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Article
It's Not Omni Channel--It's Infinite Channel

What happens when Facebook, Pinterest, Amazon are part of your sales channel?


Full Article Below -
Untitled Document

Introduction

Thought Omni Channel was complicated? What happens when every social or community website has your buy button?

Infinite Channels

Social sites like Facebook don’t make money directly from us chatting with our relatives or liking the latest picture of our friends’ most embarrassing moments. And Twitter does not make money from us pushing our pithy anecdotes to unknown audiences. Our Likes and #s don’t really make money for Facebook and the content provider who keeps spinning out these missives. Of course they make money on all that clicking and the streams of data and the analytics that attempt to categorize it for some business value. And they do make money from all the so-called relevant advertising that pops up based on the insights gained from the analytics. 

The internet is one of the channels that see customer interest first. Truly, that is very important. But no business or industry stands still: hence, the latest manifestation of the zeal for social sites to dominate the world: the buy button. Today your advertising on Google, Facebook, Pinterest and so on, can jump to the front with paid services. So why not capture the sale? 

For the product/brand company the commerce model is like channel upon channel upon channel—infinite rather than Omni. For example, as the consumer searches, various ads pop up. They may or may not click on them. However, consumer searches could be several clicks from a mobile device or on the web with multiple searches across multiple social sites or across multiple retailers to search for availability, price and so on, infinitely—until the shopper arrives at the buy button.

The benefits to Google et al are obvious. Each of these clicks is a tiny additional sliver of revenue. But for brand companies and retailers this brings a host of questions:

      • Is this an environment which you feel will enhance your brand?
      • What is this really going to cost? Today advertising and click costs can mount up. Since the social site is not going to do the fulfillment there are other players—a retailer, a brand manufacturer, a wholesaler—who are also involved and need to get their ‘cut’ of the deal. However this is the click that might be worth it, since it is a direct sale!

It is not totally clear what the impact on fulfillment, customer management, demand/merchandise and product design will be—all strategic issues in the consumer chain.

But more critical to retailers is the question: who is my competition? Where will these new channels take the world of retailing? This is the ultimate strategic question—an essential life or death question.

So before you buy that buy button…


Impact on the Customer Relationship

So much of our product design, planning, and demand management is wrapped around our understanding of the customer. We attempt to segment,1 categorize, promote to them and then keep them loyal. We look to understand markets that over time have the most potential. We develop history to create better demand plans.

Demand Management systems today are an integrated array of the analyses derived from customer opinion inputs, sales history, and product data that can be modeled. That is very ‘dear’ information and strategic to the product or retailer company. From there, the right product offering, mix, and assortment by channel can be created. The insights gained can add huge value to firms that want to build customer loyalty, find new ways to build revenue, and successfully enter new markets.

Segmentation of markets determines the value and price sensitivity of a customer or group of customers. By presenting the right-priced product offering to that segment and also designing services specific to that group, profits are increased.

Retailers have their own credit cards, POS, and loyalty systems which are the sources for all these merchandising and analytics systems. However, with Facebook and Google as the sales channels, they also now capture your customers’ data. The transactions happen within Google, Facebook and so on. This could relegate the brand and the channel partner (say Ralph Lauren and Macy’s) to second tier status, with Pinterest or Facebook as the owner of the channel, and the ‘cool’ site where the consumer finds what they are looking for.

What happens to the powerful brand value of the retailer? Does it become just another channel? The essential question then becomes—whose customer is this really?

Financial Impact

Part of a retailer's value to a brand supplier is not only performing the sale, but incentivizing and attracting the customers. And that costs money. Retailers pay for real estate, customer experience, headcount, advertising, and investments in inventory. Retailers build their brand around availability, experience, and so on.

However, web channels need none of that! They can sell anything with virtually no investment in inventory management, loss prevention, air conditioning, or parking lots. Ouch!!!

Impact on Fulfillment

Fulfillment is an area for product companies to ponder, as well. Today, channel relationships do provide some buffer between product companies and end-consumers, though more firms are selling direct on the web. The buy button is an aggressive step into the impulse of the shopper. If putting a buy button with each consumer search is successful, a company could be inundated with orders (we hope). So how can you ensure you can fulfill those orders without stacking too much inventory?

Product companies often have unique channel offerings, pricing, and fulfillment models. The channels can get blurred, making many of these fulfillment strategies a moot point.

No doubt, these issues, in some ways, are not new. But it’s essential to be channel adept and understand the models, the financials and costs, the impact on your brand, your treasured customer relationships and your market position before pushing that button.

The Future … Google Retail

I can envision a future where Google rather than Macy’s or Walmart is sitting across the table from suppliers hashing out supply chain strategies, compliance standards, and pricing, a future in which Google becomes the driver of how fulfillment is done.

That is not a fantasy.

The next delivery van to pull up to your house could be a driverless Google van, with products shopped for and paid for at Google. And when you open the door, there will be a Google robot to deliver your package.

Read more about Omni Channel.    

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1 Also in this issue read about, for example, JDA and Google creating new segmentation models. -- Return to article text above


To view other articles from this issue of the brief, click here.




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