Successful Multi-channel Commerce is Agile Commerce
It would be pointless to use this forum for a discussion of how media usage and consumer behaviour have changed so much. The fact is, the growing digitalisation of our daily lives is fundamentally changing not only the media and entertainment industries, but above all the area of commerce. On the one hand, for example, we see news websites and social media increasingly squeezing out print media, or streaming portals eroding the position of traditional TV among young urban consumers and on the other hand, on the retail side, we see the speed and intensity of the E-commerce assault on successful retail structures built over decades and now threatened to an extent previously unimaginable. What is especially worth noting here is that in some cases it is the same companies that are operating in both areas – media and retail – and are benefitting the most from this macro-social transformation. They are increasingly able to generate synergies by occupying more and more of the stages in the value chain. This is a key factor in reaching and leveraging target groups in an effective way.
Securing customer loyalty across multiple value chain stages
As a result, these companies, particularly Amazon – and Alibaba in China – can forge an ever-stronger bond with customers across different product categories, thus tapping their potential for other products and services and continuously adding more value. Many established brands fear this level of influence over customers and the resulting dependency brand marketers could potentially develop. So they tend to avoid this distribution channel. Many also do without their own online shops, thinking this will protect the bricks and mortar distribution channels. A classic mistake, which can quickly turn into a strategic error of judgement.
Where customers go, brands must follow
As a general rule, every brand marketer looking for long-term success should know their target group inside out and share their journey with them. The perfect media strategy is one that follows the media usage patterns of existing or potential customers to reach the level of contacts needed by marketing and sales. This approach also applies to distribution channels. Because what is the point of creating demand among potential customers if the product is not available to purchase – or if purchasing it is extremely inconvenient? We can debate endlessly about cause and effect – the fact is, E-commerce has become the preferred method of shopping for many consumers. Not to offer customers this option is grossly negligent and unsustainable.
Select distribution channels strategically
The large online marketplaces have further intensified this phenomenon. For many consumers, Amazon is now the product search engine at the start of every shopping experience. Products which are not listed there, simply don’t exist. This doesn’t just mean these products are not purchased online. It is possible they are not purchased at all any more. The result is that stationary retail partners lose out – and consequently brand marketers lose out in both channels. A win-win situation for competitors.
This is why it’s critical to take a strategic, coordinated approach to how you select distribution channels, in order to service your target group while considering the interests of your various retail partners. How can this work?
The different distribution channels are usually each premised on very different shopping expectations and possibly also on a completely unique intrinsic need. For online shoppers, the key drivers are usually convenience and flexible scheduling, whilst customers at specialist retailers or department stores want to experience products and compare them with others. In flagship stores, the main focus is again on the brand experience, in many cases in connection with events that go above and beyond a simple purchase. At the end of the day, price is everything in outlet shopping, especially online but also in physical stores, although outlet store visits are often part of a twice-yearly, all-day shopping experience at a greenfield location.
Fine-tuning your multi-channel commerce activities
These different functions also need to be reflected in the product range on offer. Whilst it has long been the accepted wisdom that the outlet channel both online and in physical stores usually does not offer the latest collections, all other distribution channels use a targeted approach to their product range. Specialist retailers offer the latest, most attractive product range of the best quality, not only to justify their existence as stationary retailers, but also to secure their competitive position in the head-to-head battle with other brands. Operating a brand flagship store creates the perfect setting for highlighting limited or really avant-garde collections, and also ensures that customers enjoy a memorable and innovative brand experience.
Profitability in a highly-competitive price environment
And in the online marketplaces, like Amazon? It makes sense to focus on basic collections there, and that is not just to protect your distribution partners in stationary retail. Standardized, well-known products with longer life cycles simplifies logistics, reduces return rates and thereby enables profitable business even in the face of intense digital price competition. This has the added benefit of maintaining availability and brand presence in the digital world and this can have a positive effect for other distribution channels. This is because every brand contact, especially at the digital POS level, grows awareness, relevance and purchase probability, thus cementing the brand’s “digital existence”, which also cascades down into the stationary channels – provided that the channel mix is strategically coordinated and fine-tuned so they operate in concert, not in competition with each other.
In summary: Multi-channel commerce strategies need not undermine established distribution channels. With an integrated and strategically orchestrated approach, online marketplaces can reinforce established brands, which ultimately benefits stationary channels as well. It is crucial to develop a coordinated interplay between marketing, sales and product range.