Should Ecommerce Brands Sell via Dealers?

For digital native brands, direct-to-consumer sellers, and similar, a brick-and-mortar dealer network could be a new revenue channel. Putting expensive, complex, or large products closer to prospects can help make the sale.

Walk along Boise, Idaho’s 25-mile greenbelt in good weather, and you’ll see dozens of electric bicycles. They come from established brands such as Trek, Specialized, Rad Power, and Pedego.

The latter, Pedego, has a franchise dealership nearby — just a short walk from the greenbelt on West Parkcenter Boulevard. Shoppers can rent an electric bike, test-ride it, and purchase it.

It might seem odd for a brand born online to sell through a physical outlet, but some in the ecommerce industry believe dealerships are an opportunity.

In this sense, selling via a dealer network is not conceptually different from selling on Amazon or a retail store. It is simply one of several ways to present products to would-be buyers — meeting the shopper where she is and providing additional services.

Pedego Electric Bikes allows shoppers to rent or test-ride before purchasing.

Potential Benefits

Adding physical dealers offers potential benefits to ecommerce brands.

Dealers can provide additional services such as installation, maintenance, and training — differentiating a “dealer” from a “retailer.”

A retailer keeps products in stock and sells them. But a dealer acts as the brand’s agent. For products that are complex, large, or require much setup, a dealer can be just the thing to close a sale. For example, a company selling home security equipment may have an audience of do-it-yourself customers for its online store. But via a dealer network, that company could expand to include homeowners who would rather have the equipment installed.

A dealer might reside in the local community, such as an existing, complementary business. For example, Loog is a digital brand that has reimagined the guitar for kids. The Loog guitar has just three strings. It includes an app and flash cards. And it often sells through a dealer network (think music shops) that can help tune the guitars, show app details, and answer questions face-to-face. These shops almost certainly have regular customers who might not have been familiar with Loog but would buy one for their child.

Dealers can improve the shopping experience by giving customers an easy way to return or maintain products or purchase enhanced services.

Concerns

There are concerns, too.

The first is that dealers may not always have the same commitment to the brand. A dealer who wants only to sell products may place the items on a shelf and forget about them. In this sense, that dealer is a retailer, not a brand advocate.

A second concern is the dealership’s performance. For example, a brand that relies on dealers to install its products risks reputational harm from a poor installation.

The third concern has to do with margins. Brands that develop dealer networks should carefully consider pricing. Selling via a dealership could wipe out profits.

Finally, brands will likely need to invest in their dealer partners with capital, training, inventory, and time. Managing dealer relationships can easily be a full-time job.

Getting Started with Dealers

Having decided to sell through a dealer network, how do you get started?

The first step is to develop dealer criteria. What type of companies would be the best fit? Where should those dealers be located? Should they target specific markets?

Then, approach those companies. Finding the right partners may take time, but it is necessary for long-term success.

Next, create a dealer contract. It should spell out the terms of the relationship, including margins, product support, and exclusivity. The contract should also outline the services the dealership must provide, such as warranty repairs or installation, and the compensation for doing it. Finally, include marketing details. Who is responsible for promoting the dealer and the product?

You may need to provide training. What should a dealership know about the product to sell it? You might focus on how to use the product, how to install and repair it, and ways to instruct sales staff.