9 Reasons why manufacturers should sell online and how to avoid channel conflict
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Manufacturers face channel conflict when attempting to sell online while maintaining relationships with retailers. By developing direct e-commerce strategies, manufacturers can enhance customer satisfaction, increase profitability, and gain valuable customer data without jeopardizing retailer partnerships. Key strategies include maintaining MSRP, offering commissions to retailers, and creating sub-stores for retailers under their e-commerce sites.
9 Reasons why manufacturers should sell online and how to avoid channel conflict
- 1. Manufacturer-driven E-Commerce Solving channel conflict
- 2. The problem: Channel Conflict Many manufacturers want their brands to capture the power of the internet and sell online. At the same time the manufacturers do not want to create conflict with other distribution channels, as these partners are necessary and viable for any manufacturer to maintain and gain success. Solving Channel Conflict Page 2
- 3. The Solution: Managing the conflict Manufacturers can build and grow a branded E-Commerce solutions while maintaining channel harmony. There are several advantages for manufacturers to engage in direct E-Commerce. Solving Channel Conflict Page 3
- 4. 9 Reasons for Manufacturer-driven E-Commerce Customer Satisfaction Profitability Inventory Exclusivity Ownership of Customer Data Customer Feedback Trust Continuity Brand Equity Solving Channel Conflict Page 4
- 5. Engaging in E-Commerce: Customer Satisfaction 63% of web users (brand loyalists) visit the manufacturers website several times per year* 20% of online shoppers come to manufacturer websites specifically to buy products* Customers rely on the manufacturer to serve their requests for Upgrades / downgrades Compatible devices and accessories New product launches Online purchase *Channel Intelligence Referral Site Survey Solving Channel Conflict Page 5
- 6. Engaging in E-Commerce: Profitability As the manufacturer you are not expected to sell below MSRP. Your shoppers do not expect discounts and rebates. By selling to the end-user directly you increase your margins significantly. Solving Channel Conflict Page 6
- 7. Engaging in E-Commerce: Inventory Retailers manage & control their own inventory Manufacturer can not guarantee that retailer will have requested item in stock – customers could decide to buy placebo product Customers expect Manufacturer-driven web stores to have inventory when retailers are outof-stock Solving Channel Conflict Page 7
- 8. Engaging in E-Commerce: Exclusivity Retailers are focused on the sale, not the product 3rd party retailers will promote other brands Example: Even though the visitor searches ‘Nike Heart Rate Monitors’, the site suggests other brands and products by LifeSource, Omron, Timex, Polar, Reebok, Sigma… Solving Channel Conflict Page 8
- 9. Engaging in E-Commerce: Ownership of Customer Data Limited end user data on sales through the retail channel. As a leading brand you can not rely on retailers to engage with the customer and continue to promote you brand and products Only by selling to the end-user directly you can generate a marketing database that allows optimizing the customer lifetime value. Online stores are the ideal instrument to collect and apply customer data. Solving Channel Conflict Page 9
- 10. Engaging in E-Commerce: Customer Feedback Developing consumer products and services requires direct feedback to get optimal results Selling to the end-user directly enables you, the manufacturer, to get unfiltered feedback by your customers. E-commerce enables you to get instant feedback while saving cost by avoiding 3rd party market evaluations. Solving Channel Conflict Page 10
- 11. Engaging in E-Commerce: Trust Online shopping is still clouded by fear of fraud, product piracy and identity theft Online surfers seek trusted brands to deal with – they go to the manufacturer website Sending these shoppers to 3rd party retailers might cause their risk aversion lead to abandoning the shopping experience Solving Channel Conflict Page 11
- 12. Engaging in E-Commerce: Continuity In times of economic instability a manufacturer can not rely on retailers to continue the customer relationship Solving Channel Conflict Page 12
- 13. Engaging in E-Commerce: Brand Equity E-Commerce has become an essential part of our economy. Showing investors and customers that you are equipped for the future is essential for the value of your company. Proving yourself as E-Commerce-centric will impact not only revenue but create trust in your market positioning. Solving Channel Conflict Page 13
- 14. Solving Channel Conflict Do’s and Dont’s Unconditional pricing Reward Host Solving Channel Conflict Page 14
- 15. Solving Channel Conflict: Unconditional pricing Don’t As the manufacturer, do not sell below MSRP. The result would be further reductions in offline channels. Do Offer products on your store at MSRP with little or no discounts. Offer rebates on shipping or accessories Offer parts and accessories not offered through channels Solving Channel Conflict Page 15
- 16. Solving Channel Conflict: Reward Don’t Even though you will increase your margin, do not retain all profits. Do Offer commissions to your retailers or affiliates for sending online shoppers into your cart. This solution provides revenue to retailers without them having to carry your inventory. 5% to 10% commission is industry standard Solving Channel Conflict Page 16
- 17. Solving Channel Conflict: Host Don’t Regulating the market, prices and product display will consume too many resources. Do Within your manufacturer-driven E-Commerce site, setup sub stores for your retailers (sub-sites). There they can brand their sub-stores but display your products. You control display and brand promos. Solving Channel Conflict Page 17
- 18. About Olaf Jonsek www.linkedin.com/in/olafjonsek/ Solving Channel Conflict Page 18