For the world of business, the turbulence caused by the coronavirus pandemic has presented challenges and obstacles that weren’t prevalent before – out of these challenges, new solutions have allowed businesses to thrive in new ways to expand revenue streams. One example of this is the rising popularity of manufacturers selling direct to consumers.
With consumer shopping habits being radically altered, the benefits of manufacturers using distributors and retailers have been juxtaposed with the models of going direct to consumers. Ultimately, manufacturers have always had to sell their products, even if this has traditionally been sales reps selling to distributors and retailers – and in industries where consumers would rather buy in-store, this has created the need for “middle-men”, who buy in bulk orders at trade-discounted prices, and then sell your produce at a profit for themselves. You are, in effect, paying your sales reps to sell your product once, and paying your distributor to sell it again.
Until mid-March, this symbiotic relationship was at the heart of countless successful business models.
The pandemic has trapped people in their homes, and online stores have thrived whilst physical locations have starved. Without reliable footfall, distributors and retailers can no longer guarantee that your products will be more visible in their stores than on your website, and across all industries, users and customers have adjusted to purchasing online, without trying or seeing products before they buy them. In some industries, there was an understanding that users would never part with money before they tried or saw the product, and that these viewings had to take place in central locations showrooms or warehouses.
Mercedes have recently opened their online showroom. No expensive showrooms, no test drives, no trying out extras – a purchase of several thousand pounds made online from miles away, shipped to order at market prices. The profit margins for manufacturers selling direct to consumers are huge, and far more than any bulk deal with a distributor can offer.
Manufacturers are already producing and shipping stock – by taking the decision to ship in smaller quantities and selling direct to consumers, the rewards are easy to see. Not only are these rewards financial, but you also become less reliant on other distributors and retailers being competent online salespeople – skills they may only just be learning for themselves.
Hesitance over such a decision is easy to understand – many manufacturers have built long-standing, personal relationships with their dealers and distributors, and worry about upsetting or disturbing these relationships. However, it is this hesitancy that creates space for new, foreign manufacturers to enter the market, and massively undercut your retail price by selling directly to the consumer.
Manufacturers selling direct to consumers will always be able to undercut distributors and retailers – there are simply fewer costs for them to consider.
If you wait to react to an insurgence, you might find yourself left high and dry, as distributors switch suppliers to the new, cheaper model. They often don’t show the same loyalty as your initial hesitancy showed – and you can make the transition to selling directly without torching your relationships with distributors.
You can update your contracts to agree not to undercut your distributors in certain areas, or share profits on certain products. You could agree to cut them in if they broker large deals for you using their contact book. Changing your relationship doesn’t mean ending it. It’s simply responding to a change in the business world – and the business world has rarely seen a more seismic change than the coronavirus pandemic. Manufacturers selling direct to consumers are the future of eCommerce; we’re not just giving an idea here, we’re helping our clients to move forward.
To see how your business could benefit from cutting out the middleman, talk to the experts at AsOne today.