Larger brands benefit from economies of scale, brand equity, and robust infrastructure. They’re not just relying on their name recognition; they’re making significant investments in analytics and targeted marketing. These tools enable them to tailor experiences, optimize pricing, and create sophisticated offers that resonate deeply with their audiences.
Implications for the Industry: Smaller brands, by contrast, often lack the resources to implement these advanced strategies. They tend to rely on sitewide discounts, which erode margins and fail to build long-term brand loyalty. This is a critical gap that smaller brands need to address if they hope to compete on Shopify’s DTC platform.
The Amazon Advantage for Small Brands
For smaller brands, Amazon is an equalizer. Its search-driven ecosystem and customer base prioritize product quality, price, and convenience over brand loyalty. This levels the playing field, allowing small brands to reach a massive audience without needing to compete directly with larger brands’ marketing budgets or brand recognition.
Larger brands, however, face diminishing returns on Amazon. Their direct-to-consumer (DTC) Shopify channels, where they can control the customer experience and retain margins, remain their primary focus.
Implications for the Industry: While Amazon is a goldmine for smaller brands, it’s also a double-edged sword. The platform’s fees and competitive environment make it difficult to sustain profitability. Small brands need to use Amazon strategically—as an acquisition channel—while focusing on building their own ecosystems through Shopify, email marketing, and other owned channels.
The Role of Offers in Driving Growth
YoY Growth Insights:
- Sitewide discounts drove higher growth for all brands, but category-specific offers outperformed for larger brands.
- GWP (Gift-With-Purchase) promotions, while less impactful for smaller brands, also contributed to significant growth for larger ones.
Larger brands have the resources to make strategic, data-driven decisions about promotions. They use their customer insights to craft targeted offers that maximize both revenue and margin. Smaller brands, lacking this level of sophistication, often default to sitewide discounts—a blunt instrument that boosts sales but undermines long-term profitability.
Implications for the Industry: The future of eCommerce lies in personalized, data-driven offers. For smaller brands, adopting a test-and-learn approach, (AND I MEAN TRUE AB TESTS, not one offs where merchants release something to the wild and guess later), with more strategic promotions (e.g., category-specific discounts or value-added offers) could help them emulate the success of their larger counterparts.
Why Data is the Real Competitive Edge
Across the board, the role of analytics cannot be overstated. Larger brands are pulling ahead because they’re not just looking at the numbers—they’re acting on them. From optimizing ad spend to personalizing the customer experience, analytics provides the insights that fuel their growth.
Smaller brands often lack the tools or expertise to leverage analytics effectively. This leaves them flying blind, unable to capitalize on trends or pinpoint opportunities for growth.
Key Takeaways for eCommerce Brands
For Smaller Brands:
Use marketplaces like Amazon as a growth engine but invest in building owned channels for retention and profitability.
Go beyond LTV, ROAS, and conversion rates and take a deep look at shopper behavior that leads to those metrics. Call me if you don’t know how to do this.
Experiment with more personalized offers (e.g., bundles or category-specific discounts) to increase loyalty and margins.
For Larger Brands:
Looks like you already have the resources to know what to do. Good on ya.
