The Challenge of Retail
With the information content dynamic present in today’s digital society and the ease and options for online shopping, there is a movement away from traditional retail distribution and towards online purchasing. As more customers become comfortable purchasing products online, manufacturers are starting to deliver products directly to the end customer.
Unfortunately for big companies that are heavily invested in traditional distribution, they are caught in a conundrum. If they try to cut out the retailer and go direct, the retailer would revolt and refuse to compete with the manufacturer, sales would drop, business organizations and structures would have to change. If a manufacturer of goods did manage to keep the retailer on board, direct sale would have to be at the full “retail” price–so no savings for the customer, just better margins for the manufacturer. As a newcomer to the market and a highly sought-after product, Revic has been able to develop a hybrid distribution model from the get-go. We sell primarily direct, with a few key dealer partners.
The Rise of KUIU
The latest example of success with the consumer-direct approach is KUIU. Clothing is well-suited for direct selling mainly because of the high distribution costs and the number of SKUs. KUIU cut out the middleman and has been able to reduce the cost the consumer pays for like products. Any purchase of a KUIU product has been through their own website, or call center. The mountain hunting consumer responded well. Concerns about fitment of a particular garment are easily addressed with a generous return policy, and the same policy protects the new customer that may have questions about quality. Basically, the idea is to try it, if you don’t like it, returns are painless. Online Shopping is also much easier than browsing racks of soft goods. To browse a full line, a couple clicks delivers all of the options and detailed information you need.
The Custom Rifle Business
The bespoke rifle has always enjoyed a direct connection to the customer. Everything needs to be discussed–the type of trip or hunt, caliber selection, weight, barrel length, trigger pull, as well as the endless discussion of component selection. After the discovery process and deposits are completed, the rifle is crafted and delivered–the process varying by manufacturer. With firearms, there is an interesting dynamic. Firearm sales are regulated by the BATF. They have to be transferred to a customer by a licensed dealer, so dealers have always been an integral part of the distribution model.
The natural progression of the rifle business is growth from a boutique systems integration company into a full-fledged manufacturer. At the same time that solid engineering and efficient manufacturing can enable enhanced quality and features, scale economies should keep costs down and allow experimentation with dealer direct distribution. A high-end rifle system is very expensive, and a potential customer usually requires a significant investment in marketing and sales communication to convert. We call this high customer acquisition cost. Highly regulated, expensive products with high CAC are perfectly suited for distribution. The plan is that the dealer invests in the marketing and sales of the product, thereby reducing the manufacturer’s costs and allowing the dealer and manufacturer to share the revenue.
A firearm company already has to distribute through FFL dealers, so why not partner with them on the marketing and sales effort to bring in customers? It makes sense. Except, the business model places a dealer in-between the communication channel of the manufacturer to the customer.
Unlike rifle systems, Revic products are perfect for a dealer direct distribution model. Sport Optics and Electronic Devices are traditionally distributed through multi-layered retail channels, In addition, many high-end optics are purchased online, so most customers are comfortable purchasing optics via e-commerce. If the sales channel is online and direct or through a select set of retailers, the consumer could potentially save significantly on price.
But the real reason we have chosen to cut steps out of the distribution channel is to build a more direct connection to our customer and end user.
When a company and the customer deal directly with each other, or through a tightly controlled group of select retailers, relationship forms and communication happens. A company can respond better and directly to the customer’s needs–whether new product announcements, service, or training, or understanding the customer needs and responding with development. And the relationship is responsive! There is no reason to fit the annual cycle of product releases. New products come online when they are ready, and get into customers hands immediately. Feedback from customers can drive change in products that can be implemented quickly.
The bottom line is we value a close connection to our customers. It’s how we will revolutionize the industry.