Traditional channel strategies need to be adopted in new electronic markets, where consumer unwillingness to pay for Internet services leads to online sales channels producing little or no return.
That was the grim warning issued to suppliers of consumer goods such as PCs at the Internet and Electronic Commerce show in New York, which examined the pros and cons of implementing Internet-based sales channels.
Bruce Gupthill, senior research analyst at Gartner Group, which hosted the conference, said: "This ain?t rocket science, it?s retail and that?s much more difficult."
Gupthill said that the track record of companies setting up online channels was marked with more failures than successes, but argued that the reasons for those failures were simple: inability to judge market desires, lack of realistic business planning and ignorance of the abilities of the Internet as a medium.
"Few enterprises are taking into account the minimal willingness to pay on the part of consumers today," he explained, adding that this meant electronic channels for the next two to three years would offer limited profitability. "User statements of interest [in online purchasing] based on simple curiosity will be misinterpreted by many vendors as willingness to pay."
Many companies see implementing an electronic channel as a way of beefing up sales and lowering distribution costs by cutting out a middle layer, in the shape of the reseller or dealer. This is a false assumption, according to Gupthill, who insisted: "If your firm is bad at selling now, it will be at least as bad at selling online."
As for cost cutting, he urged companies to learn from the pioneers in the field. "Few early participants took time to prepare reasonable business plans based on estimates of service provision costs, content requirements, network requirements and so on," he explained.
He disputed the theory that once a supplier has direct access to customers via the Net, distributors can be eliminated. A number of speakers at the conference cited the example of underwear producer Fruit of the Loom, which, rather than cutting its dealers out of the loop, offered to build them Web sites, on which the Fruit of the Loom brand took priority over any other products.
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