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The Morphing Marketplace

Markets and customers affect website organization, design, and navigation models. The blurring of channels and complexity of choices makes it a science to match up the right sales channel with the right market for the right customer. Channels are still evolving, but niche websites make it possible to target customers with specific products.

The marketplace and channels of distribution have experienced rapid change over the past few years. Not too long ago, traditional major channels were simple and had distinct customer bases and value propositions. The following is a list and description of major traditional channels:

Retail: Retail stores are shopped primarily by home, home office, and small-business consumers. These are physical "brick and mortar" buildings with broad or specific category and product assortments. There are also variations, such as "big box" super stores, department stores, consumer electronics stores, mass merchants, convenience stores, grocery stores, "mom and pop" sole proprietorships, specialty stores, club or membership stores, and discount or outlet stores. Their value is in their proximity to the customer, convenience, entertainment value, and ability to offer immediate gratification. They have a steady product mix and seasonal product offerings, and they offer special promotions.

Business Direct: These companies provide both products and services and operate predominately on a contract basis with businesses. They often provide a printed catalog containing a broad range of products and cater to calendar-budgeted purchases.

Direct Mail: Direct mail companies provide targeted printed catalogs, letters, and brochures to home and small-office consumers. These "retail in the mail" catalogs and mailings cover a wide variety of products such as clothing and jewelry, food, furniture, home furnishings, and computers and peripherals, and they generate both planned and impulse purchases.

Wholesale/Distribution: These businesses act as a "middle man" and serve as a hub for small to large business customers. They buy products from manufacturers and resell them through printed catalogs or showrooms with true wholesale prices. They receive truckloads and pallets of products from the manufacturer but ship smaller boxes, pallets, and truckloads to retailers and other channels of distribution.

Brokers: These companies are the intermediaries to business customers and provide services and sales to grocers and other industries. Some of their primary products are perishable goods, which they move through the channels quickly.

Pure-play Internet: These companies have only one selling motion—online. They provide public websites to home and small-office consumers (B2C) and to businesses, corporations, and enterprises (B2B). In some cases, they provide non-public websites, extranets, to larger companies. Internet companies can carry all products and are "perceived" to have low cost structures and prices. They have an additional value proposition in providing a broader product offering than retail or catalogs due to their virtually unlimited shelf space. They also can economically carry hard-to-find items.

Manufacturer-Direct: Many manufacturers have branded retail outlets for home consumers. These stores offer products such as clothing and housewares. They typically carry quality products and feature a trusted brand name.

Historically, reseller transactions were based on one-to-one mapping to the customer. Mail order companies sent out catalogs to customer's homes, people shopped in retail stores for products, and business-direct companies sold to big corporations under contracts.

In the past few years, some retail businesses sought to increase their reach to customers by adding an additional selling motion to their channel mix, such as a catalog. Now, with expanded technology capabilities and public and commercial adoption of the Internet, most businesses are adding e-commerce to their mix. Current marketplace trends are for single-channel businesses to become multi-channel businesses. These new hybrid models cause traditionally distinct channel models to blur and new combinations such as "clicks and mortar," a combination of retail and online sales, to develop. These new models are shown in Figure 1-2.

Figure 1-2Figure 1–2 Traditional channels, selling motions, markets, and customer models blur.

Although the percentage of the overall business is still small, sales are shifting online from other selling motions as businesses find efficiencies and transactional cost savings over traditional selling venues. It is also now possible to have multiple web properties in the selling mix. These properties target niche or specific markets. There is also a downward trend in the number of pure-play e-tailers as they merge and form alliances with other businesses to survive.

Each customer can represent multiple customer segments. Not only do multiple selling motions complicate business models for the merchant, but the customer segment models are also complicated because many of the sales channels were created based on shopping needs for the home, home-office, micro-business, medium-sized-business, corporate, and enterprise markets. Unfortunately for stores, customers don't necessarily segment themselves the same way retailers might want them to as they work through their business plans.

As customers and their needs change, the channels and shopping experiences also change. For example, with the adoption of business purchasing via the web, home consumers are influenced—because all business customers are also home consumers. When a business customer shops online for office needs, she can also shop for personal items. Every point of contact that a customer makes with a "shelf" is an opportunity for the reseller to gain a loyal, multi-segmented, and multi-channel purchasing customer.

Managing Multiple Stores and Shelves

In the process of selling through one channel, it's important to consider all the other selling motions. At any given time, customers can have access to any one of the stores—whether they are physical, virtual, or in print. Multiple channels spawn additional stores, and the proliferation creates a variety of ways to purchase a product. To the customer, each of these is just another shelf on which a product is displayed. It doesn't matter if it is a retail shelf, a catalog shelf, an e-shelf, or a TV broadcast (shopping network) shelf.

Most consumers will shop through multiple stores to buy products and services. It is evident that online shopping directly influences offline purchases. Online activities shorten the purchase process by providing to the shopper decision-making information that may not be found on the store floor. The shopper then decides from which store to purchase.

Many businesses are moving toward balance and integration to maximize sales, product mix, and customer experience across all of the individual offerings. At the same time, many businesses are not. The value of a multi-channel shopper appears to be greater than that of single-channel shoppers. Shopping research indicates that consumers shopping multiple channels are more likely to be loyal and spend more. On the flip side, a disappointing online experience can taint the entire store brand in the customer's mind and may affect future purchases at the retail store.

Practicing "integrated shelf management" is a critical business practice for today's marketplace. This technique presents each shelf or store in the same way regardless of the channel. The benefit is to present a company as a unified entity to the consumer, regardless of the type of store in which the customer shops. Figure 1-3 shows the similarities of the different types of "stores" from a customer's viewpoint.

Figure 1-3Figure 1–3 Different kinds of "stores" have similar components.

Customers become uncomfortable when shopping experiences stray too far from the familiar—and the most familiar experience is the traditional retail store. For example, web stores have random, multiple entry points through links. Customers "get lost" by dropping into the middle of a web store via some of those links. For years, retail stores have studied and designed traffic flow patterns to help customers navigate through their stores. Not all retail stores are successful in guiding customers, yet studying these elements will give you assistance as you create familiar online traffic flow patterns—navigation models—that can help customers find products. Customer retail experiences are discussed in Chapter 4.

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