Your sales, my sales, we all want some great sales. It’s a constant balance with retailing direct to consumer (D2C) and wholesaling to distributors and retail stores. We don’t want to eat someone else’s lunch, but we don’t want to give up our own either. In the modern world, we need a balance of multiple sales channels to sustain us. Sell D2C without cannibalizing distributor sales.
There are many reasons to sell D2C through e-commerce:
- Higher revenue and profit margins
- Controlled brand and product messaging
- Presence in additional relevant marketplaces
- Brand and product reputation building
Although it is easy to see the benefits of selling direct to consumers (not just because I listed them as bullet points above), the “how” is more difficult than the “why”.
Who What When Where Why How
In this digital age, everyone wants to sell online, including the various distributors who purchase wholesale. The first step in a happy relationship is to establish boundaries. Where can your distributors sell to the consumer? Is it just in retail stores? In this case, a wholesale purchase contract should clearly outline where the products can be purchased.
There are two main options here. Either those purchasing wholesale can be kept entirely off the web or distributors can sell online given proper review and restrictions. An open invitation for distributors to sell wherever and however they want is an invitation for trouble.
To review one cautionary tale of entirely open reseller agreements, one might consider Amazon. This giant e-commerce platform (boasting about half of all online sales in the US) is commonly used by consumers to research brands and products. Although Amazon did not invent the concept of consumer reviews, they certainly helped to explode the popularity of this system. These days, reading reviews of a product before purchasing is standard operating procedure for most customers.
When a purchaser searches for the brand’s products on Amazon, they may be looking primarily for reviews, but there is more they are presented with. Imagine seeing only a few low-resolution photos on white backgrounds, inaccurate bullet point features, and an overall unprofessional listing? When distributors are left to run wild with product listings the results are typically subpar. This lowers the brand’s reputation and could lose countless future sales across multiple platforms.
Let’s revisit our options for wholesale agreements in regard to e-commerce. First option is to allow no online sales of the product whatsoever. This may be appropriate for the smaller manufacturer selling to mom and pop retail stores. Those stores are unlikely to have the resources to create sufficient design and copy assets, but what about the large distributors?
Allowing large distributors the option to post approved content on approved platforms can be a great compromise. Who sells where is a start, but there are more details to iron out. “What” is the natural next big question. So, what are you selling online vs what is your distributor selling online? The easy answer is to define this with yet more questions, how big and how many?
Especially if you’re distributors include big-box stores, you don’t want to cut into your distributors’ existing market. The busy parent picking up a spray bottle of cleaning solution with their groceries does not have to be your target audience. To separate your e-commerce efforts, target the careful planner who buys in bulk. When a large distributor is allowed to sell standard products, do not sell standard size products on solely e-commerce platforms. This removes competition but has other benefits as well.
More is More for All
The first benefit is obvious, larger sizes means larger average order values (AOVs). With standard shipping across multiple providers, there is an initial hurdle in shipping cost and then an incremental increase by weight and size afterward. So, it may cost $3 to ship a $10 priced item but only $4 to ship the larger sized $20 item. Combining two identical $10 priced items into a bundle may only have a shipping cost of $4 to $5.
Bundling is another great way to sell direct to consumers online without damaging distributor relationships. Although the bundle might include items available on retail shelves, this is a great opportunity to add in complementary and/or high profitability products.
Everything in its Place
By servicing different needs for the same audience, each in the appropriate place, the customer can be reached across multiple platforms. Standard or mini sizes are available in local stores that can be quickly accessed by the consumer when their needs are highly time sensitive. Larger sizes are still available for savings to those who have a few days to wait. This is a great option for subscription services. Each platform services a different need. This well supported consumer will be more loyal, meaning increased customer lifetime value (CLTV). Additionally, more platforms mean more options for engagement.
The strategy is simple. Offer larger than standard size products and unique bundles to avoid encroaching on distributors’ bread-and-butter sales. Having a more diverse set of selling platforms equates to a more diverse set of marketing platforms. The following is where the brand halo effect starts to shine brightest.
Instead of simply bombarding the consumer with ads, consider other valuable marketing initiatives. For distribution to retail stores, there are great opportunities to provide samples. This allows for reintroduction to existing products to aid cross sell and upsell. This also allows for information gathering on soft launch products.
Good Data is Gold
Retail stores also generate great amounts of data. It is often possible to see sales on a transaction level. This data can be used to inform the bundling strategy. Which items are already being purchased together? Combine a unique additional product or two to that list and you have an excellent online bundle that is slightly different than the stores offering but still beneficial to the e-commerce bottom line.
Further up the chain from the retail store is data from the distributor’s sales staff. Past and present orders can help guide sales forecasting for production. Who knew spring cleaning was more than just an idiom? Best prepare for increased cleaning supply orders in the spring, with marketing campaigns prepped and ready for their prime moment. Sales staff also have inside feedback on which features sell which products. They have developed their own selling styles, which includes sufficient experimentation on what retail stores and end-users want to hear. This is invaluable for online product listing copy writing.
Selling direct to consumers offers a place to test other strategies such as pricing. Tools can be used on platforms like Amazon to automatically show various consumers different pricing from one another. These tests allow for key experiment data on the ideal price level versus sales volume balance. The results of these experiments can be used to set price guidelines for retail stores.
Supporting Others Supports You
Having a multichannel platform provides a number of options to help your brand and your distributors. Samples, mentioned earlier, can be great for collecting consumer feedback and reducing customer acquisition cost. These increase immediate sales for the retail location will also gating a valuable consumer for the brand.
There are several ways to increase the brand halo effect by supporting distributors. Another option is to provide coupons online good for redemption at the consumer’s local store. This offers retail stores similar benefits mentioned above, increased short-term sales. Geographic customer information can be tracked based on where the coupon was redeemed. It can also flag transactions to analyze for more precise return on investment (ROI) information for the campaign.
A strategy in few words...
To summarize this strategy:
- Create boundaries and procedures around online sales for distributors
- Avoid offering standard distributor “bread and butter” products D2C
- Sell larger than standard sizes, either in bundles or larger package size
- Sell unique bundles
- Gather and use data to benefit all
- Support retail stores with sampling/demonstration and coupon campaigns