Digital sales channels
Digital sales charnels or e-commerce is often seen as something quite new. The reality is that digitalization has been around for a long time. Digitalization and e-commerce have been a constant process during the last 40 years that has been gathering speed exponentially. It has fundamentally changed the world of shopping, and is continuously doing so.
As early as 1980 electronic data interchange (EDI) was introduced, something that became one of the key enablers in making business between manufacturers and retailers more efficient. The starting point for online shopping could possibly be dated to 1979 when Michael Aldrich used Teletext to enable online transactions through a two-way message service. In
E-commerce could be defined as sales generated by a connected activity, through either websites, mobile devices or applications. The moment of purchase is what at the end defines digital purchase charnels and differentiates them from digital marketing channels. Digital
Figure 4.23 Organization of str ategic account management
Example of the organization of strategic account management of a retailer by an alcoholic beverage manufacturer in the UK. One senior national account manager is responsible for the account with the support of specialized account managers for the two categories of spirits and wine. A category management executive is shared with another team and is responsible for category management projects with the retailer. The hade marketing executive is responsible for translating marketing strategies into channel and retail strategies and activation. Outlet managers visit and activate the different stores of the retailer in line with trade marketing initiatives and commercial strategies.
marketing includes all consumer and shopper engagement using digital channels to influence shoppers to purchase products, even if the shopper journey ends in a purchase in a brick-and-mortar point of purchase. E-commerce is buying online while digital marketing is moving shoppers down the purchase funnel. Digital marketing is to drive the shopper toward the checkout, e-commerce and brick and mortar alike. E-commerce purchase and its fulfillment, the moment beyond the point of purchase where the product, in the case of physical products, arrives into the hands of the shopper can be through click and collect or delivery, either from local stores or centralized shipment centers.
Fulfillment is an important challenge due to the costs associated with it. In brick-and-mortar retail, fulfillment costs have been streamlined. The last yard costs are normally carried by the shopper who comes to the store, fills his shopping basket, goes to the checkout, and brings the products back to the place of consumption. In brick-and-mortar retail, the big challenge has traditionally been the last mile, the cost to bring the goods from distribution centers to the individual brick-and-mortar stores. Within modern retail, the development of centralized warehouse solutions with optimized last mile delivery to the individual stores has improved efficiency, and the costs have been part of the trade terms between retailers and manufacturers. In e-commerce, distribution has developed into a key component. In brick-and-mortar environments, the shopper is usually in charge of the last yard distribution. While last mile distribution refers to delivering products and services to the point of purchase, last yard delivery' refers to delivering the product and service to the ultimate point of consumption. Obviously, in immediate consumption channels, consumption and shopping coincide, as do the last mile and the last yard. In points of purchase where there is no immediate consumption, the shopper will buy a product and service to be consumed at a later moment and at another place. In the brick-and-mortar environment, the shopper has normally been responsible for the last yard. With e-commerce, last yard distribution, after the moment of purchase, has increasingly become part of the service to the shopper. Obviously, home delivery has been offered as a service by brick-and-mortar outlets as well, but not to the same extent. E-commerce offers several solutions, for cost reasons, such as click and collect in brick-and-mortar stores or at special lockers. In the e-commerce sphere, the costs of the last yard, bringing the goods to the place of consumption, have been transferred from the shopper to the supply side, retailers and manufacturers. In some instances, there will be a delivery fee, but this is often waived for purchases over a certain amount. This implies that the supplier side is faced with new aspects of the cost to serve to cover costs of individual shopping basket picking, more and smaller storage units closer to shoppers and consumers, and delivering to the point of consumption. To lower the barrier to online shopping many e-commerce platforms offer free returns. Free returns do not only increase the direct logistics costs, but the costs of products that cannot be resold, which either need to be destroyed, given away, or sold at a discount. Some companies talk of 30 percent return rates with significant implications on the cost to serve.38 Packaging needs to be rethought. In the brick-and-mortar sphere, packaging is designed for upright visibility on retail shelves, but e-commerce requires packaging with minimal excess space and still strong enough to withstand the delivery'journey. Managing the cost to serve and developing not only effective, but also efficient, supply chain solutions that are sustainable is one of the key challenges within e-commerce.
E-commerce is not one. but a diverse set of different sales channels. Direct channels are under the direct control of the manufacturer who can position and present products and services fully in line with the objectives and the brand marketing strategy. The disadvantages are obviously a lower reach. Through SEO, manufacturers can tty to ensure high rankings for searches related to their products and direct these potential shoppers to their websites. When it comes to emailing, it is a tool to reach shoppers that have already provided their email addr ess, e.g. previous buyers. Examples of tools to help develop email campaigns are MailChimp, HubSpot, ActiveCampaign, etc. There must normally be an address list for the emails not to be categorized as spams.
The majority of sales occur through retailers, and the biggest and leading retailers are historically' brick-and-mortar stores. Amazon is the only frilly e-commerce retailer that is among the world leading retailers. In China Alibaba is also a leading player. Brick-and-mortar retailers have added e-commerce to their progr am, entering the omnichannel sphere, and conversely' Amazon has introduced brick-and-mortar solutions. Fulfillment through retailers often happens through click and collect, where shoppers order digitally and collect physically, at a given location and time window, or where the shopper is delivered to his
Figure 4.24 E-commerce channels Categorization of e-commerce channels. Source: Authoror her home. Sometimes, the delivery can be to pick-up lockers or stores nearby. Here the manufacturer is not in control of the presentation, but his products and services are part of the portfolio of the retailer and his objectives to attract and retain shoppers in line with his positioning, as well as to add to the shopping basket at each moment of purchase.
The aggregator business model is a network model, normally in specific industries, where the firm collects information about potential goods and service providers to make them its partners under the film’s brand. The goods and services are provided to shoppers under the same brand name. The providers can still act under their name under the umbrella brand of the aggregator platform. The idea is to establish a win-win situation for both parties where the partners focus on providing quality products and services to shoppers and the aggregator focuses on marketing and creating leads for the partners. The partner terms include rales on branding, quality standards and compensation, amongst others. Aggregator models are non-exclusive, and goods and service providers can partner with different aggregators. Aggregators have infiltrated many industries, such as travel, taxi services, restaurants, groceries, etc. Examples are Airbnb, Uber, Uber Eats, Munchery, Food Panda, Mjam, Gofers, etc.
Another important e-commerce channel is brokerage platforms. Here the platforms offer, as well as promote, different products and services. They are normally multi-brand with little preference for specific manufacturers and their brands. Marketplaces like Amazon, eBay, Zalando, or Taobao and Tmall in China are big and important platforms for shoppers that often already know which products they are looking for. Search engines help with presenting reviews, ratings and price comparisons. In addition, which products have been bought in combination are often shown, helping to build a shopping basket and present specific products and services. Marketplaces such as Amazon or Zalando are business to shopper marketplaces, while marketplaces like eBay are consumer to shopper marketplaces. Although some promotions and sponsoring are possible on marketplaces, the main comparison driver is price and reviews.
Comparison shopping engines are not directly e-commerce channels, but lead to platforms where products and services can be purchased. Still, they are an important tool for shoppers who look for specific products and services, and are relatively far down their shopping journey. Comparison shopping engines mainly help shoppers compare prices, and also reviews, to help them find the best deal. Examples are Idealo, PriceGrabber, Kelkoo, etc. Some activation can be done through product listings, but the presentation is more a result of the shopper marketing effort done in the channels to which the comparison shopping engines direct the shoppers, and the work done on product and service quality.
Affiliate networks like Rakuten, Affilinet, CJ Affiliate, etc., are brokers with which companies can agree to drive traffic to points of purchase, be it brick-and-mortar or digital, for purchasing specific products and services. The affiliate network will normally receive a certain sum of compensation based on specific outcomes like traffic or purchase. The affiliate network then needs to find ways to attract potential shoppers, normally through different deals. Normally the compensation is based on real sales, as metrics such as generating traffic to specific websites have shown to be challenging to measure correctly, with important implications on correct compensation levels. Affiliate marketing plays an important role as a tool in e-commerce and generates a significant share of e-commerce sales. In addition, although it is not always the final point of purchase, it plays a vital role as a final step in the shopper journey before the purchase.
Sales through social media give more opportunities to position products and services on dimensions other than price, and move toward content marketing. Social media marketing is normally considered reasonably effective when it comes to targeted campaigns. In the case of influencers the profile of the influencer needs to be aligned with the position of the product and service. Furthermore, the influencer needs to have a certain reach in targeting consumers and shoppers to make a marketing effort worthwhile. The most important platform is Instagram. When it comes to a platform like Facebook, it will help to target the right audience for the product and service. Other platforms are Snapchat, Reddit or Pinterest. Social media helps to inspire potential shoppers, remind past shoppers, and capture the attention of shoppers in the search phase. Products and services can be promoted through social posts, dynamic ads and videos. More than just being promoted, products and services can also be purchased directly on some social media platforms, e.g. Facebook.
The different search engines, with Google obviously the most important one, but also Bing, Yahoo, or DuckDuckGo, for example, are not directly e-commerce sales channels, but are important in directing sales traffic. Search engines help to attract potential shoppers who are actively searching for solutions and categories. Products and services can be promoted on the search engines through text ads, image ads, display ads, voice search, etc.
E-commerce channels, depending on the level of control and collaboration, have a hrrge opportunity to use data to deepen knowledge about shoppers and develop better targeted strategies and move from pure transactions to more retention and shopper development. The access to data for indirect sales is dependent on the level of collaboration with retailers, affiliates and influencers. The optimization of offerings and search results presented are driven by algorithms, with deductions normally based on fragmented data limited to online behavior. E-commerce is also limited when it comes to impulse purchases that can be important for specific categories.
In managing the e-commerce channels SEO is key to ensuring high rankings for searches related to products and brands, and directing searches to the most relevant websites, primarily brand and product websites. Beyond the brand and product websites content can be provided to engage shoppers, e.g. through banners, social marketing, bloggers, etc. Price comparisons and reviews build differentiation during search phases, and digital coupons and loyalty prograins are effective in driving preference and purchase.
The classical manufacturer, retailer, shopper model is still in many ways the most important model in many categories, where the process is shared between manufacturer and retailer. E-commerce expands the possibilities for direct to shopper and consumer models, including subscription models, where the main part of the process stay with the manufacturer. In the brokerage and social media model the platforms gain commissions by bringing shoppers and sellers together, commissioned by either impressions or real purchases. Advertising, e.g. through banners, is an important source of income, especially for search engines. E-commerce makes it possible to collect much shopper behavior data. Sites and platforms, e.g. Google and Facebook, analyze and sell this data. Internet service providers are key players that generate revenues both from internet subscriptions and advertising.