As more manufacturers work to deliver a consumer-friendly experience for purchasing online, Millennial procurement professionals are responding by shifting their spend to this channel. According to a recent UPS survey, Millennials show a growing preference for buying directly from manufacturers online, an increase of almost 20% in the past two years.
Overall, UPS says a growing number of buyers now include manufacturer websites as part of their channel mix when making a decision on where to buy. “During the past two years, distributors saw a 15% decrease in purchase share to 38%,” according to the report, “while manufacturers and online marketplaces have grown by 10% and 17%, respectively.”
5 Reasons to Buy Directly
Whether the goal is to eliminate the middleman, have more direct interactions with product makers, get better pricing or gain access to high inventory levels, the “buying direct” trend will likely continue in the electronics procurement space. Here are five reasons why:
- Buying direct saves money. In the article “Direct Purchases Vs. Distributor Purchases,” ThomasNet points to cost as a major factor in the decision to buy directly. “Whether you’re purchasing unfinished build materials directly from a factory or giving your customers the ability to purchase directly from you or a third party, the main advantage of purchasing direct is lower costs,” according to ThomasNet. “For example, the U.S. Department of Justice has observed that automobile purchases are typically inflated by a full one-third of their actual price in order to account for the added costs of distributors and dealers.”
- More manufacturers are offering direct sales. For many manufacturers, working with wholesaler distributors was traditionally the only way to get their products in front of customers. “Wholesalers provided the manpower, infrastructure and retail space that manufacturers couldn’t afford on their own,” Karen Waksman pointed out in an article for The Balance Small Business. With the rise of the internet, the distribution business model is evolving, and manufacturers are increasingly skipping wholesalers and selling products directly. This ensures that the inventory you “see” is what you can get, since no middleman is managing the inventory and orders (i.e., there is no business bias when purchasing online). “Traditional wholesalers and retailers, such as big-box stores, brick and mortar shops, and malls are now presented with new competition from manufacturers,” Waksman added, “[which] often sell at prices distributors can’t match without losing money.”
- The convenience factor is high. When you buy directly from a company like Texas Instruments through its TI.com website, the convenience levels are high and the stress levels low. In fact, with just a few mouse clicks or screen taps, you can load up your shopping cart, hit checkout and quickly get back to more important tasks. Manufacturer sites also offer instant access to large inventories of components and parts, all of which are authentic and immediately available.
- You get better shipping options and quality oversight. According to ThomasNet, eliminating middlemen and intermediate steps from the shipping and distribution process has the added benefit of giving both procurement departments and suppliers a better idea of what’s happening in transit. It also helps manufacturers identify whether they need to take steps to reduce product damage or address problems in the “last mile” of product movement. For example, if your manufacturer is the only party handling your merchandise, it effectively retains total oversight over packaging and shipping, and therefore can handle any reported defects or damages far more efficiently. Finally, ordering from the manufacturer directly ensures high levels of authenticity—a particularly important consideration in an industry where counterfeit products are common.
- It speaks to the tech-savvy buyer. In an era where virtual storefronts have turned into preferred shopping channels by necessity, buyers increasingly turned to company websites and search engines as their first or second supply sources, UPS reports. While 33% of Baby Boomers do their purchasing on a company website, that number is only 18% for Millennials, who spread out their purchasing over a variety of channels, including mobile apps, email and electronic data interchange. UPS expects this change to continue, with the volume of direct-from-manufacturer and online purchases likely to increase in the next three to five years.
Testing the Direct Waters
From concept to production, procurement professionals can get what they need by purchasing directly from companies like Texas Instruments, including production quantities, pre-production parts, multiple payment options and flat-rate shipping to anywhere (and at any time).
With the lowest online prices on 1,000-unit (1ku) quantities for 99% of its immediately available inventory, Texas Instruments is meeting a growing need for direct interaction in an industry that demands it.
“In general, it’s a good choice to buy directly from a manufacturer,” Dave Llorens wrote in an article for Business 2 Community. “The pricing will be better, it will be easier to get warranty replacements, lead times will be more reliable and you can be more confident that you’re getting what you ordered.”
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