Online vs Physical Retail. Something has to Give.

by Shipearly on July 10, 2017 No comments

How to perform sales attribution for online sales from a manufacturers website has been a hotly contested area of channel conflict for some time. What we’ve learned is most manufacturers prefer to silo their online and wholesale channels either from a lack of alternatives or it is their preference. But thanks to consumers and Amazon those who perform the status quo are about to get decimated. Your company has been innovating new products and incremental improvements on them, but now more than ever the way products are sold needs to be innovated on. 

The Elephant in the Room… Online Sales.

We know consumers are shopping across online and physical retail sales channels to touch & feel products, shop for social reasons including local, with free returns and instant gratification, or seeking something called a human experience. As consumers shop offline it elevates online sales for manufacturers as consumers may buy online later known as ‘showrooming’ or buy additional products online from the manufacturer post-purchase once the relationship is established. The store is becoming an advertising medium for brands that retailers pay for by purchasing product at wholesale and irks them to no end. Yet nothing is being done about it, ie. the elephant in the room.

Enter the 500 lb Gorilla

We’ve established that online sales are the elephant in the room between manufacturer and retailer, but things are about to get more expensive for consumer direct brands as the 500 lb gorilla also known as Amazon enters the equation. Amazon is predicted to capture half, yes half, of all online sales by 2021 and is anticipated to restrict market access for brands they compete against with their own private labels, or greatly reduce margins for brands as consumers come to expect the conveniences of the marketplace. Amazon is one acquisition away from being everyone’s competitor.

A war is starting to emerge for consumers and its Amazon vs Brands and Retailers. Now 2021 might seem like a long way off, especially as most organizations are just looking to hit next quarters numbers but the time to prepare for the onslaught of brands is now by partnering with physical retailers before its too late. Physical retail & in-store experiences are soon to become the new black as branded manufacturers seek out alternative sales channels other than online, which will become expensive and the common denominator appears to head towards Amazon.

The Better Way

Partnering online with brick and mortar dealers is no easy feat but ShipEarly‘s cross-channel sales platform makes collaborative commerce easy by automating the entire process to jump over the consumer expectations bar set by Amazon. Rather than competing online, our suite of tools helps brands and retailers focus on best servicing the consumer. Shopping online and visiting a store is viewed as the same journey according to consumers, not two separate events as most manufacturers treat them now. Making it as easy as possible for consumers to shop on their terms while providing employees and partners with the right tools to capture sales and measure success across channels is a winning strategy.

By operating in tandem with dealer locations your brand can become its own private Amazon with same day in-store pickup or local deliveries of products warehoused in retail locations closer to the end consumer.As a by-product it leads to more opportunities to sell in and sell through channel partner inventory. With Amazon’s acquisition of Whole Foods they just let the whole world in on a secret. The store still plays a pivotal role with today’s modern consumers both from a pre and post purchase perspective.

Selling at wholesale does give the perception of lower margins, but lets compare that versus selling direct to consumer where the norm is quickly becoming free shipping, free returns, with increasing shipping costs that outpace inflation and customer acquisition costs in the form of digital advertising. To top it off, most sales that occur online have some form of discount. We are heading towards an equilibrium of margins between online and wholesale on an individual sale, let alone the fact that 90% of all sales still occur at physical retail there is much more margin dollars to be had in wholesale for those companies that use online sales to influence the retail channel.

Conclusion

With an Elephant and Gorilla in the room, will there be enough space for your company to operate within? To increase ROI and capture greater margin dollars wholesale will be the key growth driver of the next 5 years. The brands that can establish and maintain dealer relationships better by partnering online and at retail to create better customer experiences will win/survive. A new generation of tools for cross-channel sales measurement, engagement, and attribution will be required to create the ultimate consumer experience. The only way to avoid brand extinction is to remove the elephant to focus on delivering better cross-channel consumer experiences than the gorilla. If the Online vs Physical retail battle continues to persist, there will only be one winner and it won’t be your brand. Something has to give.

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