Much has been written about the retail apocalypse. The dramatic shift towards ecommerce has caused the demise of several retail stalwarts, and the war for retail supremacy between Walmart and Amazon has thrown considerable fuel on this fire.
While this culling of retailers is indeed interesting, I believe the more interesting consequence of Walmart’s war with Amazon is a different wave of casualties. CPG Brands that rely on these retailers as their main source of distribution are in eminent danger. In the coming months, this danger to suppliers will intensify rapidly.
Saying this in Northwest Arkansas, my hometown, is sacrilege. But the writing is on the wall:
Amazon and Walmart have fired a full-frontal assault on their suppliers.
Amazon has been particularly ruthless in this action. The company is using their treasure-trove of purchasing data to build knockoffs of their suppliers’ best sellers.
- Vendor product makes a large number of sales.
- Create a knock-off product.
- Bump knock-off product to top of search results.
- Profit and repeat.
The tweet below by Jason Del Ray is the perfect example of Amazon’s ruthlessness. On a Glad branded product page, Amazon pushes their own Solimo brand of trash bags HARD:
The antitrust mongers are sounding the alarms. Unfortunately for the suppliers, it’s not antitrust, it’s simply good business. Well, at least if you adhere to the classical, long-held opinion first espoused by Robert Bork that antitrust laws are designed to protect the consumer, not to stifle competition or protect competitors.
The consumer saves with Amazon’s strategy. Brands? You’re screwed.
In addition to their hugely popular Amazon Basics, similar to Walmart’s Member’s Mark, Sam’s Choice, etc., Amazon is creating incredibly valuable brands. At last count, they’ve created well over 100 of these brands. These high-margin, owned brands are gradually stealing virtual shelf space on Amazon.
This strategy is working incredibly well for Amazon, so of course Walmart is going to pursue a similar strategy. In this effort, Walmart’s $3.2 billion dollar acquihire of Marc Lore’s Jet.com team is paying major dividends. His team has taken the effort to an even higher level.
As an example, take Walmart’s Allswell Home brand. This is a vast departure from past private label forays. It’s fantastically done, and has its own team led by Arlyn Davich, a successful startup entrepreneur who serves as President. While the brand launched in 2018, most of the world first heard of Allswell after a well-executed PR stunt revolving around a $100,000 tiny home.
While Allswell is their first homegrown digitally-native brand, it certainly won’t be Walmart’s last. The have an entire team dedicated to launching “dozens of direct to consumer brands.” These brands are not simply off-brand private labels, but real, valuable brands with their own direct-to-consumer websites, slick imagery, and killer branding.
To help launch these brands, Walmart has quietly hired an incredible team of direct to consumer eCommerce merchants. These merchants include Bonobos CEO Andy Dunn, the father of the “digital native vertical brand” movement, and Jet’s CCO David Echegoyen. Dunn was the CEO of Bonobos, which Walmart purchased for $310 million. Echegoyen was CMO at my previous company, where his brand-building ability (coupled with some incredible customer acquisition tactics) allowed us to scale to ~$100 million annual revenue in under a year!
Wondering how a CPG brand can survive this all-out war between Amazon and Walmart? It’s simple. Develop a powerful direct-to-consumer channel yourself.
For a playbook, look no further than brands like Dollar Shave Club, Warby Parker, Harry’s, Honest Company, All Birds, Quip, and Glossier. Each of these brands are less than a decade old, each is worth more than or climbing towards one billion dollar valuations, and NONE of them rely on Amazon or Walmart for distribution. Rather than being Walmart or Amazon’s pawn, they’ve built their own direct to consumer distribution channel. This process starts with a stunning online experience, is supplemented by scalable customer acquisition channels like Google and Facebook, and ends with building a direct relationship between the brand and the consumer.
I believe so strongly in the direct to consumer eCommerce strategy, I’m building Engine, a powerful eCommerce platform designed to build and grow brands in Amazon and Walmart’s world. Over our team’s 24 year history in eCommerce, we’ve generated nearly half a billion dollars in online sales, all driven by our own proprietary software and customer revenue optimization strategies.
If you are running a CPG brand and find that these words resonate, drop me a line. I’d love to discuss your strategy surrounding this opportunity. If you’re in NW Arkansas, I’m always in the mood for a cup of coffee.
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