The Internet is often thought of as a sales channel, one way among many in which a company reaches customers and distributes its products. But in fact it should really be thought of as several sales channels. Many successful online businesses end up with multiple sales channels:
■ Sales made through a brick-and-mortar store
■ Sales made through eBay
■ Sales made through a web site
■ Sales made through a merchant site, such as Amazon.com Marketplace
■ Customers found through shopping directories, such as Yahoo! Shopping and PriceGrabber If you find yourself in this situation—or considering opening a new sales channel—you need to consider how all these sales channels work together; or if, in fact, they all have to operate separately.
Understanding Channel Conflict
If you have an offline business and are planning to take it online, or even if you have one online channel and want to open another, you have to understand what is known as channel conflict. This refers to the incompatibilities between two channels. The most likely cause of channel conflict when you open an online store is pricing. You may find that the prices in your offline store are simply too high for the Internet. You can’t sell online with your offline prices . . . and you don’t want your offline customers to know just how low your online prices are!
Or perhaps you have a web store and now want to sell through Amazon.com. Amazon has certain price demands on Marketplace merchants; you can sell for more elsewhere, but you can’t sell for less. In this situation you wouldn’t want people arriving at your web site to know that you sell the products cheaper on Amazon, if that’s the case. For various reasons, companies may want to sell through different channels at different prices. This is not unusual, and nothing illegal, immoral, or fattening. Many, many companies do this in the real world. How do companies deal with the channel-conflict issue?
■ Some companies have chosen to run, in effect, two or more separate businesses, a low-priced online business under one name, and a higher-priced business offline under another name. Or perhaps an offline business, a business running a web store, and another business selling through low-cost channels such as the shopping directories and the merchant sites.
■ Other companies have chosen to bypass the problem by differentiating their online business in order to avoid price competition. For instance, a jewelry company may choose to focus on the uniqueness of its designs, so it doesn’t have to compete dollar- for-dollar with other online businesses.
■ Sales made through a brick-and-mortar store
■ Sales made through eBay
■ Sales made through a web site
■ Sales made through a merchant site, such as Amazon.com Marketplace
■ Customers found through shopping directories, such as Yahoo! Shopping and PriceGrabber If you find yourself in this situation—or considering opening a new sales channel—you need to consider how all these sales channels work together; or if, in fact, they all have to operate separately.
Understanding Channel Conflict
If you have an offline business and are planning to take it online, or even if you have one online channel and want to open another, you have to understand what is known as channel conflict. This refers to the incompatibilities between two channels. The most likely cause of channel conflict when you open an online store is pricing. You may find that the prices in your offline store are simply too high for the Internet. You can’t sell online with your offline prices . . . and you don’t want your offline customers to know just how low your online prices are!
Or perhaps you have a web store and now want to sell through Amazon.com. Amazon has certain price demands on Marketplace merchants; you can sell for more elsewhere, but you can’t sell for less. In this situation you wouldn’t want people arriving at your web site to know that you sell the products cheaper on Amazon, if that’s the case. For various reasons, companies may want to sell through different channels at different prices. This is not unusual, and nothing illegal, immoral, or fattening. Many, many companies do this in the real world. How do companies deal with the channel-conflict issue?
■ Some companies have chosen to run, in effect, two or more separate businesses, a low-priced online business under one name, and a higher-priced business offline under another name. Or perhaps an offline business, a business running a web store, and another business selling through low-cost channels such as the shopping directories and the merchant sites.
■ Other companies have chosen to bypass the problem by differentiating their online business in order to avoid price competition. For instance, a jewelry company may choose to focus on the uniqueness of its designs, so it doesn’t have to compete dollar- for-dollar with other online businesses.
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