10 Reasons Why Some Manufacturers Still Ponder Selling Online

Earlier this month, I read a blog post from E-consultancy titled "Why Not Selling Online Can Damage Your Brand".   The piece covers many of the key reasons why e-commerce has become a must have for brands, and why not selling online can be more than a missed opportunity; it can actually damage the brand. 

As a long time veteran and advocate of e-commerce, I agree with all of the points in the article.  Yet, having worked with some notable manufacturer brands who have yet to take the plunge into online selling, I can offer that for many of these companies, the decision to sell online is not the "no brainer" that it might appear.

Manufacturers who sell online don't just need to become web merchants, they need to become retailers, and that presents some interesting and often sticky strategic issues.

1. Lack of in-house retail or e-commerce talent.  This means that manufacturers may not know what questions to ask or understand the complexity of what they are getting into.  It also means that there may not be a logical choice for a leader of the strategy, planning and execution of an e-commerce initiative.
2. Concern about disruption to retail relationships.  This typically tops the list of issues, as manufacturers attempt to walk the delicate line between building their brand through direct to consumer sales and cannibalizing their retail partners.  Every manufacturer selling online has faced it, and there are many flavors of potential answers to striking the balance.
3. Product offering and pricing decisions can be mired with complexity.  Manufacturers' product lines many not be "retail ready", meaning they have been assorted for the retail buyer, not the consumer.  Thus, there are key decisions to be made around the online offer. The whole assortment? An edited version? Exclusive products? Clearance items? New test products?   And then there's pricing.  There's a need to offer the consumer a competitive value,  yet the need to be sensitive to retail partner margins and not undercut.
4. Product information and assets are not e-commerce ready. Manufacturers have a unique opportunity to showcase their products online, and consumers will likely have an expectation that the best and most extensive product information will come from the manufacturer's website.  Yet, many manufacturers find that their product images and copy are geared towards product spec manuals for retail buyers vs. online shoppers.  Re-purposing and enhancing product assets for the web can be a significant undertaking.
5. Fulfillment is not set up for single piece consumer orders.  Separate processes and systems may need to be set up to effectively manage consumer shipments and returns. Ditto for new packaging. Outsourcing many need to be investigated and considered.  Similarly, managing inventory for e-commerce can be complex if the manufacturer's systems are not set up to buy and reserve inventory for the online store, or allow for easy access to overstocks.
6. Customer service takes on a whole new role.  As with fulfillment, discreet processes, systems and people will be needed for e-commerce. Whether or not to turn service over to an outsource partner can be a critical strategic decision.  Build the team and infrastructure and reap the benefits of direct communication with your customers? Or hire experts with the people and systems in place to get you up and running quickly?
7. Marketing activities have been focused on B2B relationships and broad consumer branding.  Digital direct response marketing may not be part of the company's DNA, so understanding search marketing, email, affiliate relationships, retail promotions, social media and the whole balance between traffic and conversion becomes a new skill set need.
8. E-commerce ecosystem components need attention.  While the search for an e-commerce platform will likely be part of the manufacturer's path to online selling, equally important is the suite of supporting systems (many of them possibly in "legacy" condition) that will need upgrading or readying for integration. Order management, CRM, warehouse systems, the list goes on.
9. Resources, Resources, Resources (People, Money, Time).  All of the above is a lot of work, and everyone has day jobs.  Not to mention, this sounds like it could be a significant investment.  Maybe we're just too slammed to deal with this now?
10. Lack of a deliberate process to work through #s 1-9.   It's easy to get confused and overwhelmed by the decisions and intimidated by the potential costs, especially when you're busy running your core business.   A host of manufacturers have made the transition to direct online selling successfully and profitably.  If you have not yet taken the plunge, it's probably high time that you start the investigation process to wrestle these issues to the ground.  None of them are insurmountable, but they do require some disciplined thought and decision making.  Get some help from a knowledgeable, experienced expert to help you identify the issues and opportunties, and engage in a process to work through the answers.  Your brand deserves it, and your prospective consumer customers are asking for it.

Comments

[Sean Collier]

Great summary of the challenges a manufacturer can face when selling online. All of these challenges can be mitigated with a few smart decisions and finding the right partners. I find that the key item that each brand manager needs to decide first is how much they want to interact with their consumers. Deciding a hands one or a hands off approach can help to quickly dictate direction. Then the brand must set clear goals for how much commerce they expect to do in their first 12 months and first 24 months. The goals will color each choice they make from a cost, timing, and completeness perspective.

[Web Copy Expert]

Excellent article that has answered a lot of questions, especially as I am involved in affiliate marketing and often fail to understand the reluctance of certain merchants to 'move with the times'!

[MKT 400]

Sally,

I've been just researching this topic and though there is now a tendency to say that manufacturers that venture to sale online will fail, I've been able to dig up some good examples of the reverse.

One big point I've encountered is real knowledge of what is needed and how to acquire it. Either the company thinks it's "no biggie" or they fear the costs will be overwhelming.

This has been a very helpful read thanks!

[Sally]

Thanks for the comments, you are absolutely right. There are many many manufacturers who have made a successful transition to selling online. I often find that the biggest mistake some companies make is assuming that e-commerce is easy. There are many strategic and tactical issues to consider, and it's important that they think things through,get the necessary education and go into the effort with eyes wide open. It can be a huge source of revenue and brand equity if done well!
Sally