Manufacturer’s and the Direct to Consumer Approach

by Greg Randall

Are you a Manufacturer who has serious concerns about moving to a direct to consumer approach?  A blog post from E-consultancy titled, “Why Not Selling Online Can Damage Your Brand” covers many key reasons why a direct to consumer approach has become a “must have” in building a Manufacturer’s brand.

The rest of this article blends Econsultancy’s top Manufacturer hurdles with Exceed Online’s knowledge gathered from our Manufacturer clients who reside in both New Zealand and Australia. The one thing I can confirm is, the troubles faced by the large global Manufacturers are identical to those in Australasia:

1. Creating an online strategic plan.  Manufacturers are concerned the in-house resources do not have the ability to develop a strategic approach and and build a sound online plan.

2. Threats of damaging long term existing retail relationships.  This issue seems to be at the forefront, as Manufacturers strive to build a delicate balance between building their brand via direct to consumer sales, and not offend retail partners.

3. Product collateral.  Manufacturers’ have never really been forced to develop sales collateral which appeal to the end consumer.  It’s always been geared toward the retail buyer.  Sure Manufacturer’s typically have good product images, but where is the benefit driven copy?  Does a Manufacturer truly understand the buying process of their target market, or the buying hurdles when they shop online?  Do they know their customer at all?

4. Pricing strategy.  How does a Manufacturer determine an RRP?  There is an opportunity to dramatically grow margin, but do you intentionally remain higher priced than  retail partners?  If so, where does the cost of freight fit into this equation?  Do you ignore the need to offer the consumer competitive value?  Or is their respect for retail partner margins?

5. Logistics infrastructure not set up for single SKU orders.  To maintain proper management of purchasing, inventory, consumer shipments, overstock, and returns, separate processes and systems are required.  Manufacturers need to achieve the 3 R’s of order fulfillment:  getting the Right product to the Right place at the Right time.

6. eCommerce Customer Service.  eCommerce Customer Service consists of all the activities which occur after a purchase.  This function requires systems and a team who are in tune with your target market.  There are benefits to outsourcing however; a Manufacture needs to appreciate how eCommerce Customer Service can negatively impact the brand if done wrong.  Having third parties responsible for your customers happiness is a very high risk.  Does Amazon or Zappos rely on others?  I think not.

7. Online consumer marketing.  A Manufacturer’s DNA may not include digital direct response marketing, so understanding search marketing, email, affiliate relationships, online retail promotions, social media, and the creative balance between traffic and conversion, becomes a challenge which brings the need for new a skill set which internal staff will never possess.  This function is something which can effectively be outsourced to a third party supplier.

8. The components of an eCommerce ecosystem.  The search for an eCommerce technology is equally as important as the suite of supporting systems (many of them potentially in legacy condition) and will need to be prepared or upgraded for integration. The challenge becomes far greater in the selection process when they realise that not all technology is created equal.

9. People + Time = cost and taking the eye of the ball of core business! The risks to re focus your existing team to online, an area where they are not comfortable, are high.

With so little time to afford, who can deal with this right now?

It is easy to lose focus and become overwhelmed by the many decisions that must be made.  Many use cost as a convenient excuse to dodge the issues above.  However, there will quickly come a time where Senior Management will truly understand they can no longer afford not to go online direct to consumer.

The question will then be…will it be too late?