Whoa. That short quote has a lot of info to process.
Web summarized the retail behemoths' brand strategies in two sentences and immediately had my wheels spinning about the implications for smaller v-commerce brands like Tortuga.
First, some context. Earlier in the podcast, Web and Stephan discussed this Dave Ambrose tweet comparing Away's $295 suitcase to a $90 Amazon basics copy. Amazon's is 70% cheaper for those bad at math.
(Make sure to click the pic.twitter.com link in the tweet.)
$295 DTC, branded luggage option (checked bag)— Dave Ambrose (@daveambrose) September 20, 2017
$90 Basics offering (checked bag)
Not only does the Amazon Basics bag look the same, it has a similar logo to Away's in the exact same spot. Amazon is shameless.
V-Commerce companies may be experiencing this for the first time, but Amazon sellers have been dealing with it for years.
Fulfillment by Amazon (FBA) businesses sell solely, or at least primarily, on Amazon. They are built and optimized for Amazon. These companies aren't "name brands." They're the highly-rated, competitively-priced products that dominate many generic search results on Amazon.
FBA sellers are important to Amazon and improve the overall quality of products on the platform. Amazon doesn't care. Amazon has been copying these sellers' products for years.
Selling on Amazon is a great way to get volume, but Amazon has all of your data. When Amazon sees a product doing well, it can copy the product, sell an Amazon Basics or private label version, and price the third-party FBA seller out of business.
"Your margin is my opportunity."
Away isn't the only brand to deal with this issue on Amazon. You can find this "carry on" backpack by searching for travel backpack on Amazon. At $50, this bag is 75% chepaer than our most competitively-priced carry on backpack. Hell, it's 50% less than the eBags TLS Mother Lode, which is usually the cheapest option.
Our bags are better than Amazon's. I'm sure Away's suitcase is better than Amazon's too. Does offering a better product at a better value even matter when the price difference is 3-4x?
Tweet me if you know of any other DNVBs that Amazon has knocked off. Let's start compiling a list.
Walmart is pursuing an acquisition-heavy strategy. They've recently acquired Jet.com, Bonobos, Modcloth, Shoebuy (now Shoes.com), and Moosejaw.
Web noted that Walmart has allowed its new acquisitions to continue to operate independently while leveraging Walmart's infrastructure. You won't see Walmart logos on Bonbobos.com or in guideshops any time soon.
Like Proctor and Gamble (P&G), Walmart is developing a stable of brands that seem different and independent to consumers. Yet the money all flows to the parent company, Walmart. Unlike P&G, Walmart can put its massive brick and mortar footprint and improving ecommerce operations behind new brands.
P&G is left begging for shelf space at Walmart. Walmart is Walmart (and Walmart.com).
Implications for Small V-Commerce Brands
An acquisitive Walmart is good news for companies large enough to appeal to the retail giant but not qualified for an IPO.
Smaller, niche brands won't be acquired by Walmart but could still be knocked off by Amazon. Even if your products aren't directly copied by Amazon, you're still competing with them.
Small to mid-sized brands are squeezed in the middle. Big enough to warrant copying by Amazon but too small to be acquired by Walmart. (Not that I would want that for Tortuga.)
The most obvious solution is brand. Build a brand that people care enough about to spend the extra money. Build your tribe around that brand. On Loose Threads, Richie Siegel wrote about why networks are the strongest moats for brands. Seth Godin's book Tribes is an excellent read on this topic too.
Amazon will always win the race to the bottom. You can't compete with Amazon on price. The company's scale and willingness to sacrifice margin are unprecedented. You can't out-Amazon Amazon.
The answer for now on the product front is to create niche products that are too specific for Amazon to want to copy and high-end products that are too expensive for Amazon Basics to do well. Both approaches are subject to change as Amazon continues to grow. Don't expect them to cede any market segments.
At Tortuga, we are focused on a specific consumer. Our strength is making products for long-term, international, city travel. We are a deliberately niche brand. As of 2017, we're pursuing a two-pronged strategy of pro-level gear for serious travelers who want to make the investment and competitively-priced gear for every one else.
Is our strategy the right one? Who knows! More on our evolving product strategy in the next few weeks.