Do manufacturer direct sales undermine retail relationships?


A powerful article for our industry to consider by Chuck Surack of Sweetwater.

We saw this article recently in the US Music Trades magazine and felt it had to be circulated. Chuck presides over a huge retail business with over 1000 staff and writes an impassioned message to the industry that we should all read and consider.

The Downside Of Manufacturer Direct Sales

¬†Why a “click to buy” button threatens¬†to undermine longstanding retail relationships¬†

In recent months, I’ve noticed a disturbing trend of certain manufacturers selling their products direct to end-customers, bypassing the “traditional” rep/dealer chain. I have deep reservations about this trend, not just for its impact on my company, Sweetwater, but also for all retailers, reps, manufacturers, the m.i. industry, and the end-customers we serve. This is a practice that we must address now. Most of the 5,000 or so retailers have elected not to create their own private labels to compete with the manufacturers; it is a slap in the face for manufacturers not to offer us the same respect.

It’s no secret that sustained success in our industry is built on relationships and loyalty. Those two powerful words reflect strong fundamental values. If having an “Add to Cart” button on your site garners you a few sales but ultimately strays from those values and damages or destroys relationships and loyalty among your retailers, is it really worth it? Trust matters.

I can see where some manufacturers might believe there are benefits to selling direct. But when we take a closer look, those seeming benefits aren’t as large as they appear, and in fact ultimately will cost the manufacturer. One definite cost will be the loss of support from retailers. One would have to assume that even if they don’t drop the lines that sell direct, retailers will shift their focus to selling brands that don’t sell direct. Manufacturers have said they expect growth of 1% to 2% using direct sales. But the loss of even a few good retailers in response will eliminate that growth and more, resulting in a net loss.

For decades, manufacturers have been building a supply chain of retailers to serve the needs of both the manufacturers and existing and potential end-customers. This chain works. The key to its success is that everyone has their area of expertise and can focus on doing that job well. The manufacturer designs and builds high-quality products, often with input and feedback from retailers who are constantly interfacing with end-customers. The retailers focus on selling the products, which includes marketing, proactive sales outreach, order fulfillment, after-the-sale support, repair, returns, and so much more, all of which leads to a great customer experience.

Putting up a website with an “Add to Cart” button is just one tiny part of providing a customer experience. Good retailers know this and work hard to do what manufacturers are not set up to do: deal effectively with end-customers. Good retailers are intentional about every aspect of a sale, from confirming the order to getting the item shipped quickly to following up after the sale. Plus, retailers are uniquely qualified to assemble, quote, and sell systems and packages, whereas individual manufacturers cannot adequately service this need at all–and selling direct completely undermines this massive market opportunity.

When a manufacturer sells a product direct, the retail part of the equation is obviated, and there is no compelling customer experience. Simply put, manufacturers are not in the retail business. Pretty much every manufacturer we challenge about selling direct says, “It’s such a small part of our business, it doesn’t even matter.” That statement alone proves that the manufacturer has no idea what they’re doing. A good retailer knows that every single customer matters. Every interaction matters. Every experience the customer has can go viral–either positively or negatively. But beyond that, if it doesn’t matter, then why do it at all and risk losing customers and dealers?

What can a manufacturer do to drive sales for customers who visit their site or inquire directly? There are many options. For example, use “Buy Now” buttons that link to retailer product pages. Use services such as Omacro to connect to retailers on the web. Keep “Where to Buy” links updated–it’s amazing how many companies don’t do this. Partner with your retailers for better training and marketing. Support dealer initiatives that support your brand and products. Above all, simply communicate with your dealers!

Fortunately, most manufacturers understand the situation and have been loyal to the mutual support synergy provided by the retailer chain. They know that they’re manufacturers, not retailers, and they understand the benefits of doing their job to the best of their ability, while allowing retailers to do our job to the best of ours. This proven partnership provides the best experience and support for our end-customers, which keeps them coming back to purchase again and again.

When a manufacturer chooses to blindly discard this partnership, everyone loses. I can assure you that here at Sweetwater, we are closely monitoring which manufacturers are choosing to go direct and will be making quick decisions about the lines we will be carrying and supporting based on that. I encourage all of the more than 5,000 retailers in our industry to take a close look at which manufacturers are supporting you and which are choosing to compete with you, and to decide who you will support accordingly.