What Brands Must Know About E-Retail

In most markets it has become clear to marketers that being online is no longer optional, it is now mandatory. What many brands may not yet realize is that not all online channels are the same! While many might view “online” as a channel in and of itself, there exist a number of types of online channels – each serving different products, shoppers, and needs. When it comes to e-retailing, online shoppers in the United States, Europe, and Japan would think of big retailers (Wal-Mart, Best Buy) or pure-play online merchants (like Amazon). In China, however, according to McKinsey, about 90% of e-commerce for electronic s is attributed to online storefronts on megasites analogous to eBay or Amazon Marketplace (consisting of independent sellers selling to shoppers) – rather than big online stores like in the U.S. The two biggest players in China – Tmall and 360buy – which together generate over half of China’s e-commerce sales – consist of thousands of independent resellers offering products and services to consumers through online storefronts. Similarly, in Thailand, popular online storefront WeLoveShopping.com claims to have as much as 70% share of total e-commerce value in the country (excluding online bookings).

As these examples show – managing  e-retail channels is a lot more complicated than you think. From the vast number of e-retail options, how do brands decide which e-retail channels to dive into, what are the benefits of getting it right, and the dangers of getting it wrong?

Determine which e-retail channel choice is best for your product category

The first consideration in developing a brand’s e-retail strategy is the product category they’re in. While certain products may thrive in any number of e-retail channels, others are better off being offered through larger or more credible channels.

In Tmall, for example, clothing and household items are by far the biggest categories. These are generally lower-priced products with less of a “risk” factor when making purchases. A colleague at engage’s office in Shanghai revealed that for items like clothes, she generally prefers to shop on storefront sites, through the independent sellers,  as opposed to retailer sites like Suning.com or Amazon.cn, as  brands  are generally cheaper on the former. However, for bigger purchases like home appliances – where quality is important and the risk of encountering fakes is high – she prefers big retailer websites like Suning.

Do not apply the rules of the “popular retailer” to an online setting

In the physical world, shoppers have a higher tendency to visit stores they are familiar with when they want to buy a product.  Shoppers may be more tempted to visit Best Buy to check out their new television, or Bed Bath & Beyond to buy some towels – as opposed to the local stores. Shoppers believe in the quality of products sold at the major retailers, they are familiar with the store setting, and know that staff won’t disappoint.

But is the same true for the online setting? Possibly not. It is likely that there is a higher chance for an online shopper to Google “Sony televisions” and browse through unheard of websites, as opposed to go to BestBuy.com right away. He may be comparing prices and deals with BestBuy.com – and perhaps end up buying through the latter – but the point is, there is a big window of opportunity for shoppers to consider other independent sellers! When considering e-retail channels, therefore, it is important to not forget these independent seller websites, which may be grabbing a share of your online sales.

What brands must consider in their e-retail strategy

• Before diving head-first into online, manufacturers must take a step back and reevaluate their strategy by considering their brands, their products, and their shoppers. Which e-retail channels would best support and enhance the brand? Which channels are a better fit for their product categories? Which channels are more likely to be searched and found by their shoppers? Not all online channels are equal, and it is important to focus on the channels which play the roles that are most suited for each specific brand.

• On a positive note, the marketplace ecosystem brings new opportunities to brands. For example, manufacturers thinking about entering China would be able to test the market in a cost-effective way by selling through these online storefronts. This was exactly what Uniqlo did when they first entered the Chinese market.

• There are always two edges to a sword; while online storefronts allow brands to more easily penetrate certain international markets, they also allow current sellers on these websites to expand their reach abroad – perhaps into your home market. Brands must be ready for this new wave of competition.
• To succeed, brands can’t just be present online – their presence must be strong. Brands must offer real value to shoppers and be sure to communicate their value proposition clearly – and the proposition may need to be vary from site to site as each site may attract a different shopper profile. While price may sometimes be a big factor, brands should not forget about customer service, fast and reliable delivery, a better shopping experience, and more targeted marketing. Brands should be careful of assuming that any distribution online is good distribution: if shoppers are let down by the site, then the brand may be tarnished as well.

Assuming all online channels are equal will at best lead to an online presence with a lack of focus: or worse, a presence which damages long term brand equity. Online retail requires careful strategic thought, based on a clear understanding of the relationship between the brand, the channel, and the shopper. For more on the complexities of online retail strategy, check out Mike’s blog on How To Stop Your Brand From Suffering As Retail Moves Online.