Digitalwall: It All Boils Down to Brand Names

Competition in eCommerce will emerge from endless price warfare and head back to brand name cultivation.

[+] There will always be a lower price

Some while ago, on the occasion of a speech, I acquainted myself with an Internet start-up mom, who got her business up and running by auctioning maternity dresses on the Internet. She has got herself a reputation for good service and is doing just fine. Now this Madam Entrepreneurial is on route to operating a website that she can call her own.

In the world of online start-ups, this route, in fact, is a well-treaded one. Naturally, most would start with very little capital. After all, that's the beauty of Internet-based business. Business owners get to operate on a stripped-down platform to get access to a large number web surfer. That's how it goes. They start trading on the Net first using whatever platform already there and then picture having one of their own online store in the wake of some success.

Interestingly enough, maternity apparel as a product is not required either in large quantities or on a long-term basis. That is, she gets to do business with each of her clients during pregnancy only. The fact that each client has a business life expectancy of only 10 months gives her a hard time holding out as she is in constant need to locate new clients.

Besides, selling via e-Bay and the likes used to incur less cost as sellers could choose to sell their products one at a time, meaning they can back out anytime they want. Things get a bit tricky when one runs his or her own online store website as there is an underlying commitment for perennial operations. (Read: more choices provided, faster delivery, and higher inventory cost).

As if it's not bad enough, going it alone also means having to fend off price competition from new individuals conducting online auctions, to the surprise of many who have chosen marketing on the Net exactly having stripped-down cost and flexibility in operations in mind, just like this friend of mine before. It's a story of rags-to-riches turning against rags. Ironic, isn't it?

What happened to this friend of mine epitomizes what the eCommerce is like right now. The fact of life is that once on the Internet, nobody, be it large-scale online stores or small-fry auctioneers, can even get close to shaking price competition off their backs. Is eCommerce doomed? One can't help but wonder.

[+] Online shopping means low tag prices

Marketing people specialize in making simple things complicated unnecessarily so that they can squeeze more values out of a product. Dishonest as it may seem, it's what marketers must do to steer clear of price competition. If what's left of competition is pricing, what worth is of marketing professionals?

In the world of tangibles, pricing is less of a problem for shop owners as it's way too much trouble for consumers to even want to go store to store, aisle to aisle, or even rack to rack checking prices. That simply is not going to happen.

But that happens on the Internet as even those seeking to get a car can afford the time to go through the specs of all the cars within budget on the market before making the trip to local dealership or showroom for the actual buying. It makes a lot more sense time-wise.

When consumers can easily find something in all online shops, price becomes the only thing that makes a difference. In this day and age, loyalty is in near inexistence. The only thing you can count on is price, and that does not draw a smile from virtual shop owners.

Over time, shopping on the Net has become synonymous with shopping at bargains. That explains why one can hardly find any LV, Gucci, you name it, on the Net, since these brand names do not even go on sales much, not to mention debase themselves by rubbing elbows with cheap knockoffs on the Internet. They have brand name values to protect after all (They have got a lot to lose brand-wise).

Luxury items (garment, handbags, shoulder bags) are highly sought after on auction websites, but they are in extremely small quantity as marketers can scrape together only so many (or little, to be exact), and they are swept off by buyers the minute they appear on the Net for, again, lower prices than in the brick-and-mortars.

The truth is we have never seen producers/distributors of any of these elite brand names bother to supply to eCommerce runners. There is nothing you can click on to buy stuff s on their official sites. This is how much these elite vendors distrust the Internet.

[+] Say goodbye to price competition

For those who run small eCommerce businesses, steering clear of price war on the Net is easy, at least in theory. The key term is product differentiation. As long as your product is different, your price can be different. Period. The problem is it's hard to get something that different to sell on the Net. When you do, competitors imitate as soon as they can.

That leaves one with the sole choice of creating one's own brand. Many have been able to do so and build a reputation for which people come back to shop again. What's better, having one's own brand name means you get to name your own prices.

This strategy worked for another friend of mine, who started up a business on the Internet four years ago, when he chose to create a new aromatic essence oil brand name in stead of representing foreign ones. In just two short years, he was able to establish an unchasable lead ahead of peers.

For prestigious fashion brand names who take a dim view of Internet sales in the form of either fear or contempt, there is a way out. That is, there are answers to one's fear of what selling on the Net could do to harm channel prices, brand name values or outlet sales.

I suggest setting up a brand new sub-brand especially for the operations on the Internet. These products shall only be accessible on the Net, and yes, they should be cheaper to meet web shoppers' expectations. If anything else, they should take on a younger look to appeal to the supposedly young web-surfing generations.

All marketing activities boil down to brand names. It's just that simple. With a convincing brand name, you can thrust one type of shampoos down consumers' throats at a higher price than most and they won't even make a sound. That how magical brand names can be, and there is no reason why they won't work on the Net. (
2005/10/09 - By Digitalwall.com - Way to
China Internet/Telecom )