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Amity Business SchoolElectronic Channels MBA Class of 2013, Semester IIDistribution &Logistics Management Swati Bhatnagar
Electronic channel defined Amity Business School Any channel which involves using internet as a means of reaching the end user or any channel from which the consumer buys online.They are used both for B2B & B2C formats.Disintermediation versus reintermediation?Coordination challenges in electronic channels• Channel conflicts do arise with the establishment of online channel along with a traditional channel because of disintermediation.• Online sales happen in mainly the following three situationsa) The manufacturer itself creates an owned online presence in direct competition to the standard channel.b) Manufacturer contracts to sell through third party pure play on line resellersc) The manufacturers products might get sold online because its retailers itself are into online operations
Contd. Amity Business School• In case a) the online sales and marketing effort , carries the potential of goal, domain & perception of reality conflicts.• Goal conflict arises as the manufacturer wants to maximise its profit over its totality of sales channel, one of which is the on line channel.• Domain conflict also arises because the manufacturer who sells on line may cannibalise directly the consumers of the bricks and mortar channel. Thus domain conflict occurs over territorial rights.• The classic opportunity of free riding also is available. Domain conflict also occurs when the consumer bought the product on line but tries to return the product to the bricks and mortar outlet.• Perception of reality conflict also emerges as for the manufacturer its just a mere expansion of its reach in market whereas the retailer perceives him of trying to steal its customers.
Contd. Amity Business School• In situation b) the classic dual distribution conflict occurs.• Here again, the same type of goal, domain & perceptual conflict occurs .• The two competing resellers generally have very different goals. Again a possibility of free riding exists.• However in this case unlike case a), the manufacturer does not have direct pricing or service control over the on line channel. The same limits its ability to prevent conflict.• In case c ) The on line reseller internalises at least partly the negative effects of aggressive online competition on the bricks & mortar channel.
Amity Business School Demand side gaps in electronic channel• End users have demand for the same service outputs ( bulk breaking, spatial convenience, waiting delivery time, customer service, assortment & variety) in general but the expectation and the context changes in an on line format• On line format is viewed is more pleasant than fighting the holiday crowds at stores• However, difficulty does crops up on issues like :- returning products, out of stock issues, delivery time uncertainties, information security & price.• On the SODs separately ; Bulk breaking : online resellers should be able to ship few units at a time to many addresses versus the standard in retailer based channels of shipping many units at a time to few retailers. E.g amazon.com
Contd. Amity Business School• Spatial convenience : the spatial convenience of shopping at home simply cannot be beat by any bricks and mortar retailer. However if the product needs to be returned the same spatial convenience can become quite a pain.• Waiting & delivery time : the same is not a major strength of on line resellers in many categories. The waiting time becomes too long when delay happens in terms of loading & viewing the screens because of poor internet speed. Interestingly, there is little the online reseller can do to contain it.• The second dimension of delivery time is the actual lapse that happens in delivery• Assortment and variety can be vastly increased with online shopping over what is available at standard bricks and mortar store. E.g Amazon . Com markets itself as “ Earth’s biggest selection” offering 5 mn book titles• Customer service A multidimensional offering. It includes both pre sales service and post sales service.
Amity Business School Supply side gaps in electronic channelInjecting an on line element to the channel helps in reducing the cost of the following channel flows. Physical possession Promotion Negotiation Risking Ordering Payment
Amity Business School Advantages of electronic channels• Purchase possible 24*7• More convenient than battling holiday crowds at bricks & mortar outlets• Enables good value for money most of the times• Access to a wide assortment of goods & services
Amity Business School Disadvantages of electronic channels• Security concerns of payment• Issues over product returns• Stock out of products• Delivery delays• Shipping & logistics cost relative to the margins of certain goods• Leads to conflict with other channel partners if not carefully handled.