The Channels are Dead Long Live The Channels

A question very often raised these
days is the impact of the Web
on channels. Will the customer of the near future search, select, bargain,
order, get user tip and order through the net making the distributor/ dealer /
reseller network redundant? The answer is as often — yes and no.

The channels as we see them will undergo major changes. With
the Net making information sources at clickable distance the customer would have
much more information available to him. The search process for information would
come under severe change and the role that the channels have in this process
would go down. Once having selected the products / services the consumer would
also be able to find the prices available across the world and therefore be in a
position to bargain better making the profit squeeze even higher. And if he
likes what he gets he will order on the net. In this process the fear is that
the really suppliers — who could be vendors also — would gain the benefit of
economies of scale, logistics and brand name appeal to build up large monopolies
and cut the channels out of the complete cycle. Gone would be the overheads of
the chain in the form of inventories, margins, multiple establishment expenses
and manpower costs. The buyer would therefore get wider choice at lower cost.

Now the flip side. What will it take to make all this happen
?

First — a cultural change in the mindset of the customer.
If I order from the net will I get what I have ordered ? Will it arrive in time?
Will replacements be given if the transit damages occur ? Will somebody come and
help me if support is required? Obviously the vendors / large distributors who
seek to achieve this dominant position will have to work hard to clear the old
mindsets and build sufficient credibility before the numbers start increasing.
They will have to set up the logistics and support systems required to assure
the customer of timely delivery, reliability of service and support. They may
need to set up local delivery points and support centres. After all it is not
easy to ship a computer or a dozen ink cartridges or a heavy printer from New
Delhi to Bangalore on a per consignment basis. That will add so much to the cost
that the benefit of the electronic transaction route would be negated. Airports
are not organised to handle mass handling of numerous goods and road and rail
transportion is time consuiming.

Second

Second — for many products a look and feel factor is still
important. I want to see the model. I want to choose the color. I want to check
the exact dimensions. I want to try out the software. Some of these would be
possible on the net but not all — at least not with a high degree of
conveinence. That may make it necessary to have local demo centres.

Third — customers would want choice. They may want a Compaq
machine , an HP printer and Microsoft software from one source. Who will supply
that — Compaq, HP , Microsoft or an independent retailer ? Vendors may choose
to their own product portfolios.

Fourth — there would be need for local promotions and
publicity to build the brand or keep it alive. Who would do that ? Local help
based on geographical considerations would be needed.

Fifth — the e-commerce transaction model has to build. Not
everyone wants to buy through credit cards. People may want to pay cash and
corporates would still have purchase processes and cheque payments. Security of
transactions would have to be gauranteed not just by law but by actions. Who
would want to take the risk of buying something and then going to court to get
its delivery. That would be a long wait.

What do the channels need to do ?

So the channels are not going away in a hurry. But they would
need to gear up rapidly for the changes that will come. If the customer wants to
find you on the net you have to be on the net. And at many places as you can.
From search engines to magazine websites. When he wants to find the best price
at a location near to him where he can also go have a quick look your name
should figure in the list. So a net presence is a must.

If he wants to order online if he has selected you better
have a real time database of your inventory and the delivery time flashing on
the screen before he clicks for the next source. That means a complete
computerisation of operations on a real time basis.

Size of operations would give a price and logistics advantage
so being a regional player only may go agaianst you. If a customer from
Coimbatore likes your offer but you can only ship form Gauhati you have a
possible problem. So allinances may be in order if you can build a net presence
fast enough. You get the order and have your partner supply it.

Extra value would be the key. Price is standard. Product is
standard — so what is it that you offer me, the customer ? Maybe it is
service. Maybe it is time schedules. Maybe it is a better overall package. Maybe
it is wide variety of goods at one place so that I do not have to locate many
different places ( after all downloads are still not instantaneous !). Or maybe
it is a website that loads faster and is easier to navigate and order from.

The online business will call for numerous changes. That is a
given. The speed at which these chnages happen is not yet a given but it is not
now a question of years. So if you have not already done so get on the net,
start getting yourself known, build your alliances , get yourself computerised
and start building value propositions which are not just based old contacts and
relationships. The future belongs to e-contacts and e-relationships.

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