Many producers are cautious about setting up direct sales activities through their own web shop. They rely on their traditional retail channels for a large part of their current sales and fear losing a substantial turnover when they start competing with these channels themselves, risking these retailers will stop working with them. Many of these manufacturers, however, also experience a shrinking revenue from those traditional channels because of extensive competition through new e-commerce channels. Additionally, the largest retailers all started initiatives themselves to develop products in nearly every product category.
Why, as a producer, should I sell directly to my customers?Many producers fear a potential channel conflict when ‘direct sales’ (via internet) is becoming subject of conversation. However, producers should better consider selling directly to their end-customers:
- Because retailers are primarily focused on continuously selling under fierce competition, they often fall into the trap of lowering the product’s price over and over again through their online sales channels. “Online, everything should be cheaper - right?” In addition, product pages on their online stores are often characterized by the use of sloppy texts and cheap graphic design, harming the positioning of your products. When you develop a web shop yourself, you are able to strengthen the control over your brand’s online performance. In other words, your brand will be less dependent on the retailer.
- Through e-commerce, your company will have direct contact with the end customer, where traditionally both the wholesaler / importer and the retailer is an intermediary. Your web shop will allow you to engage the end customer in your company’s innovation process. You can, for example, gain customer insights directly without interfering filters of third parties. You can also use your online sales channel to test product variations or let the customer customize (apply advanced variations) the product themselves. A good example in the latter category, for example, is Lego.
- An increasing percentage of total sales originates from online channels. Thus, when your retailers are not able to match your traditional market share through online channels, you are de facto losing market share. More frequently, end customers also explicitly choose to buy directly from the manufacturer. They know what product they want and experience little added value from the retailer (where products often are not available in the right size or favourite color anyway..). Furthermore , consumers experience a higher degree of authenticity when they order directly from the maker.
Most middlemen will eventually disappearThe end customer should - obviously - have a reason to order directly from the manufacturer. Traditionally, stores offered customers local presence and accessibility. They offered choice (multiple brands) and quality assurance (a pre-made selection by the retailer). Shop owners advised you on the best product for your specific need . The rise of the internet slowly makes retailers irrelevant: on the internet consumers have the best choice possible, all the necessary product information at their fingertips and the tools for simple product comparisons available. Add speedy delivery and free returns to the equation and you have a killer combination. You can call the role and added value of retailers as ‘product advisors’ nowadays at least doubtful. Those few retailers who are successful through e-commerce all managed to develop a clear proposition that usually goes beyond the lowest price.
Four scenarios to start selling online, directlyManufacturers who want to develop a ‘direct sales’ channel through e-commerce have a good starting position. Especially compared to shops and wholesalers. After all, either the end customer already knew what he wanted to buy (and Googled your brand name) - or did not yet know the solution to his or her problem (and would again, probably, have started with an online search). As a manufacturer, you have numerous ways to shape your e-commerce strategy. To name a few:
you sell through your own online store, but deliver orders through your customer's local shops;
you focus your web shop on the sale of outdated models; for instance through exclusive stock sales (‘flash sales’) of the old collection at a discounted rate;
you focus your web shop on the sale of spare parts and accessories;
you reach out to geographic regions where you don’t have a local presence.