9 reasons why manufacturers should sell online and how to avoid channel conflict

Manufacturer-driven E-Commerce

Solving channel conflict

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

Solving Channel Conflict

� 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.

The Solution: Managing the conflict

�Manufacturers can build and grow a branded E-Commerce solutions while maintaining channel harmony.

� There are severaladvantages for manufacturers to engage in directE-Commerce.


9 Reasons for Manufacturer-driven E-Commerce

Customer Satisfaction

Profitability

Inventory

Exclusivity

Exclusivity

Ownership of Customer Data

Customer Feedback

Trust

Continuity

Brand Equity


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*

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


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

� By selling to the end-user directly you increase your margins significantly.


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

have requested item in stock – customers could decide to buy placebo product

� Customers expect Manufacturer-driven web stores to have inventory when retailers are out-of-stock


Engaging in E-Commerce: Exclusivity

� Retailers are focused on the sale, not the product

� 3rd party retailers will

� 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…


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

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.


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

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.


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

they go to the manufacturer website

� Sending these shoppers to 3rd party retailers might cause their risk aversion lead to abandoning the shopping experience


Engaging in E-Commerce: Continuity

� In times of economic instability a manufacturer can not rely on retailers to continue the customer relationship


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.

for the value of your company.

� Proving yourself as E-Commerce-centric will impact not only revenue but create trust in yourmarket positioning.



Do’s and Dont’s

Unconditional pricing

Reward

Host


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

� 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: Reward

� Don’t

� Even though you will increase your margin, do not retain all profits.

� Do

� 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: Host

� Don’t

� Regulating the market, prices and product display will consume too many resources.

� Do

� 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.


About

� Olaf Jonsekwww.linkedin.com/in/olafjonsek/


9 reasons why manufacturers should sell online and how to avoid channel conflict

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