Shoppers May Have 99 Problems But Channel Fragmentation Ain’t One

Jarod Walter (lead image) is a marketing scientist at Adelaide’s Ehrenberg-Bass Institute for Marketing Science. In this guest post, Walter takes the guess work out for marketer’s struggling with channel fragmentation…

Should you invest money into building your brand’s presence within online channels?

Many marketers would say “Yes, of course!”, championing the idea that online shopping will be the death of physical storefronts, which has only grown in popularity since the Covid-19 lockdowns. However, research from the Ehrenberg-Bass Institute reveals that it’s not so cut-and-dry.

Professor Magda Nenycz-Thiel at the 2023 Mental and Physical Availability Summit showed that shoppers aren’t deserting brick-and-mortar stores. Instead, they are adding new channels to their existing repertoire of places to shop. And that’s even in categories which are ideal for online, like dog food where there’s the added inconvenience of having to transport the bulky bags home from the store.

Data collected over the peak of the pandemic (2019 – 2022) across various markets and categories revealed significant growth in revenue for online channels. However, most buyers that embraced online shopping still made purchases from offline channels, a finding observed all across the world, even within more digitally advanced countries like South Korea. In fact, the data showed that online channels grew much more by getting more new consumers to purchase from them at least once, than they did through getting a smaller group of consumers to allocate all their purchases to them.

What this finding suggests is that marketers should be embracing a forward-thinking approach to adopting new channels, from the perspective of an intelligent investor.

How can you do this? First, remember that the aim of building physical availability is to make the brand easier for buyers to find and buy. View channel investments through that lens; for how many more people is this investment making it easier to find and buy your product.

The fact that customers tend to add new channels rather than switch suggests that new channels, no matter what the percentage growth, aren’t always the best investments. While it can be easy to get carried away with the industry’s hype for the new channel, you need to consider whether investing in the new is better than improving or expanding the ‘tried and true’. Here are some questions Professor Nenycz-Thiel suggests asking:

• Will the investment make it easier for your current category buyers to purchase your brand, now or in the future?

• Could the channel investment expand the brand’s presence to different category buyers or buying occasions than what you currently serve?

• Do I have a business model that suits, or can I make money in that channel?

Your brand will benefit much more from a forward-thinking approach to building physical availability that takes these criteria into account, than a reactionary strategy fuelled by hype and FOMO.

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Ehrenberg-Bass Institute for Marketing Science Jarod Walter