Three ways to sell online

There are three types of online businesses.  

• The single brand direct to consumer, 
• the direct retailer of many brands and 
• the brand aggregator.  

An example of a single brand would be Apple, or fashion brands like Carla Zampatti, Roman Daniels or specialty boutique brands like Farmhouse Muesli.  The single brand has a unique product story that people seek out because it offers them something they cannot get anywhere else.  This is the strongest and safest strategy, make and deliver something unique that people want and you will never have to compete solely on price.  The single brand has the luxury of being able to choose whether to outsource their logistics because price is less of an issue and their margins are higher.  If their brand has no
complicated services related to the delivery then they may as well outsource unless they are sure they can do it cheaper and better than the 3PLs.  

The single brand needs to primarily focus on their marketing and the brand experience of the customer.  Logistics is only as important to them in so far as it impacts on the brand experience.

The direct retailer is an aggregator of many brands within a category (or several categories) that provides everything a customer might need within the category. Examples include: The Iconic, Pharmacy Online, The Book Depository, Anaconda, Amazon.com.  The direct retailer should generally run their own supply chain because their margins are usually thin and supply chain is a core competency that defines their business and adds value.  

The direct business is at a disadvantage to the single brand because they do not own the brands they sell and so are price takers from the brand owners and continually subject to price competition from competitors selling the same brands.  This model will ultimately favour the large player who dominates the market with a large range, efficient operations and volume to help keep prices low.  They ultimately become the go to site with the best price and service.  

Amazon.com is the prime example of this, they doubled in turnover from $25Bn -$50Bn in two years from 2009-2011 and are practically untoucahble at the moment,  - and they have done this on the back of running their own supply chain.  They value supply chain so highly that they recently bought Kiva Systems who make an AGV mobile shelving system that moves stock to the storeperson, eliminating travel time in the warehouse.

If you are in direct retail then you need to focus on product range and marketing, and service delivery through the online experience and on your supply chain operations.  Developing your own brand as an aggregator to stand out from the crowd and become the go to site in your category is key.  Connect with customers to keep them coming back and give them the best price and service.

Your supply chain must be lean and able to fulfill the promise of the website. You must control your inventory and know how to keep it turning over so that the long inventory tail does not languish on your shelves unsold.  You must have stock or be able to get it and deliver it to the customer very quickly.  All of this is difficult and we can help you achieve the High Performance Warehouse you need at Logistics Help.

The brand aggregator is a further evolution of the direct retailer where the traffic to the site is so large that it can be leveraged to include other categories that are serviced by third parties.  The site aggregates offerings from single brands and even other direct retailers and presents their products in its own online format and centralises the ordering and payment facility but sends the order to the third party to be fulfilled.  Examples include Amazon.com, Westfield and some direct retail sites also do this in a limited way to provide the long product tail more economically.

                                                                                                               

As far as I can find out Westfield's online strategy does not include their own physical supply chain, which to me seems like a big problem, as they have a front end eCommerce store that would normally require a physical operation in order to add value to a base business that makes them a dominant direct retailer.  

Amazon dominated direct book sales and leveraged this into other categories to create a dominant direct retail marketing brand.  Amazon is now around 33% of U.S. online sales.  It was this dominance that gave them the capability to take a fee from third party single brands and direct retailers who listed their products on the Amazon site.  I do not see how the model will work in reverse with Westfield building a 3^rd party only marketing platform with no base value add beyond the aggregation function.

Westfield has a great opportunity to be aggregating physically as well as virtually to back up their shared shopping malls with shared physical logistics for online sales.  Westfield could do something really unique and provide the infrastructure for its specialty stores to ship to the world.  They could bring local stores' offerings from overseas to Australia.  They could source from their international shopping mall tenants to create a global aggregator brand delivering unique products around the world. 

With over 100 or so shopping malls around the world Westfield could build a unique and unchallengeable direct retail brand.  Add in valued customer connection and experience that is seamless and transparent between online and in the mall and the new retail model will be complete.

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