How does a customer get their hands on your product? If it is like most products, your product development definition called for a middleman to be involved. You create your product and then provide it to some sort of a middleman who runs a store or a catalog. The customer determines that they would like to buy your product and so they get in contact with the middleman and they purchase it. This is all fine and good, but do you really think that the middleman is still necessary?
E-commerce’s Final Frontier
So let’s give this some thought. If your company decided that they wanted to sell your product directly to your customers, just exactly what would they need in order to pull this off? This would all probably start with a well-designed website. Couple this with some additional e-commerce tools and you’d have a complete sales solution. This is exactly what a number of firms, including D-Link, Bosch, and Electrolux have been doing.
The world of e-commerce has been growing for quite some time. The arrival of the direct-to-consumer online sale channel is truly the last frontier of this effort. This is a very fast growing part of the market. Some estimates say that by next year, the direct-to-consumer online sales should become the largest source of sales for brand manufactures. It is estimated that this portion of the market will have grown to encompass 34% of the total sales. Firms are reporting that their online sales grew by 30% in 2013. This stands in comparison to the 14% growth that occurred in all of e-commerce.
In order for a company to be successful online, there are a number of different things that they will have to be able to do. The first is to both create and run a successful website that provides visitors with information on the products that the company sells. The next is to handle the fulfillment of orders and the handling of returns. I’m not sure if any of these skills are currently on our product manager resume
Why UPS Is Getting Interested
The idea of having more and more product managers start to market their products directly to their customers and cut out the middleman would only be so much talk if there were it not a host of small start-ups that have sprung up to help make this happen. This by itself probably wold not be enough to establish this as a viable market, but recently the very large shipping firm UPS has started to make some strategic investments in the firms that are helping product managers make direct-to-customer a reality.
UPS has a strategic corporate venture arm who’s job it is to spot new trends that may impact the parent company at a later date. The firm then tries to make investments in firms that are active in this area so that they can more closely study how the market is developing and how it might eventually affect the parent company. This part of the company has been busy as of late and has made investments in 20 different firms that have invented technologies that align with what UPS is trying to accomplish as a company.
The reason that UPS will invest in a company that is involved in the direct-to-consumer market is because they feel that it is going to affect either UPS or its customers within the next 2-5 years. The reason for the investment is for research purposes. The company’s goal is to understand how the smaller firm is operating so that UPS will be ready when the changes hit their market in the future.
What All Of This Means For You
Traditionally many product managers use a middleman to get their product into the hands of their customers. However, with the arrival of the Internet, our product manager job description has changed and many product managers are rethinking this model and are exploring implementing direct-to-consumer approach.
E-commerce and direct-to-consumer online sales are going like a weed – direct-to-consumer is up 34% in just one year. In order to implement the direct-to-customer model, a product manager would have to create a website and add to it a number of supporting online functions. The shipping company, UPS, has become interested in the small firms that have popped up to provide product manager with the tools that they’ll need to implement this new way of selling their product. They care about it because they believe that in the next 3-5 years it may have the ability to impact both their business and the business of their customers.
Product managers need to always be looking for different ways to boost the success of their product. In the past, creating a relationship with one or more middlemen was the key to making sure that customers were able to obtain your product. With the arrival of the Internet and e-commerce, the new direct-to-customer model has now arrived. You need to take some time and check this out – it is right for you, your product, and your company?
– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Product Management Skills™
Question For You: When do you think that implementing a direct-to-customer model would be the wrong thing to do for a product?
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What We’ll Be Talking About Next Time
I’m pretty sure that at one time or another, we’ve all eaten at a Sbarro pizza store. In my case, I’ve run into them in airports as I’ve been looking for a quick lunch or dinner on the way to catching my next flight. They are also in just about every mall out there. However, in the past few years the company has been struggling. The company has had to enter into Chapter 11 twice. The reason that they’ve had such problems is because the malls that they rely on have suffered through a global recession. What can the Sbarro product managers do to update their product development definition and get the company back on solid footing?