By Chris Petersen and Adam Simon
Charles Dickens begins his historical novel with the classic opening: “It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity”.
Dickens’ words also accurately describe the paradox facing consumer brands today. In many ways, brands have unprecedented opportunities to reach consumers. Yet, the consumer transformation to omnichannel has disrupted historical retail models creating new challenges. Those that brands that thrive will be those that collaborate in ways that adapt to the changing dynamics of the retail ecosystem.
Prior to the rise of ecommerce, the route to market for consumer brands was primarily through the retail store. The supply chain was essentially a linear model from manufactures, to distributors to retailers. Today’s omnichannel consumers have disrupted that model and now expect to shop, purchase and take delivery anytime and everywhere. This has created some dynamic new opportunities for brands marketing and selling products to consumers.
Direct Sales to Consumers
As consumers increasingly shop and purchase online, manufactures have an opportunity to sell direct to consumers through their own ecommerce. Direct channels can increase margin, but more importantly, they enable direct relationships with customers.
New Marketing Opportunities
More than 70% of customers begin their purchase journey online. Brands have an opportunity to engage customers early and often through multiple touch points, in addition to customer experiences in store.
Reach – Products and Supply at More Places
Through the integration of physical and digital retail, brands can effectively spread their supply across more places and use “virtual inventory” to reach more customers.
Long tail – Opportunities for Premium Mix and Revenue
The number of products carried in physical stores were limited by physical space and open to buy capital. The growth of ecommerce means making a full range of products available to many more customers locally and globally.
Why these are the WORST of times for consumer brands
The rise of the omnichannel customer has swung the pendulum to be more customer centric. While the situation today might not constitute the “worst” that can happen, current customer behaviors certainly post major challenges to brands, their previous strategies and program effectiveness.
Commoditization of Products
The power of ecommerce and omnichannel customers is reaching customers anytime and everywhere. The corresponding challenge is the explosion of everyone’s products everywhere. Even if brands go direct, they are still competing with over 400 million products available on just Amazon, not to mention what’s available on Alibaba and Google.
Slippery Slope of Price Erosion
The challenge of ecommerce is transparency and ease of product and price comparison. The ecommerce giants can change pricing dynamically, by market hourly. Once online, prices become the lowest common denominator. Even major retail stores have now realized that they must match prices online.
The missing 5th P – Personalization
Ecommerce has for the most part been an electronic catalog of what’s available at a price. Brands have little opportunity to differentiate product or their value add services selling through ecommerce. Brands need to find ways to personalize solutions and services before and after the sale.
Connecting the Brand and User Experience
The experience online has been primarily features, function and price. Brands need more innovative ways to connect at multiple points in the customer, especially early in the journey, and at the critical points of decision to purchase which now occur across channels.
The bottom line: “All of the above” requires strategic collaboration
Brands have more opportunities than ever to reach today’s consumers. Herein also lies the challenges of having the right media and resources to leverage those points of contact to optimize the brand experience. The reality today is that few brands the capacity or resources able to do it all. Indeed, future success for consumer brands lies in their effectiveness to:
- Optimize brand value beyond commoditization of product and price
- Create an engaging brand experience across multiple channels
- Solve for optimizing supply at the right time and place
- The ability to solve for the last mile to the customer’s door
- Personalizing service that meets customer expectations
Chris Petersen and Adam Simon are collaborating on a series of blogs that explore the rise of strategic collaboration and new customer centric ecosystems. This blog series will culminate with a worldwide panel discussion at the ContextWorld CES CEO Breakfast, where a global brand, distributor and retailer will share their perspectives on strategic collaboration.
If you are interested in more information on this CES event, contact [email protected].