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Will House-Brands Kill Large E-commerce Retailers?

by Matt Weik

You can say that I’ve been around the block in the supplement industry. I’ve worked for a large supplement company for nearly a decade and helped manage some of their large e-commerce accounts. One thing that has always bothered me and I’ve had to keep my mouth shut on is, how and why should I support accounts that have a house-brand line of supplements that compete with mine?

You want me to compete against you AND pay you for marketing?

I’m not going to name names, but I’m sure you know the large online retailers who are now creating their own line of supplements, all while trying to sell you every other 3rd party line of products under the sun. I used to bang my head against the desk, and now with even more e-commerce retailers following suit, I look even more like a unicorn these days from the trauma to my forehead.

Why would these e-commerce retailers think that supplement brands would want to maintain a relationship with them? These sites basically just gave every brand that works with them the middle finger. If I’m selling you a protein, BCAA, pre-workout, and a fat burner, and you come out and create your own to sell, why would I support you? It’s your site and you can do whatever you want, but I’m not here to support you and help make you money if you’re going to try and hurt my business by creating your own brand. That simply doesn’t make any sense.

I’ve been speaking with several brands over the last few months about this very topic and many of them are throwing their arms up and stopped supporting these websites. They’ve spent millions of dollars advertising on these sites and now they are left wondering what the heck just happened. They feel betrayed by a retailer they helped build.

Follow this example

For those of you who need a further explanation, let me paint this picture. I have a website and I sell your products on it. We have a marketing plan in place to help get you extra exposure to help increase your brand’s sales on my website (which was working). Things are great, your sales are going up each year, and all of a sudden without telling you, I created a line of products that matches your entire line. Not so nice, right? So, now I have my own line to compete against yours (which I gave you zero notice that I was working on), I’m making insanely good margins, I’m going to promote the heck out of my line because I can potentially make more money, and you and I can talk about increasing your marketing spend to help future growth of your brand. Oh, and you need to continue funding your own promotion on my website while it costs me nothing to promote my own house-brand. See what I did there? Make sense to keep working with me? Didn’t think so. But, that’s what’s happening.

Mass exodus

I’m watching brands jump ship like animals running from a forest fire. There were brands doing extremely well on these sites and who were exclusive to just that retailer who is now changing their tune and selling everywhere. Honestly, this is better for the supplement brand in general but leaves them with an extremely bad taste in their mouth from how the e-commerce retailer left things.

It honestly leaves you scratching your head, wondering what e-commerce brands were thinking when they created their own house-brand line of supplements. Did they really think that their partners would be ok with this and not bat an eye? They surely couldn’t be that naïve, right?

The odd thing is, they are still picking up the phones and sending emails trying to work marketing plans for the year with these 3rd party supplement brands. From what I’m hearing, most brands are just hanging up the phone on them and turning their backs. Others are refusing to put a marketing plan in place or even promote on their site and are letting the brand sell itself on the retailer’s site.

When you factor in everything that could be going on behind the scenes, it doesn’t make sense that these e-commerce retailers are thinking about dropping all of their 3rd party lines and only selling their own line. They’d lose their butts if that happened and there’s no way they would make up for the millions and millions of dollars sold from selling other lines. I just can’t wrap my head around the reasoning for coming out with a house-brand of supplements and thinking people will want to continue working with you and selling on your site.

Personally, I think in the end this is a huge mistake these online retailers are making. I think their greed is not allowing them to think clearly and by moving forward with their own line of supplements that it will blow up in their face and they will regret the decision. I guess only time will tell, but I’ll be sitting here paying close attention to the happenings as they unfold.

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