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Should manufacturers sell directly to consumers?
A customer opens their wallet, ready to make a purchase. The big question is, who are they purchasing from? If you’re a manufacturer, the best answer is you.
As mentioned before, many customers find it beneficial to buy direct from the manufacturer. The perception is that it's better for many reasons and one of the biggest factors is brand trust. Much of this goes back to 2016 and older studies on the brands that made the shift toward direct-to-consumer models.
The consumer always has been in control of whom they want to purchase from (brand), but now more than ever, they are in control of where they buy it from. Somewhere in the neighborhood of 85% of the decision-making process is facilitated prior to the person walking into a retail location or contacting someone. Meaning, they're well-educated and ready to buy. So, if the consumer is in that mode already and researching a brand on the manufacturer's website, why not provide them with the path of least resistance?
Competition is fierce
The distribution channels for both B2C and B2B products/services are changing, some at a much more rapid pace than others. Considering where the person might be in their path-to-purchase journey, if they are sent off to your brand’s “retailer of choice,” the consumer is then lead down the path of comparing your products with your competition vs. making the deal right then and there.
This does not take into account the large disruption that major players such as Amazon or Walmart are causing across many industry verticals. Recent research by our team shows large e-commerce retailers are disrupting your industries simply based on the fact that they’re becoming the resource to sell directly.
Products that have been traditionally sold via distributor models are disrupted. In this case, the phrase “innovate or die” becomes very apparent for a manufacturer of specialty goods being sold to an industry niche. Consider medical and dental examinations. Does your dental provider continue down the path of purchasing through their existing distributor or tack on exam masks and nonlatex gloves to their next Amazon order?
Customer size varies
In retail operations, the margins given are their bargaining chip. We see it with major retailers like Bass Pro or Home Depot, etc., where they can utilize their margins and research to set the price according to competition and buyer demand. The advantage larger retailers have is bundled pricing and shipping deals that we as marketers and brand managers must be aware of.
While this might sound like a case for not selling directly to consumers, that's where the conversation quickly stops. We must remember that customers come in varying sizes. In industrial and manufacturing verticals where a distributor is selling many products, yours is just a few SKUs amongst their entire catalog.
There's zero way in which you can stand out other than margin shuffles and a race to the bottom. In these B2B and specialty retail situations, the opportunity resides with selling directly to the end-user. While a dealer/distributor is highly engaged with selling a $60,000 machine or a $120,000 boat, ancillary items such as machinery lubricants and cleaners, or even boating accessories, are not even on their radar at the time. Meaning, a lost sale for the product manufacturer.
In industrial B2B markets, those smaller customers could be better suited to buy direct, and if the manufacturer does not offer an easy path-to-purchase, then the user is off to buy from someone else — or your distributor sells them a product they might have a better margin on.
As mentioned above, some customers in many industries simply trust the manufacturer more than anyone. They have done their research, they know what product they want from a select brand and now are in the high-intent category of buyers, meaning they are 100% ready and committed to buying your product. Making them navigate the walled garden of retailers/distributors might not be the best path to purchase.
Direct sales grow incrementally
Direct sales will grow incrementally over time. Do not expect them to deliver outstanding results right out of the gate, especially if you are in a very unique niche market. Many consumer products will see a higher rate of return (quicker) than those in a specialty B2B market. Keep in mind, too, that the specialty B2B industries that have opened up to direct sales can view this as income/revenue that was not recognized previously.
At the end of the day, brands need to ask themselves which channels they will continue to support as this discussion goes well beyond that of digital marketing. Open the lines of communication with your distribution channels and make sure you have a finger on the pulse of buying behaviors and how you can best support them. If you are considering going direct but fear your distributors will be upset, how can you best present the information to them to set their mind at ease?
This can feel like murky waters for many brands but keeping an outlook to the future of specialty verticals and easy paths to purchase might change your mind.