Last year, I presented to a group of Maginus customers some of the major developments in online retail I believed would be significant over the next few years. One of the biggest game changers I thought would be imminent was the increase in manufacturers selling direct to the end consumer, and the ways in which they would do it.
Only a few weeks later, HP launched their latest range of printers, which notify HP when the ink is running low and automatically dispatch a refill to the customer. No middle man, no trip to the shops and certainly no cheaper 3rd party refill from a pureplay ink retailer online.
This development has huge ramifications for retailers (which I will cover in a separate article), but from the point of view of B2B retailers, manufacturers and wholesalers, it also present an opportunity which is far too good to miss. Hewlett Packard have created themselves a captive, subscribed customer base who are receiving convenience (who wants to trawl through the aisles of PC World trying to find the exact printer cartridge that fits their printer? Not me!) and reliability (the new cartridge is received before the old one completely runs out) over choice and flexibility.
Retailers like Tesco and Amazon have pushed their relationships with product suppliers as far as they can to maintain low prices and good margins, so it is no surprise that many manufacturers are looking at ways to even the playing field. I have worked for manufacturers, wholesalers, suppliers and retailers, and I know how much mark-up can be added as the product moves through the supply chain – as a manufacturer, the ability to take that precious mark-up and make it all mine has historically been a pipedream, not least due to the complexities of B2C sales and the intricacies of end-consumer retail. This is no longer the case.
One thing the online retailing boom has demonstrated is that there are a huge number of ways to get your product to the consumer. Retailing giants have been founded from bedrooms and $49 web shops, there are multi-million pound sites selling nothing but doorknobs and people regularly earn significant sums through eBay and Amazon stores without needing to worry about supply chain logistics or SEO strategies.
If these guys can do it, so can you. There are few products too niche to offer online; even for complicated technical items and specialist tools there are hobbyists, small businesses and middlemen who will already be buying on the web and seeking the convenience to do the same with your products. All you need to do is decide which approach (or approaches) would be most appropriate for your business (or speak to Maginus to help understand where your opportunities lie):
This is possibly the most obvious approach – to create a new direct to consumer channel and sell your products as any online retailer does. It allows you to have full control of your brand online, and to micromanage things like SEO, PPC campaigns email marketing and CRM.
However, this approach is also the most disruptive to a business. Adding a new channel is a business transformation exercise and should not be considered insignificant. The biggest mistake you can make as a company is to try and force the B2C channel into your existing supply chain model – it is unlikely to scale effectively and you will be setting yourself up to fail (or at least, have to make massive investment to fix) should the channel become a significant part of your business.
An alternative approach which is becoming more popular is the concept of “White Label” – having a 3rd party trade your products direct to consumer on your behalf, either under your brand or a different one.
The benefits of this approach are that you can dictate the amount of control you want over the full supply chain and offload the rest onto the 3rd party. For example, some businesses will fulfil orders, but leave customer service and website operations to their 3rd party partner, whilst others will leave warehousing and fulfilment to others, but maintain the site themselves – there are many ways to approach a white label strategy.
Another benefit of this approach is that, done correctly, it avoids the potential political mess of explaining to your customers why you are dealing directly with your consumers – something that they may see as encroaching on “their territory”, or may even be in direct conflict with the agreements you have in place. It also minimises the amount of business transformation which needs to be made up front and can be a smaller first step into trading online.
However, white labelling can be complicated and it needs all parties involved to be equally invested in the success of the site. I have seen many white label partnerships fail due one or more parties being unwilling to invest time and resource into publicising the site, or going that extra mile for a customer they may not see as truly theirs. On this subject, there is also often conflict between parties on the ownership of the end customer and how they are marketed to – something which can be confusing to the consumer if they receive mixed messages from multiple parties.
Amazon and eBay have become synonymous with selling online, so many traders make their first foray online by using the trading platform provided by the two retailers.
It is possible to get a quick gauge of demand for your products online by offering them through eBay and Amazon – the huge catalogue they offer, coupled by the massive user base mean that your products are quickly exposed to a large number of people and (all being well) orders should follow.
Amazon also offer a more advanced service, where they will hold stock of certain items on your behalf and fulfil from their warehouses – giving the added benefit of you not needing to worry about logistics and also having your products offered in some of their rapid dispatch offerings. Obviously, there is an additional financial overhead associated with this and sometimes the costs can be prohibitive.
It’s not all positive though - both trading platforms have fees, and they do remove a lot of the flexibility having your own online platform can offer. In addition, the end consumer is never really yours, and it becomes difficult to build a longer-term relationship through CRM with your B2C customer base. Additionally, payments, settlements and order handling (returns, fraud, etc) can get very complicated and time consuming, so caution is advised.
Some businesses are restricted in what they are allowed to offer the end consumer, due to existing trading agreements or relationships with major retailers. In this case, it may still be possible to offer a B2C channel in other markets – for example in mainland Europe, or Asia.
Selling internationally is easier than ever with many web platforms allowing for sales in a multitude of currencies and with varying complex tax and import rules. In markets which become successful, it is possible to offer more localised sites, local warehousing and logistics, reducing costs and improving customer experience.
Alternatively, offering online tools for potential new customers to register an interest, create an account or create trade agreements with you can expand your customer base beyond the traditional field sales and telephone based channels.
At the other end of the complexity scale is the launch of a brand site. When it is impossible (or not yet practical) to launch a transactional site, many brands launch an online catalogue site which gives consumers visibility of the product catalogue along with details of retailers or partners who can provide the product.
A huge benefit to doing this is that you are producing a digital, customer-facing version of your product catalogue. This can then be used to provide to 3rd party suppliers of your goods a feed of product imagery, product descriptions and specifications, ensuring that the end customer sees your products in the best light and has accurate information, increasing conversion and customer satisfaction across all sites your products appear on.
Maintaining a brand site also allows the building of an online identity, exposing your company to more people and showing a professional image online. The site can also become a hub for news, product launches and marketing material for retails to use when selling your product.
There are a huge number of options for a business to expand into the direct to consumer market, and each opportunity is unique for each business. Maginus use their years of experience in multiple industries to help you understand the benefits and drawbacks for each approach, creating multi-channel solutions which are bespoke to your business, allowing you to remain competitive in a constantly changing retail environment.