The Marketplace Dilema

 In the current climate of Covid, it is clear that the shift of consumer purchasing through e-commerce is accelerating. Many companies are eager to capitalize on the change in consumer buying habits, but the choice between direct-to-consumer and marketplace is not as clear as the choice to increase investment in online channels.  Numerous 'internet native' brands that got their start with a direct-to-consumer model have made the strategic choice to expand to marketplaces like Amazon.    The recent HBS assessment of the evolution of the direct-to consumer marketplace  (https://hbr.org/2020/03/reinventing-the-direct-to-consumer-business-model) demonstrates that companies often require omni-channel strategy to help scale, especially as the online marketplace becomes more crowded.  Also, the lure of the large reach of a marketplace such as Amazon can be tempting. In fact according to a recent survey, more than half of all search starts at Amazon https://www.bloomberg.com/news/articles/2016-09-27/more-than-50-of-shoppers-turn-first-to-amazon-in-product-search) But the move to a marketplace is not without its risks.

Medium highlights the case of popular shoe manufacturer Allbirds, who continues to choose the direct-to-consumer approach (https://medium.com/community-commerce/why-direct-to-consumer-brands-are-ditching-marketplaces-b610d573977f).  Many brands worry about the risks of brand degradation through counterfeiting, 3rd party resales, or even Amazon own brand knock-offs. Many larger blue chip brands such as Nike have also struggled with the decision, balancing the attraction of the potential reach given Amazon's community size versus the risks of loosing control of aspects of their branding and potential damage to their brand equity (https://www.bloomberg.com/news/articles/2019-11-13/nike-will-end-its-pilot-project-selling-products-on-amazon-site).  

However with the rapidly evolving Covid retail environment, despite the brand risks, many companies, particularly in fashion retail are choosing the marketplace channel route (https://www.fashionatingworld.com/new1-2/e-commerce-shift-to-a-marketplace-model-even-as-experts-advise-caution).  This does allow improved flexibility with inventory, that would otherwise be stagnating given sudden slowdown in orders from traditional retail avenues. It also gives flexibility to multiply the audience for a given product, especially if selling through multiple marketplaces. With the growth in marketplace sales, even the number of marketplace options is multiplying.  Only time will tell if this is a Covid fad or if it's here to stay.