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Manufacturers: Fastest Growing Merchant Category on IR500

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3 minute read

Earlier this week, Internet Retailer reported that of the online retailers that made its annual Top 500 List, manufacturers have emerged as the fastest growing merchant category. Given that consumer brand manufacturers have traditionally trailed web only, multichannel retailers and catalogers for online sales, this should catch the attention of manufacturers that have yet to take the plunge into ecommerce. Top 500 manufacturers grew their combined web sales 15.7% in 2008 over 2007, with web-only growing 12.1%, multichannel retailers 12% and catalogers 5.2%. Some manufacturers like American Apparel, Jones Apparel Group and Vera Bradley enjoyed year-over-year online growth over 50%, while others like Tempur-Pedic, Palm and Select comfort suffered declines of 40%. Overall, 40 out of 55 manufacturers on the Internet Retailer Top 500 List posted higher web sales in 2008 over 2007, 4 remained flat, and 11 declined. Benefits of selling online for manufacturersGoing direct-to-consumer online has many opportunities for manufacturers:

  • Monetize type in traffic (typing “brand” into web browser and hitting the brand.com site) (to make more money)
  • Monetize product-research traffic (to make more money)
  • Take advantage of consumer trust of the brand (to make more money)
  • Take advantage of consumer perception that the brand site offers the best brand selection (whether that’s true or not)
  • Take advantage of consumer price perception (some consumers will assume they can get the best price direct from manufacturer, others believe they can find better price through eBay/Amazon etc)
  • Reduce the chance the customer is recommended a competing product in cross-sell/upsell/alternative recommendations/promotions/house brand (as may be the case on retail partner sites)
  • Offer better service and support (customer deals through you rather than the retail partner as middle man)
  • Offer better sales tools (such as the Timbuk2 bag builder)
  • Have a closer connection to the customer than through retail partners (who are not likely to hand over analytics data that gives you that insight about consumer preferences and behavior)

Challenges for manufacturers when starting an online store Despite the clear benefits (did I mention make more money?), selling direct-to-consumer is not that simple. As Sally McKenzie notes “Manufacturers who sell online don’t just need to become web merchants, they need to become retailers, and that presents some interesting and often sticky strategic issues.” On her eCommerce Consulting Blog, Sally lists 10 reasons why some manufacturers haven’t taken the leap with a direct-to-consumer online offering (summarized below, see her post for full detail): 1. Lack of in-house retail or e-commerce talent. 2. Channel conflict. Manufacturers must consider how selling direct may impact their retail partners. 3. Product lines many not be “retail ready” if they have been assorted for the retail buyer rather than the consumer (assortment, pricing etc). 4. Similarly, content may not be “e-commerce ready” when produced for the retail buyer and may take significant effort to meet consumer expectations. 5. Fulfillment, packaging and inventory management may not be optimal for single piece orders. Often separate processes and systems are required. 6. Customer service requires its own people, process and systems. Expensive, and the in-house vs. outsource dilemma exists. 7. Moving from B2B to B2C marketing includes search, email, affiliate and social media expertise. Again, expensive, in-house vs. outsource. 8. E-commerce ecosystem (platform, web services and bolt-on products) must be built from the ground up. 9. This is a lot of work, and there may not be enough people hours to support the project. 10. Lack of a deliberate process to work through #s 1-9. We’ve asked Sally McKenzie to discuss this topic further with us for our August webinar From Manufacturer to Retailer: Expanding Your Brand through Ecommerce. An ecommerce veteran with over 20 years experience with companies like Eddie Bauer, Classmates.com and Expedia, Sally will speak to the unique opportunities, options, and challenges facing branded manufacturers as they make the migration to ecommerce.

Webinar takeaways:

  • 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

Please join us Tuesday, August 25, 2009 9:00 AM – 10:00 AM PDT. Sign up today!

Linda Bustos
Linda Bustoshttp://www.elasticpath.com
Linda is an ecommerce industry analyst she specializes in conversion optimization for enterprise digital goods and media companies.
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