Manufacturer Advantages In Direct-To-Consumer Selling

A couple weeks ago, Internet Retailer announced that manufacturers selling direct to consumer is the fastest growing online retail category in its Top 500 Guide. Gearing up for this month’s webinar on direct to consumer retailing with Sally McKenzie, we mentioned some benefits and drawbacks of manufacturers selling direct-to-consumer online. Today I want to focus on how manufacturers can overcome the challenges of competing with retail partners online, and leverage the strengths of a branded site. Keep in mind, there are 4 types of manufacturers who sell direct to consumers online, those with:

  1. No retail stores, sell only through retail partners (e.g. Bose)
  2. Retail stores and retail partners (e.g. Sony Store)
  3. Retail stores, no retail partners (e.g. American Apparel)
  4. No retail stores or retail partners, only available online/phone (like Dell used to)

This post focuses on the first 2 — manufacturers who compete with retail partners (who may also be restricted in what/how they can sell online due to channel conflict). Why do manufacturers lose consumer sales to retail partners?Manufacturers that sell through retail partners may lose sales to retail partners because of any of the following:

  • Customer unaware the brand has an online store
  • Customer experience with the branded store has been poor, even if the site is much improved today
  • Customer experience with manufacturer sites in general has been poor, customer goes directly to retailer e-store
  • Retailer e-store has better features and functionality such as comparison tools, product images or simpler checkout
  • Customer wants to pick up in-store, whether to physically experience the product before purchase, to save time or shipping costs, for lower price/store promotion, to use a store coupon or to earn store loyalty points

How can the manufacturer overcome these challenges? Awareness: Spread the word Before you say “thank you, Captain Obvious,” hear me out. Awareness of your online store is important. Don’t be afraid to bid on your own branded terms in paid search. Put your URL on packaging (although this may upset some retail partners). Put your store URL on all catalogs, direct mail, TV and print advertising. For manufacturers who run their stores as separate URLs, subdomains or subfolders, choose a URL that clearly communicates the site is transactional, and redirect to your existing store if necessary. Awareness: Drive new traffic through an affiliate program Many manufacturers will not compete on price with retail partners, and will sell at full MSRP (manufacturer suggested retail price). While this may reduce your competitiveness, your margins will not suffer. Fatter margins can be passed off to affiliate partners who will promote your products on their popular product review blogs, shopping portals, newsletters or other web sites. Awareness: SEO your content, and SEO some more Branded sites have the search engine ranking advantage of a keyword-relevant domain name, but often rank lower than retail partners when attention isn’t paid to title tags, keyword-rich product descriptions, SEO friendly customer review content or worse, the site is built in full Flash without SEO. I always tell retailers to write their own product descriptions and not use the stock manufacturer description. I would suggest to manufacturers to also write custom content for their web stores, and not use the same as is distributed to other retailers and affiliates. Customer experience: Content Though some customers prefer to buy from a retailer (whether online or offline), many will check out your site for more detailed product information to research before purchase. It helps to have better content than your retail partners to meet their initial expectation of good information on your site such as product videos, 360 degree imaging, downloadable manuals and in-depth product descriptions can attract customers. Persuasion: Value propositions and assurances If the content on your site “sells” the customer on the product, you win even if the purchase happens through a retail partner. But converting that customer on the branded site has several advantages such as higher margin, the collection of customer data and the ability to re-market to that customer. The secrets to converting the customer lie in your value proposition(s) and point-of-action assurances. Consider Apple.com. You can buy an iPod from any electronics retailer, but only Apple throws in free engraving:

Plus it beats or at least matches any other retailer’s shipping offer – ships free, within 24 hours. Point-of-action assurances include size charts, shipping arrival calculators, pre-checkout shipping and tax calculators, links to return policies, guarantees, security seals and so on. Added value: Personalized products Speaking of personalization, manufacturers have the unique ability to offer value-added services like build your custom product that retailers don’t. Some brands already doing this include Sigg water bottles (though Cafepress), Flip video recorders, Etnies shoes and Timbuk2 bags. Retailers like Etnies already allow customers to share their custom creations with friends via email, but how much better to share with your social network in this Web 2.0 times by posting the image of the custom product to Twitpic, Facebook or a personal blog? For example, Shutterfly allows its customers to create custom photography books and embed it on any website:

Customer service: Help them find the product in-store Sometimes product is out of stock on your site, or you may only sell that SKU through retail partners. Patagonia has the ability to check its partners’ store inventoryand redirect the customer to the retailer for purchase which is win-win-win for customer, manufacturer and retail partner.

While you don’t claim the sale yourself, you’re still putting money in your pocket and providing a good customer experience. If you’re interested in ecommerce for the manufacturing industry, you don’t want to miss our webinar next week From Manufacturer to Retailer: Expanding Your Brand through Ecommerce.

We’ll be covering:

  • Blending brand form and function: making the transition to interactive, direct marketing
  • Striking the balance between direct selling and promoting retail partners
  • Assorting and pricing for ecommerce
  • Making solid ecommerce technology and infrastructure choices
  • Resource and organizational planning for success

Missed our manufacturing webinar? Watch the replay today!


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6 Responses to “Manufacturer Advantages In Direct-To-Consumer Selling”

  1. anonymous says:

    I have to correct your categorization of manufacturers into four buckets…

    > 1. No retail stores, sell only through retail partners (e.g. Bose)
    > 2. Retail stores and retail partners (e.g. Sony Store)
    > 3. Retail stores, no retail partners (e.g. American Apparel)
    > 4. No retail stores or retail partners, only available online/phone (like Dell used to)

    Like many (possibly most) manufacturers, my employer does not sell through retail stores or partners. We do not make “consumer” goods, but we sell to our own consumers via many channels: field sales force, distributors in other countries, direct mail, phone, fax, eCommerce, EDI, etc.

    Consumer goods are not the entire economy. Keep in mind all the companies who make machinery, palettes, looms, lathes, test equipment, custom software, ball bearings, steel, plastic pellets, process analyzers, medical imaging equipment, specialized tools and thousands of other items which keep our economy and society going. These manufacturers face some of the challenges you’ve discussed lately, but you’re missing their biggest challenges.

    How do you sell a complex, customizable and/or configurable products on the Web? How do you sell a product online when a consumer often wants to talk to a sales person to make sure the product is truly what they need? How do you find resources to provide copy for the thousands of items in your inventory, including items which may only sell a dozen units per year? How do you sell service plans and package offers on the Web? How do you keep all the documentation and support information for those products up to date on the Web?

    I’d love to read a series on these issues, even if you have to scrounge up a guest blogger or two.

  2. Hi anonymous,

    Your comment is spot on, I agree there is more than B2C. I do realize there is a wealth of B2B manufacturing out there, which is why I clarified direct-to-consumer a few times in the first paragraph and throughout the post.

    We already have some posts planned for B2B issues that will be posted in the next few months. Keep your eyes open for them :)

  3. Linda;

    How should manuf work with retailer before selling online? To me, it would be beneficial to all if manuf engaged their retail partners or (distributors to engage retailers). Maybe let their retailers know what they are doing and the purpose. A manufacturer whose product is one of our largest sellers just appeared one day with an online store to aggressively compete with us. We dont mind the competition, but are now less than enthusiastic about marketing their products to our customers. With a little advance notice, we could have helped them work together. Maybe this is a fantasy, but it seems manuf could use this opportunity to avoid channel conflict and build better relations with retailers.

    • Hi Paul,
      It’s common for manufacturers to make agreements with retailers before going online, in fact, many manufacturers avoid ecommerce because they don’t want to even deal with that. Others will agree to just sell accessories or discontinued products or at a higher price than retail partners, or to use http://www.shopatron.com/ as a channel conflict mitigator. Patagonia also integrates inventory with retail partners to direct web traffic to local and web stores for partners.
      I imagine some manufacturers simply can’t liase with every retailer if they have very large distribution, and even worse, the big-box stores with more negotiation power may also work out better terms with the manufacturer (on pricing, for example) which also hurts the smaller retail partner.

  4. I realize a lot of what I’m reading lately has to do with the current financial crisis, but your post is another story :) thank you for sharing this!

  5. Linda;

    Thanks for the follow-up. I appreciate the clarification and perspective.

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