Firms that use traditional marketing techniques rather than Internet strategies are known as “bricks-and-mortars.” And they’ve been dubbed the true losers of the ’90s, as more and more cyber-born e-commerce sites have managed to capture marketshare.
US bookstore Barnes & Noble, Toys R Us, and HMV were shocked that Internet-based businesses could capture several percentage points in their industries in five short years — a marketshare that usually takes many years to establish.
The Internet was a totally unanticipated source of competition. As a result, the bricks-and-mortar retailing businesses seemed antiquated when the Internet entered the stage.
Now it looks like the real winners will be those bricks-and-mortar businesses, afterall. Three key factors will cause this change over the next six months — Y2K resources, brands, and distribution.
Most of the resources used by bricks-and-mortar businesses over the past two years have been tied up in managing the Y2K issue. On average, several million dollars were spent by each company with a workforce of 500 or more employees.
Such Y2K investment has seriously restricted the available corporate IT resources needed to develop an Internet presence, particularly in the area of backend office systems.
A short time after the new year, many IT people should be freed from their Y2K focus and, in theory, be available for the creation of serious backend systems.
The True Value Of Brands
The second key factor for dominance of offline brands is their true value. More and more, people do not trust the Internet, but they trust brands. Especially offline brands, as people know them, relate to them, and identify with them. Brands have proven to be the survival kit for companies on the Internet.
Until now, only a few companies have managed, in a systematic way, to leverage the true value of their brand. When drugstore.com merged with offline pharmacy chain Rite Aid, businesses around the world began to realize the real value of combining offline and online brands.
The fact is that only 42 out of the top 500 most well-known brands were born online — 458 were created the traditional way.
Distribution is going to be the third reason why offline brands will soon become a real threat to online-born brands.
Even though many companies have claimed that distribution in cyberspace is not necessary, one of the largest investments by Amazon in 1999 was the establishment of distribution centers to manage the increasing demand for books.
For several retailers, it has taken decades to establish solid distribution channels worldwide. When selling software and music, it might not be necessary to offer a regional store. But for almost everything else like drugs, food, cars, clothes, etc., the case could very well be different.
New Times – New Values
Great companies are created through a very Darwinian competitive process involving a natural selection of the strong. All that we have seen on the Net so far is the first stage of this process.
The second stage will see the rising of old-line retailers, and they will come with a vengeance. They have lower costs, purchase in larger quantities, have longer standing relationships with suppliers, and highly-tuned supply chains.
In the new millennium we will acknowledge the true value of offline brands, and more accurately perceive the cyber brands.
Yes, in many ways Internet-born brands are flexible, independent of old traditions and fast moving. On the other hand, offline brands are impossible to establish quickly – no matter how fast the Internet becomes.