Thanks to Head PGA Pro Michael McCrudden from Roe Park Resort in Northern Ireland, for this Tweet:
"Hi Phil, any chance of a blog post on how to deal with suppliers going direct to consumer and cutting out/by-passing bricks and mortar retailers like the green grass PGA Pro?"
This is a great question, and one that seems to be a really hot topic at the moment. Whilst I can't provide you with a silver bullet, I might be able to provide some insight in to why brands are doing it, why consumers like it, and how retailers can respond.
So, here goes!!
Why Do Brands Go Direct?
It's only since we have moved in to the digital age that brands have been able to interact directly with the consumer. In the past, manufacturers relied on distributors selling products to retailers who interfaced with customers. Brands could not provide the infrastructure to get in front of the customer.
As a starting point, it's important to understand why brands want to go direct to consumers, as the reasons aren't what you might think. When I've previously asked retailer colleagues why they thought this was the case, the usual response was for "more margin".
"Nike and Apple are two classic examples of strong, mega brands, that have well-established D2C channels, but universally distribute their products among a traditional retailer-base".
However, although cutting out the middle man will generate more profit for a brand, this is only part of the story. In order for a brand to deliver goods to a consumer, they have to put in place all the right mechanisms, such as advertising, receiving orders, charging and delivery. This is an expensive exercise, and either requires physical stores or a digital platform. Either way it's a significant investment to develop a consumer channel of distribution.
So, if we agree that the extra margin is only part of the story, what other benefits could brands possibly see by going direct. Well, the following key benefits provide opportunities to develop the brand at a rate that isn’t possible through other indirect distribution channels. Here are the key benefits for brands:
- Brands can receive free and immediate feedback from customers about products and services: something that can be difficult through retailers.
- Going direct to the consumer provides the opportunity to trial new products in limited quantities, with greater ease, and obtain rapid feedback, reducing development cycles and risk.
- It enables brands to develop a better communication channel with its customers.
- Brands can cross-sell their other products and increase overall sales.
- It enables brands to set clear price points for their products, without falling foul of any price fixing rules.
As you can see, there are many more benefits than extra margin as a reason for brands to go direct to consumers. However, the reality is that nearly all brands need to use established retail channels to achieve the scale of sales that they desire. Direct to consumer is part of the puzzle, but not all of it. You only have to look at some of the worlds biggest brands that have directly targeted consumers for a long time, to see that they still need to work with retailers to achieve their goals.
"Direct to Consumer is part of the puzzle, but not all of it."
Nike and Apple are two classic examples of strong, mega brands, that have well-established D2C channels, but universally distribute their products among a traditional retailer-base.
So, we can see that there are lots of business benefits for a brand to deal direct with its consumer. Let's now consider the customer.
Why Do Consumers Go To Brands?
So why would a customer want to deal with a brand directly, instead of a retailer?
- For the "full" brand experience - The presentation and service are all part of the shopping process. If a customer chooses to buy into a brand, it may be that the brand does the best job of delivering the overall experience. Think of how cool the Apple store is compared to most electronic stores.
- There's a comfort-factor in dealing direct with the brand. Going direct to the brand gives you the confidence that the products are genuine, and there'll be fewer issues with any guarantees.
- To get the right information about the product. This is especially the case with consumers going to brand websites. Generally the product data and imaging is best on the brand's own website: they have greater control and the ability to deliver the brand experience
- Access to the best sizing and stock availability. Manufacturers should be able to provide the widest range of sizing, which is hard for retailers to compete against.
Having some appreciation of the benefits of both brands, and consumers, dealing directly with each other, enables retailers to form a few tactics to address this issue.
What Should Retailers do if a Key Brand Targets Consumers Directly?
Let's look at practical solutions that we can adopt in our retail business to combat, and even benefit from, this strategy.
Establish Your Own Brand
The first priority for any golf retailer should be to establish their own brand. This is often overlooked by smaller retailers, but is critical to their success. All retailers should try to define the experience that their customers should expect from them. From the look and feel of the retail space, the welcome they get when they walk in through the door, to the expertise they can access down to the packaging of the goods they take away.
"Don't be defined by the brands you stock. Establish yourself as the expert and steer your customers to the products you think suit their needs."
Every part of the customer journey contributes to a retailer's brand, and can significantly help (or hinder if done wrong). Every effort should be made to ensure that all these elements are consistent, and clearly communicated, to the customer.
Perhaps the key element for golf retailers is the establishing expertise and experience. When a customer visits your pro shop, he needs to know that he's going to get the right advice for his game.
Don’t be defined by the brands you stock - establish yourself as the expert and steer your customers to the products that you think suit their needs. If this happens to be products that give you more margin, so be it. As long as you are providing good advice that delivers, or exceeds, customers expectations, then it shouldn’t matter.
Many consumers don't trust brands when it comes down to reviews and comparisons, so this is an opportunity for retailers. Customers usually look for external validation on their decisions or, in fact, look to abdicate from making a decision and want to be told what is the best product for them. This is a key part of the in-store experience, and gives you an opportunity to add value. Establishing trust like this also puts you back in control of the sales process: taking it back from the brands that are trying to pull their products through the store.
Going back to the 'reviews' for a second, the advice and external feedback (in this instance, 3rd party reviews), is an area that has provided massive opportunity for Amazon. The online marketplace developed a highly-effective review mechanism that, ultimately, reduced the power of brand advertising and brought the power back to the consumer. This has given independent, or unknown, brands a great opportunity to sell their wares, without having to fork-out on marketing.
Become an Order-Maker
Another critical element of success, is being ACTIVE: Stop being an order taker, and be an order maker. If you have been letting the brand drive the customers to your store, you're at risk. However, if you have been driving customers into the store, it shouldn’t matter which brands you choose to work with, or whether they go direct to the consumer, or not.
Don’t be afraid of products that are available direct. You can often offer a higher level of service to your customers than the brands can. You have the ability to talk directly to the customer; understand their needs; and recommend the right products for them.
You can also be a bit more “flexible” on pricing. Most brands will be selling products at full retail price, so for most retailers, that’s good news. It both sets customer expectations at a higher level, and gives retailers a clear opportunity to offer “loyal customers” a discount.
In summary, more and more brands are likely to go direct to consumers. This move is not ALL about sales. Often it's about marketing and customer insight. Consumers will buy direct and in many cases, will pay more for those products. Most brands need retailers to achieve their goals. It's up to retailers to provide the best possible service, and customer experience, to keep the customers coming back.
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