More and more vendors consider selling direct to consumers

by | Oct 19, 2016

When it comes to online sales and distribution channels, shipping pallets and cases of products off to retailers isn’t the only option for suppliers anymore. Vendors normally send their products to a retailer for in-store and online sales, but more and more, suppliers will handle the fulfillment on their behalf and drop ship the item to the consumer.

But some vendors have begun selling directly to consumers themselves, cutting out the retail middleman for greater profits.

Expanding online sales channels, growing profits

While most suppliers don’t sell directly to customers, a large number of them have been doing just that. It’s a new way vendors are thinking about their sales channels. More and more are selling online as a way to grow profits and market share.

The big concern is any potential harm to their retailer customer relationships. Over the past few years, this is becoming less of an issue as many vendors have established an e-commerce site as well as opened their own retail stores — Apple, Nike, Bose, Starbucks — and they’re also selling into large retailers like Best Buy, Finish Line, and Kroger.

Vendors also are realizing they’re missing out on market share in rural and undeserved areas because they’re not selling online themselves. So when vendors look at their orders, they may not realize how they can support the retailers who already come to them for online orders in those rural areas. The vendors may question whether they should only manage fulfillment for retailers, or take the plunge to become online retailers themselves.

Changing sales landscape for retailers and suppliers

That’s a trend we’re starting to see, which can hurt the retailer. That’s because the retailers thought that was their world for decades. Now the world looks quite different. Many retailers are seeing smaller vendors enter the world of e-commerce, and are worried about what this means for them. But smart vendors recognize they need to protect their margins for themselves and their retailer customers. They cannot sell their products for lower margins. So instead they sell their products at full retail through their online channels, mimicking the pricing strategies used with their retailers.

For example, when Nike puts a store into a strip mall, we used to think it was all overstocks and seconds. But that’s not the case anymore. Nike has its own products, and they’re competing with their retailer customers. But they’re also protecting them by selling the same items at the same price. They’re doing it online as well, as a way to protect Finish Line, Dick’s Sporting Goods, The Running Store, and other sporting goods retailers.

In the end, vendors have to decide whether they’re going to sell and ship to consumers directly, or whether they’re going to stay out of the retail market altogether. Do they want to get into the order fulfillment business or do they prefer to work in crate- and pallet-loads, shipping only to retailers?

If you’ve been struggling with whether to sell your own products directly online, or want to let your retail channel manage the online sales for you (and you just provide drop shipping), SPS Commerce can help you figure it out. Take a look at SPS Commerce solutions for suppliers for more information or contact one of our experts who can answer all of your questions.

Get products in the hands of more consumers.

Get products in the hands of more consumers.

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Scott Bolduc

Director of Supply Chain Strategy at SPS Commerce
Scott Bolduc is a multi-time winner of the Supply & Demand Chain Executive Pros to Know. He has worked with e-commerce retailers on their growth strategies and helped retailers transform their freight spending strategies to maximize efficiencies.
Scott Bolduc

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