Why are manufacturers selling direct and why retailers still have the edge with their service, knowledge and experience? Bill Miller, the MD of the Kitchen Bathroom Buying Group (KBBG), investigates.
The recent news that a leading KBB supplier is going to sell direct has, as you can imagine, led to quite a lot of debate among our Kitchen Bathroom Buying Group (KBBG) members, many of whom are customers of this supplier.
This got me thinking about the reasons behind the decision. Are they unusual in opening a direct sales channel? The truth is that many KBB suppliers now sell direct to consumers. Some do this under the radar, by selling through a website that has no obvious connection to them, while others have been open about their wish to sell direct.
The first obvious question is, why? There are many reasons, the key one being the need to generate more sales. Many KBB suppliers have their head offices based overseas. In my experience, the senior management probably has little or no understanding of the UK market. Their interest is the bottom line, and achieving the agreed sales targets, come hell or high water. They are not too worried about where these sales come from, only that the targets are achieved. It is little wonder in an uncertain market that suppliers look for additional sales channels.
The sad fact is that the number of independent kitchen and bathroom retailers has been slowly falling. With an ageing business ownership profile, and only limited new start-ups, this decline is set to continue. This, of course, creates a smaller sales opportunity for suppliers. This, coupled with the rapid rise in online sales, accelerated by the pandemic, has created a very attractive sales opportunity for many suppliers and the temptation for them to create their own direct-supply business is too great for them to resist. An online retail site can be set up quickly and relatively inexpensively, and by using a third-party fulfilment company, even the logistics can be taken care of. You can see why this is often an attractive option for some suppliers.
Some suppliers do not believe independent retailers add any real value to sales.
Bill Miller the MD of the Kitchen Bathroom Buying Group (KBBG)I have heard it said by some suppliers that consumers that purchase online, are not the same customer that will purchase from an independent retailer. Therefore, the argument goes that by selling direct, the supplier is not actually taking any sales away from their retailers. I’m not sure this was ever truly the case. In today’s complex consumer market, customers will look at many sales channels, including both online and through retail, before making a buying decision.
Many suppliers wish to control their brand message. They worry that the millions they may spend on advertising could be wasted if the retailer does not carry the same brand message and loyally sell the brand to all the consumers that the supplier believes will flock into the showroom driven by their advertising. They lay awake at night worrying that the retailer may be tempted to switch the consumer over to a competitor’s brand, therefore wasting their marketing investment. The truth is that some suppliers do not believe that independent retailers add any real value to sales. They see them more as order takers, simply taking the orders that the supplier themselves have generated through PR and advertising.
All that said, my question to the supplier is, if you bypass independents and sell direct online, where will the consumers get to see, feel and touch your product? Where will they have the great new features and benefits explained to them and demonstrated? What suppliers often fail to understand is one of the primary reasons that a consumer will buy from independents is to benefit from their experience and advice. The retailer has invested time and money in displays and learning about the products they sell and is happy to demonstrate the advantages of the product, often persuading a consumer to increase their spending to buy a more highly specified product.
How should a retailer react to this situation? My advice is not to knee-jerk. The majority of direct sales made by a supplier are done at the full retail price. Even though some consumers may perceive there is a benefit from purchasing direct, convenience may dictate that the consumer would rather buy everything from one source.
The fact is that the line between a supplier and a retailer has become very blurred, with retailers now sometimes competing for the same sale with the very suppliers that they work with. Whether they like it or not, retailers will have to accept this new normal. The genie cannot be put back in the bottle.
Importantly, independent retailers need to have confidence in their own strengths and abilities, which no supplier selling direct can match. Namely, local knowledge and reputation, experience and the firm belief that they do add real value to the sale. If they embrace this, then the future remains bright for the independent retail channel.