Brand Differentiation and Online Retailing

Christopher Columbus may have been wrong after all as the Internet removes geographical boundaries essentially rendering the globe flat and expansive. This has generated a boundless realm of possibility and wealth and Internet Retailing is at the forefront of this push.

Mark Freidin is an online retail pioneer. As Chief Operating Officer of the Catch of The Day group of companies incorporating catchoftheday.com.au, Groceryrun.com.au and its sister site Scoopon.com.au. Prior to that he was the General Manager of a national luggage and handbags multi-channel retailer. He led the charge online, establishing the age of the ‘non-brand as a brand’. He also co-founded InternetRetailing.com.au, Australia’s first news and information resource for the Online Retailing Industry. He now works as a specialist online retailing consultant. Mark shares some key insights around creating a profitable retail product online in a tricky, global marketplace.

More and more products sold to Australian consumers are being manufactured in such places as China, Taiwan and India. Companies such as Catch of the Day and Deals Direct have been very successful in creating comparable non-branded products at a lower price point and creating a brand of that through providing service and support to sure up consumer confidence. Mark explains; “As a retailer you are held to the control by the brands in a lot of ways. This created a need for a substitute product in order to have control over the destiny and marketing of your product set.”

Pricing controls also tied the hands of burgeoning Online Retailers. “The ability to be able to discount a product and provide a compelling reason to shop online was a real challenge without that flexibility. We had to find another way.” And this is what they did. “We would go to the same factories and select the same materials and components that made up the branded product and applied our own design to it. We created a product that was of comparable, if not higher quality supported by a 15 year warranty, in the case of luggage and offered that to our customers. We were able to offer a lower price but made more margin without the brand restrictions and with the warranty it was a no-brainer for customers. We were creating a brand of our website as a respected alternative which allowed the products sold to be non-branded individually but had the comfort of the site reputation to ease consumer’s minds. It was a win-win situation.”

Mark went onto explain the offline version of this model. “Woolworths has its private label “home brand” products with a lower price and plain packaging that have become a trusted brand, with some products in the range now priced slightly higher than its branded shelf mates. This is the same with Aldi, they have created a number of sub-brands for their Aldi produced items that are now emerging as brand preferences within the Aldi range itself, adding weight to the approach of building a brand based on service, price and trust, not the individual products”.

“We also found that during our market testing we could offer a branded bag that was not leather next to a more expensive non-branded bag that was leather and sell multiples more of the unbranded. In this instance, leather was the brand.” The lesson for Product Managers looking to take a product online for sale is to look at all of the characteristics of your product as your selling proposition and consider that the differentiator may not be brand.

As a Product Manager that may recognise some of the product management discipline emerging online. Companies such as UpStream Commerce (www.upstreamcommerce.com) have created a product that allows an Online Product Manager to monitor the prices of comparable competitor products in order to make informed pricing decisions, similar to TerraPeak on eBay. “There is a real opportunity for smart Product Managers to utilise their product discipline to create a significant product opportunity online, just don’t assume that what goes on your traditional market is going to be the same online.”

Brave New World indeed.