We live in an instant gratification society, much to the detriment of processes that actually involve this little thing called time. Now don’t get me wrong. I’m a fan of quick-and-easy, as long as it won’t affect results. But some things take time. And at the top of the list is this: eCommerce.

During my copywriting career, I’ve gotten calls from people with “great ideas” for products to sell on the web. Some of these people realize they’re looking at this thing called eCommerce. More often than not, though, they don’t have a clue (note: I’m not trying to be snarky here; I appreciate their enthusiasm, but you need more than enthusiasm to set up a successful online business).

The traditional role of a manufacturer is to mass-produce products and sell them in bulk to retailers (or distributors) who provide the infrastructure and services to consumers that wish to purchase these products in the retail market. There has traditionally been a sharp distinction between the wholesale market and the retail market. However, the advent of online retailing and drop-shipping has blurred these lines to a point where manufacturers are now active competitors the retail market.

In the past, this was considered a no-no. For a manufacture to sell direct to consumers meant losing their wholesale accounts, as well as tarnishing their reputation as a reputable manufacturer. Over the past few years, many manufacturers have struggled with the notion that they’re doing all the legwork (product development, purchasing, warehousing, shipping, etc.) while drop-ship retailers are reaping all of the benefits oftentimes at a higher margin than the manufacturer themselves make. We’re finding that more and more, manufacturers and distributors are turning to retail eCommerce websites in an effort to expand their customer base and increase sales. And who can blame them?

It’s a scenario that many online retailers are going to face time and time again in the near future (if you haven’t already, consider yourself lucky). How they’re doing it is the interesting part. Most of them will setup separate business entities to run these sites in an attempt to cover up the fact that they are selling directly. So “technically” they aren’t selling direct, but they drop ship for this “other company” that happens to be run by the same management (or even a parent corporation).

So what’s the big deal?

Imagine yourself as an online retailer of the ever-popular example blue widgets.  You buy them from Blue Widget Manufacturing, Inc. for $10 a piece.  They may be drop-shipped, or you may even inventory them yourself.  Factor in your costs, and markup, and maybe you sell that Blue Widget for $20.  You’ve sold it successfully for years, and found it to be a very popular product with your customers.  All of a sudden you notice a trend that sales for these blue widgets are declining – is the fad over with?  Has their popularity diminished?  Are you losing sales to a competitor? Only then to find a new website, bluewidgetsdirect.com and are amazed to see that they’re selling the exact same blue widgets for $10 – your cost!  You look in comparison shopping sites and see them listed right next to you – at half the price!  How many consumers do you feel are going to buy it from you when the next guy has it for half the price?  Who are these guys and how are they selling blue widgets so cheap.

When you find your products online selling for your cost or close, the first thing you should investigate whether you’re dealing with a retail website of your supplier.  One dead give-away that you may be competing with your manufacturer here is if all of the products on the site is only from the same manufacturer.  Most manufacturers want to increase the sales of their products, not a competitor’s, so they may only carry their brand.   Aside from that, if the manufacturer has covered their tracks in an attempt to appear un-associated with this retail website, there’s a few things you can check:

• The address:  If it’s in the same city, or even close to the manufacturer consider that a sign.
• The phone number: Call it, see who answers.  Many times they’ll just setup a toll free number and direct that to their office where the same secretary will answer both lines.  Get the name of the person you’re speaking to, then call the manufacturer to see if it’s the same.
• WHOIS: Perform a WHOIS query on the domain, see who has it registered.  If they were smart, they would have listed it privately.
• Use a tool such as DomainTools.com to run a search against that domain and compare against the manufacturer’s website.  If the IP addresses are close, or if it’s using the same host those can be giveaways as well.
• Read their policies: Many times these sites will use the same return and privacy policies and forget to replace one company name with the other when they perform the ol’ cut and paste job.
• Use Yahoo! Site Explorer to see who links to the website.  Chances are, in their SEO linkbuilding efforts of the retail site they created some links on their existing manufacturing website to the new retail site.  If that’s the only retailer they link to then that’s a good indicator.
• Use a Corporations Search (like this one in GA) to find more information about the company running the retail website (if you know the company name).

If these tactics lead you nowhere, ask your sales rep at the manufacturer directly.  I’ve had people tell me “no it isn’t them”, or that it’s just a customer they drop-ship for, and a number of other fallacies.  But after conducting an hour of research I was able to gather enough evidence to prove otherwise.

Not only is the manufacturer violating the inherit trust established in a manufacturer – retailer relationship by competing against their customers, they’re also low-balling the retailer by selling at, below, or even near cost vs. selling at full MSRP.  On top of it all, they’re hiding the fact that they’re selling retail because they know it is going to piss off (excuse my french) their retail customers and in many cases lying to the customer in an attempt to cover up these practices.

I can’t think of an online retailer that wouldn’t be disturbed by the fact that their manufacturers were selling direct to consumers at a lower price.   You’ll find this practice much more prevalent with manufacturers who do provide drop-shipping services.  If they’re setup to handle individual orders then they’re one step closer to selling directly themselves.  You’ll find that manufacturers that ship in bulk only avoid single product shipments like the plague. They’re inefficient, costly, and a drain on their resources.  For that reason, they’ll be much less likely to sell retail directly.

This situation is likely to cause strain on the retailer – manufacturer relationship.  In most cases, if the manufacturer is already selling online, you’re going to have a tough time trying to get them to stop unless you’re one of their top customers and you threaten to stop purchasing from them.  I think the goal in this scenario is to try to at least get the manufacturer to level the playing field by selling at full MSRP to give you a price advantage, or, to give you better pricing so you can attempt to compete with their direct retail site pricewise.  Either way, the manufacturer’s have a distinct advantage so it will be interesting to see what direction this takes in the next few years.

Knowing what’s being said on the internet about you, your company, or your product can provide valuable insight and feedback from the marketplace. How do companies manage to keep tabs on that sort of information? Google Alerts. Google Alerts allows you to “subscribe” to any information indexed by Google either weekly, daily, or as it happens.

You should at least have alerts setup to monitor anything important to you and your business. This would include your business name, your website address, competitor’s addresses, product names, etc. If you sell a widget A, setup an alert for “widget A” – this will allow you to see who else sells it, how they sell it, and what they sell it for, as well as anything in the news about it. You can monitor virtually any term or phrase you’d like, so whatever affects your business is game for inclusion here.

A great example of this in practice is in a previous post about Integrated eCommerce Solutions – I mentioned a few product names, one of which being Everest software. Shortly therafter, the CEO, Edwin Miller was posting a comment to that very article. Is Edwin Miller an avid Blue Acorn blog reader? I highly doubt it – he’s not even my target reader. But, I’d be willing to bet that he has a Google Alert set for particular key terms (such as his software name) that notified him of my posting. In fact, he’s probably getting another one right now for this post as well! And he’s not the only person that’s caught wind of my references.

Keeping tabs on what people are saying about you can help you in knowing market perceptions, as well as address any concerns. As an eCommerce merchant, you’ll want to pay particular attention to reviews about your products, your site, customer service, etc. and be able to address them as quickly as possible.