CEO at Econsultancy
09 December 2005 11:11am
I was just reading an article in New Media Age about the IMRG being under fire from electronics manufacturers following IMRG claims that they are charging etailers more for their products than their offline counterparts.
Only the other day I was out with a friend of mine who is in a senior position at just one of those manufacturers and talking to him about this. And, yes, they do indeed operate separate pricing structures which are punitive on the online retailers. Why? I asked...
"Because the offline retailers invest in our brand" he said.
"What do you mean by 'invest in our brand'" I asked
"Well, they have the costs of the stores, their staff, training and so on" he replied
"Yes, but they're not really investing in *your* brand just by having the costs of a store are they? Certainly, that doesn't seem in any way preferential to your brand as opposed to your competitors" I countered.
"But any old person these days can set up a website and start selling online and that doesn't help our brand" he replied.
"But surely a website can invest in your brand and you can reward them accordingly? For example, they might include better content and photography of your products, include reviews, demos, buyers guides and so on. Isn't that better investment in your brand than some store staff can deliver...? I argued.
And then I think we were distracted onto something else...
This was almost the same conversation I had with him about 2 years ago so not much seems to have changed.
It strikes me that this isn't really about "brand investment", it's about protectionism and the fear of margins being squeezed by etailers.
Giving preferential pricing to your biggest buyers makes sense, and indeed to those who 'invest in your brand', but neither of those things are channel specific.
There still seems to be this strange approach to the internet and e-commerce at the moment which goes along the lines of "people are buying more and more online - what are we going to do to *make* them keep shopping offline?". That seems like lunacy to me. You shouldn't be trying to force your customers to behave in a way they don't want to.
Analyst at CxFocus
15 December 2005 15:32pm
Loyalty to the existing retailers may also be a factor here. Or, indeed, pressure from the existing retailers. I've seen this happen at close quarters: the manufacturer's sales team will have been on the receiving end of a constant stream of complaints about how the etailers are killing the market.
It's very hard to resist that pressure from your best and longest standing accounts. But the effect is only to try to slow things down -- a resistance to the inevitable, not an attempt to deny it.
I agree that in the medium term it makes no sense. The ultimate customer is the end user, and everyone else in the chain knows it.
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