Challenges manufacturers face in an e-commerce environment

Tags: Multichannel Retailing, Online Retailing

Type: White Paper

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 percent of consumer-packaged products sold in the U.S. in 2009, up from 20 percent 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 percent of the total retail market by 2012, up from 6 percent, or $211.7 billion, now, according to Forrester Research.