You Don’t Have 15 Years to Waste Like Walmart
In my last post I talked about how especially technology / BtoB companies have coped with technological changes by using their existing company / brand name for each new product launched in new categories until now.
A new category, however, requires a new brand name.
In this post I would like to follow on from the same theme and focus on how the same mistake is done on the Internet, especially by retailers.
The Internet is also a new category that requires a new brand name.
This is one of the latest Positioning Principles from Al & Laura Ries in their new book: Positioning in the 21st Century.
Here is a longish excerpt from the Internet chapter, the part of it on retail businesses specifically, as they are the first to hop on this mistake wagon:
“From a positioning point of view, the most-significant feature of the Internet is that it has doubled the number of potential categories. For every physical category, there is also an Internet category based on the same product or service.
The Internet is a collection of new categories.
And new categories demand new brand names.
Most marketing people welcomed the Internet as a “second” marketing channel.
The buzzword in the marketing community was “OmniChannel” a retail approach that integrates the different methods of shopping (online, in a physical store, or by phone.)
Almost every physical retailer has set up a website to sell the same merchandise on the Internet as it does in its stores.
Take Walmart, the world’s largest retail chain with 11,695 physical stores.
Walmart believed in omnichannel marketing.
In the year 2000, Walmart launched Walmart.com to sell its products on the Internet.
Eighteen years later, Walmart’s Internet sales represented 3.1 percent of the company’s total sales.
Even worse, the rapid growth of the company came to a halt.
In the ten years between 1998 and 2008, Walmart sales grew at an average annual rate of 11.3 percent.
In the ten years between 2008 and 2018, Walmart sales grew at an average annual rate of just 2.5 percent.
That’s why in the year 2015, Walmart spent $3.3 billion to buy Jet.com, a retail Internet site founded the previous year.
Walmart wasted 15 years before it recognized that a new category like the Internet demands a new brand name.
There are many reasons why this is so.
First is pricing. It’s cheaper to sell products on the Internet than it is in a retail store.
Second is the cost of retail space. It can cost five to ten times as much to rent space in a retail location as opposed to warehouse space where an Internet site might stock its products.
Third is stocking. An Internet operation can afford to stock many times as many products as a physical store.
What’s driving Internet sales are the low prices and the greater selection. Especially low prices. That fact alone makes it difficult for a physical retailer to also sell merchandise on the Internet using its existing brand name.
How do you price your products on the Internet?
If you price your Internet products at the same price as your physical stores, you will lose business to competitors.
It’s far easier for customers to compare prices on the Internet than it is between retail stores. To compare prices between retail stores requires travelling between different stores. To compare prices on the Internet requires typing words on your mobile phone or on your computer.
If you price your Internet products at significantly lower prices than your physical stores, you will alienate the customers of your physical stores and eventually lose a lot of their business.
Every category on the Internet is a new category and a new category demands a new brand name.
If you look into the minds of customers and prospects, you will find that they think of retail stores as belonging to two separate categories.
Physical retail stores in one category and Internet retail stores in another category.
That’s consistent with how consumers buy things.
They first decide whether to buy an item from a retail store or on the Internet.
Then they look into their minds to see which retail store to visit.
Or which Internet site to visit.
Brands that try to occupy two different categories almost never succeed.”
(More in the book on differences on the Internet such as why you traditionally have 2 dominant brands in a category but only one can dominate online, also for non-retail categories).
Having intentionally reserved the stage for the Positioning Pioneers in this post, I would like to share my own experience as a customer during the pandemic when supermarket shopping has become a real source of stress, which totally reflects what is said above:
I first selected the retail brand which I trusted most to provide me with the most hygienic shopping experience due to their leadership position, to go for actual physical shopping.
When it came to online shopping, however, the same brand is known to disappoint immensely; their business model flopped terribly on the subject, to the extent that prepaid deliveries ended up on someoneelses doorknob who took it as theirs!
I personally chose the brand getir, which has its whole business model engineered for mobile shopping and owns the concept of speed.
And when my younger sons charge cable stopped working and we needed to order a new one urgently, I couldn’t believe it when it came within minutes- I’m not exaggerating, 7 minutes!
As luck would have it, I heard the leaders of many retailers (some still talking about “OmniChannel”) at a webinar discussing the “new normal” while finishing off this post.
The general manager of one of the global supermarket chains who use the same brand for their e-commerce site said the following:
“We have a huge variety and are working on speed regarding our online operation. getir is fast but offers very limited choice. Probably we will converge at some point in the middle.”
My two cents:
For all physical retailers to rethink their business model in order to stick to offering a great selection with low prices under a new brand name online.
An option like Banabi from Yemeksepeti, the restaurant curator, is not to same as a new brand from a giant such as Migros or Carrefour, who probably have a much stronger supplier ecosystem and the advertising budgets to get into the mind first.
The first to do this properly could own this space.
As for getir: they are already focused on the urgent need space and plan to go abroad with this positioning so I doubt they’ll give that up (if a broader range means compromise): thanks and go getir go…