2 New channel structures
New channel structures enabled by the Internet have been described in detail in
Chapters 2 and 4. The main types of phenomena that companies need to develop strate-
gies for are:(a)Distintermediation. Is there an option for selling direct? Selling direct can lead to the
channel conflicts mentioned in the next section. When assessing this option there
will be a number of barriers and facilitators to this change. Research by Mols (2001)
in the banking sector in Denmark suggests that important factors are senior manage-
ment support, a willingness to accept some cannibalisation of existing channels and
perceived customer benefits.
(b)Reintermediation. The new intermediaries created through reintermediation described
by Sarkar et al. (1996) should be evaluated for suitability for partnering with for affili-
ate arrangements. The intermediaries receive a commission on each sale resulting
from a referral from their site.
(c)Countermediation. Should the organisation partner with another independent interme-
diary, or set up its own independent intermediary? For example, a group of European
airlines have joined forces to form Opodo (www.opodo.com) which is intended to
counter independent companies such as Lastminute.com (www.lastminute.com) or
eBookers (www.ebookers.com) in offering discount fares.The distribution channel will also be affected. For instance, grocery retailers have had
to identify the best strategy for picking customers’ goods prior to home delivery.
Options include in-store picking (selection of items on customer orders) and regional
picking centres. The former is proving more cost-effective.3 Channel conflicts
A significant threat arising from the introduction of an Internet channel is that while
disintermediation gives a company the opportunity to sell direct and increase profitabil-
ity on products, it can also threaten distribution arrangements with existing partners.
Such channel conflicts are described by Frazier (1999), and need to be carefully man-
aged. Frazier (1999) identifies some situations when the Internet should only be used as
a communications channel. This is particularly the case where manufacturers offer an
exclusive, or highly selective, distribution approach. To take an example, a company
manufacturing expensive watches costing thousands of pounds will not in the past have
sold direct, but will have used a wholesaler to distribute watches via retailers. If thisCHAPTER 5· THE INTERNET AND THE MARKETING MIX
Activity 5.4 Place of purchase on the Internet
Purpose
To illustrate the concept of representation and reach on the Internet.Activity
For the same sector as you selected in Activity 5.2, find out which company has the best
reach in terms of numbers of links from other sites. Go to a search engine such as Google and
use the advanced search to find the number of sites that link to that site. Alternatively use the
syntax: link:URL in the search box.
visit the
w.w.w.