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Success strategy

By on 13. July 2016

Strategie

Nearly all manufacturers of renowned brands operate their websites in order to showcase their own brand and products. The satisfaction level of the end customer’s need to buy products online is particularly important for providers of expensive consumer goods – who at the same time want to safeguard their own interests, such as brand reinforcement and a profitable business model.

Without a consistent strategy that enables a skilful arrangement of e-commerce channels (see figure), even strong brands face market share losses as a result of missed opportunities. In order to sufficiently stand out, specific aspects, such as the brand’s bargaining power or product suitability for direct sales, must be taken into account.

Selected scenarios for e-commerce

Selected scenarios for e-commerce

The point of departure of numerous manufacturers is specialist trade (A) with focus on brick-and-mortar stores. As a consequence, many companies are eager to develop “trade-compatible” e-commerce strategies with commission models in order to avoid conflicts with vendors. At this point it should be taken into account that large pure players, such as Amazon, or marketplaces, such as Ebay, are meanwhile supplied directly by vendors, whereby considerable sales volumes that are achieved bypass the manufacturer. Although companies prohibit this form of intermediate trade, it cannot be fully prevented and in many places is legally unenforceable. Many manufacturers feel confronted with this “grey market”, which results in disadvantages due to the lack of influence on product presentation and prices. In addition, there is risk of gradually increasing dependence on large pure players such as Amazon. They court strong brands and tempt them with advertising subsidies for redirecting users from brand websites (B).

In order to differentiate from pure players, manufacturers who have physical brand stores can employ the omnichannel solution, where online products can be viewed and reserved for collection at a brick-and-mortar store, or the local product range can be enlarged thanks to an online store (D). In such situations it is in the manufacturers’ interest to attract customers to their own platform in order to reinforce the brand, acquire customer data and participate in growth. Cooperation with pure players can be reasonable on this basis, e.g. in the form of an online brand store on Ebay, in order to benefit not only from the additional reach but also from customer data for their own market research and direct marketing. If manufacturers do not want to or cannot invest in physical brand stores, they can apply variant (C) that corresponds to (D).

In light of the increasingly greater significance of e-commerce, manufacturers are encouraged to carefully analyse advantages and disadvantages of various scenarios and to use them for developing strategies of their own initiatives as well as of conduct with specialist trade and pure players. Otherwise, they are at risk of missing strategic opportunities and have to accept growing dependence on vendors, pure players and marketplaces that pursue e-commerce.

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