If there is one major problem every on-line retailer faces, it’s how to build trust and value in the brand to combat a pricing ‘race to the bottom’
Imagine for the moment the Internet as the worlds largest (and most convenient) shopping center, with literally thousands of shops selling everything from pencil erasers to 32 foot yachts – well, except you don’t need to remember where and when you parked your car. Furthermore, imagine that all the shops were closed to the public with exception of their window displays and all products are to be delivered to the customer after she or he left the mall.
There you have it, those are the approximate market conditions you’re competing in when you’re online.
Obviously some of the shops will find this sort of environment helpful – that custom pencil eraser shop, a niche business at best, will likely find customers that it didn’t have at the bricks and mortar location (the business is implicitly going global after all). Others however will find the going a good deal harder – for example as a wise person once mentioned: “the good things about standards is that there are so many to choose from”. Fashion retailers can attest to this – It certainly appears that no two dress sizes ever appear the same, never mind the other variables – this will cause issues for shoppers.
Even in 2011 there are still barriers of trust that on-line shops need to overcome. Conversely retailers should no longer seek refuge in a location based price segmentation strategy. The old adage of ‘voting with your feet’ becomes farcical in the face of shop distances measured in mouse clicks.
It becomes clear then, that as old sales processes get dismantled, new technology enabled ones have to be built and put in place to facilitate a good end to end shopping experience (small plug – this is where we come in )
The painful part for retailers, which (unfortunately) seems to have become somewhat of a rule, is that margins tend to suffer a little in the conversion process. This is understandable if you pictured the mall analogy above. Competition in such an environment is fierce and direct, especially for commodity products without significant value adds.
Thankfully, at least to my way of thinking, the answer to this question really isn’t far removed from the traditional considerations given to marketing and the value chain.
Quality and content (perhaps quality of content) combined with professional business processes help significantly in establishing the perception of value in the customers mind. There is really nothing all that new about the framework to establish value.
There is however plenty ‘new’ about the processes that underly the value proposition. Traditional bricks and mortar store fit out have made way to web design, fashion change rooms – replaced with 3d models and measurements. Stock levels and warehouse ordering consideration replaced with just-in-time ordering and drop shipping (think: extracting efficiencies out of new technology).
I’m not suggesting that there is a single, one size fits all strategy that guarantees success on-line – that’s the domain of many snake oil sellers and unscrupulous SEO specialists*.
My suggestion is that If you want to succeed on-line you most definitely should NOT put aside your traditional retail thinking but should recognize the limitations inherent in a new market as well as the opportunities presented by the technology and leverage them where appropriate to overcome or enhance the shopping experience.
If you are not sure about what those limitations and opportunities are please send us a email and we’ll have a chat.
* I’m not suggesting that all SEO is flawed – but people offering to ‘put your brand on the first page of Google’ annoy me. It’s in the search engine’s best interest to keep the search results relevant. Hence they control, directly, every aspect of the search results. In my opinion if you want to be relevant to google – either engage in a sensible Ad word campaign or (my favorite) become a respected resource about the items you’re selling – if nothing else that is a direct ‘value ad’ that goes towards justifying and protecting your margin.