Online is not a channel
The biggest mistake a company can make when moving into the digital world is to treat online as a channel
In the past few years we've seen traditional industries like music, books, movie rental, hotels, taxis, retail etc being disrupted by new entrants who have been able to digitize the entire experience or a part of it. And we've seen incumbents failing to adapt and cope with the changes. There are several reasons for that, but today I'd like to concentrate in one aspect — an erroneous belief that online is a channel.
When e-commerce started to become popular in the late 90’s some of the largest retail magazines went online to sell products through this, so called, new channel and there was a belief that online and offline customers were different, only commodities could be sold through the internet and online shoppers were budget shoppers. What couldn't be imagined was that 20 years later more than half of the planet's population would have access to real time information on the tip of their fingers through their smartphones. Statistics of 2018 account for more than 4.1 billion internet users worldwide and over 2.3 trillion USD in e-commerce. People regardless of age, income level, geography or gender are buying everything online from perishable groceries to customized outfits.
When people massively started using internet to search for information, compare offers, brands, products, prices and customize experiences, online and offline converge as two sides of the same buying experience.
Companies from all around the globe are facing the same challenge of serving this new customer right now and in 2019 many companies are still struggling to understand which direction to move while they see their profits and market share shrinking overnight. Undercutting costs is just one way disruptors are using to create value to customers, but those who are winning in the digital game are thinking way beyond that.
The fashion industry is one that is booming right now. Many different experiences are being designed using technology to offer a better customer experience. The Japanese brand ZOZO is a good example of that new business mindset. They've created Zozosuit, a measurement system allows customers to precisely take their measures and order customized outfits directly on their website.
But while Zozosuits and other amazing solutions are being created on one side of the spectrum, on the other side some CEOs I've been speaking with are still complaining that e-commerce platforms and marketplaces are eroding their margins and destroying business value to an extent that some of them have made a bold — to not say crazy — decision of getting out of the online world. If you see online as a channel, it is fair enough to evaluate and compare results with all other channels: large retail networks, wholesalers, exclusive resellers etc and avoid a channel that is not as profitable as others.
But let's take a bigger look. All of these, so called, other channels are suffering of exactly the same problem, because everyone is competing for the same customer that now is empowered by technology to decide where to buy and which experience to go through. It is time to start seeing online as part of the customer journey and go way beyond the transactional value to understand what customers are expecting when engaging with brands to find new revenue streams to support that value creation shift in your business.
Those who avoid that discussion and try to stick to their old business models are fated to fail and it is not a matter of if, but a matter of when.
The sooner you embrace change and start leading disruption at your own market, the bigger your chance of survival. Because it is no longer the customer who adapts himself to the market, it is the market that adapts itself to the customer.
