The Nature of Online Channels

Our Rapidly Changing World

As online environments become increasingly ubiquitous, new channels are forming. What we love about online is its flexibility and its capacity to inform consumers and concurrently influence shoppers. Starting a retail website is easy: there are thousands of templates available, and the cost of logo and site design tumbles daily. It’s now possible to establish a retail proposition on the web in less than a week for less than $1,000. The requirement for physical space and capital–once a significant barrier for budding retail entrepreneurs–has been completely overcome. Payment systems and search applications allow you to run an effective offer from your home. Around the world, fulfillment operators offer the ability for anyone to stock, pick, pack, and ship merchandise with a level of sophistication once available to only the largest retailers. And with affiliate marketing programs like Amazon’s, websites don’t even need to sell a product to make money from the traffic they attract.

Online propositions have the power to engage shoppers in a whole new way by providing reviews, rankings, and even the opportunity to experience the product in the home through augmented reality. Shoppers can see what their friends and other shoppers “like” and benefit from, thanks to algorithm-led recommendations that range from suggesting the right wine for a meal to information on similar products other people also bought. We can now leap from a recipe suggestion to an order page in one click. All these phenomena are democratizing retail and placing the power in the hands of the shopper.

Of course, it’s true that the online world contains some major players. Amazon now dominates not only the world of books but also numerous other categories, and its success has led to the decline of many traditional operators and to the development of thousands of specialists around the world. Some global players were caught napping as Amazon transformed from specialist to generalist and eBay turned individuals into retailers. How many shoe sellers would have thought people would buy a pair of pumps online? Few, probably. But then Zappos came along and removed the risk of ordering footwear online by offering free shipping and free returns–and great customer service. But in the last few years, major retailers and brands alike have wised up to the power of online retail, and all the major global players are steadily rolling out compelling online offers that extend their brand into digital.

This new set of environments creates new channels where microsites, run from the home, can compete with mega retailers. In the world of clicks, this competition can cross borders with relative ease, and the distinction between environments that market to shoppers and environments that market to consumers has become blurred.

This world is likely to change rapidly, presenting new ways to reach out to shoppers. In 2010, Tesco’s South Korean affiliate, Home Plus, sought to acquire a leading position online, not through enhancing backlinks and page ranking but by bringing the offer to shoppers directly. In a recent YouTube video, Tesco’s agency, Cheil, showed how in the highly connected, time-poor market of South Korea, they brought the shopping experience into a completely new realm. Using billboards in subway stations, they created a virtual Home Plus store. Posters showed life-size replicas of the stores’ shelves as they appeared in the real world (or perhaps better than they appeared in the real world, as these shelves never went out of stock!). Commuters were encouraged to scan QR barcodes for the products they wanted, and items were delivered to their homes 30 minutes later. The campaign was a hit, attracting new shoppers to both the physical stores and the online offer.

Defining these channels requires that you stretch the physical and commercial characteristics you apply currently–but these characteristics do still hold true. Distinguishing between a WordPress site and a massively sophisticated mega site remains relatively easy today, and with many e-tailers seeking direct relationships with major manufacturers, the commercial differentiators hold true regardless of whether the outlets are virtual or actual. Today, online might be a small part of a company’s sales, but it could have a huge influence on your shoppers. It’s unlikely to remain static–40 percent of one global brand’s South Korean sales of vitamins and mineral supplements are made online, making it the biggest single channel in the market. There is little left to prevent this happening globally. Online channels can’t be ignored, however small they are right now.

This blog found in Course 19: Online Channels.

May 16, 2018

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