No one could have anticipated the COVID-19 outbreak and the global response, but there will undoubtedly always be marketplace disruptors like this that put our brands to the test. It is up to us, the leaders of change, to be able to 1) assess the evolving state of business and 2) make the best decisions possible, all based on the data available to us.
Intuitive data and actionable insights, now more than ever, will determine which brands stand the test of time due to both the online channel shift and category demand surges driven by COVID-19, as well as the real-time dynamics of the digital shelf across marketplaces like Amazon.
Introducing Market Share 2.0
At Edge by Ascential, we recognize data needs to be easy to understand and access, but above all, accurate, which is why we are so excited to introduce Market Share 2.0 to our customers, which launched this month.
Market Share 2.0 is one of the most accurate and reliable solutions for Amazon sales, share data, and insights in the marketplace. Now with a completely redesigned interface focused on helping you understand your Amazon business in an easier and more accessible way. It has been designed with you, our clients, in mind to be streamlined, intuitive, and actionable.
Are You Now, or Are You Next?
But instead of an elevator pitch, let's "pretend" we actually run a brand's Amazon business. Whether we're in a category facing the impact of COVID-19 "now," such as toilet paper and hand sanitizer, or one likely to face the impact "next," such as video games and gardening supplies for stay-at-home entertainment. Let's walk through some of the key questions we should be asking ourselves and the actual data available to us via Market Share 2.0 to best navigate our way to success.
1) How is my category performing?
If I am a toilet paper brand, for example, the category is experiencing unprecedented growth on Amazon (+172% YOY in the Latest 4 Weeks) as somewhat panicked shoppers stock up and as Amazon prioritizes those essential categories over non-essentials.
But as expected, while 1P category sales have historically dominated, these last 4-5 weeks of sales, which have exceeded Prime Day Week 2019 and Cyber Week 2019, have depleted 1P inventory, leaving 3P sellers as some of the only remaining suppliers and pushing the 3P mix of sales in the category to historic highs.
This shift to 3P can provide both benefit and risk to brands depending on 3P partnership strength, their inventory position, their "ethics", and approach to pricing and protecting brand equity.
2) How is my brand performing within the category?
Okay, so the toilet paper category is on fire. What about my own Brand A?
Well, the good news is that my organization has really leaned into ecommerce and prioritizing Amazon as a core growth driver moving forward. And so, while I couldn't anticipate COVID-19, we were in a strong starting inventory position with Amazon and had inventory reserves and operations to more nimbly support sudden demand spikes should they happen.
As a result, my 1P sales are ahead of the category growth and my own Brand A has climbed from #3 to #1 in market share while some of my competitor brands were clearly not in the same position to respond to the spike in demand.
While sustained market leadership is not guaranteed, this lead should give my Brand A the right inertia to maintain the #1 rank as long as I ensure Amazon and eCommerce PO's are prioritized over brick-and-mortar irrespective of the size of the business due to the dynamics of the digital shelf and secure marketing investment dollars to fuel campaigns once the market reaches a new normalcy.
3) How is the 3P marketplace affecting my business?
But 1P sales are not the only piece of the puzzle. The category data trends above confirmed that the 3P mix significantly increased in recent periods, so if that's true, how is 3P impacting my Brand A and those market share leadership dynamics?
When the 3P data is layered in, it tells a slightly different story. While my Brand A did capture sales and share vs. competition, I'm actually now tied for #1 with Brand B and Brand C. This is because Brand B and C -- whether they want it or not -- had more 3P seller support to fulfill their demand as their 1P inventories depleted.
Therefore, the market lead that I thought I had is not as much of a comfort zone, which reinforces my need to accelerate replenishment efforts both via 1P at Amazon and established 3P seller partners, all while preparing my investments behind demand generation as supply and demand balance out in the coming weeks and months.
One potential watchout we should be investigating is how this shift to 3P is potentially impacting our brand equity from a pricing and experience standpoint. In looking at the average prices in the latest 13 weeks vs. prior 13 weeks across all brands and my own Brand A, average retail pricing has increased rather significantly in the latest period, driven primarily by 3P offerings.
Some of this is driven by either larger pack sizes at higher prices being purchased as the smaller pack sizes at lower prices have been depleted (particularly with 1P sales), but it could also be because of some select 3P seller efforts to increase dynamic prices to take advantage of the low supply and high demand during this challenging time.
It will be critical to dig into this to confirm exactly what the drivers are for my Brand A so that I can ensure I'm not missing a resolvable unauthorized 3P seller issue.
4) So what should I do as a NOW brand?
Armed with the data above and many more insights that Market Share 2.0 provides me, as a brand facing the supply and demand challenges of COVID-19 "now," I'm able to assess the evolving state of my business and make better decisions to affect my Brand A's success.
- 1P Availability: I need to work closely with my internal commercial and supply chain leadership to ensure that my Amazon PO's are being prioritized first over brick-and-mortar PO's irrespective of my % of business or top customer rank. I want to be in-stock everywhere, but I will not lose my slots on the physical shelf in the short-term due to OOS. If I'm OOS online, my sales rank and search rank are lost almost immediately and it can take months and redundant investment to get back to my original trajectory.
- 3P Availability: I need to ensure that my authorized sellers are prioritized from an inventory standpoint as well to ensure they can fulfill demand in my 1P absence and help protect my brand visibility and equity online
- 3P Pricing: While pricing is at the sole discretion of the retailer/seller, brands do have some means to protect their brand equity via authorized reseller programs. If in my investigation, I can identify unauthorized sellers or potential sellers who are no longer behaving according to the guidelines established in the authorized reseller program, this is a good time to work internally and externally with appropriate stakeholders to resolve these issues so to protect my Brand A's equity and consumer experience.
- Content Optimization: While the business is focused on getting back in stock, this may be a good time for me to work with my brand and marketing teams to review and plan for a content refresh coming out of the COVID-19 outbreak to ensure we're maximizing Brand A SEO visibility and conversion to maintain that 1P market share lead I've established going into this period.
- Demand Generation: While there isn't as much need for robust paid demand generation activity during a period of such organic demand, there will be a turning point and my team and I will need to have our Brand A campaigns and programs ready to act as quickly as possible to maintain the momentum, especially considering that toilet paper is not an expandable consumption category and I may be facing a period of much lower sales as shoppers work through their stock-up supply.
- Promotion: BUT I need to be mindful that I'm connecting internally with other channels and customer sales leaders to minimize Brand A price promotions in-market. This can trigger price matching as everyone tries to rebound, which can cause channel conflict and profitability issues that may put my future business as the #1 brand at risk.
But what if I lead a "next" brand that isn't in an immediate and obvious COVID-19 stock-up "now" category like toilet paper, hand sanitizer and grocery, but about to see a surge in demand? What if I lead a brand in office supplies for stay-at-home workers, or in kids' crafts, outdoor toys, home improvement and gardening for adults and children that have time on their hands and a desire for entertainment and activity?
I will need the data and insights to follow the guidance above and thankfully will have some weeks, maybe months, on my side to prepare so I wont be caught off-guard.