Since the COVID-19 state of emergency was declared, U.S. ecommerce revenue has increased by nearly 50% (source: https://www.listrak.com/covid19). This is, in large part, due to obvious causes such as the forced closure of non-essential brick-and-mortar stores, stay-at-home orders and a lack of certain product availability. Over a short time, however, these mandatory closures have hastened bankruptcy filings by more than six large brick-and-mortar retail chains (J. Crew, JC Penney, Modell’s, Neiman Marcus, Papyrus, Pier 1 and more).
The bottom line is that more purchasing is taking place online, which is teaching the more resistant shoppers to learn how easy it is. Will this translate into long-term changes in buying habits? That remains to be seen but the experts believe it will.
The brick-and-mortar stores that don’t wave the white flag will need to adopt omni-channel strategies in order to survive.
While we don’t have a crystal ball, we foresee that in the coming months there will another large-scale migration to ecommerce. The brick-and-mortar stores that don’t wave the white flag will need to adopt omni-channel strategies in order to survive. But no matter how this shakes out, new online stores are coming. And there will be a lot of them.
For brands this can ultimately be a positive turn of events. But given how the ecommerce world operates with its repricing bots, lack of transparency, and inventory diversions, companies need to become more adept at knowing which accounts are safe to open.
In order to be pro-active, we would like to share our top ten etailer red flags. The list is based on characteristics shared by a majority of the unauthorized sellers, diverters and policy violators of the brands that work with MAPP Trap. It is highly recommended that you look for these when opening online accounts (and maybe even for renewing existing ones.)
Residential addresses, PO boxes, UPS stores, virtual offices, drop shipper addresses
Opening accounts that only provide these kinds of addresses is among of the greatest risks that a manufacturer can take. Residential addresses are an indication of a lack of professionalism or, at the very least, a small business. PO Boxes, UPS Stores and Virtual offices make it extremely difficult to trace owners. And 3rd party drop shipper warehouses are a sign that the account could be offering its inventory to other, unknown and unauthorized sellers.
Be suspicious of any account without a professional, domain-based email address. It’s 2020. What legitimate online seller doesn’t have a domain?
Non-business domain email addresses
Be suspicious of any account without a professional, domain-based email address. It’s 2020. What legitimate online seller doesn’t have a domain? Besides, personal email domains (e.g., @aol.com, @yahoo.com, @gmail.com) for a business are red flags because they are easily (and frequently) changed to avoid continued contact.
Non-functioning main ecommerce site
As per the above, if a new account does not have a functioning ecommerce site then they are purely 3rd party sellers. Or worse, they could be diverting products to unauthorized sellers.
Low transparency
Is there a way to contact the seller? Do they list customer service numbers (that work!), websites, addresses, etc. on their profile or contact us page? Online sellers that don’t provide contact information are a high risk. Not only could it affect a consumer’s ability to ask questions about your products but if the seller changes its store name the brand won’t know it’s them (unless they track seller IDs like we do.)
Lack of full disclosure
We recommend that all MAPP Trap clients require their new (and existing) accounts to complete an Online Disclosure Agreement. This can be a separate document or part of an account application. If the form does not list ALL of their ecommerce sites (both direct and 3rd party ecommerce) then they are a high risk.
“Just Launched” stores
As with the granting of credit terms (Net 30, etc.) where payment history is important, the amount of time an online seller has been open is important. The less time they’ve been around, the more of a risk they are. A “just launched” Amazon store could also be an indication that the etailer was suspended by so many brands that they had to open a new storefront (and aren’t telling you.)
Multiple stores with different names
In the early days, the only differentiating factor for an online seller was price. But as ecommerce has evolved, many online stores are becoming trusted brand-names. These stores are making an effort to become legitimate retailers. Stores that have different names on each platform tend to be less reliable and trustworthy.
Frequent store name changes
When companies like MAPP Trap reveal the identity of an online seller to its clients, those clients can suspend or terminate the seller. In order to continue getting inventory, many sellers change the name of their store. One reason they change the name rather than open a new store is so they can keep their seller ratings, reviews, etc. This is frequently what vendors refer to as whack-a-mole. The reality is they are not new stores, just the same stores with new names.
Poor customer feedback and low ratings
Anything less than 4 out of 5 stars is an issue. You may even consider making 5 stars a requirement. Bad reviews show that consumers have complained about issues like customer service, slow shipping, damages, etc. Although this is usually the seller’s fault, consumers often associate a poor retail experience with the brand.
When managed poorly, ecommerce leads to gains in top-line revenue with an accompanying drop in brand equity and profitability.
Product mix
Today’s retailers have the greatest access to inventory in the history of retail. They can buy direct from you, from your distributors, drop-shippers, and more. Check to see if the store primarily sells the type of products you have. Are they in the same industry or do they have a product mix that spans a dozen categories? Our advice: stay with sellers that don’t list a diverse portfolio. Not only is it costlier and more time-consuming for them to optimize product searches but it’s an indication that they are unfocused and/or have a hard time getting products from your peers.
The reality is that most online sellers are honest and honor the policies and agreements of their vendors. Sadly, far too many do not. The downsides include rapid and deep discounting, brand erosion through over-distribution, product diversion from one unknown seller to another, intellectual property rights violations, loss of retail margin, loss of brand equity and, ultimately, loss of market share.
When managed poorly, ecommerce leads to gains in top-line revenue with an accompanying drop in brand equity and profitability. When managed properly the top-line gains translate to a stronger bottom-line – both financially and in terms of a brand’s long-term viability.