The Franchise Centre

Online sales must keep both customers and franchisees happy

By Centre Contributor

Online sales must keep both customers and franchisees happy

It is a constant battle to balance the conflicting needs of customers and franchisees in online sales, but it is well worth the effort if you can achieve it.

That was the message from Darren Gunton, General Manager of Marketing at Total Tools, at the recent Franchise Marketing Forum.

Total Tools is a ‘big box’ tool retailer that has 65 stores across Australia, opens around 10 new stores a year and enjoys annual average same store sales growth of 25%.But this growth pales in comparison to its online sales, which are growing at 500% a year.

Given such spectacular growth rates are available online, and will only continue to grow, it is a space that no retailer can afford to ignore. But it comes with its own unique challenges, particularly for franchise chains.

Darren’s presentation to the Franchise Marketing Forum, titled ‘How to sell online without antagonising franchisees’, gave a valuable behind-the-scenes insight into the challenge of executing and managing online sales in a franchised retail network such as Total Tools.

Purchase the Franchise Marketing Forum recordings here » 
While there are many different ways of selling online, Darren said the key to success is “finding a happy medium” between the needs of both customers and franchisees. “The goal is to make it work for the customer and not annoy the franchisee,” he said. And the starting point is to firstly identify what it is both these groups want from online purchasing.

What franchisees want:

  • want to maintain different pricing in their store
  • don’t want to do any more work than they already do
  • want to keep a different range in their store
  • want sales to their store
  • only want to work the hours they are open

What customers want:

  • standardised pricing
  • quick shopping experience
  • product or service is available
  • quick fulfilment
  • don’t care where it comes from
  • want 24/7 service

Customers ultimately just want a quick and easy buying experience, whether instore or online. A customer doesn’t see a retail network as individual franchisees, but rather just one brand. They just want the product and they don’t care where it comes from.

While franchisees want an online sales presence, they have many areas of concern in this area including: territory encroachment, competition, online pricing differences, product and service availability, costs, customer service and fulfilling orders.

Darren explained to the Forum that there are essentially two contrasting approaches to online sales in a franchised retail network – ‘Centralised’ or ‘Decentralised’ – and then a whole spectrum of other options in between.

Each has its own pluses and minuses, and it is about choosing an approach that best fits your franchise network while balancing the needs of both customers and franchisees.

Under the Centralised approach, online sales are run as a completely separate business by the franchisor. There is no input from franchisees, they receive no revenue from it, and it essentially competes against their franchised stores. Customers like it because it is easy. Franchisees don’t like it as they see online sales a direct competitor to their store.

Under the Decentralised approach, franchisees have the freedom to run their own websites and online sales. The franchisee likes the full control, but it is expensive to run and consumes a lot of time and effort. Customers don’t like it as it is confusing, there is no consistency and it looks like the brand does not know what it is doing online.

In between these two extremes, there are a whole range of other hybrid approaches to online sales with joint responsibility and revenue sharing between franchisor and franchisee.

Of these, Darren advocates the ‘middle ground’ model where the franchise head office runs the online sales from a central website and the franchisee in the local area where the order originates fulfils that order. Total Tools operates this system where the customer clicks and collects from their own local store. The franchisor takes the online order but there is no centralised distribution. The ordered product is collected or delivered by the relevant franchisee.

Darren said franchisees like this model as head office runs the IT function but each franchisee feels like ecommerce is an active part of their business. There is simple consistent pricing, they fulfil the orders, get revenue from the sale and feel like they are running the process. The customer also likes it as it is an easy and convenient experience.

For the franchisor, this approach requires significant investment in systems and support. There is also not a lot of money in it for the franchisor as the franchisee is making most of the money on the sale, with the franchisor only taking a small cut. However, the real benefits are in keeping both customers and franchisees happy.

“The middle ground is the best in my opinion,” Darren said. It is still a challenge, as some stores fulfil orders better than others, but the overall attraction for franchisees and the ease of use for customers cannot be underestimated. “The quicker you can show customers the price and availability, the quicker you can get sales. It is about keeping everyone happy and making money at the end of the day.”

Purchase the Franchise Marketing Forum recordings here »