6/10/14

When manufacturers sell directly to consumers online, retailers benefit

More than half of manufacturers that sell directly to consumers via the web say they’ve avoided angering retailers that sell their goods—quite the opposite, in fact, according to a new study.

Abby Callard , Associate Editor

One reason many manufacturers have hesitated to sell directly to consumers via the web is the fear that doing so would negatively impact retailers who sell their products, and possibly lead those merchants to turn to other suppliers. But that conventional wisdom might not be true.

More than half of manufacturers who report selling directly to consumers on their own e-commerce sites report it has had a positive effect on relationships with other sales channels, according to a study commissioned by Digital River Inc. and completed by Forrester Research Inc. Only 9% reported a negative effect while 36% reported the effect was neutral.

Forrester conducted an online survey of 109 U.S. sales channel decision-makers at brand manufacturing organizations for the report from March to April 2014. Overall, customer satisfaction drove manufacturers to launch a direct-to-consumer sales channel, with 72% of respondents citing a closer relationship with consumers as a reason for creating a direct-to-consumer sales channel. And it worked. 82% of respondents said selling directly to consumers improved their customer relationships, and 76% reported that it improved customer experience.

They also sell a lot. “One of the most striking findings in the study was that an overwhelming majority of companies that have implemented direct-to-consumer e-commerce channels—76 percent—reported that their programs either met or exceeded revenue targets,” said Scott Heimes, Digital River senior vice president and chief marketing officer.

Of those respondents saying they met or exceeded revenue targets, about 3.9% said revenue was well above target, 40.8% said revenue was somewhat above target, and 55.3% said revenue met target.

“The research also addressed a key barrier to direct-to-consumer channel adoption—the fear that it would conflict with other channels,” says Heimes. “Instead, the study found that if handled appropriately, direct-to-consumer channels can actually enhance the performance of other channels.”

The manufacturers citing an improved relationship noted several reasons. 54% said “channel partners”—that is, retailers that sell the manufacturers’ products—saw incremental sales because the manufacturer routed some or all of its direct-to-consumer online channel orders to retailers for fulfillment. 49% said direct-to-consumer sales have increased brand awareness and created incremental sales for channel partners. 49% said direct-to-consumer sales have increased brand awareness and created incremental leads and visitors for merchants that sell their products. 27% report retailers are able to focus on items that are profitable for them to sell while letting the manufacturers themselves offer the lower-volume products. And 14% reported the ability to test new products before passing on new items to retailers as a positive benefit.

Topics:

Digital River Inc., direct-to-consumer e-commerce channels, Forrester Research Inc., marketing, Online shopping

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