Direct to Consumer Sales and Channel Stress
One of the many services we offer our clients is helping develop direct-to-consumer sales programs for their websites and email communications. When we’ve mentioned that option to some potential clients they looked at us with horrified expressions as if we had suggested burning down an orphanage. We would never do that; we love orphans!
We understand this is a tricky issue and there are no easy answers. Most of our clients distribute through bricks and mortar retailers and/or custom installing specialists, groups that are understandably hostile to competing with their suppliers. While it is true that “most every brand is doing it,” that won’t be enough of a justification to keep you out of hot water. But there are some conditions under which direct to consumer ecommerce may make sense.
These are some of the legitimate, defendable reasons to engage in some level of direct sales: If you have large swatches of territory where your products are not represented in B&M retailers and you don’t have an Internet retail partner it is perfectly justifiable to offer direct-to-consumer sales. Or you may have accessories, parts or old models that your retailers simply do not stock. Consumers have a right to fast, convenient access to those accessories, parts and obsolete items and manufacturers have an obligation to make them readily available.
We’ve seen vendors hang Buy Now buttons on their sites and wait for the cash register to ring. Usually they wait in vain. Were it only that easy! Online buyers prefer to buy from retailers rather than manufacturers. Retailers can provide every part of a system, not just the speakers or electronics or TV. Online retailers have robust customer service and sales staff behind the website for 12 or more hours a day. Online retailers have experience in SEO, SEM (paid search word advertising) and other marketing techniques for attracting customers. Most brands can’t do any of those things. In short, retailers know what they’re doing; manufacturers generally don’t, but they can learn.
The first lesson to learn is never, never, never undercut your retailers’ offers for current model “A” goods. In most cases an on online transaction will not be subject to sales tax (although that may change soon) so if you want to level the playing field, charge for freight. If you feel the need to make a special offer to boost sell-through, make sure your retailers are informed in advance and are able to make the same offer.
You may have SLOBs (slow turning or obsolete products) in the warehouse that are tying up valuable capital. It is far better for you and your retailers to sell those goods in an orderly fashion rather than dump them via an inventory liquidator or favored retailer. Brands have typically moved SLOBs by choosing one or two retailers to buy the lot at fire sale prices. The retailers in turn promote the products at deep discounts. While that tactic worked when retail was strictly local B&M, it makes less sense in the internet age. Now one retailer has a win and everyone else loses. The brand makes low to no margin and ticks off the rest of its channel partners who could not compete with the closeout price. Double whammy.
A good low risk way to move SLOBs and get your toes wet in e-commerce is to begin direct-selling your B-stock, open box and refurbished products. You can put the store on your site, or make the product offers available only to your friends and family though an email program, or, as many have done, open an EBay store. Most agree that the EBay customer is by nature a bargain hunter who will never pay retail so there is little risk of one of your retailers losing a full price sale.
The marketplace has changed - the Internet and ecommerce are not fads and the genie is not going back into the bottle. We think that it is inevitable and necessary for brands to have a means of selling direct to consumers to some extent – not as a replacement for B&M and online retailers, but as an adjunct. You might as well jump in now at least for the learning experience.
There are other elements to successful, low channel-stress, direct to consumer sales that we would be happy to share with any brand marketer who would like to take the plunge. Contact us to discuss.
About CE-Marketing Pros
We’re a full service marketing/advertising agency specializing in helping consumer electronics brands and retailers compete more effectively. Former marketing executives with two of the most successful CE brands, Al Ballard and Paul DiComo help brands STAND OUT in a crowded and confusing CE marketplace.
WE KNOW CE.