Release Date: 12 January 2007
Release ID: 1208
Small companies favour multi-channel approach finds Crossflight report
Smaller consumer goods companies with a turnover of less than £100m, on average favour a multi-channel strategy, rather than relying solely on e-commerce/mail order sales. This is the key finding of new research commissioned by international express courier, freight, mail and logistics company Crossflight. This was found to be the case even when a company had started life as a pure e-commerce or mail order-based business.
Four key consumer goods categories were examined: Cosmetics and Beauty; Consumer Electronics; Clothing; and Food & Drink.
Most of us are true multi-channel consumers. Indeed, our obvious predilection for using store, catalogue and online as the mood or circumstances find us, is now exercising many of the keenest marketing operations minds in retail, fmcg and consumer durables
The multi-channel consumer represents a particular challenge for consumer product companies. Twenty years ago, the channel choice was between retail and catalogue. Now the routes to the consumer have effectively doubled. Retail, phone, web and catalogue are sometimes all employed by consumer goods companies, but the balance and interrelationship between these channels is really very complex.
The sector with the highest proportion of pure e-tail brands was Clothing. This is a direct result of the way in which the internet has brought down barriers and cost of entry for niche designer labels. Cosmetics and Beauty firms also still have a substantial proportion of pureplays (23%), such as Beauty Naturals, although we expect this to diminish over the next few years.
19% of companies in the Food & Drink products sector only sell over the internet and by mail order. This is higher than one might expect, and is mainly composed of specialist food producers who address segments such as the luxury market, rare breeds products, special dietary foodstuffs, and so on.
However, the sector which might be seen as most likely to be susceptible to pureplay e-commerce – namely Consumer Electronics – is in fact the sector most dependent on traditional retail outlets, in direct contrast with the B2B electronics market where the vast majority of vendors are pureplay e-tail.
The successful growth companies amongst these smaller firms all reach the stage where they cannot ignore the traditional retail channel. As these firms grow and mature, they are beginning to achieve penetration onto traditional retail shelves
The proliferation of channels to the consumer – in-store, catalogues, e-commerce and phone/direct mail – has faced smaller consumer goods companies with several challenges.
First, these companies need some access to customers direct, in order to understand preferences, buying behaviour and sales patterns, so that marketing and operations can be focused proportionately on the most commercially productive combination of channels.
Second, a range of logistics demands have to be met to satisfy consumers, retail clients and other resellers, with each of these groups having very different requirements.
Smaller consumer goods companies often start by performing their own distribution in-house, but rapidly find this approach unsustainable. In order to accommodate growth, these companies are outsourcing logistics to third party firms with the scale and facilities that can cope with rapid expansion, both in the UK and overseas.
The retail channel has become far more demanding than it used to be in logistical terms. Just-in-time stock delivery is now a stipulation for all goods suppliers, with shelf space increasingly constrained, expensive to maintain, and competitive between brands.
Then if goods are also being delivered direct to consumers, another system and set of standards is required so that these customers are not let down by the logistics process. Mark Jones, Sales and Marketing Director, Crossflight, comments: “Direct customers are either a smaller company’s best advert (word-of-mouth) or most powerful detractors when something goes wrong (also word-of-mouth). And as repeated surveys show, this is one of e-commerce’s main weak spots. Add to these two sets of demands, the additional requirements of the mail-order reseller channel and e-commerce resellers, and the logistics task becomes unmanageable, even for larger players. Logistics scale and facilities investment are required that simply do not make commercial sense unless passed to a third party specialist. “
Pureplay e-commerce consumer goods companies are nothing like as widespread as the pundits would have us believe. Multi-channel marketing and distribution is evidently the name of the game for the majority of consumer goods companies. And as these channels to the customer continue to proliferate and interact, the logistics element – a key touchpoint with the customer – is ignored at peril.
© The Adora Group Limited 2017 - Publishers of Freightnet