During this holiday season, does one want to tell their family and friends that they sell knock offs--or that they help Main Street? I'd vote for the latter. Yet, a new service is trying to sell knock offs and eat in to retailers' lunches.
For the last few years, retailers have been having a hard time of it: they are increasingly circumvented by the brands. With the advent of the e-commerce websites and social media, brands are pitching their wares directly to consumers and cutting out retailers.
I’ve sometimes wondered: what if the factory decides to do the same and cut out the brands? If the retailers didn’t like it, how will the brands? Some businesses are now trying this. Services like Italic (https://italic.com/) allow a consumer to bypass the brand and buy knock offs—thereby cutting out the traditional retailers and the brands. The pitch: The customer is promised the same high quality pot as one from All Clad, but at 60% off the retail price. And that’s the standard price, not even the Italic sale price. In addition to using the same or similar factories as the brand, Italic uses social media and advertising networks to remarket to consumers.
When stores were first cut out of the retail equation, this was called “show rooming” because consumers would finds what they want a store and then buy it via their iPhone from the brand’s website, possibly while still in the store.
I call this new factory-to-consumer trend: "elbowing.” Entities further up the chain push the brand out of the way and secure the sale.
Yet, with each new player up the distribution chain, we see that the parties encounter more trouble. A recent study shared that B2C orders make the brands the same profit or less as their wholesale orders (https://www.bridgecatalog.com/news.cfm?id=21121). I imagine a future study may show the same for elbow businesses.
While Scott Galloway has professed the brand era to be in decline, he didn’t profess that due to elbow businesses in retail goods. He predicted future powerbrokers owning the ‘rails’ on which consumers shop, such as Amazon, that can easily generate repeat purchases. Elbow businesses don’t have the rails nor the brand to drive repeat purchases. On top of this, they are participating in a business model that is questionable due to intellectual property issues (see: https://hypebeast.com/2021/2/new-balance-new-barlun-china-trademark-lawsuit-news&sa=D&source=hangouts&ust=1637678046070000&usg=AOvVaw3aTBDBBaPXjhlrSqrqFoai" target="_blank">https://hypebeast.com/2021/2/new-balance-new-barlun-china-trademark-lawsuit-news). Amazon’s private labels and third-party sellers operate much like Italics: with few ethics. Amazon and its sellers rip off other brands and then add these products to Amazon's ecosystem of promotion and distribution (See: https://www.nytimes.com/wirecutter/blog/amazon-counterfeit-fake-products/). Amazon even sells legit, real brands on the same digital shelf as the knock offs, thereby muddying the waters and tricking the consumers as to what is legit. Italic may not be unethical enough.
Our job is to keep an eye these trends and learn from them. Bridge wants to stay true to our compass of trust, transparency, and shopping local.