What are the pros and cons of using the Web as a distribution channel? Are there any situations where it is inappropriate for a company to establish an e-commerce site? Be prepared to defend your answers to your peers.
According to US Department of Commerce in the 4th quarter of 2017, 9% of total retail purchased happened on the internet. The Internet is being used as direct and indirect channels, with rising penetration on internet-enabled devices and online retailer options web is a great distribution channel. The web started being considered and used as a distribution channel with the internet boom, and now allegedly it is killing brick and mortar stores for tech sector (Jetta, 2017). Using the internet to order something is convenient, no need to the driver to make a trip to somewhere. Most of the time you get a discount coupon or a free delivery to your home. You can compare and read the review before you buy. Yet only 10 – 15% adults in the US make a purchase weekly online according to Pew Research Center.
But these are only a few pros, the web offers many more pros as a distribution channel.
The pros of using the Web as a distribution channel
Marketing research is really easy for the e-commerce sites, most of the sites have the profiles of the customers and with all the information it is very easy to analyze the demographics.
Communications is really easy and effective. Companies put on ads, they feature their items to grab the attention of potential buyers, email coupons. The best part is these communications are very much targeted and cost-effective.
Matching or Customizing is a huge part of e-commerce nowadays. When you purchase something from Amazon, you see suggestions. Using user behavior the e-commerce websites automatically suggests items to the customer.
Relationship Management – can be handled with a loyalty program and with an e-commerce site it is easier to store and earn a point every time, as there is no chance of forgetting to carry the card to store. But this is not the only criteria, the perceived value of the loyalty program has to be something substantial to use it.
Regarding Distribution, today’s e-commerce sites are great. As long as you have a postal service you can get the item delivered, this might not true all the time though. On another hand, you can expedite the delivery with some extra fee in most of the cases. So no customer actually feel left out, since they can order online and get it delivered does not matter how far they are from the actual manufacturer.
Cost efficiency wise usually the e-commerce stores are better than brick and mortar stores. They are easy to set up and does not take many people or physical space to run. In that way, it helps manufacturers to save cost (Gaille, 2015).
Internet store or e-commerce stores came into existence in the late 90s or early 2000s, when it comes to grocery less than 5% adults’ order 6 or fewer times online (Jetta, 2017). So, there are reasons (or cons) why the web is not replacing brick and mortar store anytime soon.
The cons of using the Web as a distribution channel
Contact is a bit challenging when it comes to the web. For any new product when users are not very knowledgeable, customers usually suffer to obtain knowledge about that product. Although, now the manufacturer is producing demo videos explaining how it works to provide some idea to the first time buyers. That is not the only thing though, getting information about a return policy or warranty or payment for all these customers might need to talk to someone. Although e-commerce sites make this information available and many sites provide support over chat, email or phone, still brick and mortar stores do better on this front with an actual human who is easy to reach.
Negotiation is not possible on the web, although the customer can find a coupon and get some discount, real negotiation happens on stores, not on an e-commerce site.
Financing is often an issue on big ticket item and most of the time the retail store offers options which are not present on an e-commerce platform. Although some sites might have that option and some credit cards ( for example Amex s offering Plan it, which is easy monthly installment plan on big ticket items) are offering that, but it is not that widespread yet.
Service – while distribution channels can also provide service, but getting a service from a retail store is way easier and saves you time. IF you have to ship a product to get service, it takes way too much time on shipping and actual servicing.
Are there any situations where it is inappropriate for a company to establish an e-commerce site?
At this day and age, it is hard to imagine any company without an e-commerce site. Just about any legal business have a web presence, but I do not think e-commerce sites should be allowed for any regulated substance or material( I am not considering anything illegal at all). When I say regulated, in many countries tobacco and alcohol are age restricted, so those should not sell on an e-commerce platform. As it is a bit difficult to verify age on the internet, anyone can fake ID and buy those age-restricted products. And this applies to anything such as weapons, lethal chemicals or prescription drugs – whatever is regulated are not appropriate to be sold on e-commerce sites.
Retrieved on 3/16/2018. Retrieved from https://www.census.gov/retail/mrts/www/data/pdf/ec_current.pdf
Jetta, K. ( June,2017). The E-Commerce Paradox: Brick-And-Mortar Killer…Or Is It?. Retrieved from https://www.forbes.com/sites/forbestechcouncil/2017/06/30/the-e-commerce-paradox-brick-and-mortar-killer-or-is-it/#760490447736
Gaille,B. (November,2015). 12 Pros and Cons of Distribution Channels. Retrieved from https://brandongaille.com/12-pros-and-cons-of-distribution-channels/