Thursday, March 27, 2008

Online retail and the struggle for brand control

A version of this piece was published in Marketing in 2008

In 1921, Wolseley Motors commissioned the architect William Curtis Green to create an opulent and impressive showroom in the heart of Piccadilly, next door to the Ritz. In doing so, they anticipated a very modern trend – a drive to control the environment in which their marque was displayed, and a desire to create a direct line of contact with the consumer.

Then as now, the motor industry sold through networks of independent dealerships – an arrangement which enabled them to scale rapidly to achieve national distribution without bearing the huge capital cost of establishing local presence. But lack of control of the retail environment created a particular challenge for Wolseley, which was a premium brand, and the Piccadilly store was their response.

Fast forward eighty years, and brands face the same challenges today.

The internet has created a new distribution channel, one where retailers have multiplied and competition is intense. But unlike in the physical retail environment, in-store merchandising skills are still in their infancy, and online retailers are often criticised for poor images and inaccurate product information.

Brand managers have been slow to get to grips with the new demands of the online retail space, and the lack of effective merchandising continues to do nothing to discourage price competition.

And whilst brands are often insufficiently proactive about their brands’ representation in online retail, price comparison websites add further fuel to this commoditisation, encouraging consumers further to value price above other elements of the service package.

So where does this leave brands online?

Ironically, back where Wolseley started in 1921. Brands like Panasonic, Nike and Levi’s have all opened stores online, selling direct to consumers.

In doing so, they regain control of their brands – displaying them online as they want them displayed, and at the same time creating direct contact with consumers that they can then use for eCRM programmes, building aftersales support, cross-selling initiatives as well as communities of their users.

These sites are rarely at the sharp end of price competition – their role is a different one. They carry a comprehensive range of branded products, rarely available in a retailer, and more detailed information about products – allowing customers to look more closely, even if subsequently they complete a purchase from a different retailer.

But it isn’t just online that manufacturers have pushed into direct retail operations. The much-praised Apple stores have built on the brand’s design heritage to create an immersive experience for consumers – a place to bathe in the brand and to love it. Sony have launched their concept store in Heathrow’s new Terminal 5, where their ‘technology garden’ will give cash-rich time-rich passengers hands-on contact with the latest kit. And BMW in Munich have just opened BMW World, a glass and steel landmark building that incorporates restaurants and a cafĂ© – but most particularly, a special service for customers as they collect their new vehicle.

As digital channels grow in importance as distribution and marketing channels, they tend to push manufacturers towards commoditisation, emphasising the directly comparable features of products – primarily their functionality and their price.

But what Sony, BMW and Apple have shown is that the key to fighting commoditisation is in amplifying the distinctiveness of their brands, through design, proximity and experience. To do this, they’ve brought together the different channels, and used them to complement one another.

In doing so they’ve moved the debate on from whether the internet is a branding medium, valuing instead the part each channel can play in the customer’s overall interaction with the brand. To these brand innovators, the online/offline, retail, advertising and direct channels are all opportunities to make the brand manifest to the consumer, and by allowing the consumer to choose where/when to play with the brand, they’re responding directly to customer demand.

It didn’t work for Wolseley, whose showroom is now a restaurant. But its many modern imitators are testament to the continued importance of managing the retail experience for brands – something most brands still struggle with in digital.

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