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04 Nov 2016

A four-point plan for strategic entry into online retailing

E-Commerce for manufacturers: Expand your brand online

For many years, manufacturers were able to rely on their network of brick-and-mortar retailers. The supply chain was clearly defined: the manufacturer produces the merchandise; the retailer distributes it to the consumer. This division has changed with the rise of the Internet and the resulting new sales channel. Many manufacturers now have the unprecedented opportunity to enter into direct contact with customers in a cost-effective manner and to sell their products directly to consumers. Some sectors, such as the fashion industry, were affected early by this development – others will follow soon. Many of these manufacturers are currently faced with the question of how to successfully manage their entry into the e-commerce business. The following 4-point-plan support manufacturers in their decision-making process.

 

  1. Status quo analysis

First step is to gain a clear understanding of the current situation.  The goal should be to identify potential barriers and challenges that have hindered a direct-to-consumer approach in the past and to find suitable solutions in the following. Potential question can include:

 

  • What are the main challenges and barriers pertaining to e-commerce?
  • Is the product readily available at brick-and-mortar stores and thus subject to considerable “offline” competition?
  • What is the price range?
  • Can the manufacturer achieve shopping cart volumes that are sufficient to cover the fixed costs of handling each order?
  • Is there a risk of a distribution channel conflict with existing merchants?

The last question, in particular, has proven to be challenging for manufacturers. A pro-active approach with the merchants can be a solution here, as a direct-to-consumer approach of the manufacturers can often benefit the merchants as well (e.g. attracting a new online target group).

 

  1. Definition of e-commerce goals

The next step is to formulate a clear objective, something that is often underestimated but vital to achieving what you want to get out of making the online leap.  Often manufacturers tend to see the establishment of another sales channel as major goal. Experience shows however that there are other objectives as well, such as branding reasons or the collection of data insights. The formulation of the right goal is critical as it has major implications for the subsequent operational strategy, as for example the assortment strategy. An early analysis of your objective is therefore highly recommended.

 

  1. Comparison of e-commerce entry options

In a next step, the comparison of the different direct-to-consumer entry options should be assessed. This can happen in a three-step approach:

 

  • Define the potential entry options.

You will need to know what options are available for your needs.   A key question will be if using owned online shop or if the entry via marketplaces is preferred. The decision will heavily depend on the defined goals of the manufacturers

  • Evaluation criteria.

In order to compare the different entry options, a set of assessment criteria should be defined. Some manufacturers see branding as a core issue others will want to generate customer insights. Depending on the final objective, a set of criteria should be established.

  • Evaluate.

The evaluation of the entry options is the final step. Based on the defined criteria, all entry options should be carefully assessed against each other. This can for example happen in a matrix with a pre-defined point system.  A simple or weighted average of the individual dimensions can show which option is the most appropriate for you as manufacturer.

 

  1. Decision and definition of the next steps

Through detailed comparison, the manufacturer can ensure that all possible e-commerce options have been compared and analyzed. The decision for one or more options as well as the definition of the next steps – for example, the search for a suitable partner – complete the analyzed.

Find more useful information on driving performance of your online shop.

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