Channel Management Models

:: Channel Management Models ::


There are six major methodologies that manufacturers/brands utilize when selling online ranging from complete channel destruction/disintermediation to the most robust and complete "closed-loop" solution being that offered by Reshare Commerce under our patented system and business model, all of which are discussed below.





The Dead End Model - Do Nothing to Refer Consumers

The "Dead End" Model will leave consumers with nowhere to go. Although most companies recognize the need for a methodology that offers consumers sources for their products, there still remain those who have not executed such a strategy. We can cite several examples of companies with tremendous websites featuring all of their products with no store locator or online sales. It will not shock you to learn that this model is a lose-lose proposition for all. For consumers, not being able to buy online is frustrating enough. But not even being able to find a distributor or retailer or get a phone number is quite another. Retailers lose the awareness that a website could provide and the business that results from it. The manufacturer or brand owner loses sales and something far more important - brand satisfaction.







The Fumble Model - Refer but Lose Consumers

The "Fumble Model" exists when a brand sends consumers to a channel partner in the hope that they will promote the brand with the same veracity as the brand does. While retailers are mostly concerned about selling "any brand," brands should only be concerned about selling "their brand". At many brand websites, consumers can search for nearby retailers by city, state, zip or name. These sites gives numerous options in an attempt to even the playing field for competitive retailers and give consumers more choice. Unfortunately, by using this model, brands may lose consumers to another brand - perhaps an online brand that can meet consumers' needs then and there. And no matter how you look at it, brands lose control of the branded experience that they've worked so hard to achieve.







The Two Faced Model - Partially serve Consumers and Damage your Channel

In this "Two Faced" model, consumers can purchase a limited selection of products from a brand website. The products may represent a segment of the brands entire line or be an entirely separate "online-only" offering. Regardless, consumers expect that the brand itself should offer its full suite of products. Consumers are rarely satisfied by being forced to choose from a limited selection and will often leave the brand website without purchasing. The result is a negative brand experience. At the same time, the distribution channel sees this type of online store as direct competition. Even if a brand sell different products online, distributors and retailers are now put in the position to compete with the brand for a finite number of consumer dollars. Brands often defend the strategy by claiming they are selling at full price, thereby not undercutting their distribution channel. The sad truth is that while this is accurate, the consumers who buy at full price from the brand would have been buying at full price from the brand's partner, making them the best type of consumer around. Furthermore, channel partners see such initiatives as a first step towards being totally circumvented by the brand, whether that is the intention or not. The result is that channel relationships worsen and focus on brand within retail establishments is diverted to other brands that appear more loyal to the distribution channel.







The Broken Boomerang Model - Share but Lose Consumers

Often called "product-to-product linking, a broken boomerang exemplifies this model. Brands "toss" consumers to the website of a retailer or other channel partner with the expectation that the consumer will boomerang back to them by purchasing the brand's product. Unfortunately, the boomerang breaks mid-air and the brand has little or no visibility into what happened to the consumer and no ongoing relationship with that consumer after the sale. In this model, consumers goes to brandname.com, shops for a product, and clicks on "buy online", taking them to icons of online retailers that are supposed to have the item in question IN STOCK. Consumers chooses a retailer and is taken to the product page at the retailer's website. Now at the retailer's site, consumers may be influenced by competing brands. Because these systems rely upon the retailer providing its complete and massive product inventory detail, often by location, there are countless examples where the desired product is not in stock, forcing consumers to search for alternatives. The result is a complete loss of the brand experience the manufacturer has worked so hard to deliver, the potential for a lost sale, the ultimate loss of the relationships between the manufacturer and consumers and all of the geo-demographic, psychological and purchasing data associated with consumers. Although this model works well for large brands who sell into large retail chains and department stores like Best Buy, Home Depot and Macy's, it does not accommodate special or custom orders which represents the largest number of products any brand offers. Because of this system complexity and magnitude, small brands and specialty retailers cannot use this system. Lastly, although retailers can link their websites to brands using this methodology, there are significant reasons for retailers not to do so as they may lose their consumer to a competitive retailer in the process of doing so.







The Auction Shill Model - Auction the Consumer off to the highest bidder

The most insidious "channel management" method involves a brand offering product for sale at its website and allowing retailers to enter into a virtual battle for the consumer unrelated to their retailing skill, reputation, or customer service. Moreover, in this model, the unsuspecting consumer is forced to deal with a retailer not of their choosing. In this model, consumers go to brandname.com, shops for a product and adds it to the shopping cart. Once the sale is complete, an email or other electronic notification goes to the closest "x" number of "participating" "stocking" retailers. Participation means the retailer must be engaged in the system; stocking means the retailer must have current inventory in the product(s) being purchased by the consumer. Whichever "participating" "stocking" retailer first sees and claims the sale in this system wins the consumer and is expected to fulfill the order. Retailers carry but a fraction of the product catalog any single brand offers. The "closest" "participating" "stocking" retailer may be tens or hundreds of miles away from the consumer. The model disenfranchises the best retailers who provide a high degree of customer service by disallowing the consumer to choose that retailer. Nefarious retailers can cheat the system by ordering products they don't have in inventory to fulfill the order offers as they see them. The brand must assume responsibility for fulfillment in all products that no retailers carry or cancel the order altogether. Significantly, large retail chains and department stores like Best Buy, Home Depot and Macy's cannot partake in this system because it demands that fulfillment be done at the store level. The inefficiencies of such a model eliminate the desire of any of these large entities to invest in the substantial technology, personnel and logistics infrastructure on a store-by-store basis that would enable the use of such a system. Lastly, no retailer of any size should hyperlink their website to a brand utilizing this methodology as there is almost an infinite impossibility that such a retailer would receive the order being placed by a re-directed consumer at the brand website.



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