Advertisment

The Channels are Dead Long Live The Channels

author-image
DQC Bureau
New Update

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.

Advertisment

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

?

Advertisment

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.

Advertisment

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.

Advertisment

What do the channels need to do ?

Advertisment

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.

Advertisment