Specialist shops in retail won’t go under – manufacturers‘ concerns about branding and marketing rescues traditional distribution channels

(Thank you, Claudio, for pointing out this trend in the first place!)

Internet has radically changed the world – including marketing and sales of products and even services. With cheap transportation, tariff reductions and saver payment systems world-wide on the one hand and large savings in shop rents, product display, promotions and expensive employees for product advice on the other hand, internet dealers have been gaining an increasing market share in retail. Not only cost-sensitive buyers but more and more the general customer base wants to profit of quick and stressless shopping and fast and save delivery right to their house.

However, such internet shopping has always needed and exploited retail shops with product display, professional advice and support. Buyers started to inspect the products in stores, just to get home and order them cheaper over the internet. As retail shops could neither prove such exploiting behaviour nor call on any legal measures against it, they were bound to carry the costs themselves – with layoffs in particular. There seemed to be no end to this trend until to the point where price competition on the internet got so fierce and the high fix costs of retail shops so unbearable that the whole retail market collapsed and there would be no more traditional shops at all. Solutions like product display and sales by manufacturers themselves (see Apple stores) struggle in maintain the corporate image or lack knowledge about local markets, while ideas of exhibition halls with entrance fees would scare off or be bypassed by the customers.

To my own surprise, I have come to learn about a solution by the manufacturers themselves: More and more of them (see Philips for example) have started to provide exclusively specialist stores with specific high-end product lines. Others (like HP Compaq) distribute different product lines over internet and retail. As manufacturers could not possibly be (directly) concerned about the fate of independent retail shops, the reason for this strategy must lie in bad experiences with their corporate image and profits: Probably, lack of advice and support by internet resellers did not cast as much shadow on the resellers themselves as on the manufacturers’ brands. Further, the fierce competition among internet resellers will probably have effect on the production development in the long term: Assuming that in the near future, internet resellers try to out-compete their rivals by requesting only cheap models (with lower margin) from manufacturers, they cannot bear the costs of their high-cost and -profitable series anymore. Thus, price rivalry on retail markets will gain such a strong momentum that it effects production of the manufacturers themselves.

These two reasons appear to be the reason for this striking development in consumer markets: Manufacturers limit the distribution of their product lines and cancel market forces – in favour of their own and retailers’ profits.

Of course, such separations of distribution channels will heavily affect market overview, consumer information, buying behavior and satisfaction: No longer can customers compare prices as well as product specifications in retail or internet stores, but need to access manufacturers’ websites to gain full overview. This goes hand in hand with recent changes in retail shops where manufacturers send their own employees to. Those employees will only promote, inform about and support customers of their brand.

As a result, radical changes in competition and market forces will result: Internet resellers will be parked on a new discount market while retail shops won’t compete among each other as much as manufacturers inside the shops themselves.