Distribution Channels - A Changing Landscape

 

The I-Pad arrived this week.  I was not in line at the local Apple store, but I listened with interest to the media coverage.  The debate will continue for awhile as to the impact of the I-Pad, but there is little doubt that it is at least a symbol of a much bigger trend that has emerged in consumer products.

 

That trend is the major shift in how consumers evaluate and, ultimately, purchase products and services. This trend has important implications for how marketers should be selecting (and creating wholly new) distribution channels for their goods and services in the future. We have already seen significant changes in how books are purchased and how news is accessed, with online options having a clear impact in those categories. And most companies in those industries have been caught up short – eventually being forced to develop new business models in order to compete, indeed to survive.

 

What we believe is not fully recognized yet is that this same trend will impact a much broader range of products in the future.  I discussed this trend recently with Diane M. Meister, founder and Managing Director of Meridian Associates Inc., a Chicago-based consultancy that advises consumer products companies on scenarios planning strategies and building new business models.  www.meridianai.com (Full disclosure, Diane and I both have consumer products’ backgrounds and have known each other for several years.)

 

Diane mentioned two key drivers of changing consumer behavior that will continue to impact which distribution channels will thrive and which will need to be “reimagined” if they are to survive. The two important drivers are:

a)   A new post-recession consumer mindset that recent studies by the retail consulting firm, Alix Partners, calls a “clear-cut shift to thrift,” and

b)   The convenience – and growing consumer comfort with -- online shopping, which reaches more and more product categories almost monthly.

 

Diane explains that our “shift to thrift” has driven changes in the retail landscape that are likely to hang around awhile. Shoppers are now supporting discounters over full-priced venues in a growing variety of categories. Examples include: children’s toys (note the disappearance of retailers Zany Brainy and restructuring of FAO Schwartz in favor of the growth in toy sales at Wal-Mart and Target), clothing retailers (note the emergence of the now regional upscale Tanger Factory Outlet stores and challenges faced by Neiman-Marcus and Saks), and even groceries (growth in sales at Wal-Mart and Target again, and coincident consolidation by traditional grocery chains).

 

The importance of online access to shopping and information has been evident for some time in the purchase of books, certain insurance products, and newspapers. What is driving these changes is something all marketers must acknowledge: the increasing consumer comfort and growing trust in accessing information and making purchases online. 

 

Diane feels we are still early (perhaps in only the third inning) of a massive shift in how and where consumers will be making purchases. And that marketers across industries must stay on top of the changing perceptions and behaviors of their specific customer segments in order to be in front of the curve of these changes. Changing purchase channel options combined with the concurrent economic pressures on consumers today are creating a powerful one-two punch that marketers can only ignore at their peril.

Thinking about the West Virginia coal miners

 

Those of you who have read my bio know that I worked for Ingersoll Rand Company.  I was Purchasing Director for the Lee Norse subsidiary that manufactured equipment for use in underground coal mines.  One of our plants was in Beckley, West Virginia, south of the location of this week’s tragic event.  It’s a long way from coal mines to consumer products, but I could not do this post without asking all of us to keep those miners in our thoughts this week.  Thanks.