One constant in business is that the business environment is never constant. In recent years, this has been particularly true with respect to the way consumers select and purchase juvenile products. The question you might want to consider is whether your channel strategy—the process you use to get your products into consumer hands—is still optimal given the new reality?

When I first started in the industry in the late 60’s, the road from manufacturer to consumer went first through wholesale distributors and then retailers. However, a major channel transformation that would be the death knell of many distributors was in its early stages. The pioneering "discount department stores" were changing the retail financial model to a low margin high volume formula that was attracting consumers in droves. As these chains got big enough, they no longer needed the services or economies of scale that their distributors had provided. Any distributor that did not see this coming went the way of the wooly mammoth. Fortunately, we changed our company’s business model from distributor to manufacturer (not an easy task) and prospered as a result. 

So what’s happened recently in the marketplace that might require you to change some of your channel assumptions to avoid the possibility of extinction? 

·         Consumers have many more ways to get unbiased product preference information than they’ve had in the past. There are almost too many sources to mention—consumer magazines, consumer guidebooks, social media, independent web sites, bloggers, government web sites, etc. This arguably enables them to make more objective buying decisions and to be less influenced by traditional advertising and PR. The days of dazzling the consumer with b.s. are over. 

·         Price comparisons are available at everyone’s fingertips. Consumers can readily compare prices for your products from one outlet to another and can easily compare the price of your product to competitive offerings. We’ve all done this to check online prices but now apps like Red Laser and others are even allowing consumers to easily check online and local store prices while in store by scanning bar codes with their smart phones.    

·         Resistance to online purchasing of products in just about every category has decreased. Consumers not just in the US but globally are becoming more comfortable buying online—even for so-called "touch and feel" categories. Also, shipping costs have come down making total pricing more attractive. In their October 2011 article, Harvard Business School professors Rajiv Lal and Jose B. Alvarez mention baby products as one of the categories moving to online retailers most rapidly.         

·         Brick and mortar retailers are at a tipping point that is changing the dynamics of the traditional retailer-manufacturer relationship. Largely because of the preceding bullet points, conventional retailers are under increased stress that is in many cases translating into increased pressure put on their suppliers, including JPMA manufacturers. The previously mentioned HBS article outlined what they need to do to survive which includes moving even further towards unique merchandise not available online and providing the kind of personalized selling or customer educating that web sites can’t do effectively. 

Here are some interesting questions to ponder as you do a "situation analysis" of your current channel strategy:

1.       What buying process are consumers now using to buy your products and similar competitive products? Are you talking to new parents and gift-givers about exactly how and where they are making up their minds? Given that understanding, are you getting your product information and products to them at the right time and in the right place?

2.      What would be an improvement to that consumer purchasing process that would make it easier for them to buy, reduce their cost, decrease their risk, etc.? What if you mapped your consumers’ current buying process for your products and then applied process improvement thinking to come up with a better way for them to obtain them? In other words, are you being as innovative about the process you’re using to deliver your products to consumers as you are about the products themselves? Should you have a multi-channel or hybrid strategy to accommodate all consumer preferences? Are you taking full advantage of what the online revolution has to offer? Have you discussed possible new delivery options with your target consumer customers?

3.      How can you streamline the flow of goods through the pipeline to reduce your costs and/or prices? Can you eliminate any intermediaries or steps? Or, as my company was in the late 60’s, are you the intermediary in danger of being eliminated? Is there a shorter route to the consumer?  Should you consider more direct-to consumer selling? Are you leveraging the best shipping options? Do you have better or more flexible production options? Are there any applications of technology that could reduce channel costs?

4.      Should you proactively find ways to provide unique products to your major retail customers? How will you respond to your retail customers’ need for unique merchandise? Can you afford to produce multiple versions of the same product? Should you become a private label supplier? Or, can you make your products so important to your retail customers that they can’t do without them? 

There’s a lot to ponder. What’s important is to be ahead of the curve. Start to make the necessary changes in your business model when it’s first clear in what direction things are going rather than wait until your financial performance is already suffering. It takes time, often years, to make significant business model changes.

If you’d like to discuss any of this with me, you can do it through JPMA’s CEO Mentor Program. Just contact Kyle Schaller at kschaller@jpma.org to set up an appointment for a Skype or Face Time session.