Old leading brands face tough competition from online retailers

At one time leading brands had the upper hand over competition, simply because they were the leading brand. They could charge more for their products and win over consumers with their expensive advertising. But that is changing, as consumers are no longer responding to being “advertised at” in the same way. Instead of being sucked into the hype of TV adverts by leading brands, their buying habits have changed. The internet enables them to share information with other buyers, read reviews and research and compare products online.

Old leading brands have just as much chance to make a lasting impression on consumers as the new online retailers, but many fail to understand the shift in consumer buying habits and how to market to them effectively. According to research by A. T. Kearney, the top 50 Brands are not using social media effectively and instead of using platforms like Facebook to interact with fans, they are using them as a one way communication stream.

The 2011 study showed that the old leading brands ignored customer feedback

The 2011 study showed that the old leading brands ignored customer feedback, and at least 69% of their Facebook posts were self promotional, despite getting fewer responses from fans for those type of posts. They also failed to interact with customers, despite having thousands of opportunities to do so. In fact, 56% of the top brands failed to respond to one single customer comment in 2011.

An example of success

There are several other crucial differences that set online retailers apart from traditional offline brands. For a start, successful online retailers focus solely on providing customers with an excellent online experience and service, whereas many traditional brands see the internet as a place to make some additional sales. Take ASOS (As Seen on Screen), the internet fashion store. In 2000 they launched their online business with only 3 members of staff. Yet just a decade later they had over 1000 employees and $354.5 million in annual sales, with around 40,000 different products available in their online store.

According to ASOS product and trading director, Rob Bready, the reason for their success is simple, “The site is beautiful, it’s easy to use, and delivery is free.” Yet offline stores have failed to make the effort to give online consumers what they want. As Bready points out, “Off-line stores like Selfridges must have about 40,000 products in the Oxford Street store, but there certainly isn’t that same choice online.”

Competition spans multiple industries

And it is not just the fashion industry that has been turned upside down by online retailers. The result is the same across many different industries. Take the mattress industry for example. Tempur-Pedic, the big brand that began selling the traditional memory foam mattress is having a hard time competing with online stores such as AmeriSleep and AstraBeds.

These new online mattress retailers seem to be giving customers what they want for a fraction of the price, longer guarantees and generous free trials. They also share verified customer reviews on their websites, and communicate with consumers via social media. This is important as consumers want to hear the opinions of other genuine customers, before making a purchase decision.

Why this shift in consumer attention?

The New Consumer Study, conducted in 2009 by the Euro RSCG Worldwide, concluded that “Consumers credit less and less the brand message transmitted through TV commercials, they are more inclined to take into account what they are told by those who they interact with in different environments, especially online.”

successful online retailers go the extra mile when giving customers exactly what they want in terms of choice, price, guarantees, and convenient delivery and return options

It is clear that the more successful online retailers go the extra mile when giving customers exactly what they want in terms of choice, price, guarantees, and convenient delivery and return options. Unlike traditional brands, they also use social media as a tool to interact with customers and discover what they want, rather than using channels like Facebook as a traditional advertising tool.

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