Turn the video commerce supplier video distribution model upside-down
We are going to interrupt the series on online video metrics with a single post. Over the last couple days, I’ve focused intensely on analyzing the supplier/manufacturer video content market and have a new perspective on this important video commerce topic. Of course, I’m interested to learn your thoughts and whether you agree or disagree with some of the findings and the conclusion I’ve drawn here.
First, the background…
Undeniably, one of the greatest challenges online and multi-channel retailers face when embarking on a new video commerce effort or expanding an existing effort is acquiring new video content for the e-commerce site. If a retailer only has a few videos (or zero videos), where on Earth is the video content that’s required for a video commerce program going to come from?
Brief review of the three sources of e-commerce video content:
1) Suppliers/manufacturers of products sold on an e-commerce site develop video footage or contract with a third party to produce footage featuring the supplier’s products. This content is then made available to online retailers for consumption (often on product pages of an e-commerce site).
2) Customers who purchase products sold on an e-commerce site can provide video testimonials and reviews for those products.
3) Retailers self-produce video content. For example, a retailer might focus on creating educational/how-to videos, product demos, category/knowledge expertise videos, lifestyle content, service videos, etc.
Today’s prevailing model for acquiring supplier video content:
There are companies in the marketplace that generate revenue by producing video content for suppliers/manufacturers and distributing that content to a variety of e-commerce sites. This is sometimes referred to in the industry as “retail syndication.” The quality of content produced by these companies is usually pretty high (it may or may not gel with the retailer’s own brand – the subject of another post). Many retailers also like acquiring video content through this model because the content is free for the retailer. In fact, the manufacturer covers the entire cost of video production and syndication because the manufacturer benefits from the added product exposure on e-commerce sites and increases in conversion rates on product pages. Presumably, higher conversion rates mean manufacturers will be able to sell more products to their retail customers in the future.
So if there is an existing model for retail video content acquisition, why is there not more video on e-commerce sites today? After all, online video is nothing new…
I have been thinking about this problem for a while and finally landed on what I believe is at least part of the answer:
The retail video content market, as it is structured today, doesn’t serve retailers. It serves suppliers.
Many (I’d venture to say most) retailers considering the launch or enhancement of a video commerce program resist the idea of self-producing video content to start out (cost reasons/uncertainty of where to start/general lack of familiarity with video production and how to apply video strategically), so the next place retailers look is to the vendors that create content for suppliers and distribute that content to retailers. However, even those retailers that acquire content this way still have video on only a tiny fraction of all the products on the site.
The fundamental answer is that the video producers/distributors serving suppliers as customers create a friction in the market between a retailer and the ‘entire universe’ of supplier video content that could potentially be featured on the retailer’s e-commerce site. Since video producers that work for suppliers must be compensated for their talent, time, effort, and intellectual property (including retail syndication network), they are an imperfect distribution channel for retailers to acquire video content since the vast majority of a retailers’ suppliers/manufacturers are likely unable or unwilling to pay the vendor’s distribution or production fees. Therefore, existing [and future] supplier video content may never make it to the ultimate intended destination – on product pages or elsewhere on an online retail site.
Over the course of interviewing now close to 200 retailers, I’ve learned that many retailers don’t put in a lot of additional effort to acquire content from suppliers after the pre-packaged content available through retail syndication networks “runs out.” Those retailers that do put in the additional effort often do so in a one-off, disjointed, or informal way – or bite the bullet and do a ton of self-produced product shoots. The pain of acquiring additional product content from suppliers and deploying it on site is often just too great in too many cases – just imagine the IT headaches and dealing with hundreds to thousands of suppliers who all do video differently – it’s definitely a “project” for someone. So, rather than absorbing the pain, many online retailers simply come to the [false] conclusion that the universe of supplier video content is smaller than it really is.
Many online retailers simply come to the false conclusion that the universe of available product video content is smaller than it really is.
The second mistake I have observed several retailers make is in miscalculating the dynamics of leverage that exist between a retailer’s buying/merchandising team and the retailer’s suppliers.
Think for a moment about the relationship dynamic between a buyer or merchandiser working for a retailer and the supplier reps that work for the retailer’s suppliers. Retailers need to remember that no matter how large or small its market footprint, every retailer is an important sales channel to at least some of its suppliers. The larger the market footprint of the retailer, the more leverage that retailer may have when working with suppliers. What do you think would happen if a merchandiser or buyer at a retailer proactively requested video content from a supplier? Now consider that same buyer’s or merchandiser’s likelihood of success relative to a sales guy at a company trying to sell video production services to a manufacturer. OF COURSE a retailer is going to have a better chance of success. The retailer is the customer in this relationship, after all.
Two weeks ago, I was meeting with a relatively small multi-channel retailer. The CTO, CMO, and COO were in the meeting along with a buyer and a member of the merchandising team. During the meeting, the buyer made a comment that I thought was fascinating, even if I didn’t fully appreciate how powerful it was until just today. While we were talking about where to obtain video content, the buyer said, “I was talking with supplier XYZ and told them we were going to start looking into doing more video. Supplier XYZ didn’t even have any videos at the time, but after I told them we were looking at making video a more important part of what we do, they went out and made videos – especially for us.”
The last part of that statement, “especially for us,” is just amazing when I stop to think about it. If such a small retailer could acquire content that easily, it just makes me believe the untapped potential for video content acquisition out in the market is enormous… probably bigger than I can even imagine.
The lesson for this posting:
If you’re a retailer, don’t miscalculate the leverage you may have with your suppliers when seeking video content. With a little planning, time, and buy-in on the buying/merchandising teams, and astute relationship management, you may just discover the universe of available product video content for your video commerce initiative is a little larger than initially thought.