9 reasons why manufacturers should sell online and how to avoid channel conflict
DESCRIPTION
This 18 slides presentation provides insight why manufacturers should not rely only on distribution channels for sales. Read about 9 reasons why they should engage in direct-to-consumer E-Commerce and how to avoid channel conflict with existing sales channels. Connect with me on Linkedin: www.linkedin.com/in/olafjonsek/TRANSCRIPT
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
Page 2Solving 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.
Page 3
� There are severaladvantages for manufacturers to engage in directE-Commerce.
Solving Channel Conflict
9 Reasons for Manufacturer-driven E-Commerce
Customer Satisfaction
Profitability
Inventory
Exclusivity
Page 4
Exclusivity
Ownership of Customer Data
Customer Feedback
Trust
Continuity
Brand Equity
Solving Channel Conflict
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*
Page 5
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
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
Page 6
� By selling to the end-user directly you increase your margins significantly.
Solving Channel Conflict
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
Page 7
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
Solving Channel Conflict
Engaging in E-Commerce: Exclusivity
� Retailers are focused on the sale, not the product
� 3rd party retailers will
Page 8
� 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
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
Page 9
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
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
Page 10
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
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
Page 11
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
Engaging in E-Commerce: Continuity
� In times of economic instability a manufacturer can not rely on retailers to continue the customer relationship
Page 12Solving Channel Conflict
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.
Page 13
for the value of your company.
� Proving yourself as E-Commerce-centric will impact not only revenue but create trust in yourmarket positioning.
Solving Channel Conflict
Solving Channel Conflict
Do’s and Dont’s
Page 14
Unconditional pricing
Reward
Host
Solving Channel Conflict
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
Page 15
� 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
Solving Channel Conflict: Reward
� Don’t
� Even though you will increase your margin, do not retain all profits.
� Do
Page 16
� 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
Solving Channel Conflict: Host
� Don’t
� Regulating the market, prices and product display will consume too many resources.
� Do
Page 17
� 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
About
� Olaf Jonsekwww.linkedin.com/in/olafjonsek/
Page 18Solving Channel Conflict