Why Owning Your Retail Customers Matters

No doubt about it marketplaces, like Amazon, Faire and Mable (the latter two being most relevant to the B2B wholesale space) have a place in every brand's existence. But being too reliant on marketplaces can be a slippery slope for a brand if they are not making a concerted effort to develop direct relationships with their retailers to “own” the relationship.

Before we go any further, it’s important to define what it means to “own” the relationship. When a brand “owns” a customer that means that they have a direct relationship with the customer. If they need to get in touch with the customer, they can do so directly, either through email or phone; they don’t need to go through a platform’s messaging system to communicate with them. Additionally, the brand will have all of the customer’s previous order history readily available so they can tailor messaging and offers in a more personalized fashion. Owning the customer means that the brand simply has more direct control over the relationship. 

Over the past several years, brands selling direct-to-consumer (DTC) have focused on owning their customer. Pillar companies within the ecommerce landscape, including Shopify and Klaviyo, have in part been built by brands directing their business off of marketplaces (like Amazon) and onto platforms that they control in an effort to “own” the customer. While the B2B wholesale space is just now starting to evolve as more brands begin focusing on selling into retailers, the wholesale vertical is behind the DTC space in terms of adoption of technologies and thinking. However, it’s just as important (perhaps even more important) for a brand that is selling to retailers to own their relationships as it is for brands selling DTC to own the relationship. 

Brands have more of an opportunity to develop a personalized 1:1 relationship with a retailer than they do an individual DTC customer. A brand can much more easily develop a personalized relationship with a retailer, understanding more about them on a human level. Similarly, a retailer is more likely to spend thousands of dollars at a time with a brand, compared to a DTC customer that is likely spending under a hundred dollars at a time (depending on the specific products they are buying), highlighting the importance of developing these relationships. 

A marketplace (like Faire) provides flashy incentives to do business with them. For example, they offer free shipping for a year, and lengthy payment terms - both of which appeal to brands and retailers alike. However, when the year runs out and those flashy benefits evaporate, you are stuck paying a hefty commission fee per transaction and communicating with your customers through a platform - not owning the relationship. 

We are not advising against cutting out marketplaces entirely. However, we are suggesting that in order to have a long-term profitable business, it is wise to have a strategy to acquire retailer relationships through a direct fashion in addition to knowing when and how to migrate your marketplace relationships to direct relationships. 

Follow along below as we outline the main benefits of owning your retail relationships! 

Have a direct line of communication to your retailers 

The key to any relationship in life starts with communication. If you are not able to communicate, you are going to have a difficult time developing and maintaining relationships. And if you are forced to communicate through a third party (like a marketplace), you run the risk of the third party getting in the way and hindering or blocking the communication. 

Let’s look at this through the lens of brands selling to retailers through a marketplace (like Faire, Mable or Airgoods). If you are a brand owner and 100% of your retailer’s information is kept inside of Faire and Faire shuts down or decides to change how you can communicate to your retailers, your business would be severely impacted. If this were to happen, you wouldn't be able to get in touch with your retailers to let them know how to order from you. 

Having a direct line of communication with your retailer not only safeguards you against a marketplace potentially changing the way that they allow you to communicate with retailers, but also allows you to develop more of a personal relationship with them. For example, you’d be able to more accurately see what products they have purchased from you in the past and learn more about them personally. Being able to do this will only benefit your business because you will be able to develop a stronger relationship with them - which will likely translate into the retailer doing more business with you. 

Gain stronger control over your brand 

Any time you are selling through a third party, you are subject to their rules. These rules may include when and how you communicate with your customers, return policies, or who can purchase your product. And as a brand owner, your reputation in terms of what types of retailers are carrying your product and what the return policy looks like is very important. 

If you are a luxury haircare brand, odds are that you want high-end relevant retailers (like skincare brands and luxury salons) stocking your product. The clientele that is shopping in one of these high-end retailers is more likely to be interested in your product, making it more likely that your brand will be discovered by individuals that could become brand loyalists. Similarly, that high-end retailer will likely have a better sell-through of the product if it matches the types of customers that frequent the store - which in turn will lead to a more frequent reorder from you. However, if you are selling through a third-party marketplace, you have less control over what retailer purchases your product. 

In the above example of a luxury haircare brand, if a “dollar-store” type retailer purchased the product, it would not only cheapen your brand, but it would also be very unlikely that the “dollar-store” would purchase from you again because the product would likely sell less. If you don’t own the customer in this case and are subject to a marketplace’s terms, your brand can be distributed in places that you don’t want to be associated with. 

Let’s take this a step further and say that the “dollar-store” realized that your luxury haircare brand was not selling after a month and wants to return the product. And within that month period, many customers in the store picked up your product to look at it. While they were looking at it, they damaged the packaging. But the retailer is able to return the product because the marketplace has a return policy of 60 days. If you get the returned product back directly, you’ll see that the product is unsellable due to the damaged packaging. However, if the product is sent back to the marketplaces warehouse, they will likely receive the product and send that damaged product out when an order comes in for it. So the next retailer that receives the product that they bought will be getting a damaged product - something that you, as the brand owner, have no knowledge or control over. 

By owning the relationship, you eliminate the risk of your brand being sold in locations that don’t fit your ideal customer profile, while also having full control over the returns and distribution of your product. 

Drive better profit

Marketplaces are great avenues for discovery, but they come at a cost. Most marketplaces take a significant percentage of the transactions that flow through the platform. Popular marketplaces in the retail space (like Faire and Mable) take upwards of 15% per transaction. And in today’s world with rising costs, 15% of each transaction adds up and eats at brand’s already laser thin margins. 

While on one side you are paying a “toll” to be discovered, once you are discovered, paying an ongoing 15% per transaction can become a hindrance to growth. When you own the customer and have a direct line of communication to them, and aren’t subjected to high per transaction costs that eat at your already thin margins. Said another way, when you own the customer, you are able to drive a high profit margin, making your business more solvent. 

By now, you likely see the value of owning your retail customer, the same way that you own your DTC customers. In order to build your owned customer list, we suggest the following:

• On your website, instead of sending retailers to a third party site (like Faire or Mable), direct interested retailers to fill out a form or email you directly - don’t give them the option of going to a marketplace to shop your products.

• Begin prospecting accounts more aggressively. Don’t hope that retail business will fall into your lap on a marketplace - be proactive and reach out directly to target retailers in an attempt to get them to stock your product. This will allow you to own the relationship off the bat. 

• Include ways for retailers who purchase your product on marketplaces to get into touch with you. For example, consider creating a different type of packaging for the products that you are selling through a marketplace that includes your contact information in an effort to get some of these retailers to contact you directly, rather than purchasing through a marketplace. 

If you are interested in learning more about how Vanik can help you grow your retail business by owning your retail customer relationship, sign up for our waitlist and we’ll be in touch regarding a time to chat with you.