MSRP v MAP Image

The Future of Retail Could Be in The Hands of the Brand Manufacturers

The line between retailers and manufacturers is becoming blurred. Not in a creepy way that Robin Thicke sang about, but in a transitional way. In the wake of increasing MAP violations, many brands and manufacturers are starting to consider selling directly to customers, if they aren’t already. But what does this shift mean for retailers?

The direct to consumer market only makes up 12% of ecommerce as a whole, but it is growing 15% annually. Why is it growing so fast? The answer can be found in retailers’ pricing strategies.

Attack of the MAP Violations

When manufacturers sell their products to retailers to achieve a wider customer base, they want to make sure they can preserve their brand. One large factor of brand value is price, and to make sure the price is right, it’s important to establish MAP, or minimum advertised price, with retailers. MAP basically acts as a price floor for retailers so they don’t hurt the manufacturer’s brand with a low price.

MAP violations
So do retailers abide by these processes? Well, some do. Approximately 40% of retailers never violate MAP, but 20% violate it all of the time. Yikes! This creates a problem, especially with the intense competition in the retail industry. When one retailer violates MAP, it often creates a domino effect. Since many retailers are attempting to undercut one another, a price is only going to be lowered constantly until retailers hit their own minimum price. On average, MAP violations are 14.5% below MAP. This has left many brands and manufacturers with no choice but to begin selling directly to consumers.

How Brands and Manufacturers are Fighting Back

A handful of brands and manufacturers are turning to their own websites as a means to sell their products, and many have achieved great success because of it. Many enjoy the independence of cutting out the middle man, and many enjoy tailoring the brand experience on their own site. In a Digital River, Inc study conducted by Forrester Research, 82% of responding manufacturers said selling directly to consumers improved customer relationships, and 76% reported that direct selling met or exceeded their revenue goals.

But wouldn’t this offend retailers by adding more competition? Many would think they’d move to a different supplier, but the study shows that direct to consumer selling has done the opposite for many manufacturers. More than half of manufacturers that sell directly to customers report an improved relationship between them and their retail outlets, and only 9% reported a negative relationship. This makes sense when you think about it. Approximately 54% of manufacturers with a positive effect said they routed orders to retail outlets for fulfillment, giving them additional business, among other reasons.

How to Sell Directly

Before you start selling to consumers, there are a few things to make sure you’re doing to seal the deal. First of all, do not redirect your shoppers to another site to complete the purchase. Your website is content rich, and is likely optimized for search engines. It’s easy to find, and easy to navigate, so make sure it’s optimized for transactions. Nothing is more frustrating for a customer than clicking on a product and being redirected to a different, unfamiliar site.

And of course, offer high definition pictures and in-depth descriptions to leave little hesitation for the customer. Be sure it’s optimized for mobile as well, especially since it now makes up 50.3% of ecommerce traffic. Don’t tarnish your brand image with a poorly designed site. You’re going to want to showcase your items, but make it transaction-friendly as well. Be sure to advertise the fact that consumers can buy directly from you to keep them from leaving for a retailer that is likely to carry the same product.

Of course, the best way to maximize reach is to sell through both your own website and retail channels. Many, 50% as a matter of fact, already sell on both retail and direct channels, typically online. Doing so can help you preserve your brand image, and increase the breadth of your product availability. If you haven’t already, now is the time to take more ownership of your brand and start selling directly to consumers. You’re not working against your retailer outlets, you’re just boosting your brand image.

What else can manufacturers do to preserve their brand?

Brian Smyth

Brian Smyth is a former content writer at Wiser, a dynamic pricing and merchandising engine for online retailers. He holds a BS in business with a concentration in marketing from San Francisco State University.

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