At first glance, a direct-to-consumer model has tons of appeal for manufacturers. Aside from the opportunity to completely control distribution, it offers the ability to cut out potentially high middleman costs and complex processes. However, this selling method has plenty of significant challenges that should have on-the-fence manufacturers reconsidering keeping their retail partners.
A ‘DIY’ project of epic proportions
To go the direct distribution route, companies need to take ownership of every moving part of the sales process, including marketing (commercials, ads, social media, community outreach, online campaigns, website updates, content, etc.), as well as consumer-driven analytics-based data, which may help inform messaging or even product design changes. Of course, there is also the potential need to acquire additional office locations, storage/inventory space and to incorporate distribution methods by land, sea and air.
“When you sell direct, you take on all of the work that an intermediary would otherwise handle. This includes taking orders, processing payments, fulfilling orders, chasing down late-paying or defaulting customers, marketing tasks and customer service.” – Sam Ashe-Edmunds, bizfluent
All of the above requires a lot of energy and resources. So, as a result of this anything-but-foolproof attempt to “streamline” the sales process, brands are unsurprisingly encountering the following three major snags:
1. Lack of data
Without a web of online or brick and mortar retailers to glean consumer data from, brands risk losing maximum visibility into how shoppers are making purchases. Imagine an octopus without tentacles—no reach! As a result of cutting off these valuable resources, direct sellers are finding themselves struggling to keep up with the overwhelming competition in today’s round-the-clock world of digital sales. To make the most impact, manufacturers need to examine and de-code consumer-related information that includes the vital where, what, and why factors influencing product selection.
2. Burning bridges
Going the direct sales route is a bold step, requiring the cringe-worthy experience of explicitly removing retailers from the distribution chain. While there may be “nothing personal” to the shift, it can be both embarrassing and damaging to your partners’ financial projections. Creating competition among big names such as Walmart and Amazon is a surefire way to make profit goals more difficult and potentially crush any hope of re-engaging your retailers down the line, should you change strategies again. After all, would you give a brand top placement after going AWOL?
3. Consumer churn
Along with cutting off those valuable retailers “tentacles,” manufacturers attempting to sell direct are also reducing access to highly trafficked distribution channels, which are being tapped every day by consumers through an array of modern apps and websites. Bottom line? The more places you can list your wares, the more convenient they become to purchase. This is especially important nowadays, considering ‘convenience’ is the mantra of smartphone-savvy millennials, representing the most impactful demographic in the industry. To thrive, manufacturers need to meet customers where they are technologically, instead of waiting to be found.
“One of the problems of selling direct is that you lose the other distribution channels offered by intermediaries. The more places you can sell, the more convenient it is for your customers. With this increased reach and ease of customer access comes more sales.” – Sam Ashe-Edmunds, bizfluent
Consider the alternative
At PriceSpider, we have seen first-hand the amazing benefits of taking advantage of today’s omni-channel sales model. Because of the many online pathways consumers use to search products, manufacturers have an unprecedented ability to reach millions all over the globe. Having a trusted sales network may seem like quite a bit to stay on top of, but with the proper monitoring software, it can ultimately cost significantly less than turning a valuable business into a ‘DIY’ experiment.
With PriceSpider’s offerings such as Prowl and Brand Monitor, manufacturers of all types and sizes can have confidence in a retail network that is following content guidelines and brand policies. Through a single portal, CEOs and managers can quickly pinpoint problem areas and instantly contact retailers to make necessary adjustments.