FB pixel
July 22, 2020

Why Manufacturers Need to Create a Direct to Consumer Channel

5
Minute Read

The global pandemic has disrupted how manufacturers do business. For manufacturers, the effects are forcing a change in the day-to-day as resellers/distributors close. To survive, how can manufacturers keep customers with a D2C strategy?

schedule a call
Strategy
message icon

Want to talk?

Schedule a call

The global pandemic has disrupted how businesses do business. For manufacturers, the effects are seen in multiple ways, forcing a change in the day-to-day and challenging the old guard norms. An April 2020 Price Waterhouse Cooper survey found:

  • Financial impact, including effects on results of operations, future periods and liquidity and capital resources: 71%
  • Potential global recession: 64%
  • The effects on our workforce/reduction in productivity: 41%
  • Decrease in consumer confidence reducing consumption: 40%
  • Supply chain disruptions: 23%

From supply chain disruptions to customer servicing, manufacturers are also seeing resellers and distributors dropping out. Leaving manufacturers asking: how can manufacturers sell directly to consumers if they lose a core component in their selling path? Especially as consumer confidence is shaky, how can maufacturers provide an exceptional customer experience? There are a few ways of tackling this challenge.

How Manufacturers Can Help Resellers

As the pool of resellers/distributors narrows, how can manufacturers support the ones that remain? What are competitive pricing and terms that help these businesses get through the economic turmoil? What self-service tools can you implement that make contactless, remote, business as easy as possible? How can you educate and support your resellers in their eCommerce and in-store initiatives?

Amazon Business for Manufacturers

We’ll take a quick moment to mention the elephant in the room: Amazon Business. It is, as many have written, a double-edged sword. For manufacturers looking to sell directly to consumers, it offers a quick solution with a built-in customer base. As Brian Beck noted in 2017, manufacturers can benefit from Amazon

A typical manufacturer or brand can be up and running on the Amazon platform in one to two months, normally at a nominal cost. Compare this to development and deployment of an in-house e-commerce web site, which can consume nine to 18 months with associated capital costs ranging from $250,000 to multiple millions or more (that said, I do believe strongly that brands and manufacturers should have both an e-commerce site as well as a presence on Amazon). Amazon’s programs such as Fulfilled by Amazon also make it easier for you to ship quickly to business customers, and meet Amazon’s fulfillment and service requirements. - Brain Beck, DigitalCommerce360

However, there’s an enormous risk to manufacturers relying on Amazon. Amazon is in the business of capturing the data that drives business. As they facilitate your sales, they are learning about your customers, your products, and your industry. Understand your uniqueness and how easy (or not) it would be for Amazon to make incursions into your product line. A recent report from the Wall Street Journal outlines how Amazon employees used sellers' product data to create competing products

Amazon.com Inc. employees have used data about independent sellers on the company’s platform to develop competing products, a practice at odds with the company’s stated policies. Yet interviews with more than 20 former employees of Amazon’s private-label business and documents reviewed by The Wall Street Journal reveal that employees did just that. Such information can help Amazon decide how to price an item, which features to copy or whether to enter a product segment based on its earning potential, according to people familiar with the practice, including a current employee and some former employees who participated in it. In one instance, Amazon employees accessed documents and data about a bestselling car-trunk organizer sold by a third-party vendor. The information included total sales, how much the vendor paid Amazon for marketing and shipping, and how much Amazon made on each sale. Amazon’s private-label arm later introduced its own car-trunk organizers. - Wall Street Journal

Also know that Amazon can advertise against, delist, or bury, your products without your control. It creates a codependence over which your business has no control. 

Marketplace Solutions

If you are nervous about a single entity’s control of a distribution channel (see Amazon Business), you can build marketplace diversity. A platform like Mirakl can let you control the experience, distribution partners, and customer and product data when implementing manufacturer D2C. 

Creating a Direct-to-Consumer Channel

With disruptions in distribution, supply chain challenges, and new health considerations (low-contact order fulfillment), manufacturers have sped up a move to direct-to-consumer eCommerce channels. 

The coronavirus outbreak has forced many consumers online, some out of fear of visiting stores and others just as a means of ticking off their shopping lists because supermarket shelves have often been left empty from pantry-loading. Some of the biggest names in food manufacturing have turned to the DTC channel, with PepsiCo joining the likes of Nestle and, more recently, Kraft Heinz, in setting up DTC services. - Simon Harvey, GlobalData

One great use of manufacturers selling direct to consumers case is in food, where a number of brands have launched new direct-to-consumer websites:

The Myths of Moving Direct to Consumer

Traditionally in manufacturing old guard has held on to the existing supply chain structures. But the global pandemic and economic fallout has required a rethinking of the way manufacturers do business.  

Myth One: Channel Conflict will Kill Our Business

With disruptions in distributions, now is the time to rethink how and why you manage a manufacturer D2C channel conflict. Think strategically about how you can support your resellers, your existing sales infrastructure, while building a sustainable direct-to-consumer channel. Consider pricing structures for partners, incentive programs for sales, and product mix across channels. Get alignment on serving your customer, get your channel on board, and build initiatives to keep the players motivated and engaged.

Myth Two: We Can’t Expose our Pricing (It Will Kill Our Business)

It likely won’t. In fact, hiding your pricing can make you look less trustworthy. In the age of Amazon and eCommerce, your pricing will come at no surprise to anyone doing the research. Instead, show your retail pricing upfront, and offer discounting behind a verified login. You can offered tiered pricing and volume pricing. You can build your business on brand, loyalty, and customer experience

Myth Three: Our Customers Don’t Shop Online

We bring this up for posterity. Spring 2020 has revealed new weaknesses and opportunities. Customers are now needing to shop online, whether from stay at home orders or store closures. In-store inventory is suddenly less reliable (with a drastic change of products that are now in higher demand - e.g. toilet paper, hand sanitizer, but also things like inflatable pools  and fitness equipment). How can your business start meeting changing customer needs?

Want guidance to get started? From experience design, to eCommerce accelerators, we can help. Reach out to the team of experts at Object Edge today.

Latest Posts

message icon

Want to talk?

Schedule a call