Don’t Let Platforms Commoditize Your Business
Large digital multisided platforms (MSPs) such as Amazon, Alibaba, and Apple’s App Store have made it much easier for sellers to reach new customers, but as thousands of companies large and small have discovered, conducting business on them carries significant risks and costs. Sellers are drawn into increasingly intense price competition as MSPs attract more and more of them. The platforms sometimes exploit sellers’ dependency in subtle and not-so-subtle ways. They raise fees. They change their recommendation algorithms to put more emphasis on price. They require sellers to advertise if they want to maintain visibility in search results. They compete with sellers by imitating their products. They restrict the prices sellers can set elsewhere. And they change their rules and designs in ways that weaken sellers’ relationships with customers.
A broad spectrum of enterprises are grappling with these problems, including sellers on Alibaba and Amazon; app developers on Apple’s iOS and Google’s Android; restaurants on DoorDash, Grubhub, and Uber Eats; hotels on Expedia and Booking.com; small businesses on Tencent’s WeChat; and media outlets on Facebook, Google, and Twitter. And antitrust authorities and regulators around the world are investigating some of the largest MSP operators, including Amazon, Apple, Facebook, and Google, for possible abuses of their market power.
But all is not lost. Sellers can employ a number of strategies and tactics to avoid being exploited and commoditized. We have grouped those measures into four categories.
Develop and Invest in Your Direct Channel
Even if it is impossible to avoid operating on key MSPs, sellers should limit their dependence by investing in their own channels, such as branded websites and apps, to reach and serve customers directly. Given the widespread availability of business-in-a-box solutions such as Shopify, BigCommerce, Magento, WooCommerce, Mailchimp, Square, Appy Pie, and Wix, creating a fully functional online storefront is increasingly easy and affordable. The key difference between relying on those providers of software tools and relying on an MSP is that the former exert no control over brands’ relationships with their customers. For example, Shopify provides all the digital tools and infrastructure a brand needs to sell online, typically without consumers’ realizing that the brand’s store is powered by it. Part of the reason Shopify is so appealing to online merchants (it has more than one million of them as customers) is that unlike Amazon, Shopify is not a marketplace connecting them with consumers and therefore does not commoditize them. As Shopify’s founder and CEO, Tobias Lütke, has said, “Amazon is trying to build an empire. Shopify is trying to arm the rebels.”
Read More https://hbr.org/2021/05/dont-let-platforms-commoditize-your-business