Question

With the increased use of the Internet, more companies are selling directly to their customers. How does this affect their wholesalers and retailers? Do customers want to buy everything on the Internet? What are the pro's and con's of selling direct?

Answer 1

The traditional model of companies selling to wholesalers or retailers (B2B model) that in turn sold to the consumer has served commerce for hundreds of years. But now the internet has changed all of this. E-commerce opened new channels of distribution and the marketplace evolved.companies are selling directly to consumer (B2C model).

Pros of Direct selling :

1. Investment

Previously, companies selling direct required a massive capital investment in brick and mortar stores and additional employees. Now the investmentis much smaller and it is in technology. A single e-commerce enabled website is the equivalent of a store on every corner in every city.

2. Time to market is significantly decreased

Instead of the long traditional retail sales cycle that requires locked-in product development well in advance of order and delivery, companies can prototype,test, and move to market quickly. Agility is a key differentiator in competitive industries.

3. Complete Brand control

Brand image is not subject to distortion or dilution by third parties. Consumers like it when they can interact directly with a brand. It's always wise to give the consumer what they like.

4. Price Control

Direct selling allows the companies to further reinforce MSRP (Manufacturer's suggested retail price) and communicate directly with consumers about price points.

5.Better customer data

Companies could collect a goldmine of data through direct selling. Better customer data leads to better promotions, better products,better relationships and more sales.

Cons of Direct selling :

1. Damage to existing relationships

Retailers and wholesalers can react negatively to what they perceive as competition for the brand.

2. Single brand

Companies sell single brand through direct selling whereas wholesalers and retailers sell multiple brands. Consumers who demands access to multiple brands prefer the latter option.

3. Lack of Infrastructure and human assets

Companies that leaps into the direct market without the proper infrastructure and human assets will only damage their brand. They need to have a deep understanding of retail sales and customer expectations.

4. Shipping and customer service

There is a challenge for the companies in providing shipping and customer service infrastructure to support direct sales. They should be prepared to Ship quickly and handle returns flawlessly. They finds difficulty in supply chain management and logistics.