Retailers have had a difficult time in recent years, as brands have increasingly circumvented them. With the advent of 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 don’t like it, how will the brands? Some businesses are now trying this. Services like Italic allow a consumer to bypass the brand and buy knockoffs, thereby cutting out the traditional retailers and the brands.
The Italic site says: "Shopping on Italic means supporting a network of independent manufacturers (the same ones behind your favorite brands)." The pitch: the customer is promised the same quality pot as one from, say, All Clad but at 60% off the retail price.
In the absence of a physical store or a brand name, Italic uses social media, advertising networks to remarket to consumers, paying for reviews, paying for referrals (affiliate marketing), and a subscription (membership) program.
When stores were first cut out of the retail equation, this was called “showrooming,” because consumers would find what they wanted in 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 than their wholesale orders. I imagine a future study may show the same for elbow businesses.
While Scott Galloway has stated that the brand era is in decline, he did not state that this is due to elbow businesses in retail goods. He predicted that future powerhouses, such as Amazon, which can easily generate repeat purchases, would own the "rails" on which consumers shop. Elbow businesses don’t have the rails or 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). 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 knockoffs, thereby muddying the waters and tricking consumers as to what is legit. Italic may not be unethical enough.
Our job is to keep an eye on these trends and learn from them while keeping true to our compass of trust, transparency, and shopping local. A simple test: During Thanksgiving, does one want to tell their family and friends that they sell knockoffs or that they help Main Street?