Challenges manufacturers face in an e-commerce environment

August 4, 2010 by Diana Ferraez · Leave a Comment
Filed under: Articles 

By Richard Angelo, Director Product Marketing, Jesta I.S. Inc.

 Traditionally, consumer product manufacturers have marketed their products through the traditional retail customer channel or in many cases through company owned brick and mortar stores. Companies with strong brand images have been able to successfully market in both spaces by incorporating through line exclusivity offerings or protective pricing strategies. This has historically been received by traditional retailers with mixed reactions running from resigned acceptance to outright anger.

Considering today’s tougher economic conditions, manufacturers see their traditional retail client incorporate more profitable private label goods that are in many cases being sourced by the retailers directly, cutting the consumer products manufacturer out of the picture. Private-label goods accounted for 22% of consumer-packaged products sold in the U.S. in 2009, up from 20% the year before, according to The Nielsen Co. Some manufacturers today are choosing e-Commerce to sell directly to the consumer in order to increase market share and add profitability to their lines. Another impetus to sell via the Web came with the recession, which prompted consumers to do more shopping online, where comparison bargain-hunting is easier. Online sales are expected to reach 12% of the total retail market by 2012, up from 6%, or $211.7 billion, now, according to Forrester Research.

Manufacturer sites are already established as the trusted resource for product information. Forrester Research reported that 77 percent of consumers expect manufacturer web sites to have the best product information and 75 percent say they should be useful for post-purchase information. Because of this existing mentality of trust, manufacturers are finding themselves in a position to influence sales and customer satisfaction in a way that never has been available to them before.

 The traditional role of a manufacturer was to mass-produce products and sell them in bulk to retailers (or distributors) who provide the infrastructure and services to consumers that wish to purchase these products in the retail market. There has traditionally been a sharp distinction between the wholesale market and the retail market. However, the advent of online retailing and drop-shipping has blurred these lines to a point where manufacturers are now active competitors in the retail market. 

Direct sales by consumer-brand manufacturers are one of the fastest-growing areas of online retail, increasing almost 13% in 2009 to $487.6 million, according to Vertical Web Media, a Chicago-based research firm. Manufacturers such as Procter and Gamble, Levi Strauss & Co, Mattel, and Columbia Sportswear are now positioning themselves as retailers with revised and revamped consumer friendly websites. As a consequence these companies are increasingly looking at direct-to-consumer selling. Six key motivations can be identified:

  • Recovery of share of margin
  • Increased brand visibility and control
  • Shopper experience control
  • Strengthened relationship with increased insight into end-consumer
  • Improved ability to sell a wider assortment and services
  • Improved price and promotions control

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The technical and process challenges to the Manufacturer that markets in this space are not insignificant. New data requirements and delivery methods will have to be created and streamlined in order to achieve a high level of success. Some examples are:

  •  Near real time inventory positions presented to the web front end
  • Forecasting web sales to be incorporated into the make \ buy plan
  • Inventory reservation \ segregation to support the online channel
  • Flexible pick \ pack ship warehousing processes with an emphasis on parcel shipments
  • Robust freight and tax calculation processing
  • Well thought out returns processing and policies note: some e-tailers report up to 25% return rates
  • New CRM data based on end consumer information
  • Sophisticated pricing strategies i.e. freight free on xx dollar purchase , BOGO, etc

When manufacturers sell direct to consumers they risk losing their wholesale accounts, as well as tarnishing their reputation. Over the past few years, many manufacturers have struggled with the notion that they’re doing all the legwork (product development, purchasing, warehousing, shipping, etc.) while drop-ship retailers are reaping all of the benefits oftentimes at a higher margin than the manufacturers themselves make. We’re finding that more and more, manufacturers and distributors are turning to retail e-Commerce websites in an effort to expand their customer base and increase sales. And who can blame them?

About Jesta I.S. Inc.

Jesta I.S. is a leading supplier of enterprise business solutions for manufacturers, distributors and retailers primarily in the soft goods and specialty industries worldwide. Jesta I.S. is recognized for its expertise, innovative products and services and its commitment to evolving business solutions in today’s rapidly changing business world. Jesta I.S.’ solutions process essential business management information for well known industry leaders including Perry Ellis International (NASDAQ: PERY), PUMA (German: PUM), Genesco Inc. (NYSE: GCO), Town Shoes Limited, Cole Haan, Haggar Clothing Co., Cavender’s Boot City and DSW Inc. (NYSE: DSW) as well as many others.

Jesta I.S. Inc.

P: 1-888-925-5152

Email: info@jestais.com

Web: www.jestais.com

Copyright (2010) Jesta I.S. Inc. ALL RIGHTS RESERVED. All information contained in this document is the property of Jesta I.S. Inc. All company and product names are trademarks or service marks of their respective owners

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What Goes Mobile?

July 21, 2010 by Diana Ferraez · Comments Off
Filed under: Articles 

By Leslie Belcher, President, Jesta I.S. Inc.

 Ten years after national commercial platforms for mobile commerce were launched in the Philippines and Japan; they are slowly beginning to emerge in the North American market. Residents in rural parts of the Philippines and other developing nations routinely pay bills through their smart phones, while people in Japan and Europe canbuyproducts as well as train and airline tickets using their mobile phones.

The accelerated growth of mobile commerce, combined with the acuity of location-based applications makes it possible for direct response retailers to use the mobile channel for locally targeted mass marketing. One estimate, according to Mobile Marketer, puts worldwide mobile phone connections at 4 billion; while another by Neustar and SMS Mobile Marketing predicts that mobile revenue in the United States will reach $3.3 billion by 2013. SMS text messages dominate mobile advertising in markets like the U.S today, but coupon to phone and location based marketing are emerging.

A recent study by Coda Research agency has revealed that mobile ecommerce in the US shall grow at a compounded rate of 65% between 2009 and 2015. According to this study, mobile phones will constitute 8.5% of all ecommerce revenues in the US. Here is an estimate of the mobile commerce market in absolute terms:

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  The rapid growth of banking and bill paying activities with mobile phones aside, today’s retailer must be looking towards some rapid development of new marketing strategies. Three areas seem to be emerging as real opportunities: coupon to phone, product locators, and location based marketing. All three rely heavily on existing robust CRM data bases, integrated ERP and POS systems that readily interact with various web services. In the case of product locators, near real time inventory status and true distributed order management functionality are essential ERP functions since the consumer is being directed to sites with product on hand. POS systems are being asked to readily support scanning of bar coded coupons on smart phone displays.

Mobile coupons are the next evolution of the traditional printed coupon and they’re growing in popularity. The YankeeGroup released a consumer survey report in November 2009, which found that 73 percent of respondents were interested in receiving mobile coupons via SMS or MMS. The same report also predicted that mobile coupon redemptions would increase tenfold over 2010. A new report from Juniper Research, forecasts that consumer usage of mobile coupons will generate close to $6 billion globally in retail redemption value by 2014. This new approach to coupon marketing will place tremendous pressure on legacy POS systems to adapt to scanning smart phone displays at the register. Not only will the POS system need a scanner that can physically read the phone display (laser scanners will not), but the POS software will need to be able to handle what amounts to ‘timed pricing by customer’. With this kind of capability being implemented as the cash desk, it is essential to have robust, comprehensive, and real-time accessible CRM databases that can customize campaigns based on customer buying histories and customer loyalty programs.

Smart phone applications now offer various product search tools. Google offers freeware like Barcode Scanner and Googles that can locate a product based on its barcode or a photo image. They offer not only where to buy based on your location, but price comparisons and some retailers offer inventory checking. Product Search for mobile with local inventory lets a user see if, say, a Nikon Coolpix camera is in stock at a nearby Best Buy or Sears and then provides basic directions to get there. Consumers can then tap on an adjacent “in stock nearby” link and navigate to the seller’s page to see whether the camera is in stock. This is approach has exciting potential for the retailer who can provide accurate near real time inventories by product and by site. The obvious risk is alienating the customer who drove out of her way to the store only to find the item was not on hand. The pressure on the ERP system to update the Web Service with accurate on hand inventories by site is critical to success.

The third emerging Mobile marketing strategy involves location based marketing to mobile devices. Google for example is updating its Buzz applications to not only recommend close by retail services, but provide reviews and relevant information along with the obvious directions. Some retailers combine e-coupon pushes to the mobile user to further entice the consumer. The reliance on robust CRM data is critical to the ultimate success of this marketing approach. To be effective, location-based marketing requires the ability to target appropriately, by both geography and context. As much as mobile consumers are looking for places and things, they are also looking for information (directions, reviews, recommendations, help). Part of what makes hyper-local targeting effective is having both the right kinds and the right depth of content to go with relevant ad inventory and offers.

The future of e-Commerce utilizing new smart phone technologies is growing exponentially over the next several years. Retailers that invest in their IT systems to tap into this emerging market can grow market share and revenues successfully.

About Jesta I.S. Inc.

Jesta I.S. is a leading supplier of business solutions in supply chain management systems for manufacturers, distributors and retailers primarily in the soft goods and specialty industries worldwide. Jesta I.S. is recognized for its expertise, innovative products and services and its commitment to evolving business solutions in today’s rapidly changing business world. Jesta I.S.’ solutions process essential business management information for well known industry leaders including Perry Ellis International (NASDAQ: PERY), PUMA (German: PUM), Genesco Inc. (NYSE: GCO), Town Shoes Limited, Tween Brands Inc. (NYSE: TWE), Cole Haan, Haggar Clothing Co., Cavender’s Boot City and DSW Inc. (NYSE: DSW) as well as many others.

Jesta I.S. Inc.

P: 1-888-925-5152

Email: info@jestais.com

Web: www.jestais.com

Copyright (2010) Jesta I.S. Inc. ALL RIGHTS RESERVED. All information contained in this document is the property of Jesta I.S. Inc. Vision Store is a trademark of Jesta I.S. Inc. All other company and product names are trademarks or service marks of their respective owners.

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