A discussion draft of the Online Sales Tax Simplification Act of 2016 is expected to be introduced in Congress soon.
Manufacturers have learned some valuable lessons about selling on the web, including how not to alienate their retailers.
Levi Strauss and Co. got a lot of publicity-most of it negative-when it tried to sell slacks directly to consumers over the web in the late 1990s. Back in those days, retailers and manufacturers were still trying to figure out how the web worked. Levi decided it would be the sole source on the web for its jeans and Dockers. It created Levis.com and Dockers.com for that purpose, just as most retailers were building their own web presences.
Big mistake. Major retailers who sold Levi products through their stores let their ire be known to Levi and anyone else who would listen and Levi quickly backed away from its plans. Other manufacturers who harbored similar notions gave thanks that they weren’t the ones who blazed that trail.
Four years later, retailers have become resigned to the fact that some manufacturers are going to sell direct to consumers on the web-for example, computer makers and, despite the Levi experience, some clothing manufacturers-while manufacturers have gotten a lot smarter about selling on the web. They’re realizing there’s a reason they use retail distribution channels to begin with-and they’re realizing that the web is a retail distribution channel best left to the retailers. “Manufacturers that tried to sell online found direct selling to be a lot harder than it looked,” says Ken Cassar, retail analyst with Jupiter Research Inc. “They’re now happy to let retailers handle retailing.”
But if manufacturers are happy to leave retailing to retailers, that doesn’t mean that they have turned the web over to retailers. In fact, far from it. When it comes to selling on the web, manufacturers have decided they want to be in control of how and where their brands appear online. And so, many have come to a truce with retailers over selling, but in a way that they still exercise control over their brands. “Manufacturers now are focusing on product education and product content and that’s good for retailers,” Cassar says.
Support the dealers
Indeed, that is exactly the approach that major appliance manufacturers are taking. Through an arrangement with Chicago-based JGSullivan Interactive Inc., major appliance manufacturers provide product images and data for local retailers to display on their web sites hosted by JGSullivan. To date, 6,000 independent appliance retailers have signed up for such informational sites, at no cost to the retailer.
The success of that program-and of a similar one in the consumer electronics markets-is indicative of the lessons that manufacturers have learned as the Internet has matured. “The bottom line is that we want to provide a positive online shopping experience for the consumer and we want to deliver that consumer to an e-enabled trading partner,” says Ray Brahams, manager of Whirlpool Corp.’s eWhirlpool Group, b2b. “We’re very committed to our distributors. They’ve gotten us to where we are today and we want to be supportive of them.”
Especially in the appliance market, such an arrangement makes sense, analysts say. Even though big, national retailers such as Sears, Roebuck and Co., Best Buy Co. Inc., Circuit City Stores Inc. and The Home Depot Inc. have thriving businesses in appliances, appliance selling is still a local market. More than 15,000 retailers nationwide sell appliances, and many are small, local chains of three, four or five stores. And with appliances the proverbial last mile-delivery and installation of the product-is often the most arduous.
The future is here
But the independent retailers are usually so intent on selling appliances in the store that they have paid little attention to the web, even as consumers have demonstrated willingness to buy big-ticket items sight unseen, analysts say. “They’re busy focusing on the day-to-day business,” says Bob Donaldson, e-commerce manager of Associated Volume Buyers, a buying cooperative for independent appliance retailers that uses the marketing name Brand Source. “They’re too busy getting deliveries out the door in the morning to focus on the future, but the future is here.”
Indeed it is. “What surprises our members is the number of people willing to go online and spend $2,000 on an appliance without ever seeing it,” Donaldson says.
Furthermore, the web is providing exactly the convenience that shoppers seek from the web. A surprising 18% of business conducted at Whirlpool.com, which allows shoppers to choose products then refers them to local retailers to buy, occurs during times that appliance stores are not usually open: 7 pm. to 8 a.m. daily and on Sundays, Brahams says. “It gets back to the convenience factor,” he says.
New co-op marketing
Tapping into that willingness to buy is where JGSullivan comes in. Working with appliance manufacturers, JGSullivan has created web templates that independent retailers use to create their web presence. JGSullivan maintains a database that contains product features and images that manufacturers provide. Dealer sites receive product information updates automatically every week. Manufacturers pay for the retailers’ informational sites in a variation on the cooperative marketing model.
To be eligible to participate in the program sponsored and paid for by manufacturers, dealers must sell $100,000 worth of product a year. JGSullivan estimates that as many as 10,000 dealers qualify, of which 6,000 have sites. For $595 a year, retailers get an e-commerce site. The sites allow the retailers to choose which products to display and promote and to set their prices. The e-commerce system does not, however, include automated payment processing. The sale is initiated by an e-mail from the customer to the retailer, who must re-key the credit card information into its regular processing service and contact the customer to arrange delivery. JGSullivan operates 850 such sites.
Retailers who participate in the manufacturers’ programs must meet minimum standards of responsiveness. For instance, with Whirlpool, retailers must respond within 24 hours of receiving an order to arrange delivery. There have been very few instances so far, Brahams says, of retailers not responding within the specified time.