Multichannel Title

What is Multi-Channel? Advantages and Disadvantages of new distribution Channels

Due to digitization and the rapid spread of smartphones, today’s consumer expects to be able to enter the buying process anywhere and at any time. More and more companies are taking this requirement into account with a so-called multi-channel strategy.

Therefore, what exactly is meant by multi-channel sales and what advantages and disadvantages this can result for dealers, we would like to shed more light in today’s blog post.

Meaning and definition of terms of multi-channel distribution

Multi-channel sales is the sale of their own products and services through more than one sales channel. Here, the same assortment can be offered on all channels or the product range can be adapted to the respective channel. The goal is to reach different customer segments depending on the channel preference and thus increase sales. When talking about multi-channel distribution, often the terms cross-channel or omni-channel are not far. The latter are both based on the principle of multi-channel distribution, but make more gradations in terms of channel integration. For a better understanding, the differences are briefly summarized below:

  • In multi-channel distribution , the different channels are operated independently of each other. The buying process begins and ends in one and the same channel. This means, for example, that the online store and the physical store coexist, but there is no link between the two channels. This type of “silo thinking” is now considered obsolete, which is why the concept has been developed further.
  • When talking about cross-channel, it is no longer about independent, parallel sales channels, but about their interlocking with each other. Within his buying process, the customer can switch from one channel to the other.For example, orders are made in the Web shop and the goods are picked up at the store. Companies demand this meaningful integration of all channels via a central data management system. The same product, customer and process data must be available across all channels. The company is consistent across channels and customer service is synchronized across all distribution channels.
  • Omni-channel is sometimes synonymous with cross-channel, but sometimes understood as an even finer gradation. According to the latter view, omni-channel distribution means an even stronger link between all channels: The channels are not only changed, but also used simultaneously, for example by searching for information via a company app directly in the store. Omni-channel sales, just like cross-channel, requires technical and organizational integration of all channels

Multi-channel crowd

What are the key sales channels in a multi-channel strategy?

Companies have a large number of different sales channels available on and off-line. Not every distribution channel is equally suitable for every customer and every product. Depending on the industry and target group, there are channels that are particularly useful for a company. The most important options in today’s multi-channel strategies are the following 5 sales channels:

  1. Online shop

The most common form of channel extension is the addition of in-store stores to an online store. Online commerce is booming and is recording significantly higher growth than stationary retail. A presence on the Internet is therefore essential for many retailers to remain competitive. Particularly worthwhile, measured by the share of sales, is a web shop for dealers from the fashion and accessories (25.1%), electronic products (24.8%), leisure and hobbies (14.5%) as well as living and furnishing ( 9.2%).

  1. Mobile commerce

A major driver of the importance of multi-channeling is the proliferation of tablets and smartphones and the accompanying upturn in mobile commerce. In 2018, 48% of e-commerce transactions in Germany were made via mobile devices. [1] With mobile-optimized websites or corporate apps, merchants also allow their customers to shop and gather information while on the move. This particularly meets the needs of the young, technology-affine target groups. Looking at the online segment only shopping via tablet or smartphone fashion, books and travel are particularly popular with mobile shoppers. [2]

  1. Online marketplaces

Online marketplaces such as Amazon Marketplace or eBay offer an enormous reach for external dealers due to their brand awareness and their diverse product range. For many companies, these platforms are therefore a popular extension of their distribution channel mix. On Amazon Marketplace alone, 25% of total online sales are generated in Germany. But also niche platforms such as Etsy, a marketplace for handmade and artist supplies, just offer smaller retailers a quick entry into the online market, which is associated with less effort than the establishment of its own online store.

  1. Social media

The popularity of social media also opens up new sales channels for businesses. For example, consumers can buy products on Facebook and Instagram directly through posts and ads through the launch of the buy button. On Pinterest, a digital pin board that is often used as a kind of online wish list, pins can be provided with product prices and availability and link directly to your own shop. Likewise, chat bots are gaining in popularity, sending referrals and product links to messengers. Even though superficially a communication tool, the social media is becoming more and more relevant as a distribution channel.

  1. Stationary trade

In contrast to e-commerce, brick-and-mortar fast moving consumer goods [4] account for the lion’s share of 42.5%.Only by a clear margin follow in second and third place electrical goods (8.1%) and fashion & accessories (7.7%). [5]

In general, brick-and-mortar retail remains a crucial sales channel despite the continued growth of online retailing: just under 60% of consumers still prefer shopping in traditional retail. [6] As a result, online pure players are initially expanding their web-based offering to include physical stores. The most popular example here is Amazon Go, the supermarket giant of Amazon, a commercial giant. Often, however, the focus in the stationary expansion of a digital service is less on a sales increase, but on increasing brand awareness. Here, flagship stores in the sense of a figurehead for corporate values ​​and image serve as an instrument for branding.

Note: The EXCELLENT.ORG badge helps collect reviews on all your channels. The rating badge is customized for mobile websites thanks to its responsive design, social media and online marketplaces can be integrated via the All-In-One feature, and a rating code is available for stationary locations.

Benefits of Multi-Channel Sales

The clear advantage of presence across multiple channels is the increase in market coverage as new target groups are tapped. Each new channel creates contact points for different customer segments. Above all, e-commerce, with 1,918 million users worldwide, 51 million of them in Germany [7] , offers sales potentials that hardly any trader can afford to do without.

At the same time, a multi-channel strategy increases the satisfaction and loyalty of existing customers. Customers are provided with a choice of channels to choose from, depending on their preference – fulfilling the expectation of the most flexible and convenient shopping experience for their customers and avoiding out-competition due to unfulfilled channel preferences.

Another advantage is the increase in brand awareness through different channels. If a consistent brand image is consistently maintained across all channels, the brand awareness of the company increases.

Internally, companies also benefit from synergy effects between the various channels. For example, costs for storage of goods or advertising campaigns can be distributed among the various channels. The risk of slump in sales can also be spread through multiple sales channels. For example, if the stationary sale goes back, this can be absorbed by the online shop.

Last but not least, new distribution channels provide traders with a larger amount of customer data. With the right analysis tools, needs, characteristics and behaviors of the target group can be captured and evaluated even better.

Disadvantages of multi-channel sales

Cannibalization effects due to the competition of the various channels are often called a disadvantage of an expansion of the sales channels. The fear is that the heels do not rise through additional channels, but only shift from one channel to the other. That such concerns are not entirely unfounded, the HDE online monitor shows: In almost all industries, an increase in online sales is accompanied by a loss in the offline business. However, no hasty conclusions should be drawn here: The online profits exceed the steady losses in each industry significantly.

The major disadvantage of multi-channel strategies is the cost to most organizations of building and maintaining multiple channels. More sales channels mean more complex planning, control and logistics at the same time. That makes a technical infrastructure, which integrates all channels, indispensable. Only a centralized management of all sales channels can prevent double sales and guarantee a smooth shopping experience. The effort for strategy development and optimization of internal structures is often the biggest hurdle for traders to pursue a multi-channel approach.

Conclusion

Distributing across multiple sales channels simultaneously is the answer to consumers’ current expectations of retailers. The change of a channel is as easy as never before for customers: If the preferred channel of a customer is not offered, he can change without much effort to the competition. In order to compete in the long term, most retailers are less concerned with the question of how to build a successful multi-channel strategy. Here, the consistent linking of all individual channels via a break-free technical integration is becoming increasingly important.For traders who are still lacking funds for an extensive multi-channel concept, at least one online channel should be available. The beginning can already be made here with a listing on Amazon or eBay.

[1] Food, beverages, tobacco and drugstore articles

[2] https://www.einzelhandel.de/index.php?option=com_attachments&task=download&id=9449

[3] https://de.statista.com/statistik/daten/studie/472999/umfrage/entwicklung-des-einkaufsverhaltens-im-onlinehandel-vs-einzelhandel-in-deutschland/

[4] https://de.statista.com/statistik/daten/studie/692924/umfrage/anteil-der-mobile-commerce-transaktionen-in-online-handel-weltweit/

[5] https://de.statista.com/statistik/daten/studie/677917/umfrage/anteil-der-online-kaeufe-ueber-mobile-endgeraete-nach-branchen/

[6] https://www.einzelhandel.de/index.php?option=com_attachments&task=download&id=9449

[7] https://de.statista.com/statistik/daten/studie/488012/umfrage/prognose-der-e-commerce-nutzer-in-deutschland/

[8] https://www.einzelhandel.de/index.php?option=com_attachments&task=download&id=9449