Navigation: Home > News > Changes in the retail landscape are forcing manufacturers to adjust their sales strategies

Changes in the retail landscape are forcing manufacturers to adjust their sales strategies

by Markus Fost on 3. September 2015


Markus Fost in interview with Hendrik Fuchs, editor of the SME magazine Die News. The whole article can be found here.

Hendrik Fuchs: What challenges do manufacturing companies face  when it comes to the topic of e-commerce?

Markus Fost: Since the information process for products and services now occurs to a large extent online, it is essential for manufacturing companies to build a high level of digital visibility. Manufacturers should recognise the customer journey of their end customers and, in the case of a multi-level sales model, review the suitability of their retail structure for the future. Many sectors are experiencing a decline in revenues from stationary retail and an increase in the market share of online retail – a change that is affecting manufacturers directly. Moreover, with a total market volume of 870 billion euros, B2B e-commerce in Germany offers huge potential for sales; B2C is valued at 136 billion. We only need look to the USA to see what the future holds: there, almost 30 per cent of companies active in B2B retail generate over half their profits via online channels. A number of venture capital investors in Germany have recognised the potential in the B2B e-commerce market and are building business models like “Contorion”. When “Amazon Supply” (a pure online shop for B2B products) comes to Germany, I predict disruptive changes for the retail market and for manufacturers. The latter should be prepared for these changes.

Hendrik Fuchs: SMEs generally lack the financial capital and human resources necessary to build their own e-commerce channels. How can make the switch to online retail be made in spite of these challenges?

Markus Fost: The possibilities open to SMEs depend very much on the industry in which they’re active, the speed at which they’re able to digitalise and the market strength of the company. It’s worth checking whether the industry in question offers viable cooperative solutions and whether controlled cooperation with pure online players like Amazon and Ebay could be beneficial. When it comes to e-commerce, a good piece of advice for companies is to take their destiny into their own hands. Modern open source shop systems provide SMEs with an an affordable and scalable way of building their own e-commerce channel. This said, I’d advise any company to spend time developing an e-commerce strategy and seeking independent, unbiased advice before choosing a system. The wrong choice of system – a mistake from which even large corporations are not safe – leads inevitably to enormous costs. This frequently then becomes the reason that e-commerce is not a worthwhile venture.

Hendrik Fuchs: What’s the most effective way to integrate stationary and online retail channels?

Markus Fost: The answer to this questions forms the core of any e-commerce or online strategy. Generally speaking, a manufacturing company should have an exact idea of the customer journey taken by their end customer; if a company has a multi-level distribution strategy, this is not always simple. If it emerges that end customers are jumping back and forth between stationary, online, mobile and catalogue sales channels – as is usual in today’s consumer goods industry – it is advisable for companies to develop a “no line” retail strategy – that is, to ensure the wide-reaching integration of all existing channels. However, to implement such a strategy is expensive and complex and, if a company has multi-level distribution strategy, can only be realised to a limited extent. Direct sellers enjoy huge advantages when it comes to the interlinkage of various sales channels. For this reason, manufacturing companies with a stationary retail structure are often advised to opt for a cooperative e-commerce strategy in which manufacturers guide their website visitors to the websites of their retail partners, helping to strengthen the latter. This type of arrangement functions in much the same way as an affiliate system.

Hendrik Fuchs: What mistakes do companies tend to make when developing an e-commerce channel?

Markus Fost: Many companies fail to recognise the importance of digitalisation within their industry. Investors are increasingly occupying any and every market segment that offers digital potential, while established market players are watching one industry after another be invaded by new competitors.  Even if they recognise the significance of digitalisation, companies often fail to derive sufficient conclusions and thus underestimate the need for change. This has already forced a number of companies into insolvency, Kodak and Loewe among them. In light of all this, e-commerce projects in companies with stationary roots require true change management competence – and must consistently be driven by top management.

Next post: