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The Internet as Channel

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. What is a channel? Purpose: to move stuff from supplier to buyer Nature: interdependent firms as intermediaries

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The Internet as Channel

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

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

  3. The Internet and Distribution: The Future Through the Past • 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

  4. Impact of the Internet: The Past, Present • 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) • As a channel component • Disintermediation (most hyped possibility) • Reintermediation (most likely possibility)

  5. Characteristics of Disintermediation • 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 • Likely victims of disintermediation • http://www.napster.com/whatisnapster.html • http://download.cnet.com/

  6. Another Option: Reintermediation • Introduction of new middlemen • Infomediaries • Aka, “cybermediaries” • Characteristics of infomediaries • Constitute online brands • Reflect new way to create relationships • http://www.barbie.com/mydesign/look.asp • Occupy different niche in channel structures • From transferring product • To creating buyer/seller links • Function as service, not as product

  7. Mix Implications of the Internet as a Channel Resource • 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? • Channel and Price http://computers.cnet.com/hardware/resellers/1,10231,0-1079-311-129432,00.html?st.cn.1078-7-1463354.subdir.1079-311-129432 • Disintermediation effects • Reintermediation effects

  8. More Mix Implications • 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 • Channel and Promotion • Information as what gets transferred • Global reach • Target appropriateness issues (channel affects content) • Channel as means for contact (personalization, customization)

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

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