Manufacturers turn their hand to retail

Posted on 4 Aug 2014 by The Manufacturer

Jeremy Vernon, a director at Core Fulfilment, discusses how manufacturers are learning from retailers as a growing number choose to sell products directly.

Jeremy Vernon
Jeremy Vernon, director, Core Fulfillment

Selling has traditionally been left in the hands of the retailer. Manufacturers make the products and someone else sells them. But, the boundaries between these roles is becoming more blurred. Increasingly, manufacturers are realising that they have a lot to gain by selling directly to their customers rather than relying entirely on retailers and wholesalers. There are a few barriers to get through however, in order to get it right.

Often manufacturers are not able to realise the true value of a surge in demand for their products, as a significant proportion of the profits will be taken by the retail channel. Of course, manufacturers will always need retailers as part of their selling and marketing strategies as they play a crucial part in helping a brand to sustain a presence on the high street. This is why so many manufacturers are wary of upsetting this well-established relationship.  However, selling direct simply opens up another channel from which to sell to the consumer – which, if handled correctly, does not have to interfere with existing relationships and agreements.

Manufacturers are often surprised to learn that you don’t need to be the cheapest, or undercut the retailer, to make direct work.  Choosing not to compete will not only help to pacify any retailer concerns but can also have a positive impact on the way your products are perceived by the consumer. Selling a higher value product exclusively from you as the manufacturer, for example, will open up a new option for existing customers whilst potentially attracting a new audience that hasn’t bought your products before.

Clearly, one of the main advantages of selling directly is being able to establish a new revenue stream for your business, but further benefits to be gained include:

•             Helping to build brand awareness
•             Facilitating better customer engagement
•             Building relationships with customers directly
•             Obtaining customer feedback and using it to improve products and services
•             Helping to increase brand loyalty

The problem for many manufacturers, of course, is that they don’t have ecommerce experience so aren’t sure how to undertake the opening of this channel. Fortunately there are businesses out there that can offer advice and handle the logistics of selling on the manufacturers behalf. In the meantime, here are my top tips for manufacturers to bear in mind when starting out online.

The Customer
Before doing anything, if you don’t already, it’s important to have a firm grasp of who your current customers are as well as who you want them to be in the future.

It’s crucial to work out the costs involved in introducing this new channel into your existing processes. It’s likely that you will eventually need to outsource some of these processes as the channel develops. Make sure you shop around varying delivery and fulfilment partners to get the best price and practice for your business.

Be open
Build customer loyalty – be open about how and where your products are made. Despite the economic downturn there has been a growing interest in a product’s provenance and heritage in a bid to support the British economy.

Make sure you have a website that functions well and is easy to navigate – if you don’t get this right customers will be reluctant to buy.

Make sure you have the right customer service systems in place including the ability to deal with complaints swiftly and effectively. Ensure existing staff learn know the difference dealing with an end-consumer versus a wholesaler.

Be open
If you’re opting for the co-operative approach with your existing retailers, be open with them about what you’re planning to do. Explain that this new channel offers you a new demographic and outline how it can be mutually beneficial. For example, by working together with your retailer you may be able to offer click and collect from their store as an additional way of getting people through their doors. You could also advertise this service and therefore there store on your website.

Other options
Some manufacturers will feel uncomfortable being so open about the fact they’re selling direct, but there is solution for this. Many have simply set up an ecommerce site without their company branding associated with it, which allows them to sell to consumers in a more neutral way.

Try it out
You can test new services on a small scale first to see how it goes down with customers – which removes the risk factor to some extent. After your trial period, be sure to survey customers on how they found the service so you can make all the necessary improvements before rolling out on a larger scale.