for better or worse. I am fairly familiar with the tactical space, so I want to draw my examples from there. First I want to share with you 3 strategies for selecting which brands to carry and promote, then I want to share with you what other implications that, ultimately, suggest that long-term success of a drop shipping company is decided by its ability to brand itself.
3 strategies for selecting brands to carry
Look for blue oceans. Let’s say a company is considering whether or not to carry the brand 5.11. 5.11 is one of the largest tactical brands out there and the search volume is relatively enormous considering other tactical brands. This means that a drop shipping company could potentially get a decent traffic volume from search and shopping for this brand, and I bet it would drive the largest share of traffic to the site. However, there’s a few catches – there’s many, many other sellers selling 5.11, including themselves, meaning you’ll have be just as competitive in getting the final sale. Conversion will depend on pricing, shipping, reputation, and other conversion factors. So for newcomers to the space or stores without a huge following of their own because of the market saturation, big brands won’t directly contribute to your bottom line. Rather than carrying big brands where there market is saturated, find brands that are big enough to bring in traffic.
Somewhat on the opposite end of the spectrum, take the brand Eberlestock. It’s got a fairly decent search volume, far from 5.11, however if you were to start advertising on Eberlestock keywords and going after it in your SEO, you would have a high chance of gaining traction for your store.
If you must, use market saturated brands as a form of customer acquisition. That said, it’s okay to carry big brands to drive customer acquisition. If you are a small store and would like to grow, one of the ways of doing that is by attempting to compete in a bigger market. It’s challenging, no doubt, but you could beat out the competition because you’re much more nimble and require less gross profit than the competition. While you may not profit much from brands like 5.11, you can sell them to break even, collect customer information and remarket to them via email and other channels.
Carry the full line if at all possible. Going back to Eberlestock, if you’re carrying 5 of the 21 models they offer, then you’re going to limit your conversion probability. This is due to the fact that you might be bidding on or optimizing for the term ‘Eberlestock,’ or ‘Eberlestock pack’ or something like that, but the people might be looking for one of the other models. People do, but rarely, search long tail especially for smaller brands and niches like the tactical space. It is always best to maximize your opportunity for the sale.
Developing your brand
I believe there are two inferences we can draw from this:
- It is necessary that brands themselves develop their own brand that supports their retailers and distributors – finding audience segments, getting traffic, building awareness, communicating with customers, and maybe even going direct to consumer.
- The drop shipping company itself must develop their own brand, just like Cabela’s, Macy’s, Footlocker, and the like.
I’d like to share with you my thoughts on both.
- In order for brands to be successful, they themselves have to raise their own brand awareness. This lesson draws on what traditional advertising already knows – it’s often up to the brand to generate its own buzz and appeal. SPAM doesn’t sell itself. In the age of digital marketing, we’ve really got lost in the “if you build it, they will come.” But that’s becoming less and less frequently successful – eCommerce has become incredibly competitive, brands are starting to sell direct, drop shipping companies are barely turning profit. Brands must market themselves – whether they go direct or not.
- Just like Cabela’s, Macy’s, and Footlocker, drop shipping companies must develop their own brand. There are a few successful drop ship companies that have done this – cheaperthandirt.com, backcountry.com, and Wayfair. These companies have a brand that extends beyond just the brands they carry. This is why they’re so successful. They’re branded and direct traffic alone brings in huge amounts of traffic. So for drop shipping companies that have the mentality, “if you build it they will come,” the if-you-build-it-they-will-come mentality will only get you so profitable, if profitable at all. You must develop your own brand, your own reputation, and your own audience to survive long term.
The brands you carry will determine your success, especially without your own brand. Building your brand as unique to a certain audience is vital to long-term success. I see that both are big challenges. Selecting which brands to carry will take some trial and error (and even some retrial). The brands themselves must be supportive in that they do their own advertising and promotion. And, all along the way you should be setting yourself up to build your own brand.
Many brands don’t do this for a few reasons, but the two biggest reasons I see
- They’re product centered.
- They think that by advertising online, they’re hurting their retailers
Creating amazing products is very noble; products that are not amazing won’t sell for long. However, marketing has drastically shifted away from simply focussing on features and benefits to marketing based on felt experiences and tribal associations. This shift demonstrates that great products — with features and benefits — also need marketing and advertising that focuses on felt experiences and tribal associations. So, regardless of who is selling the products, the customer need those later messages marketed to them.
Many brands feel that by advertising directly to the consumer, especially online, is cutting into their hurting their retailers. This could be true if they’re selling. However, whether or not they are selling, they still must support their own brand and their retailers by marketing themselves. Traditional advertising understands this naturally because they’ve always operated in the environment when brands didn’t generally have their own storefront. With the advent of the internet, it is now very easy to have their own storefront or product catalog online. Some companies choose to sell other companies merely want a place to showcase themselves. In either case, brands themselves must take responsibility for dispersing their brand name to their target audience.
In many ways, going directly to the brand is better for the end user. However, a drop shipping company can trump the value that the brands can’t in three ways:
- They carry a wide selection.
- They have lower prices.
- They offer a sense of community.
The first two are fairly explanatory – get the best selection, get the lowest prices – and there are a few problems with those offers. There is a product that someone else isn’t carrying, and there is rarely a product that someone isn’t carrying for a lower price. The third option offers the most promise because it’s unique to the company – no one else can offer the same sense of community. Brands that are successful have developed their own sense of community.
Before I move on, I’d like to go back to the point about having the best selection. A drop shipping company that carries what everybody else is carrying is going to face competitive challenges; a drop shipping company that carries under-carried brands is going to face challenges with getting enough revenue.