Mar 15, 2008

Ten Years Later: Internet Settling in as Information Channel

It's been ten years since anticipation that the Internet would become a disruptive and dominant retail sales channel reached its frenzied peak. Of course, the early-2000 bursting of the Internet bubble quieted the noise level, but expectations endured that the Internet would continue to displace 'brick and mortar' outlets, albeit at a slower pace.

With time, distance, and perspective, the role of Internet technology in 2008 retail distribution is coming into sharper focus. With a few market sector exceptions (air travel; music) the Internet seems to be settling in primarily as an exceptionally powerful place for product information, solution design assistance, safety reassurance, and peer evaluations.

When it comes to actually transacting a purchase, it appears the fastest growing channel is a hybrid one - online searching and offline buying. For many categories, consumers seem to still desire the opportunity to touch, demo, interact with and confirm their selection.

For marketers managing a portfolio of distribution channels, it's essential to understand that channel structures are simply a "division of labor". By labor, we mean the distribution activities requried to meet consumers needs throughout their entire experience of deciding, buying, and owning/using. The key is to not get hung up on an 'all or nothing' view of the internet and recognize it is simply one mechanism among many for performing specific activities in a distribution "system".
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Footnote: In a further sign of how quickly online channels are settling in to a less prominent position within the overall retail portfolio, the WSJ and report the following survival incentives being offered by online merchants trying to hang on to some piece of the consumer transaction pie:
Crate & Barrel will allow customers to send gifts to more than one address in a single order and offer new gift-box options.

Circuit City Stores says shoppers can order products of $25 or more on its Web site and pick them up within 24 minutes at a local store, or they will receive a $24 gift card.

• Gift merchant RedEnvelope gives forgetful shoppers a “shop now, ship later” option, which is free and offered only during holidays like Christmas and Valentine’s Day. Purchases made with this option will arrive between Dec. 17 and Dec. 21.

Dale and Thomas Popcorn has produced about 40 short videos featuring Chef Ed, “the world’s first Popcorn Chef,” talking about the different flavors and gifts on the gourmet popcorn site.

Sharper Image is running a holiday sweepstakes, with 50 prizes over 50 days and a chance to win a $10,000 Gift Card.

• Crafts seller Jo-Ann Stores plans a site makeover with over 100 romance images focusing on merchandising promotions and an emphasis on projects and inspiration. It also plans free return shipping, in case a gift needs to be sent back.

• Urban Outfitters’ Anthropologie, a women’s apparel retailer, is offering express shipping options for gift cards ranging from $25 to $200 denominations.

• Internet jewelry merchant Blue Nile is offering free overnight priority shipping this holiday season on all orders, without setting a minimum purchase price. Shoppers previously received free overnight shipping only on engagement ring orders or purchases of $1,000 or more. Starting on Cyber Monday, the first Monday after Thanksgiving, Blue Nile is running a 20% cash back special on purchases made with the PayPal electronic paymentservice. The promotion, a first from Blue Nile, translates into as much as a $50 credit per PayPal account.
• Online bags retailer EBags is also kicking off Cyber Monday with the same special, which it hasn’t offered in previous years

• Jewelry retailer is offering free shipping and free returns this holiday season.

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