Marketing Channel Strategy

The OmnI-ChAnnel eCOsysTem
22
SIDEBAR 1.2
E-Commerce in India: Channels Operate in an Ecosystem
52,53
China is the world’s largest e-commerce market; its 2016 sales of $681 billion made it nearly 
twice the size of the U.s. market. In comparison, India’s e-commerce market is miniscule, cur-
rently earning sales of around $21 billion that might increase to $63.5 billion by 2021. yet 
despite this relatively small size, India’s e-commerce market is drawing vast attention from 
global e-commerce giants; Amazon has made investments of close to $5 billion, and softbank is 
investing $2.5 billion. The reason for this interest actually parallels the reason that the market 
has remained so small thus far.
That is, e-commerce in India has not spread because the Internet has not penetrated the 
nation. The second most populous country in the world (more than 1.3 billion people), India also 
is home to an estimated 730 million mobile-phone users—but only about 450 million people use 
the Internet. even as Internet penetration increases, reaching 31 percent of the country in 2017, 
it lags greatly behind the rates of mobile users, who were 88 percent of the population in 2016. 
The spread is even slower in rural areas, which are home to a population of 916 million people—
all potential e-commerce customers, if only they could access the online channels.
Another challenge also represents a potential opportunity. The poor penetration of credit 
and debit services, along with consumer uncertainty about using them, imposes constraints on 
any transactions that rely on anything other than cash on delivery.
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 In such a system, channel 
members tasked with delivering products and services often risk theft, whether of goods or cash. 
These channel members cannot rely on air cargo options, though, because the available logis-
tics in India do not reach smaller towns and cities.
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When we include the challenges of online 
channels that are inherent to the medium, such as the high rate of returns, the low numbers of 
e-commerce customers start to make more sense.
yet as penetration of both the Internet and credit services continues to spread, that vast 
untapped market offers great promise for marketers. even the clogged and congested Indian 
roads may be an opportunity; people may learn to prefer to avoid the hassles of going out to 
shop, and rural shoppers likely will appreciate a chance to get the coolest urban styles, without 
having to venture into the big cities.
EXAMPLE: BEEPI/VROOM—SELLING USED CARS ONLINE (USA)
Would you buy a used car online, sight unseen? The process of buying used cars vexes many 
consumers, and the phrase “used car salesperson” is a widely used pejorative term to denote 
someone untrustworthy. But in Beepi’s novel consignment model, sellers consigned the car to 
Beepi, which used its online portal to find buyers for the car and deliver it to them at the location 
of their choice. The car remained with the seller while up for sale. For sellers, Beepi promised the 
opportunity to get a higher return, while also eliminating the potential risk and hassle of dealing 

The OmnI-ChAnnel eCOsysTem
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with strangers in a private-party sale. For buyers, it guaranteed a full refund if they did not like 
the car and returned it within seven days, certified the car with a thorough inspection, and posted 
several pictures of the car’s interior, exterior, and engine. The target market, consumers looking 
for late-model used vehicles, could shop 24/7 and be freed of the challenges of haggling with a 
used car dealer. The company also promised that its direct model would save consumers money. 
yet even after Beepi attracted funding to the tune of nearly $150 million, it could not sustain the 
business; it was sold and now operates under the www.vroom.com umbrella.
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Take-Aways
•
Marketing channels are a set of interdependent organizations involved in 
the process of making a product or service available for use or consumption.
•
Firms have to come up with a blueprint to deliver the firm’s offerings to the 
end-user in a manner that conforms to their preferred mode and method of 
buying and is efficient, cost-effective, and confers competitive advantage to 
the firm. This is in essence the firm’s go-to-market strategy.
•
There are nine key channel functions that have to be performed: physical 
possession, ownership, promotion, negotiation, financing, risking, ordering, 
payment, and information sharing.
•
Technological advances are changing the channel landscape and altering 
how end-users buy.
•
The growth of online channels led firms to utilize multi-channel strategies 
where channels typically operate in silos as separate entities with less than 
optimal integration and insufficient coordination. It also led to disinter-
mediation with well-entrenched intermediaries being removed from the 
channel value chain. Also some well-established formats like department 
stores are struggling to manage the onslaught from online channels and 
adapt to changes in consumer buying preferences.
•
Today, the focus is moving from a multi-channel to an omni-channel 
strategy where firms seek integration of the customers’ ability to research, 
purchase, communicate, engage with, and consume a brand such that the 
customer experience across online, physical, mobile, social, and communi-
cation channels is seamless and optimized.
•
The key players in a channel system include the manufacturers who are 
upstream channel members, intermediaries like wholesalers, retailers who 
are intermediate channel members, and end-users who are the downstream 
channel members.

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•
The key distinction between omni-channel and multi-channel is one of 
seamless integration versus disjointed silos and that omni-channel captures 
the notion of customer engagement in its DNA.
•
The trends driving the migration to omni-channels are that consumers live in 
a connected world where they engage in cross-channel shopping. Thus shop-
ping norms have been altered and this, coupled with the move to services and 
the ability to generate deep consumer insights and create a custom, targeted 
experience for end-users, necessitates a move to an omni-channel world.
•
We view channel strategy as operating in an ecosystem.
•
The key to an omni-channel strategy is to integrate across channels and 
consumer touchpoints to create a transparent, seamless, and unified brand 
experience for the end-user.
A P P E N D I X 1 . 1 : A L T E R N A T I V E C H A N N E L 
F O R M A T S — D E F I N I T I O N S A N D E X A M P L E S
Alternative channel formats may stem from any of the three sections of the
traditional distribution channel; that is, manufacturer, distributor, or customer. 
But they also could have other bases. This appendix summarizes the variety of 
channel formats and the characteristics on which they rely to gain strategic 
advantages, as well as some examples of specific companies, types of companies, 
or product categories that use the specific channel format. By comparing each 
market against this information, channel managers can identify opportunities 
and vulnerabilities.
Manufacturer-Based Channel Formats
1. 

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