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Should Suppliers Sell Direct to Consumers?

The following article was published as a guest column in the June 2010 edition of Toys 'n' Playthings magzine.

Manufacturers and suppliers in all sectors have been leaning more and more towards direct to consumer selling for many years as an ever-expanding part of their channel-mix. Levis, Apple and Sony are among the biggest names that have embraced direct selling, but it's happening everywhere.

Whether itís via concept-stores or websites, the outlet for suppliers selling direct isn't really important to retailers. All they know is that when suppliers start bypassing their own sales efforts and compete directly with them on their websites (often by having exclusive products, shifting old lines at cut prices, or withholding stock for sale when everyone else is out-of-stock) it can be quite a kick in the teeth.

Companies like LEGO who are often singled out as the biggest culprit of direct selling, would say that their ingenious approach to collaborative product development has resulted in better products - something that benefits supplier and retailer alike. By enlisting an army of fans to contribute ideas via their website (often for no other reason than because they want to) it's perfectly possible to believe that some great new products have been created in the process. The fact that LEGO listen to their end customers, give them a reason to participate in concept development and have created a community of avid fans is a great use of the web.

Cries of "couldn't they do all that funky stuff without selling exactly what I'm trying to?" is a pretty reasonable reaction though. And that's before Iíve even started on the suppliers who just throw products online (in blatant competition to retailers) without even trying to add value in the process.

The problem is, just adding an ecommerce section to an existing website without much more thought than that, is precisely what many suppliers have done. One company last year caught my eye by suddenly selling products online without the merest mention of it in any press release or promotional material. That's strange. A company launches an expensive, ecommerce website and they don't even announce it?

Of course this was no oversight. The fear of alienating retailers is clearly a major concern for some suppliers, especially those who still rely on bricks-and-mortar stores to get their products under the noses of prospective customers.

It must be a fine balancing act: Selling to the public as enthusiastically as you can, but making sure that you don't quite upset retailers enough to lose them for good. Personally I wouldn't blame any supplier for at least weighing up the pros and cons. There cannot be a forward-thinking supplier anywhere who hasn't at least had that conversation. Just as independent toy retailers have tried to use the web as a tool to bolster their own sales, it would be rather hypocritical to not expect another company to want the same.

The fact is though, some have chosen to go down the direct route whereas some have actively chosen to stick with doing what they do best. No-one ever said selling online was easy. Even if it is cheaper than opening a retail outlet, there are hundreds of practical considerations such as forming a talented team to manage the website, introducing a new stock control system and perhaps worst of all, having to deal directly with the customer! It's easy to see how all this could distract from a suppliers core business.

Flair's Peter Brown has a freshingly straightforward take on the matter: ĒAt Flair we see our primary role as being an effective and efficient supplier to our retail customer base. We similarly rely on our customers to supply the ultimate consumers as efficiently as they can. That provides us with a very concise and clear definition of responsibility without any conflict of interests. If I were a retailer I would be most uncomfortable about a supplier who sold directly to the public.Ē

That's interesting not least because a handful of retailers listed on Toy Shop UK have chosen to vote with their feet and no longer deal with any supplier who competes with them. It has to be said though, that the vast majority don't do that. They accept it. It may not lead to a particularly happy marriage between supplier and retailer but it would appear that so far, some suppliers have managed to get that balancing act right. Whether itís a wise long-term strategy remains to be seen, but once a supplier has embarked on the road towards selling direct to the consumer, itís pretty hard to criticise retailers for wondering whether the suppliers ultimate aim is to remove the traditional retail channel altogether.