Becoming a “Bretailer”: is direct-to-consumer trading right for you?

Posted: Friday 20th February 2015 in Retail Strategy, Thought Leadership.

There are many things to consider when planning direct to consumer trading

So you haven’t heard of “Bretailing?”  I’m not surprised.  I made it up, but bear with me and all will be revealed.

First though, I’d like to provide you with a quick recap of what retailers do and why they exist, because it’ll provide some useful context for
the remainder of this article. I’ll keep it brief though, because you probably know this.

So why do retailers exist?

  • Retailers provide convenience –They are typically well located, often near other retailers, where you can park your car easily, sometimes for free, with only a short walk to the shop (and back to the car, which is handy if you’re shopping for something large or heavy)
  • Retailers provide choice “width” – Often stocking more than one category of product, so you can pick up a few different things on your visit.  In the case of a department store or grocer, you can spend hours shopping cross category, and coming home with bags of goodies
  • Retailers provide choice “depth” – they typically offer many different brands to choose from within a single product category, providing more variety in product features and quality
  • Retailers provide a spectrum of product prices – so no matter what your budget, you shouldn’t come away empty handed
  • Retailers offer you immediacy – you go in and you select the product you like.  You pay, you leave, you get home and you can use your new thing pretty much instantly
  • Retailers offer you advice – staff, admittedly with varying levels of knowledge and helpfulness, are usually available on hand to assist you with your purchase should you need it

There are probably many more to add to my list, but you get the point.  Retailers have a firm purpose – they are useful and convenient, and are good at what they do.  And all of this creates a compelling proposition for a consumer to visit the retailer, thereby creating the audience that the manufacturing brands need to sell their product.  All that retailers ask for in return for selling a brand’s product is the opportunity to make a profit margin.

And that’s a fair swap.  As a brand owner, I’m happy for you (the retailer) to sell (hopefully large) volumes of my product and in return, I’ll give you a discounted buying price.  You can mark it up, to make a gross margin in order to pay for the commercial, operational and financial elements associated with retailing, with a bit left over. Hopefully.

But I’d like to explore in a little more detail the manufacturer’s side of the bargain. Yes, as a brand manufacturer, we are accepting that we offer our product to the retailer for a discounted price.  But there is more at stake than a bit of margin.

Manufacturing companies invest vast sums of money building brand “equity,” in order to influence consumers and positively affect the way they feel towards their brand.  But through a retailer, the manufacturer loses control of their brand at the most important time of the customer journey; right when the customer is at the point of sale.  Because it is the retailer’s prerogative to decide how and where they merchandise each brand, how it looks on the shelf, where on the shelf it is, the promotional messaging, the advice staff give about it, and all the other elements, whether it be on or offline.

This gap in the consumer relationship is something that manufacturer brands have largely had to swallow historically.  But I’m increasingly being asked by manufacturer brands what the considerations are when exploring whether a direct-to-consumer (DTC) proposition is right for them. So it appears that brands are exploring this route with increasing intent, with a motive of not only gaining more control over the customer relationship, but with added benefit of retaining more margin.

And the platform that manufacturer brands are looking to explore in order to test whether it could work?  The low risk Internet.

This doesn’t come as a surprise when reviewing the list of retailer benefits I stated at the beginning of this article.  Sure, a website can’t deliver them all in the same way, but the most important points it covers off to a satisfactory level, if not better.

But if you’re a manufacturing brand reading this, slow down before you go and decide that DTC is the next big thing for you.

Is bretailing right for you?


Is ‘bretailing’ right for you?

Try answering these questions first; it should give you a better steer on how successful you might be:

  • Your product – Do people already buy it online? If the answer is yes, then ask yourself, are they likely to buy it online as a product in isolation? Largely this depends on how involved the purchase is.  Domestic bleach for example, may easily be put into an Amazon basket, but would struggle to pull people to a dedicated website only selling bleach
  • Is your product a luxury item?  – There are many items that are being counterfeited, but most at risk is the luxury market.  This works in favour of a DTC proposition, as purchasing direct from the site will provide confidence and reassurance
  • Your brands – do you own more than one brand you could go to market with?
    If yes, there may be more chance of success if multiple brands are offered with a harmonised proposition. For example, the proposition may be “the one stop shop for a super clean home,” where products from different categories are offered – laundry detergent, dishwasher soap, bathroom cleaner, etc.
  • Your content – Is there the capacity/do you have the capacity to produce educational/informational/engaging content that will drive consumers to your site?  Let’s take bleach again (sorry bleach manufacturers, as you may argue this); for me personally, I’m unlikely to ever bother reading about it.  So no amount of “engaging” content is likely to change that, which will give me less reason to visit a dedicated site.
  • The shopping environment – Does the Internet add value to your customer’s purchase journey?  If you’re a chocolate bar manufacturer, then probably not.  But, for example, if your product is designed to solve issues of a sensitive nature, then the Internet can provide a perfect environment to support your DTC proposition. For example, products related to personal hygiene
  • Existing commercial partnerships – To make this work project work, you’re going to need to sell large volumes of your product directly.  But what if it’s really successful and you sell well beyond your expectations? Will you upset the applecart with your existing etail and retail partners?
  • Subscription – is your product something that people would potentially sign up to on a regular basis?  I.e. they consume or use it with a predictable volume and frequency? If so, this is perfect for DTC selling
  • Fulfilment – do you have the means to hold stock and deliver orders to individuals’ doors? And do you have reverse logistics capabilities, so do you have a smooth process in place if a customer wants to return and refund an item?
  • Internal pressures – Do you have eCommerce experience within your business?  Does anyone internally know what’s involved in displaying sales messaging direct to your customers? And is the Brand Director going to be supportive when you advise them that you are proposing to put a product price and some promotional messaging next to their beautiful imagery and video content?

Brands retailing direct, or “Bretailing” as I’ve referred to it (don’t worry, I don’t think it’ll stick), is certainly not the right move for all manufacturer brands, but with some careful consideration and planning it can, and has, really worked for some.

If you’re exploring the idea and would like a conversation about it, Summit has had experience in the end to end delivery of these projects, and continues to partner on them.  Please contact Neil Collins on 0203 428 5307 if you’d like further details.