The Internet as Channel Role of channel as a resource The Internet and channel types Mix implications Channel issues for perspectives

Channel as a Resource: Overview n What is a channel? –Purpose: to move stuff from supplier to buyer –Nature: interdependent firms as intermediaries n How is the Internet a channel? –Enables distribution –Enables and acts as intermediary n What are the effects of the Internet… –On channel characteristics? –As channel component, on mix elements?

The Internet and Distribution: The Future Through the Past n Traditional forms of channel structure –Manufacturer-->Consumer Ex.: Land’s End –Manufacturer-->Retailer-->Consumer Ex.: anything you buy at WalMart –Manufacturer-->Wholesaler-->Consumer Ex.: Sam’s Club –Man.-->Whole.-->Ret.-->Con. Ex.: Grocery stores

Impact of the Internet: The Past, Present n As a channel –Which companies can do this? Depends on product type –E.g., digital are most direct Depends on channel relationships –Producer and retailer (need strong producer) –Producer and consumer (nature of contacts) n As a channel component –Disintermediation (most hyped possibility) –Reintermediation (most likely possibility)

Characteristics of Disintermediation n Elimination of one or more middlemen –e.g., Direct sales by producer to buyer –Related factors More effective when producer has more power More effective when consumer relationships are less important –I.e., less specific market –More for B2C than B2B? In toto, when barriers to entry are lower n Likely victims of disintermediation n n

Another Option: Reintermediation n Introduction of new middlemen –Infomediaries –Aka, “cybermediaries” n Characteristics of infomediaries –Constitute online brands –Reflect new way to create relationships » –Occupy different niche in channel structures From transferring product To creating buyer/seller links –Function as service, not as product

Mix Implications of the Internet as a Channel Resource n Channel and Product –A digital bias? –Issues for determining product strategy Digital form as replacement or complement? Effects on product assortment (virtual aggregation) –Coordination benefits for inventory and warehouse costs Effects on product development –Supply chain coordination –Virtual integration? n Channel and Price ,00.html?st.cn subdir ,00.html?st.cn subdir –Disintermediation effects –Reintermediation effects

More Mix Implications n Channel and Place –Effects of the channel on the end of the channel Online stores –Lower physical costs –Tax advantages –Virtual inventory advantages The emergence of reverse netcentricity Global distribution n Channel and Promotion –Information as what gets transferred –Global reach Target appropriateness issues (channel affects content) Channel as means for contact (personalization, customization)

Do You Have a Problem with This? n Issues for marketers: feasibility –Channel relationships Power and conflict Leveraged cooperation –Impact of shopping agents as infomediaries n Issues for consumers: availability –Real v. ephemeral benefits –Product availabilty (Toys-R-Us at Xmas…) n Issues for policymakers: liability –Illegal consumption (e.g., drugs and alcohol) n Issues for technology: stability –Reliability of channel delivery (e.g., hackers) –System/process development (e.g., extranets as Internet EDI)