Stop Being Afraid of Channel Conflict
By: Tim Haycocks
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This article was originally published on LinkedIn.
For more than 20 years, brands have been wary of developing direct-to-consumer ecommerce channels because of concerns the move may upset their retail partners. I still walk into meetings every day with companies worried about creating conflict between their sales channels.
And frankly, it needs to stop.
Channel conflict has always been more of an internal fear than an external reality. Given the changing retail landscape, it’s time for brands to come to terms with the fact that they need to develop D2C ecommerce channels or risk paying the price.
Reality check
There isn’t a single country in the world today where retail hasn’t been affected by people shopping online. Large retailers that were once household names are now closing stores. Even for retailers that remain open, the available shelf space for brands to display key products is dwindling. The space to showcase a wider product range is shrinking even faster. With fewer and fewer customers walking through the doors of retailers, brands need to find new ways to develop relationships with their customers. A D2C ecommerce channel is the most effective way to foster those relationships while providing a valuable customer experience.
This is not meant as an attack on retail. Nor is it a suggestion that you should move away from retailers altogether – they remain an important route to market. Rather it’s an honest assessment of the current landscape. Retail isn’t dead. And with innovations happening in the space I foresee it continuing to be an important piece of the commerce puzzle. The increase in “buy online, pick up in store” activity demonstrates that brick-and-mortar stores still hold value for consumers. But at this point, physical locations simply can’t generate the revenue that brands need to stay viable. Given market conditions, building direct relationships with your customers though an aggressive D2C ecommerce channel is your most strategic play.
Communicating with retailers
Again, I’m not suggesting brands abandon retail altogether, but rather that they need to reevaluate retail’s place in their overall sales strategy. It’s important for brands to be open with their retail partners and have a conversation about the future of their partnership. This can be daunting for brands scared to lose the little shelf space they have. But it’s ultimately a conversation that needs to happen for the sake of both parties.
You’re never going to reach 100 percent agreement, because effectively we’re talking about some level of competition. But there is room for understanding. Some retailers are already squeezing companies on margins, making it a race to the bottom for brands that continue to rely on those channels. The question then for brands nervous about upsetting retailers is: what do you have to lose?
Effective D2C channel strategy
Just building a D2C channel isn’t enough to recoup lost revenue from declining retail sales. Brands need to create an engaging ecommerce destination that aims to develop long-term relationships with customers. By offering exclusive products online that are not available through retail channels, or bundling accessories online, brands can add value to their digital storefront without competing with retailers on price.
Research shows consumers will purchase products at a percent higher price point if they know they’re getting a better experience. But brands have to make sure they’re actually supplying that superior experience or risk losing the customer altogether. An effective D2C channel uses customer data to offer a personalised experience that adds value for the customer and ultimately forms a relationship that can be leveraged for future sales.
Yes, there is upfront cost to building a D2C channel. But the cost of not committing to a D2C strategy is even greater. Without a D2C channel, brands will fail to maintain control of their revenue streams, won’t gather crucial customer data, and most importantly, will fail to create meaningful relationships with their customers. Innovative products only get you so far, building strong consumer relationships will take you a lot further.