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Over the last decade, brands have embraced the creator economy (albeit forced) to stay relevant. The digitization of pretty much everything has led the creator economy to be valued at nearly $100 billion dollars, more than double its size from 2019.
At the same time, eComm brands are facing a reckoning – customer acquisition costs (CAC) have become unsustainable:
- Digital advertising costs are set to increase at least 20% in 2023 alone
- Apple/Google are imposing privacy policies that make achieving ROI untenable
- The democratization of marketplace technology has given rise to more DTC brands and competition
To top it off, the average consumer continues to lose trust in traditional institutions; instead electing to follow the recommendations of the creators they follow.
Platforms, like TikTok, democratized distribution and gave these creators an outlet to reach audiences directly. Monetization tools soon caught up, and the audience-centric creator commerce business model was born.
What is creator commerce?
Creator commerce refers to the faction within e-commerce where content creators, influencers, and bloggers promote and sell products directly to their audiences.
Historically, brands and creators collaborated via affiliate links and codes, with the place of transaction ending up on the brand’s eComm. In this influencer marketing model, the brand owns the place of transaction and then pays the creator out via commissions.
That’s all starting to change. Sales channels are becoming increasingly distributed, and the average influencer has intuitively decided to leverage their own sphere of influence to own and conduct the final transaction. The brand, then, becomes ultimately responsible for fulfilling the order only.
With the lines blurring between influencer marketing and entrepreneurship, the content creator is having its moment. eComm brands have been left to grapple with the quintessential question, “who should host the customer transaction, the content creator or the brand?”
The problem with today’s creator commerce platforms
Brands must make this important choice. Social marketplace platforms, like Amazon and LTK, have made it easy for brands to appease the content creator’s entrepreneurship desire. But – it doesn’t come without its problems.
- The brand relinquishes a higher percentage of their margin to the content creator and third party commerce platform
- The customer experiences friction to make the purchase (download an app, redirect through multiple sites, etc.)
- The brand no longer provides direction over the content that the influencer produces
- The influencer promotes several brands on a single store. Oftentimes, competitors sit next to each other on these storefronts
- The brand loses all of the crucial customer acquisition and behavior data that informs trajectory changing decisions
There’s a middle ground solution for brands & creators
Brands have the option to take back control over the place of transaction. The strategic model and technology exists today:
Creator storefronts that resemble an LTK shop or Amazon Influencer Storefront can live on a brand’s eComm site (i.e. like this Lucchese storefront & Revolve shop).
Several emerging technology platforms have made embedding shoppable videos and other UGC content throughout the site seamless.
These are just some of the ways a brand can make a creator feel like an entrepreneur without surrendering control of commerce. In fact, featuring creators throughout the brand site has other benefits like:
- Influencer retention – creators stick with brands they feel connected to
- Conversion rate – social proof directly on the site alleviates institutional trust issues
- Average order value – creators have a unique eye for product curation and it drives higher cart values
Conclusion
Brands can no longer rely on the natural growth of eComm sales to stay alive. The post pandemic boom in eComm has returned to reality. eComm sales growth is expected to slow down to 3.9% this year, compared to the staggering 26.7% seen in 2020.
Social continues to offer the solution given its dominance as the primary way customers discover products. With that, continued investment in influencer marketing and creator commerce will persist.
But brands can and should embrace this approach without surrendering their own sales channel. Brands can help their creators become entrepreneurs without giving up the place of transaction. The social commerce tools exist.
