Here is something that is counterintuitive: you don’t need lots of online retailers selling your product. You just need one good one.
But wait! Don’t retailers expose your product to more people? Don’t they increase your market share?
The short answer is usually no. At least the answer is no in online retail, most of the time.
Let’s think about it like a pie. The pie represents your revenue and the size of the pie represents the size of your revenue. Maybe at the moment, you are about a 12″ pie.
You are all about increasing the size of your pie. It seems very natural to think that adding online retailers will help you do that but that is not what most online retailers are about at all. It turns out that making a bigger pie is hard. It is much easier to just focus on getting as big a slice of your pie as possible.
In other words, they siphon revenue from other retailers. They do this primarily by price wars of course and that is a big problem for you for a few reasons:
- Price wars reduce profits for everyone, leading to dissatisfaction across all your distributor and retail channels.
- Price wars usually end up siphoning business from your offline retailers who actually ARE working to make your pie bigger.
Price cutting is easy; that is why online retailers do it. We call it scavenger marketing or piggyback marketing. No one wins but the retailer doing it.
Here is truth: in today’s online retail landscape, you do not need another retailer unless they can tell you what they are going to do to make your pie bigger. If they can’t do that, they are not an asset to you.