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Omnichannel Optimization: Value, Trade and Digital Commerce Capabilities

By rowanm
Feb. 15, 2018

So, what is a channel?

A brief consideration of channels for trade and commerce - with examples

Simply, a channel is a means for interaction. Businesses use channels as a means to connect with potential consumers and for consumers to interact with the business.

Channels provide different means for participants to interact

  • a roadside billboard - informing prospective consumers of a new product

  • speaking on the phone – customer with a customer service representative

  • a trading kiosk in a railway station – conducting a personal transaction

Unique Perspectives

The abstract channel concept enables many uses, each offering a unique perspective of the channel – for example one person may see the kiosk as a newspaper vendor while another enjoys casual conversation with the merchant while their morning coffee is prepared; the customer service representative may provide both pre-sales, post-sales and account support services.

Participant Roles

Channels are generally business to consumer (B2C) focused, requiring both consumer and supplier participants to be effective. Consumers can use channels to satisfy needs for information, media, goods and services in a variety of roles such as parents, hobbyists, car-owners, sports-fans, etc. Suppliers use a range of roles over a range of channels to connect with, inform, engage, supply, reward and support consumers.

Other channel patterns include business to employee (B2E) where employees are empowered with tools and business data to be more effective in their roles, along with business partner (B2B) where the business interacts with its partner businesses in a variety of use cases, often forming patterns similar to B2C.

Channel Value

For consumers to engage using channels there needs to be an expectation of value – whether that be providing timely, accurate information such as stock availability and location or of satisfying a need such as seeing the news on BBC World News TV channel (or another similar service). Conversely, without channels-to-market businesses couldn’t function. The BBC needs iPlayer, TV and radio channels to deliver content to deliver consumer value as much as Amazon needs web and mobile to provide product information and receive orders to deliver consumer value.

When delivered value meets or exceeds expectations the consumer is satisfied, reinforcing perceptions, driving behavioural familiarity (such as going to the BBC or Amazon first).

Channel Capabilities

From a business perspective, channels provide an intuitive means of satisfying demand, but there are key differences. Some channels are relatively simple such as content broadcast to all potential consumers in a fixed area; the only consumer participation requirement is a generic TV or radio to receive the signal, the consumer does not need to be known, have an account or settle payments for service use.

While the ease of access and anonymity of this channel has established need, it doesn’t lend itself to more complex scenarios such as conventional shopping through public consumer access to a stocked retail premises with product information and pricing along with order and payment processing.

According to the dictionary, a channel is a waterway joining two larger bodies of water, such as a straight between seas – by extension the English Channel, joining England and France. This serves well to portray a channel as a means for coming together where ships, representing the participants, traverse the channel to interact in various ways to conduct trade. This physical channel is used to conduct the necessary interactions to effect bespoke and complex business models leading to satisfying demand but in a very different way to broadcast.

Evaluating Channels

“The [radio] has no imaginable commercial value. Who would pay for a message sent to nobody in particular?” – David Sarnoff’s associates in response to investment request in the radio in the 1920s

Channels (and their effective use) are still frequently misunderstood. Businesses don’t need to use every channel to be successful - use only the necessary ones, but use them excellently.

While there may be similarity in purpose for the use of a channel, there are also subtle and significant differences. A limitation for one use-case may readily benefit another. Factors for channel consideration include

  • Channel discoverability, availability and accessibility

  • Lifecycle of the transaction - and the trading relationship

  • Physical characteristics (what can be exchanged and how quickly including size, weight, range, speed and latency) for all channel interactions (order, payment, fulfilment)

  • Pattern and complexity of transaction interaction between parties

  • Emotional needs of the participants to satisfy expectations and build relationships

  • Security aspects including integrity, confidentiality and trusted identity

Using these, the practical differences between TV channel and water channel include:

  • The TV channel, without augmentation, supports only one-way interaction, where the viewer consumes broadcast material and information

    • May be mutually beneficial through inclusion of adverts for revenue generation

    • Provides minimal opportunity for extra-regulatory contractual terms (of service)

    • Anonymous use is difficult to reward loyalty or build relationships and changing the channel is quick and unmitigated

    • Instant fulfilment without increase in cost to fulfil increased demand

  • The waterway facilitates complex exchange patterns using the channel to bring parties together, effecting order and payment flowing one way and order fulfilment flowing back

    • High latency as it takes time for each channel crossing and is weather dependent

    • Relatively low-cost transport for heavy or bulk goods

    • Vis-a-vis contact permits contracts to be adjusted and agreed and trading relationships actively developed

    • Need for a ship is a barrier to entry, but may be mitigated by the consumer using a public ferry

Channels over time

Throughout the 20th century, business channels have employed fairly consistent touchpoints. Examples include in person exchanges such as in a shop and mail order - using a catalogue or TV for product information, phoned, faxed or mailed order with mail order fulfilment. The 21st century’s rapid increase in personal communications technology has drastically affected existing channels, most notably with websites reducing the latency of the obtain-catalogue, place-order legs of the mail order pattern.

This has resulted in a prior channels evaluation being revised from consumers’ perspectives. It also led to many new channel capabilities becoming viable

  • In-store self-scan, self-checkout (and scan-as-you-go variant)

  • Order online, collect at store (and drive-through variant)

  • Facilitated and escrow multi-party or peer-to-peer trades

  • On-demand content and content subscriptions

The future includes many exciting opportunities, including

  • VR preview of products (how this new sofa will fit and look in my lounge)

  • Omnipresent voice assistant (ever increasing capabilities in a digital world)

  • Intelligent home appliances (fridge or bin places order for depleted products)

  • AI predictive and pre-emptive supply, especially when supplemented with personal data (GPS) and localised IoT data (when the lights are on indicating activity and sleep patterns)

  • Mass participation and collaboration (networks of people driving specific outcomes)

  • Fractional channels – components for composite channel design and augmentation

Put simply, enhanced digital capabilities can lead to a real, meaningful digital transformation, and digital solutions can transform business and improve user experiences, none of which can never be bad for business.