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Jun 22, 2023 | 5 minute read
written by Bryan House
One of a16z’s big ideas for 2023 centers around B2C companies doubling down on B2B distribution channels. Fed up with the rising customer acquisition costs (CAC) of ever-changing big tech advertising models, many companies have already begun to explore alternative commerce distribution channels. While adding a new distribution channel would have been disruptive in the past, today composable commerce architectures make it easy.
What a16z partner Joe Schmidt calls “escaping hell’s flywheel” holds true for many D2C commerce companies. Many fell victim to the once-low CAC of digital ads on Facebook, Google and others to drive customers to products. As data privacy regulations tightened and digital ad models flailed, many D2Cs found their primary customer acquisition channels eroding before their eyes, preventing the ability to re-invest in the brand.
However, as we have seen with many of our customers, escaping hell’s flywheel is a matter of distribution. I’ll cover more about why B2B2C is smart business, and the mechanics of setting up this distribution channel in a composable commerce model.
As I recently covered in my post, “Commerce for Weirdos” rising CAC on social media channels and changes to third party cookie tracking policies have forced many D2Cs to reconsider their distribution playbooks. That’s not necessarily a bad thing. Just like you would diversify your investments in your 401K portfolio, commerce companies should rely on a variety of distribution channels within their customer acquisition strategy.
Many brands have considered B2B2C channels as an alternative “non-inflationary” commerce distribution channel, as described in the hell’s flywheel piece above. Simply put, non-inflationary channels like B2B2C have a fixed CAC vs. costs that depend on inflationary market conditions (or big tech company decisions beyond your control). In other words, where the price of an Instagram or Google ad can fluctuate, B2B2C channel partnerships are often set and agreed upon in advance.
What’s more, you can determine unique pricing and packaging for each partner. Once these partnerships are in place, it isn’t as hard to set up a new B2B2C distribution channel within a composable commerce model. Best of all, composable commerce makes it easy to add even more distribution channels over time. Experimenting with a new channel shouldn’t ever require abandoning your other go-to-market (GTM) strategies.
Commerce brands are already used to diversifying their digital presence to some extent — they often sell in marketplaces like Amazon or Walmart, as well as direct. As a way to diversify your GTM and hedge against inflation, start thinking outside the box beyond marketplaces alone. There are multiple routes to market; you should be able to take them all.
The best thing about an API-first composable commerce strategy is that you can experiment with new channels in small ways. It doesn’t require big bang investment to unlock a new channel, unlike with a commerce monolith.
You can see how B2B2C partnerships and collaborations go wrong in the monolith world all the time. A great example is shoppable landing pages for collaborations. I recently saw this collaboration between Reformation and Canada Goose. On the Reformation landing page, the size small parka in coriander is sold out, whereas on Canada Goose’s landing page, it’s in stock. Each brand’s commerce system is working against the partner’s, and most shoppers won’t bother to proactively look for another landing page.
Collaborations are meant to build and share customer lists, and in this case both companies suffer from a lack of inventory integration. It shouldn’t be so hard. In an API-first, composable model, you can build jointly branded shoppable landing pages specifically for each collaboration, bolting on ties into each brand’s existing commerce system. The technical ease and low cost of executing on these collaborations could be a major boon for brands, particularly in a period of economic uncertainty.
As we saw with the Canada Goose x Reformation example above, monolithic platforms can be inflexible and rigid. They often don’t allow for changes in pricing or packaging for partners. Or, in many cases, you’ll find that inventory integrations are impossible to execute.
This is a product catalog management challenge. Commerce catalogs are not customizable, and require intensive engineering work to spin off new partner shops. Inventory and other commerce platform silos can lead to a poor customer experience and lost sales. To contrast, rapid-to-assemble, API-first solutions focus on breaking these silos and improving customer experience.
API-first commerce experience simplifies the process of setting up B2B2C distribution channels in a number of ways. First, you can create customized commerce experiences for partner channels with unique pricing/packaging. That means you can build unlimited product catalogs across customer accounts, geographies, brands, etc. Or, you can design complex product configurations, each with their own unique pricing. Think of it as a hub and spoke model, with one unified commerce solution as the hub, and each partner store as a spoke. API-first commerce enables low latency and fast load time from the main hub to each “spoke” channel, meaning customers can transact quickly and always have an accurate picture of available inventory.
To sum up, it’s smart business in 2023 to diversify your commerce distribution channels. Experimenting with setting up multiple channels and testing them in-market shouldn’t be costly or difficult. The ticket to achieving this success starts with composable, API-first commerce.