Online retailing: For which manufacturers can an online shop be profitable?

Daniel Kostyra

Online brand shops are in general very practical for the manufacturer. With them, he has complete pricing authority and can offer his whole product range without service fees. Especially for brand fanatics this is a great service. When looking at the status quo online though, branch differences in e-commerce become apparent quickly. The ECC Cologne analyses these regularly and documents if leading manufacturers present themselves online with their own brand shops - a selection of results is put together in the graphical overview. But what are the reasons for or against an own brand shop?

Crucial factors for an online shop are:
  • depth of product range,
  • existing market coverage in retail,
  • customer involvement, and
  • product properties (search vs. experience goods).

This becomes clear with the help of the displayed branches. If you take a look at brand manufacturers in the areas of personal hygiene and pet food, you realize: They already have a high market coverage. Prospective buyers can find these in almost any grocery or drug store. In addition, customer involvement is relatively low - a deodorant purchase is no serious decision process and is rarely focused on aside from the weekly shopping trip. The (relevant) depth of product range is also manageable. The appeal of an own brand shop is therefore rather low.

The sanitary industry is hampered by a different factor. It offers products that customers want to see in real life before they purchase them - so-called experience goods. After all, these products remain in your own living space for several years and have more of a decorative experience characteristic than technical (easily comparable) properties. In this case a brand shop can only be recommended conditionally. 

In these branches inherent online shops pay off:

Technology fans, hobby chefs and sports enthusiasts can look at a rather broad range of brand shops (see graphic). Because here most of the listed factors are true. The respective product ranges of the manufacturers are extensive and usually not fully displayed in retail. Customer involvement in usually high - partially because of the high prices. And products can be compared well from home - at least in the electronics area (standard search goods). So altogether these are good conditions for a successful brand shop.

If you would like to find out more about online retail - especially about the relation to the stationary retailer - you should watch our video about the topic e-commerce at anschauen. Here, we also explain what brands have to do without an own online shop. 

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Daniel Kostyra

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Daniel Kostyra has been working as a Consultant for Cocomore since June 2014. Before he was a research assistant in Marketing at the Goethe University in Frankfurt. If you ask him, what he is doing at Cocomore, he says: “I know, what I do, even if I can’t always explain, what I make”.

Describing Kosy in four words: curious, talkative, black humor, not bearded.