September 27, 2007

E-Commerce: More Like Direct Marketing, Or More Like Retail Stores?

Had a discussion this evening about the future of e-commerce.

One of the topics was "which business model has the best chance to succeed, long-term ... catalog/online, online pureplay, online/retail". I vote online pureplay, followed by catalog/online. I simply don't buy the "multichannel" stuff we're fed by vendors and research report writers.

All of us who actually are asked to measure retail/online customer dynamics know the real truth ... retail customers are not likely to cross-over and buy online ... whereas online customers are very likely to buy in stores. This means the online/retail business model is ultimately dependent upon retail success ... and retail has way too much square footage for all retailers to be healthy.

One could ask a more interesting question. Is e-commerce more like traditional direct marketing, or more like traditional retail stores?

I argue that e-commerce is more like traditional retail stores. Traditional direct marketing is all about identifying an audience, then blasting a message to the audience. E-commerce (outside of e-mail) depends far more on the tenants of retailing than direct marketing. For e-commerce, Google is the mall owner.

Your thoughts?

5 comments:

  1. Catalog/online merchants have been more successful up to this point for two reasons 1) They have better refined the infrastructure for direct transactions. 2) They have applied the discipline of direct marketing to online marketing. Most catalog/online merchants understand that they will eventually evolve into internet pureplays.

    Too many online/retail merchants seem to be stuck on inefficient concepts like in-store pickup and still view online as cannibalization of their core brick and mortar model.

    Perhaps, the "transaction method" better defines direct marketing today.

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  2. The vendor and research community harp on the "buy online, pickup in stores" concept.

    How would you explan to them that this is inefficient, and what strategy would you suggest is more efficient for retailers to execute?

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  3. I understand that in-store pick-up works for retailers right now. I'm looking more at where this is heading.
    The process of buying on-line and then going to the store is not much of an efficiency improvement, even with the express parking and checkout.
    Retailers have a natural advantage in that they can decentralize fulfillment at local stores. They could provide same day or next day delivery for the same cost of 3-7 day shipping from traditional centralized fulfillment operations.

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  4. Anonymous8:16 AM

    Hi Tom and Kevin,

    I am from a vendor, but may I ask you more about this important point as a retail customer? How about my convenience of securing the item, being able to ensure that it is in the store when I get there, being able to hold in my hands, yet return it if I don't like what I see?

    Alternatively, if we think the customer may not be ready to buy at all yet if they are still evaluating, how about softer ideas such as "reserve online, check in store" or wish lists, gift registries etc.

    Ultimately, if customers like it, somebody is going to make it profitable and offer it. If customers don't find it convenient, then who is going to bother. 8-)

    Akin

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  5. Thanks, Akin. We'll see if buy online and pickup in stores thrives or dies!

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