How has digitalization changed the relationship between manufacturers and retailers?

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Angela de la Vieja

Digitisation has changed the way we see the world, this is a fact.  It has also, when applied to business, been a huge leap in the relationship between manufacturers and retailers.  This progress has been both qualitative and quantitative, enriching and refining the understanding between both, along with improving communications and the supervision of certain processes.

Through the magnifying glass of digital transformation, certain points are seen which are especially interesting to use as examples.  Let's see what the key aspects are in the relationship between manufacturers and sellers that have changed with the introduction of digitalisation into their environment.

- A new business model.  With the digitalisation of the entire sales process, manufacturers can now reach the end-customer through direct channels such as a new online store.  One could maybe come to think that the manufacturer begins to compete with itself, causing them to consider more than ever the importance of the retailers in their results.  Likewise, sales orientated manufacturers websites become the place to implement actions which it considers achieves good results for each of its vendors.

In fact, this is one of the situations that worries most new (and maybe some existing) retailers, since it opens a channel to possible loss of profits.

- Customer knowledge.  According to traditional sales models, the manufacturer was, more or less, limited to serving the product to the retailer so that they would sell it on to the target audience.  Beyond their own market studies, manufacturers obtained very little data from their end-users.  On the other hand, the seller obtained considerable information about who, how, when and why they bought their products.  Now, with digitalisation, this data is worth gold - and manufacturers know this!

This new reality forges new alliances, new agreements, in which access to data is the commercial objective.

- Automatic supervision of MSRP’s.  Digital price tracking systems allow each manufacturer to check how retailers interact with their recommended retail prices.  While it is true that they cannot force MSRP implementation, it is now possible for a manufacturer to know at all times which vendors do and do not apply them thanks to data digitalisation.

In this way it is possible to promote future actions that directly allow the manufacturer to understand why the seller prefers not to use their RRP.  This creates a closer relationship and improves the communication with each retailer, demonstrating a real, vested, interest in their status.

- Monitoring competitor prices. The are two ways of looking at this.  Retailers can check at what price a manufacturer's product is sold by their competition, the manufacturer can also analyse in real time what prices are stipulated by its competitors.  This greatly influences the infamous price war (which is almost constant) but allows each of the parties to have full knowledge of everything that happens in the market.

With joint strategies, the relationship between the manufacturer and the retailer is enhanced, when possible, to mutually improve the benefits of both by monitoring what others do.

- New ways of advertising and marketing.  If before the physical spaces intended for the promotion of a brand or product were the most direct transmission route for the manufacturer, now the options are multiplied.  Beyond the classical advertising formats, it is now possible to create collaborative actions in which good relationships between one actor and another stand out.  This is also a sign of healthy and constructive communication.

A practical example can be found in the product datasheets.  This is a fundamental piece for the conversion of an ecommerce; however, it is still a reflection of the brand identity of the manufacturer, as well as a differentiating element that enhances its relevance in the market.

In short, as a result of digitalisation, light areas and shadows have emerged around the relationship between manufacturers and online sellers.  However, at the end of the tunnel mutual understanding develops out of necessity, mainly because if something seems not to be changing, medium term, it is the necessary collaboration between the two just to continue staying afloat.

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