Manufacturers vs. Distribution Channels: Cut-throat race for online space.
The customer is the king. The delighted customer keeps businesses moving. In a traditional business setting, the manufacturer produces goods and the retailers are concerned with distribution and sale of the goods. The profits and margins of both, manufacturers and retailer depend on the coordinated work, understanding the tastes and expectations of the customers.
The retailer’s role on the shop-front is one of feedback gathering and response providing to the manufactures, to rework on product customization, and product output. The retailers also bridge between the customer’s real-time buying behavior and the manufacturer’s desperation for sustaining and strengthening its position in the market.
The recession has greatly influenced the traditional business order, with the manufacturers making dedicated efforts to establish direct contact with their customers, online. The conventional “moment of truth” is in question – where the customers actually examining the products displayed at the shops, fast giving way to online interface, in making a choice for the best. The traditional order that existed between manufacturers, retailers and the customers seems to be fast replaced by the renewed relationships, with increasing tilt towards online buying and selling activity.
There is one potential reason for why manufacturers are increasingly going online, to showcase their variety of goods to their clients. This comes with the service to supply goods at the door step of their customers. The recession saw the retailers facing the severest of the economic crisis, with the result being gradual withdrawal of retailers in terms of lifting of the quantity of goods, investment in shop-space, and discounting to win and retain customers.
The margins that the retailers got decided their stable association with manufacturers with the higher margined goods getting maximum visibility at the shops, and the less margined getting little or no showcase display. The manufacturers globally seem to have understood this. Manufacturers in their anxiety to reach out to their potential customers have triggered off a ruthless competition in the online space. Especially, there have been rapid strides on the social network sites, and reworking on their online reputation management (ORM).
The ratio of manufacturers and retailer race for online interface with the customer can be considered as proportional. Those manufacturers that enjoyed the unquestionable loyalty of their distribution channels followed a moderate approach, by containing themselves to creating awareness of their goods and products in the customers, and working in coordination with retailers to reach out to their potential customers. Here, the manufacturer’s website or participation in social media sites was merely for visibility.
The manufacturers, who received online orders for their goods, serviced the same through their distribution channels of the customer’s region or location. This process of increased coordination helped the manufacturer to save in transportation costs, get business and keep distribution channels alive and ticking.
There are equally increased instances of retailers moving rapidly to create their sphere of influence in the online space. Distribution channels or retailers have come closer to their traditional customers; and efforts are on to sustain old customers, and win new customers. This situation has brought them into direct conflict with the manufacturers who have already occupied the online space in a major way.
In this situation, the customer is the ultimate beneficiary. The retailers to keep themselves afloat and outrace the manufacturers and also fellow retailers online have increasingly cut down on their margins, and have desperately gone to maximum extent possible to win the customers.
The ruthless completion online between manufacturers and distribution channels, though predominantly price-based, wasn’t the same all the time. For, manufacturers and retailers aware of the quality of the products and the category / class of customers least focused on price reductions, instead offered greater service value and quality of goods produced.
The conflict of interest of the manufacturers and distribution channels for online space, and greater visibility in the eyes of the customer has its impact on many related and supported domains. In the recent times, online marketing as a discipline and practice received huge impetus, with online marketing professional who actually push websites and create visibility for business online given high precedence, and enjoying greater career opportunities.
Recently, the ruthless online endeavors of Procter & Gamble Co, one of the largest manufacturer of consumer packaged goods, has ushered a sea of change in the way online customer relationships are built, and the way shopping is done by the customer, online, for choicest goods.
Not just P&G, the large technology companies like Dell, Apple…and even the denim maker like Levi’s have stabilized and strengthened their position online. The day is not far when customers place an order for goods from the comfort of their drawing rooms, with the retail outlets meant to display goods and window shop, with all goods purchased to be delivered at your door-step with no transport or shipping charges to pay.