It’s no secret that manufacturers don’t often sell products directly to consumers.
When you go to a store to buy a product, there’s a good chance that the manufacturer of that product isn’t the one selling it to you.
In fact, most manufacturers rely on retailers, distributors and other middlemen to distribute and sell their products.
So why don’t manufacturers sell directly to consumers?
After all, it would seem to make more sense for companies to cut out the middleman and sell their products themselves.
But there are a few reasons why this doesn’t happen as often as you might think.
In this article, we’ll take a look at some of those reasons and try to understand why manufacturers prefer not to sell directly to consumers.
Why Don’t Manufacturers Sell Directly to Consumers?
Right of the bat, it’s important to note that not all manufacturers choose to avoid selling directly to consumers. Some do opt to set up their own sales and customer service infrastructure. Others set up online stores. But this is not the norm. Why is that? Why don’t manufacturers sell directly to consumers?
Here are the 7 top reasons:
- Sales and Customer Service Infrastructure Setup is Costly
- Retailers provide valuable marketing and distribution support
- Retailers can offer product warranties, returns and after-sales support
- Consumers are often more comfortable buying from retailers
- By going direct to consumers, manufacturers risk losing control over distribution and pricing
- Retailers are better able to manage inventory
- Retailers can offer a wider selection of products to the consumer
Let’s go deep and understand each of these.
1. Sales and Customer Service Infrastructure Setup is Costly
Many manufacturers would consider it to be too costly to set up the necessary infrastructure and personnel to handle sales and customer service. The costs of hiring, training, and retaining sales and customer service personnel can be significant.
In addition, a call center or other customer service operation would need to be established with the necessary technology in place to handle orders and inquiries.
This would also require an online presence including an online store as well as a call center with operators who are knowledgeable about the products.
A separate order processing and shipping department would also need to be set up, adding even more to the cost.
Many manufacturers feel that it is not worth the investment to establish such an infrastructure when they could instead partner with a company that already has the field operations to get the product to the consumer.
By partnering with a third party, like a distributor, a reseller or a retailer, the manufacturer can focus on what they do best – producing quality products – and leaving the sales and customer service to the partner company.
This can be a win-win scenario for both parties involved. The manufacturer gets to sell their products without having to worry about setting up the necessary infrastructure, and the partner company gets to increase their product offerings and generate more sales without worrying about the manufacturing.
2. Retailers provide valuable marketing and distribution support
Retailers provide valuable marketing and distribution support that manufacturers need to reach consumers.
They can help promote products by featuring them in their stores and on their websites. They can also distribute products to consumers through widespread networks of stores. This distribution reach is much broader than what a manufacturer could achieve on its own. By working with Retailers, manufacturers can increase the visibility and availability of their products to more consumers.
In addition, Retailers can offer valuable consumer insights. They track what products are selling well and why and use this information to make purchasing decisions.
They can share with the manufacturers the reasons why customers are buying.
Equally, they can explain why some customers are leaving the store without buying anything.
This feedback helps manufacturers better understand what products consumers want and need, which can help guide future product development efforts.
3. Retailers can offer product warranties, returns and after-sales support
Manufacturers may offer basic warranties on their products, but retailers can offer extended warranties and handle product returns as well as after-sales support. Most manufacturers are not set up for all of this.
By using a retailer, the manufacturer can provide an extended warranty to the consumer while still keeping their costs down.
When a product breaks or malfunctions, the consumer needs after-sales support to get it repaired or replaced. This process can be time-consuming and frustrating, especially if the product is out of warranty. By using retailers, manufacturers can offer after-sales support to consumers to get the broken product repaired or replaced more quickly and easily.
4. Consumers are often more comfortable buying from retailers
Consumers are often more comfortable buying from retailers rather than directly from manufacturers because they trust that retailers will have their best interests in mind.
Retailers typically have more customer service options and return policies than manufacturers do, which makes customers feel more secure about their purchase.
Additionally, retailers often offer discounts, product bundling or other incentives to encourage consumers to buy, something the manufacturer may not be able to offer.
Retailers also offer a variety of payment options, which can be helpful for consumers who cannot pay upfront. They also have sales and discounts to attract consumers.
Many retailers offer loyalty programs, which can give consumers discounts and other perks. These programs can be very helpful for people who shop at the same store often.
A manufacturer will find it difficult to replicate all of the benefits that a retailer is able to provide a consumer.
5. Manufacturers risk losing control over distribution and pricing
In most cases, distributors and resellers are able to set product prices and promotion strategies based on local market conditions.
Distributors typically have a large network of retailers that they work with, which gives manufacturers access to a much wider market. Additionally, distributors can help manufacturers price their products more competitively.
If manufacturers cut out the middleman, they will be forced to decide how their products are priced and where they are distributed.
So, by going direct to consumers, manufacturers risk losing out on the benefits of distribution networks and pricing that distributors and retailers offer. Plus, they will be forced to compete with large retailers who will no longer carry their products but instead carry competitive products.
6. Retailers are better able to manage inventory
Retailers are better able to manage inventory than manufacturers because they have a better understanding of what consumers want and need.
They are also able to more accurately forecast demand, which allows them to order the correct amount of inventory.
Additionally, Retailers have a wider variety of products to sell than do manufacturers, so they can better meet the needs of more consumers.
Finally, Retailers are better equipped to handle returns and exchanges, which helps to minimize inventory waste.
7. Retailers can offer a wider selection of products to the consumer
By offering a wide range of products from more than one manufacturer, retailers can attract more consumers. Consumers, naturally, prefer to go to a store that offers a variety of products so that they can select the best product for their needs.
This is good for manufacturers too because it means more eyeballs on their products which can mean more sales.
If a manufacturer has a strong product in the market, having it displayed alongside inferior competitors will be better for its sales rather than if it were in a store that didn’t offer many choices.
There are many reasons why manufacturers don’t sell directly to consumers, even when it would be more possible for them to do so.
By working with distributors and retailers, manufacturers are able to reach a much wider audience than they would be able to if they sold directly to consumers.
Retailers also provide valuable marketing and distribution support, as well as product warranties. They also have the infrastructure to handle inventory, product returns, repairs and after-sales support.
Also, consumers are more comfortable buying certain types of products in retail stores that they trust. They know that if something goes wrong, they can always go to the local retail store, which is much easier than contacting a distant manufacturer.
Furthermore, in a retail store consumers can have a wider choice of products to select from rather than in the manufacturer’s branded shop.
So, to conclude – Why don’t manufacturers sell directly to consumers?
Simply put: It’s just not worth it for most manufacturers. They can leave all customer interaction to a retailer and instead focus on what they do best – making great products!