Supporting the Supply Chain

The ranks of online consumers continues to swell, and any company that hasn’t yet reacted to this reality—be it a manufacturer or retailer, business-to-business, or business-to-consumer—must start thinking long and hard about selling its products and services on line.

“You can choose to ignore it, but what you’re doing is choosing to ignore the realities of the marketplace,” says Andrew Eklund, founder and CEO of Ciceron, a Minneapolis-based Internet strategy, marketing, and services firm. “You’re consciously deciding that you’re going to stick your head in the sand and deny what’s happening with consumer behavior.”

The behavior? In 2005, consumers racked up more than $143 billion in online purchases, including travel, up from $117.2 billion the year before, according to ComScore Networks, Inc., a Reston, Virginia–based firm that tracks consumer activity. By the end of this year, online sales are projected to jump 20 percent to $211.4 billion, according to the 2006 State of Retailing Online study conducted by Cambridge, Massachusetts–based Forrester Research, Inc., for Shop.org, an association of online retailers. The Shop.org study also revealed that 38 percent of online buyers are entirely new customers to the businesses from which they’re buying. And in another recent consumer study, BIGresearch, LLC, an online research firm based in Worthington, Ohio, reported that 87 percent of respondents said they investigate products on line before they make in-store or in-person purchases. 

“Customers want to do things their way,” says J.P. Doffing, CEO of Mindframe, Inc., a Minneapolis-based Web-development firm. “As a business, it’s your job to provide them with the mechanism they need for purchasing the way they want to purchase. Otherwise, they’ll go somewhere else.” 

Herein lies a potentially perilous problem. Many companies, especially product manufacturers, have well-established sales and distribution networks. And those channel partners, be they resellers or distributors, typically own the majority of a manufacturer’s relationship with its end users. They interact with consumers daily, answer their questions, and field their complaints or concerns. When a consumer purchases a product at Home Depot, Target, or Wal-Mart, for example, his or her relationship is with the retailer, not the manufacturer. Depending on the product, it’s not uncommon that the end user has no idea who built what they bought. 

When a company decides to sell products on line and perhaps raise its previously low profile, how does it introduce this new sales channel without upsetting existing vital sales channels and potentially add distance between itself and its buyers?

“If you want to reach out and grow as a company, you’ve got to be on line,” says Greg McGee, director of business strategy for Bswing, a Web development firm based in Minneapolis. “But you don’t want to do it at the peril of your current channel. You really want to support the overall experience for the customer, and giving them as many buying alternatives as possible is really important.”