Selling online does not cannibalize distribution sales, proof by Apple

written by sandrine 12 mars 2010
Selling online does not cannibalize distribution sales, proof by Apple

We are working on several  e-commerce projects.

For each of the projects leaders, the same anxieties return loop: If we sell online, we will cannibalize our network!

At the same time, in a downturn economic situation, they all throw in the hope of additional revenue coming from online sales, but the fear.

No Man’s Land
To prove my point of view, I would like to take the example of Apple.
2 years ago, Lausanne (the town where we work in switzerland) was only having a few Apple resellers. « mémoire vice » (Riponne), Macs – horrible service btw – (near train station), an obscure dealer near to Aclens and a hard to find dealer in the the center of Morges.
It may be there were some other smaller, but say these 4 there were « big » players.
Finding a Mac in a Mall or in a supermarket was impossible.
Ordering Apple Macs however, was possible via the website.
You could buy online at the same price any computer (sometimes having to add additional delivery costs too).

Uber Marketing
The launch of new products, increased marketing and especially the release of the iPhone (brilliant marketing too) has boosted demand.
Within a few months, demand exploded.

  • Fnac (specialized hi-tech, CD, Music, Computer shop) began by introducing one Apple Mac, sadly presented on a table.  Then two other joined.  Now an entire space has been dedicated and redesigned to offer the Apple products almost the quarter of the floor space.  The whole Apple range is now available with a dedicated and trained salesperson.
  • A 100% Apple shop – Computer Art – the size of the largest resellers previously mentioned, was installedat in the most exclusive part of the city.
  • « Mémoire vive », which just had its shop in Riponne, opened another small shop in flon (presumably to compete with Art Computer) 100% mac too.
  • Media Markt now has a full corner for Apple Macs with vendors that can provide you a printer that runs under Mac (it took time)
  • Large malls such as Coop, with stores like Interdiscount, also offer dedicated Apple Mac cormers.

The more, the merrrier

Despite the presence of the online store, retailers developped, and some new came up.

So if having an online store really was cannibalizing (preventing) traditionnal sales, why would so many retailers jump in selling Apple products?

Ambassadors
If you ask retailers how they sell their products they will say « we sell products people ask for. »

They do not sell what does not sell. Watches, shoes, jewellery, clothes…. no matter the product type, retailers don’t care to sell what takes an effort.  This requires efforts, training, marketing budgets to turn retailers into ambassadors to the point they care enough to sell also the « unwanted » products (understand the products that might require a little demo or more explanation to the customer for him to buy).

To sell, they need above all that YOU do the appropriate marketing that makes people want to buy your product.

People used to by what was advertized (so advertising was enough then to publicize your product, get exposure).
Now they purchase what is « visible » and « recommended ».  And the only way to be visible and recommended today is to have an active online presence.

online, online, online
Can you compete with Apple’s inventive marketing, product innovation and advertising budget to get the same results?
Probably not.
But look at the case closely because it is emblematic.

  • The company has created demand for products exceptionally different
  • They have developed an incredibly efficient marketing based on storytelling, values (statutory) and non-technical communication (they sell a vision of people’s ego, not products)
  • They have a range of product which is easy to understand, thus to compare with others and easy to communicate
  • They sell wherever they can sell – direct, online, via retailers
  • The pricing strategy is to offer international prices, not discounted, non-negotiable, standard
  • Selling online offers advantages that retailers don’t (engraving of a tagline, availability of the whole product range, new products immediately accessible)
  • Retailers have however advantages the online store does not : easy to go to because close, physical show room and trial, after-sales service

The more you are visible, understandable and orderable – especially the more you are present and facilitate access to your products – and the more they will be purchased by customers.
An online shop offers access to the entire range. It is a direct presence of the brand which will advertise its products. A brand having direct contact with its customers will be able to grow, learn and improve to better match demand.
Facing both great and bad product reviews, they will learn and improve.
The product reviews being referenced by search engines, and major social networking tools being connected to the shop, the store will become a weapon of mass recommendation.

In short, a brand that sells online is »facing » and improving. It benefits both the clients and the whole network (including offline retailers).

  • Better communication
  • Availability of the whole product range

A network of retailer who has the chance to represent a brand that sells online benefits of this marketing and experience

  • An online referral (provided that the site is not a version or poorly coded flash blabla) and a presence in social networks (conversations, links, not to mention the various connections)
  • The availability of the complete range for customers in a hurry but also the potential of upcoming sales, additional sales (accessories) or maintenance of more products for situations where the physical presence bearby is critical
  • A wider exposure and therefore a lower learning curve meaning customers know and then ask for the products spontaniously
  • A great level of details on the net, which helps find resources for better advice, thus increase knowledge, easing recommendation and increasing satisfaction

A little known brand has everything to win from selling online as it will increase « on the shelves » requests at retailers shops

Installed brands will have to fight against the fears from retailers but will gain in « exposure ». An increased visibility inevitably reflectig back on outlets

I do not think that brands today can afford not being in direct contact with their clients: the marketing ivory towers have fizzled.

To understand the customer and its needs, a brand shall experience direct feedback from an online store. Nor can a brand only rely on a single sales channel.

If people want to buy online, you must be there. If you don’t competitors will.  And those being the more active online wiil generate increased outlet requests, thus, eventually, be also more ordered by retailers.

Cannibalization, I think, is a protectionist argument made by individuals who want the status quo. But status quo does not exist.

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