Channel Changers (for the Better)

So much e-commerce coverage focuses on online retailers, but this time eMarketer looks at the manufacturers, and the customers who visit their sites.

At some point during the buying process for consumer electronics, most customers visit a manufacturer’s Web site (there’s evidence further down). That means the manufacturer has a critical role to play in converting a sale, especially since the manufacturer doesn’t want the customer to buy a competitor’s product.

How can the manufacturer help with the sale? Alan Fulmer, president of Channel Intelligence, has some insight into that. His company has sent nearly $7 billion in leads to the online channel.

eMarketer spoke with Fulmer to discuss how Channel Intelligence locks in those leads. We put this into context by first delving into a survey by Frank Lynn & Associates, “The Effects of Internet Shopping on Overall Consumer Spending,” which surveyed over 10,000 Internet users who visited any of 19 computing and consumer electronics manufacturers (all are clients of Channel Intelligence).

eMarketer: One overwhelming issue in this survey is how price plays a role. Previously, price was found to not be as critical online. There were a lot of factors ranking right with it or higher, such as the store’s reputation. For the respondents in your study, price was clearly the number one issue.

Alan Fulmer: Right.

eMarketer: Why do you think that is?

Alan Fulmer: I think price has a lot to do with the type of product that a consumer’s looking at. The 19 manufacturers that participated in the survey represent a pretty wide range of products, from $30 USB connectors to $5,000 systems. What we saw when we broke it down was that the higher you went in price, the less price became a significant factor. There’s actually kind of a sweet spot in there. When it gets below $150, price becomes less of a factor because there isn’t much price variation. But that $150 to a couple thousand dollars, and this was the majority of the products that people were looking at when they took the survey, those are the ones where they go, “I want to take enough time here to make sure I’m getting the right price for the product.” And then you get above $2,000, and it doesn’t become an issue again. Service and product information become more important at that point.

At that point, you’re a corporate buyer, more than likely, and you’ve already got established relationships with the retailers. That relationship becomes very important.

eMarketer: Generally speaking, one question in the survey found that the higher the price, the more respondents there were who said they wouldn’t buy the product for at least 30 days. What kinds of implications does that have for retailers that are selling things like digital cameras and TVs where it’s a longer customer buying cycle?

Alan Fulmer: It’s a longer customer buying cycle, and it’s more window-shopping. It just means that people are researching those products, which is why it becomes more critical for that manufacturer-retailer relationship to be really tight so they can secure the sale. When somebody’s in that researching mode, and they’re looking at your product, you want to make it as easy as possible for them to go consummate that purchase.

eMarketer: Are there any retailers who are doing a good job in terms of maybe trying to collect a bit of consumer information at that early stage so they can stay in touch and stay involved in this?

Alan Fulmer: That’s a tough one because we don’t spend a lot of our time on the retailer side. The way Channel Intelligence services work is we act as that intermediary. We want to effectively take that person from the manufacturer’s site right to the retailer who has that product in stock whether it’s online or offline. Once the retailer’s got ‘em, what you’re talking about is whether they’re doing a good job at closing that sale. While it’s not indicated in this survey, we get a lot of sell-through information from about 169 different retailers, and conversion rates would be the indicator of a retailer’s ability to do a good job at closing the sale. And yes, there are certain retailers that are more efficient at making that a simple process of gathering the information they need to close the sale.

eMarketer: What about on the manufacturer’s end of things? If Sony or Panasonic or whoever wants the customer to buy that brand, do manufacturers encourage loyalty when the customer is on the manufacturer’s page and looking at that product, even though the customer might not buy that product for a couple of months? Is there any kind of interaction going on there?

Alan Fulmer: There’s a really interesting opportunity. The manufacturer at that point, the point that you just drilled in on, that’s some really valuable information that the manufacturer now has. They know that that particular consumer is interested in that particular product. The task now for that manufacturer is to say, “How can I ensure that that prospective buyer goes directly to my product and doesn’t get lost, distracted or cross-sold, and really pass along that knowledge I have about the consumer to the retailer?”

The way that that’s done is through deep linking. When they deep link, then they pass along the information that says, “This is the guy who’s interested in this particular product. I’m going to take him right to that product at that retailer’s site.” That’s where the knowledge is passed over, and now the retailer can do a better job at closing that sale because they’ve got that landing page for that particular product, there’s a “buy” button there, and now their brand kicks in, whether it’s a Best Buy or an Amazon or a CDW, to say, “Hey, I’m a respectable dealer or retailer, and go ahead, and I’ll make it really easy for you to buy that product that you’ve shown interest in on the manufacturer’s site.” That exchange of knowledge becomes critical.

I’ll tell you another thing that’s a statistic that wasn’t in this direct survey, but it’s other information that we’ve gathered. What we’ve seen is when a manufacturer blindly sends a consumer to a retailer’s site and doesn’t pass along that product knowledge I was talking about, about 6% of those sales are actual sales of that manufacturer’s product, which means that 94% of the sales end up being some other manufacturer’s product. It’s a huge number.

eMarketer: Do you have the comparable information for when there is the deep linking?

Alan Fulmer: What we found out about deep linking is that 34.3% of the people end up buying that manufacturer’s product.

eMarketer: That’s huge.

Alan Fulmer: That is absolutely huge. And I say buying that product, what we found is the multichannel link that’s going on here is that consumers, even when they’re online and they’re predisposed to buy online, they’ll get to a point where a couple things happen. Some buy then and there, just as they intended. Some go, “I want to buy this, but I’m going to buy it later,” and they end up doing it. Some say, “I see this list of retailers that the manufacturer is showing me, and I don’t see the retailer I like to buy from, so I’m going to go to my favorite retailer’s page and end up buying it.” And then the fourth way they end up buying is they say, “Yes, I was going to buy this online. I’ve researched pricing and what’s going on with the product online, but I’m going to buy it at the local store down the street.” You add all of those things together, and that’s what adds up to the 34.3%.

What it really means is that a lot of people, even though they’re shopping online, are looking for multiple channels, multiple ways to buy the product, and that’s what manufacturers really need to be aware of. Because of the Internet, consumers need to be able to buy where and how and what they want.

eMarketer: I don’t want to slight anyone, but some of what you’re saying isn’t exactly rocket science, such as figuring out that blindly sending a customer to a retailer’s homepage isn’t going to be as successful. I didn’t know the difference was that dramatic, but why wouldn’t everyone be doing the deep linking? Is it because of the added labor involved, or do they really not have this information? Why wouldn’t 99% of manufacturer’s sites be deep linking?

Alan Fulmer: You’re really talking about reasons why they wouldn’t do it, and you hit on a couple. I’ll add a couple more. Education is certainly one. Prior to a company like Channel Intelligence offering a service that makes it easy for companies to do this, the path of least resistance was to just put top of site links up, or homepage links. You logically got to the conclusion of what you’d like to do as a manufacturer, but it’s actually quite difficult.

We went to a rather large computing manufacturer and introduced our service to them. This particular company said, “You can’t do that. And we’ll tell you why. That’s a great idea, but we’ve spent literally hundreds of thousands of dollars trying to do what it is you just said, and we failed.” They are now a client. It works. The littler companies, it’s just as hard for them. It’s a very difficult implementation for somebody to maintain that kind of linkage to their retailers because retailers change their sites all the time. Best Buy just did a major rework of their site where they stopped e-commerce for a week. That’s a huge impact. Now that their site’s back up, everything’s different. Luckily, our technology allows us to quickly adapt to those changes. Someone who’s doing this manually—they’ve got a nightmare on their hands.

eMarketer: Why is Channel Intelligence focusing on electronics and computing?

Alan Fulmer: Those are the two largest sets of products that best match how our technology works. We are really manufacturer-driven e-commerce. The best products we work for are those manufacturers that first of all have a price point that makes sense that consumers are going to go to the manufacturer’s site, and second of all, are perhaps complicated enough or there’s enough choices out there that consumers are spending time researching.

eBrain did some research and a Forrester Research Technographics survey came out with percentages—eBrain was 70%, Forrester was 80%—that said that that percentage of people end up going to a manufacturer’s site sometime during their shopping experience. There’s a large number of people who go out there and do that research. Those are the things that make sense for us.

Certain product lines don’t make sense of for us, but there are certainly others beyond computing and consumer electronics that are interesting to us. Home appliances will be one. Tools will be one. Some sporting goods will be one. There are a set of products out there outside of the two that we’re in right now that will make sense for us to work with manufacturers.

eMarketer: Your site says, “Over $6.74 billion in leads sent to the online channel.” Where’s that number coming from?

Alan Fulmer: What we’re able to do is when somebody goes to a manufacturer’s site and finds the product that they’re looking for, they click on a button that pops up our page which is a list of the retailers who are carrying that product. Right then and there, we know that consumer has shown an interest in that particular product, and we know the average price of that product too at the time they looked at it. That $6.7 billion number is the number of leads essentially, because those are all opportunities at that point for the retailers on that list to close that sale.

That represents about 6 million individual consumers, so the average sale price of the products they’re looking at is about $1,000 for the 60 or so manufacturers that we represent. That sounds about right. We’ve got a lot of system guys out there, the Panasonic products, the Canon camcorder products, the HP products, we’ve got Cisco and Intel, and so yeah, we’ve got a lot of high-priced products out there.

The other interesting number that we’re able to track that I don’t think I’ve ever seen anywhere else is selling opportunities. I mentioned when you go to that page and see a list of all the retailers on that page, and it may be 8 or 10 retailers. The $6 billion number is the gross number. That is the large number that says that number of leads have been sent to the channel. Selling opportunities say that an individual person on an individual day for an individual product really is only going to buy one. Even though 10 guys could potentially get the lead, there really is only one who can potentially close it. We’re able to funnel that number down to a realistic number of how much could actually be purchased.

One of the things we have seen is that 34.3% we’ve applied to the selling opportunities, and narrowing it down to what we’ve fed so far into the channel, and based on that 34.3%, that has resulted in just over $1 billion in sales. So our selling opportunities is about $3 billion (I’m doing rounded up math here), which means that about one-third of those opportunities, which are very specific, has resulted in $1 billion in sales online and offline.

After you looked at the very first place you started out here with price, the next largest number that shows up on that survey [in a separate question] is the 88% of people who say that they would like to know if that product is available in a local store near them, which just shows you the cross-channel impact. These are people who are online looking at a product, but 88% of them want to know if it’s available in a store near them.

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