While direct-to-consumer sales in the nutrition industry are on the rise, companies must manage the ongoing tug-of-war between their desire to maximize sales across all available channels and their obligation to provide retail partners with a competitive price point and new promotional opportunities. A handful of powerful big-box retailers expect manufacturers to adhere to certain pricing and distribution agreements, which can limit a company’s selling options. That dynamic might be slowly shifting, however, as companies become unwilling to forego the fertile Internet market and retailers increasingly see the value in building a brand outside of brick-and-mortar retail.
“One of the issues that we keep seeing and hearing is marketers and manufacturers who want to circumvent traditional brick-and mortar-marketing,” said Ron Perlstein, president and founder of InfoWorx, a company that offers production, media-buying and telemarketing services to entrepreneurial startups and large companies. “They dislike all of the hoops they have to jump through to get shelf space and they feel as though they’re constantly being squeezed by big-box retailers.” As a result, the mix of companies that seek out direct-selling opportunities is getting more diverse with each passing year. “Each year some large corporate entities come to us to gain leverage or circumvent traditional retail distribution, and another handful come to us because they understand that traditional retail is expecting them to support the retail brand with direct marketing,” Perlstein told Nutrition Business Journal.
Retailers have increasingly embraced direct marketing over the last decade, as is evidenced by larger and larger sections of shelf space being devoted to “As Seen on TV” products, Perlstein said. “Retail distribution loves the wacky and wonderful world of infomercials—they like the branding and traffic infomercials provide,” he added. “I’ve been educating clients about this for many years. They often think they’re in conflict with retail by selling direct, when in fact the retailer views it as helpful.”
NBJ Bottom Line
As Perlstein pointed out, the trend toward direct marketing is one that has been in effect for ten to 15 years and has only accelerated. According to NBJ sales estimates, the four combined nutrition industry direct sales channels—Internet, direct-response television (DRTV)/direct-response radio/mail-order catalogs, multi-level marketers (MLMs) and healthcare practitioners—have averaged annual growth of 7% for the 10-year period between 1999 and 2008.
NBJ’s upcoming May direct-selling issue will feature sales and growth estimates for the Internet and DRTV/Radio channels, while the recently released April issue details the healthcare practitioner and MLM channels. To order a copy of either issue, visit NBJ’s subscriber page.
NBJ Related Links:
Understanding Infomercials: The Science of Direct-Response Advertising Campaigns in the Nutrition Industry
E-commerce Is Now a Must for Nutrition Firms
Nutrition Direct Sales Channels See Sales Growth Dwindle in 2008
Related Functional Ingredients magazine links: