Six Models for Tackling Channel Conflict
by Amy Lanigan, Fluid / October 19, 2012
Note: This blog entry is available in English only.
This year omnichannel is omnipresent. Consumers are at the forefront. And retailers are sold on multiple touch points as the pinnacle of user experience.
Research via mobile while standing in a store aisle. Share an ecommerce purchase via social. Revel in catalog imagery gone interactive on a tablet. Order online, pick-up in-store.
You’ve seen the wheel diagrams with arrows pointing every which way. Seamless interaction is the panacea.
But what if you’re a branded manufacturer? For you, channels are retail chains upon which your business relies. Distribution networks may not look kindly upon direct competition. Retailers have been carefully courted and any perceived alienation could negatively impact your bottom line.
Feel conflicted about going full force into direct digital commerce? At Fluid, we’ve seen a resurgence of branded manufacturers grappling with this issue. You are not alone.
Internet Retailer reports that web sales for consumer branded manufacturers in their Top 500 had a 2011 YOY increase of 12%. Web-only merchants 32%. Store-based 15%. Catalog call center companies 12.3%. No one likes last place.
In 1998 Levi’s famously false started into ecommerce when their retailers negatively responded to their aggressive online strategy of retaining exclusive online rights to the Levi’s and Dockers brands. Long before digital, brands like Coach sold in branded stores and via department stores.
In other words, this is not a new dilemma.
The good news: With the right strategy the dilemma can be diffused. Branded manufacturers have a right to pursue the rich opportunity of digital commerce directly. Not doing so runs the risk of lost revenue. In the right circumstances this can be collaborative vs. competitive.
So how to strike the best balance?
At Fluid, we’re seeing six main models of direct digital selling for branded manufacturers:
1. Full On Swagger
2. Full Price Promise
3. Sharing the Spotlight
4. Referral to Retailers Only
5. For You Only Exclusives
6. Proof Positive
1. Full On Swagger: Brands that fully own and aggressively pursue direct digital selling usually have the advantage of a base built through their own direct outlet (digital or off-line). Or they start as web/catalog only and pursue expansion into physical stores or online distribution. These brands have the confidence and head-start to own direct selling outright.
An example: Apple. Apple controls product prices at any distribution point and has retailers feeling lucky to add their products to a sku base.
2. Full Price Promise: In this scenario a branded manufacturer sells direct but makes a commitment to always sell at full price. In other words, valued distributors we will not undermine you with discounts that give us an advantage.
An example: The North Face. Other than offering free shipping, The North Face does not discount on thenorthface.com. Interestingly, consumers report a willingness to pay full price in order to buy from the “source.” Reassurance of the real thing is apparently worth extra money.
3. Sharing the Spotlight: Purchase from us or purchase from one of our retailers. This category gives consumers the option to pick for themselves. Some branded manufacturers use this to their advantage by placing high selling retailers as the coveted top options. Store locators play prominently here.
An example: Le Creuset. Le Creuset prioritizes their own Add to Cart but offers the option to shop at their affiliated retailers. They have chosen to merely link to retailer sites, other brands drive you to the actual product .pdp page.
4. Referral to Retailers Only: In this scenario a branded manufacturer chooses to not sell direct at all. They serve as a brand portal and refer all sales traffic directly to retailers. This is the most conservative approach and tends to be used by strong brands who rely heavily on retailers (think consumer packaged goods).
An example: Clorox. Clorox and the Clorox sub-brands provide purchase options for online retailers and offline stores. Interestingly, they also provide pricing. This model is not limited to CPG. JanSport and JELD-WEN are other examples.
At Fluid, we’re seeing these final two models less frequently. But we think they are the most innovative and exciting of the bunch. Expect them to expand.
5. For You Only Exclusives: Wal-Mart, QVC and HSN excel at this approach. To sell through us your offer must be exclusive to us (in price, bundle or product). We’re now seeing branded manufacturers empowered by the possibilities this holds. Exclusives in direct selling serve as a differentiator. Exclusives for retail distributors respect the sacredness of an established relationship.
An example: Reebok. Reebok’s custom shoe program gives consumers a reason to go specifically to Reebok.com. It sets them apart from their retailers – without directly competing. The next iteration of this model would be Reebok offering specific custom shoes only to certain retailers.
6. Proof Positive: In this scenario, a branded manufacturer site serves as a beta test for features, functionality and marketing tactics. The result? Arm retailers with proof of what’s working when it comes to moving product. This offers proven solutions that can be ported to succeed elsewhere.
An example:JELD-WEN. JELD-WEN leveraged their site data to show the positive impact of custom tools and guided selling. Their case convinced Home Depot to partner with them to try something similar on HomeDepot.com.
The original post can be found here where comments are welcome.