Direct selling, where suppliers jump your spot in the supply chain and sell directly to your customers, has always been an issue in the industry. But it’s also been an issue prone to prediction and supposition, with many industry insiders trying to guess how and when it’s going to escalate—and how much it’s going to affect the industry. Whether it’s a more sophisticated and e-commerce-enabled Internet or a younger generation accustomed to buying and searching for information online, there are several social and technological factors many suspect are making direct selling more common. But, is that the case? And if direct selling is increasing, is it actually a threat to your business?
The answer, it turns out, is both “yes” and “no.”
WHY DIRECT SALES ARE INCREASING
The first question with direct selling is always, “Is it happening more?” And for now, the answer seems to be “yes.” Suppliers are diversifying their revenue sources, opening up new avenues for sales. Sometimes these avenues are parallel to your business, not crossing over with your client pool, and sometimes they’re not. Jeff Scott, CEO of Tigard, Oregon-based DocuSource Print Management, a Safeguard company, explained why suppliers are opening new sales channels, and how they might affect your business.
“I do think more suppliers are creating alternate channels of distribution, attempting to not disrupt current channels, but there will be conflicting situations,” said Scott. “Channels evolve based upon necessity. If the suppliers are gaining market share and growing, they will support the channel. If they feel they need more opportunities, it wouldn’t surprise me to see suppliers going direct in certain situations.”
“You already see many industries playing both sides of the fence,” Scott continued. “Amazon hosts sites that are competitive, Microsoft sells hardware and sells software to hardware companies, insurance companies offer services through brokers but also sell direct in some situations. Bringing it home, look how many companies have entered the [promotional products] industry for personalized products,” he said. “It wasn’t long ago Cutter & Buck [wouldn’t] sell to us, only to pro shops, Nike, Columbia Sportswear, the list goes on.” On the flip side, he mentioned how Nike allows consumers to buy personalized shoes, and how that business could easily lead to decorated apparel for companies.
There’s no question that direct sales are on the rise. The marketplace today is so competitive that many suppliers are looking for new revenue streams, sometimes in ways that overlap with your current client base. But is this increased diversification affecting your business any more than previous efforts have in the past?
WHY DIRECT SALES ARE OKAY
Despite the increased threats, the traditional supply chain of supplier-to-distributor-to-buyer seems to be doing just fine. The market is too big, and distributors are too valuable to the supply chain to lose support. As Scott explained above, suppliers will support sales channels that are necessary for their growth, and the traditional supply chain continues to offer just that. The vast sales reach of distributor companies offers too much business for supplier companies to ignore.
“I don’t see a whole lot of direct supplier-to-customer selling in the promotional industry,” said Justin Zavadil, vice president of sales resource group at American Solutions for Business, Glenwood, Minn. “The industry is so large and there are so many customers, that it is very hard for a supplier to reach the amount of clients that they can through the distributor channel.”
Distributors’ ability to focus tightly on customer service, as well as handle creatively complex orders, is another strength that adds to their value in the supply chain. “I believe buyers stand with their previous supply chain because they are having their needs met,” said Scott. “I also believe the more complex the account and its needs are, the more it’s in the favor of a distributor. In those cases, clients see the value of not doing the entire process on their own but hiring a professional to provide consulting to them.”
Finally, there’s the issue of trust. Many avenues of direct selling compete on price alone, but that strategy can backfire. Delivery speeds, product safety and other core sales issues revolve around reliability instead of price. That could convince those who buy direct to return to the traditional sales chain—especially if they get burned on a direct sale gone bad.
Gerry Barker, president of Barker Specialty Company, Cheshire, Conn., said that customers lost to direct selling will come back when seemingly great price deals disappoint. “We are finding that buyers are becoming increasingly cynical of spectacular online offers, and it only takes getting burned once to jade you forever,” he said. Barker cited dependable delivery, product quality and the ability to keep information confidential as value-adds that will sway customers from direct selling. He also stressed the importance of following industry trends and adding value to your business in response to them.
“Service providers, such as promotional product distributors, need to be consistently wary of new trends and concepts that may impact business,” said Barker. “We have survived through Internet marketing, direct marketing, storefront marketing, warehouse club marketing, selling through ancillary dealers like trophy houses and printing shops, etc. Someone is always trying to develop a ‘better way’ to sell direct,” he said. “I do feel that direct selling will continue, but do hope that our suppliers who sell directly are smart enough to recognize the advantages of having a tiered pricing structure to protect their dealers. And, we will be sure to continue to bring value to our clients so they realize the benefits of doing business with someone they know and trust.”