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E-Commerce Round-Up: September 2015

E-Commerce Round-Up covers major recent events and news from the past month in the commerce world, and provides a brief analysis of what they mean. This month’s Round-Up covers the launch of a white label e-commerce service for brands, CPG companies’ growth plans for direct-to-consumer e-commerce, and Time Inc.’s content and commerce plans for People and Travel + Leisure.

The rise of the Saas online marketplace, part II: Farfetch launches white-label product for brands

Farfetch, a UK-based global online marketplace that connects consumers with a network of boutiques around the world, will begin offering a white label commerce service for brands. The service will be called Farfetch Black & White, and the first set of sites using this service are scheduled to go live in late 2015/early 2016.

Farfetch’s existing business model – which has been successful enough to date to bring the company to a $1 billion valuation after just seven years of trading – is to be the e-commerce engine powering a network of hundreds of independent boutiques around the world. Farfetch manages the entire online purchase process, which is in the buyer’s local language and currency, as well as logistics issues such as shipping, customs, and returns.

Implications:

Last month’s update reported on another European-headquartered company expanding its “marketplace as a service” offering: France’s Mirakl, which describes its offer as a turnkey marketplace Saas platform, recently received $20 million in funding to aid its expansion, part of which is focused on North America. Farfetch is a more mature and global business than Mirakl, and while it is similar to Mirakl in that it provides a managed technology service, it differs in that it appears to be competing directly with both B2C e-commerce technology vendors such as Shopify, BigCommerce, and Demandware and the service provider partners such as digital agencies and systems integrators, of those vendors. Mirakl’s solution, in contrast, is designed to work in tandem with existing ecommerce platform vendors and service providers.

Regardless of the model, the success to date of these companies shows how the e-commerce marketplace is maturing. In addition to serving as a platform for small businesses who don’t want to, or can’t, built their own e-commerce stores, marketplaces are now a managed service option for medium and large businesses as well.

Oreos direct: CPG conglomerates reveal e-commerce aspirations

Global CPG companies see selling online directly to consumers as a way to fuel growth and cut costs. Mondelez International (formerly SONY DSCthe snacks division of Kraft Foods), the owner of brands such as Oreos, Toblerone, and Trident, has plans to grow online sales from $100 million today to $1 billion by 2020. The company is launching “Buy now” buttons on its social media channels across 25 countries with 130 retailers, and has established a global e-commerce team. Similarly, General Mills is opening an “e-commerce center of excellence” to grow food and beverage sales over the next several years. The company reports its online sales are 1 to 2% of sales today: based on most recently reported yearly sales ($17.6 billion for 2014), that equates to approximately $200 million.

Implications:

CPG companies have traditionally been wary of venturing into direct-to-consumer e-commerce, not wanting to risk hurting their relationships with their brick and mortar retail channel partners. General Mills, for example, sold $10 billion in goods via its US retail channel. Yet they also see those same partners (e.g. Walmart) as well as pure-play retailers (e.g. Amazon) having success selling to consumers online. It makes sense for CPG companies to invest in e-commerce, but their eagerness to see e-commerce as a way to cut costs does not consider the new costs that come with adding e-commerce as a channel. Handling online returns, delivery, and customer care are complex and require the right expertise and partners – that has a price tag.

Time Inc experiments with magazine e-commerce

Time Inc is adding “shoppable content” to its magazine titles People and Travel + Leisure. This content will appear in branded sections of each magazine: “Style” for People and “Travel + Leisure Journeys.” The former focuses on style news and celebrity fashion. The latter is offered in partnership with a travel company called Black Tomato, and employs a revenue-sharing rather than an advertising model.

Implications

With publishers’  revenues from subscription and advertising on the decline, it is no wonder they are looking to e-commerce to fill the gaps (for a very useful and detailed summary of what a few other large publishers have attempted in e-commerce, see this recent article in WWD). The rise of sponsored content has already blurred the line between editorial and advertising – a line some critics argue should not have been crossed – and some publishers see e-commerce as just a natural extension of their role as tastemakers and style curators. Yet editorial independence aside, there is the additional question of whether publishers are venturing into e-commerce in a smart way.

Based on a trial run of People’s new Style section, the signs are not good. I live in Boston, yet when I clicked on a blazer I was taken to a site with pricing in British pounds; a click on a pair of sunglasses led me to a site with pricing in Euros. Huh? Getting the content right for the right user – localizing currency, in this case – is an absolute necessity for online selling. If publishers want to be successful at e-commerce, they need to get at least the basics right.

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