Jacob Hawkins speaks in his interview about overstock.com and their choice of positioning that has made them the online success that they are. When it comes to positioning, Hawkins doesn’t make any greater difference between the online and offline world, meaning that either way it’s all about finding a customer niche and trying to fulfill it.
I’m however not too sure about this, thinking his approach may have been a bit too general, looking maybe too strictly at the process of positioning, and not really answering the question of what works on the Internet. The way I see it there has to be some significant differences, at the least in how you choose your position in the online in comparison to the offline world. To me the number of positions you can take on the Internet must be somewhat more limited that in the real world. There are several positions and niches that I just can see doable on the Internet, like selling products through the experience approach, like Starbucks and their coffee. I can’t even see it possible to sell true exclusiveness in the online world, since I think there’s a certain point where the price makes the customer want to touch the product before buying it, which of course you can’t do on the Internet.
The value niche in which overstock.com competes can’t in any way be unique. It may have been unique back in the very beginning, but I think it’s more likely that this position is today one of the most common you can have on the Internet. The reason being that I think most customers do online shopping strictly for lower prices. If they can find the same prices in a real store, they would probably go there instead.
So the value niche, selling branded products for cheaper prices, is probably a good position to take, explaining Overstock’s success. Problem however now being that this market must be quite saturated already, Internet business being easy to start up, leaving a whole bunch of tough competition. I think to be successful in today’s market a company has to niche itself even more, position itself even more specifically under the value niche, and going that extra mile for the customer. Just like Overstocks working hard to satisfy theirs, a new company has to find a way to satisfy their customers, maybe by e.g. offering speedy deliveries.
Except for this customer beneficial positioning, I can only see one other position working in the online world, and that’s offering more unique products (but not necessarily more expensive ones). I think that except for those who shop for cheaper prices there’s an additional group of people that shop online for products not available in their local stores. In the end however, I think it's always about the prices.
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3 comments:
Donny, this is a well thought out post.
With regards to your comment that the number of profit sites / positions on the internet are more limited in the real world, I think it can be argued both ways. You are right in that the medium of ecommerce means that certain types of businesses are not viable. However, many others that were not viable offline can become viable online. You make a good point that experiences cannot be well, experienced, on the internet. We are seeing a strong attempt by online firms to bridge the experience gap through customer reviews, high quality images, 3D views, and so on. Of course, it can not match the real experience.
Another good point noting that Overstock.com's positioning cannot be unique, but that it probably had a first mover's advantage. I think that many of the firms that survived the dot.com bust became brands in of themselves. So overstock.com is a brand that customers can trust. Research has shown that consumers prefer trust to the lowest price. So apart from its value proposition, firms such as Overstock.com and Amazon.com provide their customers' with the guarantee of a secure transaction.
About profit sites, i feel that the backbone of online stores still is low price. That's what started the whole industie more or less. With the possibility of haveing the store online you got rid of allot of costs like store rent and thus could afford to offer lower prices.
Even if many online stores are evolving from beeing purely low price, i think the technology isn't ready yet to start offering much else. You must allways have the low price part, becaus this is one of the few edges you can have over an offline store.
As pointed out, positioning is not just about niche or differentiation, but also about "meaningful to consumers." Sometimes, you can position differently, but, if what most customers care is low price, then, it would not work...
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