Recognising benefits of Direct to consumer
One of the things US craft brewers find particularly surprising about their UK-based counterparts is that the latter sell very little of their beer direct to the consumer. In the US many brewers sell pretty much all of their output through their own on-site tap rooms for consumption on the premises or for take-away, whereas this has not been the case to date in the UK.
Instead brewers have ended up selling predominantly to pubs, retailers, and also exporting overseas through third-party distributors. The result being that lots of margin is lost. What we are increasingly seeing though is a growing number of craft brewers looking to grab the extra margin by copying the US model and boosting their direct to consumer sales.
It is just the same scenario being played out in the retail sector. The tougher times being faced by businesses means that brand owners are trying to boost their direct to consumer sales by relying less on third-party brick and mortar retailers.
The latest brand to take this route is Nike, which has just announced its strategy is to sell more goods through its website. This will also enable it to sell goods at a faster rate thereby aligning its sales channels with the intended speeding up of its product development pipeline. This will boost margin and give it the power to compete more effectively with the agile newer brands that have entered the market with their short lead times and direct to consumer models.
Nike’s move follows that of Adidas, which some time ago put in place a strategy that gave priority for its products to be supplied into its own stores ahead of into other retailers’ outlets via its wholesaling business. Previously its own units had played second fiddle to other retailers’ stores and so had often missed out on stocking the hottest trainers – to the frustration of its employees and customers. Adidas was also missing out on a fuller margin by employing this odd strategy.
These moves by major brands are certainly a worry for retailers and put forward yet further evidence that the safest route to secure a successful future is to sell your own brand of unique products. As brand owners increasingly utilise the internet to sell direct to consumers then retailers will face a tough challenge to remain relevant.
Glynn Davis, editor of Retail Insider
K3 Retail deliver multi-channel solutions that enable retailers to create joined up shopping experiences for their customers whether they choose to buy on-line, direct, in-store or via mobile. It has over 20 years’ experience delivering award winning solutions, to more than 175 internationally recognised retail brands.