Strategy

Why DTC Marketplaces Are Bad News for Amazon

The emergence of the vetted and curated could be a critical counterweight to the eCommerce giant.

As the DTC world grows in size and scope, it runs headlong into this problem: When you're designed to stand out, how do you still stand out in a growing marketplace of similar competitors?

It's an age-old retail question that puzzled entrepreneurs back in the early days of Sears, Bonwit Teller, and Filene's—three huge department store chains that eventually went out of business over the last few decades. (The culprits behind their demise? Changing shopping patterns, the rise of eCommerce, and, of course, Amazon.)

This is a question that DTC marketplaces have set out to answer. And in recent months, we've seen a rise in them—offering curated choices of what they believe to be the best of the DTC crop. Take The Verticale, for example. It's a dropship marketplace of 50 or so DTC brands that debuted in November. What helps this group stand out is a huge part of what makes the DTC market unique—a system of values not commonly found in mainstream retail. Or as they put it: We exclusively curate quality goods made by trusted brands that stand for something beyond the product.

Then there is The Fascination, which also launched late last year, hosting over 100-plus brands across a number of different categories. It's a bit different from The Verticale in that focuses on the brand story and the technical features of the products and only features brands that pass muster. The existence of these marketplaces are an implicit rebuke of Amazon—a one-stop marketplace where anything goes and nearly any seller, no matter how credible or virtuous, is welcome.

"It’s also a form of cross-selling that the free-for-all nature of bigger sites (ahem, Amazon) can’t imitate," Retail Brew's Halie LeSavage wrote of DTC marketplaces. Or as Fascination co-founder Matt Hayes put it: “Irrespective of the category, these brands realize that [their] customer demographic and archetypes are the same.”

Still, in spite of this momentum, this trend comes as more DTC brands pour resources into appearing on Amazon and advertising there, especially as the pandemic drags into its second year. "More DTC brands will likely continue to grow their advertising presence on such platforms [like Amazon and InstaCart]," DigiDay recently reported. "With the shift in consumer behavior, many are staying at home and cozying up to the idea of safely ordering everyday items from their phone to be delivered straight to their door. The change makes it necessary for DTC brands to be on those platforms."

But the question is whether this is what consumers, especially younger consumers, will continue to want as the senses of overwhelm and uncertainty (as well as the questionable quality of the reviews) define the Amazon experience for some.

Then, there are the moral questions summed up by this recent Vice piece titled, "How to Stop Shopping at Amazon When You Know It's Bad but Do It Anyway." Here is a partial list: "Amazon supports police surveillance, has swept the deaths of workers on their warehouse floors under the rug, spies on and undermines labor and environmental rights groups, forces warehouse employees to work 10-hour graveyard “megacycles” or lose their jobs, and is killing the planet."

With more shoppers researching the brands they choose and seeking out businesses that reflect their values, DTC marketplaces that satisfy new demands will only grow in power.