Executive Briefings

Significant Numbers of European Consumers Find Buying Directly From Manufacturer to Be Attractive Option

More than two-fifths (42 percent) of European adults have bought products directly from a manufacturer in the last 12 months, according to the JDA Manufacturing Pulse Report, which surveyed 6,146 adults online across the UK, Germany, France and Sweden.

However, 43 percent of respondents said that a lack of delivery or collection options that suited their needs would stop them from shopping directly with a manufacturer, while a further 43 percent stated they were frustrated when manufacturers did not have their desired items in stock. Despite these concerns, of those European adults who had bought directly from a manufacturer in the last 12 months, 40 percent said the experience was better than that encountered when shopping with a non-manufacturer.

When asked about their shopping habits, 30 percent stated they had bought more products directly from a manufacturer now, compared to five years ago. The research also highlighted that European adults are shopping directly via a number of channels; of those adults online who had bought products directly from a manufacturer in the last 12 months, 68 percent had shopped in-store and 53 percent had done so online. While many manufacturers have an online presence, this illustrates that many still don’t offer consumers the ability to buy directly from their websites.

“The huge boom in omnichannel commerce is now also really starting to impact the manufacturing sector. Consumer goods manufacturers are at a crossroads when it comes to selling directly to consumers. To date, many have dipped their toes into direct selling and in the main have found it an unprofitable exercise. The question now facing the majority of manufacturers, is how do I make my online channel profitable?” said Hans-Georg Kaltenbrunner, vice president of Manufacturing Industry Strategy EMEA, at JDA. “We have already seen the retail industry grapple with the same challenges. Today’s manufacturing supply chains must be reshaped to handle more fulfillment locations and increased singles picking for customer orders, while at the same time offering choice and convenience. With the potential costs of fulfilling orders high, manufacturers must protect themselves now against any impact on their bottom line.”

Getting closer to the customer

The online research found that there is still considerable room for improvement when it comes to how manufacturers are using customer data. Indeed, only 38 percent of European adults who had shopped online with a manufacturer in the last 12 months thought that manufacturers had made good use of their customer data. When it came to social media and online reviews, 32 percent of respondents said that reviews shared online and via social media had influenced their purchasing decisions over the last 12 months.

Reasons to go direct

Perhaps unsurprisingly, price (62 percent) was cited as the biggest reason for why respondents would ever shop directly with a manufacturer; followed by product availability (39 percent), product warranty (32 percent), product choice (31 percent) and product knowledge/experience (24 percent). Certain sectors lead the way when it came to the type of products that respondents had purchased directly from manufacturers in the last 12 months. Of these people, just under half (46 percent) had purchased furniture for the home, followed by clothing or footwear (35 percent) and electrical equipment (33 percent). Further broken down by gender, the figures reveal that across all countries surveyed, more men online (38 percent) purchased electrical equipment directly from a manufacturer in the last 12 months than women (28 percent), and more women (51 percent) purchased home furniture than men (40 percent); more women (36 percent) also purchased clothing or footwear than men online (34 percent).

Getting personal

Personalisation has the potential to become a significant differentiator for manufacturers in the future, yet its impact on supply chains could be considerable. Currently, 9 percent of European adults online said they had items personalised by manufacturers in the last 12 months. However, over a quarter (28 percent) of respondents said that personalisation would make them more likely to buy products from a manufacturer.

“In order to meet the demands of today’s digital consumer, manufacturers need a digital supply chain. Digital capabilities in planning, manufacturing and fulfillment will allow physical supply chains to be configured in a way that can support both manufacturers’ traditional and direct channels. If manufacturers ignore or take only a piecemeal approach to their direct channel, it will prove unprofitable and may damage brand reputation. Those that invest in it, supported with the necessary supply chain planning and execution capabilities, have the opportunity to improve profitability and create positive customer experiences,” said Kaltenbrunner.

Source: JDA

However, 43 percent of respondents said that a lack of delivery or collection options that suited their needs would stop them from shopping directly with a manufacturer, while a further 43 percent stated they were frustrated when manufacturers did not have their desired items in stock. Despite these concerns, of those European adults who had bought directly from a manufacturer in the last 12 months, 40 percent said the experience was better than that encountered when shopping with a non-manufacturer.

When asked about their shopping habits, 30 percent stated they had bought more products directly from a manufacturer now, compared to five years ago. The research also highlighted that European adults are shopping directly via a number of channels; of those adults online who had bought products directly from a manufacturer in the last 12 months, 68 percent had shopped in-store and 53 percent had done so online. While many manufacturers have an online presence, this illustrates that many still don’t offer consumers the ability to buy directly from their websites.

“The huge boom in omnichannel commerce is now also really starting to impact the manufacturing sector. Consumer goods manufacturers are at a crossroads when it comes to selling directly to consumers. To date, many have dipped their toes into direct selling and in the main have found it an unprofitable exercise. The question now facing the majority of manufacturers, is how do I make my online channel profitable?” said Hans-Georg Kaltenbrunner, vice president of Manufacturing Industry Strategy EMEA, at JDA. “We have already seen the retail industry grapple with the same challenges. Today’s manufacturing supply chains must be reshaped to handle more fulfillment locations and increased singles picking for customer orders, while at the same time offering choice and convenience. With the potential costs of fulfilling orders high, manufacturers must protect themselves now against any impact on their bottom line.”

Getting closer to the customer

The online research found that there is still considerable room for improvement when it comes to how manufacturers are using customer data. Indeed, only 38 percent of European adults who had shopped online with a manufacturer in the last 12 months thought that manufacturers had made good use of their customer data. When it came to social media and online reviews, 32 percent of respondents said that reviews shared online and via social media had influenced their purchasing decisions over the last 12 months.

Reasons to go direct

Perhaps unsurprisingly, price (62 percent) was cited as the biggest reason for why respondents would ever shop directly with a manufacturer; followed by product availability (39 percent), product warranty (32 percent), product choice (31 percent) and product knowledge/experience (24 percent). Certain sectors lead the way when it came to the type of products that respondents had purchased directly from manufacturers in the last 12 months. Of these people, just under half (46 percent) had purchased furniture for the home, followed by clothing or footwear (35 percent) and electrical equipment (33 percent). Further broken down by gender, the figures reveal that across all countries surveyed, more men online (38 percent) purchased electrical equipment directly from a manufacturer in the last 12 months than women (28 percent), and more women (51 percent) purchased home furniture than men (40 percent); more women (36 percent) also purchased clothing or footwear than men online (34 percent).

Getting personal

Personalisation has the potential to become a significant differentiator for manufacturers in the future, yet its impact on supply chains could be considerable. Currently, 9 percent of European adults online said they had items personalised by manufacturers in the last 12 months. However, over a quarter (28 percent) of respondents said that personalisation would make them more likely to buy products from a manufacturer.

“In order to meet the demands of today’s digital consumer, manufacturers need a digital supply chain. Digital capabilities in planning, manufacturing and fulfillment will allow physical supply chains to be configured in a way that can support both manufacturers’ traditional and direct channels. If manufacturers ignore or take only a piecemeal approach to their direct channel, it will prove unprofitable and may damage brand reputation. Those that invest in it, supported with the necessary supply chain planning and execution capabilities, have the opportunity to improve profitability and create positive customer experiences,” said Kaltenbrunner.

Source: JDA