Infinite Endcaps in Cyberspace

If there’s one thing I think we can all agree on, it’s that online retailers and product manufacturers want to sell more stuff. So it stands to reason that retailers and manufacturers would do all they can to put video on their sites, right? If only that was the case!

We all believe video increases sales conversion rates. Yet adoption lags. In a September post, Justin suggested the lag is due to a lack of leadership. While that may be the case, I think there are number of factors in play. The one that has been on my mind is the question of “who pays?”

eMarketer and Internet Retailer report that video is a top priority for retailers, yet some (many?) feel the manufacturers should pay all the costs. Why is that? Why would retailers want manufacturers to pay for video that will enable them to improve sales conversion rates and sell more stuff?

Having spent the early part of my career in sales and marketing with Procter & Gamble and General Mills, I believe the reason has to do with the long time practice of brick & mortar retailers charging manufacturers slotting fees for new products and merchandising fees for end aisle displays. This practice makes sense in the physical world because the supply of shelf space and end caps is limited while manufacturers’ demand for this space is unlimited. Any economist will tell you that this scenario creates tremendous power for the retailers. They use it – why wouldn’t they?

However, in the world of ecommerce, shelf space and to a lesser extent merchandising space are virtually unlimited. Retailers don’t have to limit the number of products they carry due to “shelf space constraints.” And they don’t have to ration merchandising opportunities (such as product videos) the way they ration end aisle display space. This means that supply pretty much equals demand. Yet, some retailers wait to put video on their sites in the hopes that the manufacturers will step up and pay.

In order to rapidly advance the adoption of ecommerce video, I believe both parties need to contribute because both stand to gain. Manufacturers should pay to create video and make it available for syndication because they directly benefit from the product exposure. Retailers should pay the costs associated with hosting and streaming because they directly benefit from the increased conversion. If retailers and manufacturers meet in the middle, then both will sell more stuff and make more money.

What do you think?