When adding e-commerce functionality to a Web site, branded manufacturers have more to consider than the typical online retailer. Essentially brands have two customers—their retail partners and the end consumer. Many brands facing the decision whether to sell online think they have to choose between pleasing one or the other: They can either please their retailers by not selling online (brands selling online are essentially competing with their retailers for sales), or they can please consumers by making it easy for them to buy direct from the brand’s Web site. After all, convenience is still the No. 1 reason people cite for buying online.
A better option for many brands is “retail-integrated e-commerce.” Retail-integrated e-commerce looks like a typical e-commerce Web site to the consumer. The shopper comes to the branded Web site, researches products, adds them to his cart, and makes his purchase. But it’s what happens behind the scenes that makes this solution unique. Once the sale is completed, the transaction is handed off to a retailer in the buyer’s area, which then fulfills the sale, either by shipping the item to the customer or hosting the customer in-store for order pickup.
With this model, the consumer is satisfied because he was able to make his purchase quickly and easily, brands are happy because they have gained another customer, and their retail partners are happy because they ultimately make the profit off of the sale.
What Effect Does Retail-Integrated E-Commerce Have On Brand Sales?
Happy retailers are important, but the real benefit delivered by this model is the noticeable increase in brand sales both online and in-store. A 2011 survey of brands using Shopatron’s retail-integrated e-commerce solution found an average 5% increase in overall brand sales (including both retail distribution and online sales) after launching the program. This was partly driven by increased online sales resulting from an easier path to purchase for the consumer. Retail-integrated e-commerce brand Rossignol, for example, has seen its online sales grow 40% on average every year since it launched the program four years ago. (For more, view the Rossignol video case study.)
But a second—and more important—sales benefit of retail-integrated e-commerce is that it results in more stocking by retailers. And this additional stocking, resulting in more products on shelves, leads to more products purchased. For example, if a shop stocks 10 models of sunglasses instead of five, then it will invariably sell more of a brand’s products in the shop.
This additional stocking by retailers is caused by two factors:
1. Retail-integration helps brands recruit more dealers because retailers see the brand’s products come up for fulfillment regularly on the order exchange. Seeing a product selling online to local customers proves there is local demand for those products. In a recent survey of nearly 1,000 retailers conducted by Shopatron, 52% of retailers said they place an opening order when a brand launches retail-integrated e-commerce and when they can monitor the new-brand launch to determine whether they should stock the brand.
2. In a standard retail-integrated e-commerce model, a retailer must have the product in-stock to be awarded the local order. This incents retailers to stock all products that are being ordered online, which is usually more of the product line than they would normally have in their stores. In the Shopatron survey, 46% of retailers said they increase purchases from brands that send them online orders. And 36% of retailers surveyed confirmed that this increase in stocking results in more in-store sales for those brands.
Brands looking for an e-commerce solution that supports their primary retail businesses should consider the retail-integrated e-commerce model. After all, most traditional brands rely on retail distribution for 95% or more of their gross sales. Clearly it is in their best interest to keep those retail relationships strong, and studies show that retailers won’t support brands that undercut them by selling direct to consumers. In fact, in the Shopatron survey, 64% of respondents said they would reduce or cease buying from brands that sell online direct to consumers. And that sentiment is growing: This year’s result is 14 percentage points higher than when the same question was posed in a 2009 survey.
Ultimately, pairing a brand’s online sales channel with its traditional retail sales channel increases brand sales through both channels. No other e-commerce model can boast these results.
But How Do Retailers Feel About Retail-Integrated E-Commerce?
For obvious reasons, support of retail-integrated e-commerce is strong. Not only do they feel supported by brands that use this model, but they get prepaid orders that add to their profits and bring customers into their stores. In Shopatron’s 2011 retailer study, 62% of those surveyed said incremental sales from retail-integrated e-commerce impact their profits.
Branded e-commerce is certainly evolving. As e-commerce booms, many brands are coming online and selling direct because they don’t understand their options. But as the trend of selling direct has grown, so has retailer frustration, forcing brands to rethink their online strategies. While easy profits of selling direct might be alluring, the damage that a brand can do to its valuable retail relationships should cause them to take a second look at other options and search for one that will support their business, not damage it.