The search giant first rolled out yellow ad labels next to paid links on smartphones and tablets, and in recent months the labels have ...
Manufacturers solve their online dilemma
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John Godbout, CEO of The Projector SuperStore, says InFocus has helped by avoiding direct online sales of its premium Proxima projector brand, leaving that to its retailers. "By listing us on their web site, it also gives us a chance to get the service business of their online customers," he says.
Such approaches have contributed to allaying retailers’ fears about manufacturers taking over, analysts say. “Retailers and manufacturers are finding the web as another way to collaborate,” Whitfield says. “Concern about manufacturers cutting retailers out of the loop has certainly dissipated.”
While careful to bring its distribution partners into the process, InFocus is clear that it expects to increase revenue and profitability. “We’re looking at the web as a channel for incremental growth,” Mills says. “Our senior executives have high expectations for growth and profitability in the direct-to-consumer initiative.” Although Mills declines to specify the growth of InFocus’s web consumer channel, he notes that it’s been increasing steadily. “We’re pleased at the rate it’s growing,” he says.
When watch and accessories manufacturer Fossil Inc. began selling online to consumers in 1998, it decided from the start to design its web strategy as a complement to the offline as well as online sales through its retail partners, says Matthew Brown, director of e-commerce. “We asked ourselves, how can we supplement store sales with our web site?” he says. “Our retailers made us what we are today, so we wanted to see what online opportunities would benefit both sides of the table.”
Indeed, Fossil initially learned of the consumer demand for a Fossil web site through feedback channeled through retail partners’ stores, where shoppers would ask how they could buy styles not in a retailer’s display case directly from Fossil, Brown says. Fossil’s online sales this year are running 45% over last year, a bit faster than its store sales.
Fossil takes several steps to help its partners’ sales in their stores as well as on their own web sites. In addition to helping shoppers on Fossil.com find retail partners’ locations, Fossil is careful not to offer online discounted prices or other special promotions that would take customers away from retail partners, Brown says. Fossil is also considering helping them build Fossil boutiques on their sites. This helps Fossil control the way its products are displayed by retailers to maintain consistency in its brand. “Anything we can do to help our partners helps us in the long run,” Brown says.
That was then
Ultimately, analysts say, having manufacturers more involved in selling direct to consumers increases sales for both retailers and manufacturers. They point to store examples of Levi Strauss & Co. and Coach Inc. as evidence. Jim Okamura, principal with retail consultants J.C. Williams Group notes that where Levi operates outlet stores, sales of its products at other retailers in the area go up. “The outlet stores are considered brand-builders, providing more reason for consumers to buy the brand regardless of where they buy it,” he says.
Unfortunately for Levi, retailers did not take such a benign outlook when Levi opened Levi.com and Dockers.com in 1999. Levi became the symbol of manufacturers trying to steal retailers’ market by selling direct online. Part of the problem was that Levi dictated that its sites would be the only place consumers could buy Levi products online. But even retailers who weren’t online in 1999 were mad at Levi for daring to sell direct. Some threatened to pull Levi products out of their stores.
Levi now offers its Levi.com as primarily an informational site that lets consumers use a virtual fitting room from My Virtual Model Inc., then forwards them to retail stores. In addition to a nationwide store locator, it features direct links to online and offline retailers, including BabyStyle.com, JCPenney.com, Macys.com, Nordstrom, Kohl’s, Urban Outfitters and Hecht’s.
The Levi case points to the delicate balance that manufacturers must maintain with retailers when selling directly to consumers, experts say. “Manufacturers need to balance their own control over distribution with that of their retailers,” Okamura says.
Leather goods manufacturer and retailer Coach Inc. has struck that balance, says Okamura, whose firm has worked with Coach on maintaining sales in all channels. Coach operates a direct-to-consumer business that includes Coach.com, a catalog, 156 company-owned stores and 76 factory outlets. They account for 59% of its $595.5 million in annual sales. The remainder comes through retailers. And while Coach’s Internet and catalog sales rose 15% in fiscal year 2003 over 2002, Coach sales through department stores kept close pace by rising 11.8%. “It’s maintained a presence in department stores because it’s building its brand more than stealing from retailers,” Okamura says.
In fact, Coach makes that pitch in its annual report. “Coach’s online store, like its catalogs and brochures, provides a showcase environment where consumers can browse through strategic offerings of our styles and colors,” it said in its 2003 financial report. “The growing number of visitors to Coach.com provides an opportunity to increase online and store sales and build brand awareness.”
Product testing venue
While InFocus, Coach and other manufacturers perfect their web-selling strategies, others say the indirect approach of providing online product information but referring online shoppers to retail partners is just as effective in their environments. Newell Rubbermaid has created more than a dozen sites for each of its consumer-oriented divisions. Though intended primarily as informational sites with direct links to retailers, Newell will also use the sites to provide direct sales of replacement parts for products like Graco baby strollers, which are difficult to find in a store.
Ace Hardware Corp., one of the many retailers directly linked from Newell’s Rubbermaid.com, says the manufacturer’s online presence supports a strong multi-channel partnership. “We see the value of customers knowing more about products upfront when they come into our stores after having been on the manufacturer’s site,” a spokeswoman says. “As long as our customers are being helped and know where to find our products, it’s a strong partnership between retailer and manufacturer.” She adds that some Ace stores refer customers to Rubbermaid.com if they don’t carry a particular product or model that the customer wants.