Why it sells cheaper in internet that in the street?

It is not had to, as many believe, to that in internet there is lower costs that in the physical business. To general level, the on-line marketing, that has seen contundentemente increased from the confinement by the increase of the demand of spaces, is already equiparable in the accounts of losses and gains of the majority of retailers to the cost of the rents of the physical shops; the number of people to carry out the management is substantially lower in the on-line, but the personnel is more qualified and considerably more expensive that in the off-line; the logistical costs, tools and even the necessary investment for the opening of the shop are upper in the ON vs the OFF.

Mainly the difference of discounts between channels is motivated by the perverse strategy that there is behind the algorithms for the generation of prices in the e-commerce, by means of which the trades stick in real time, through tools of monitoring of prices, to the references of all the shops that operate in the network. These algorithms apply norms of descent of margins until arriving to a tope that, in the case of some retailers, because of the hunger of achievement of quota or the need to grow in sales, finds in the cost of acquisition of the good. This occurs mainly in businesses multimarca - multiproducto, where can find a same item in several shops of different countries.

All these trades in the network, hit "" in an only screen to hit of click; no in a street, of a neighbourhood, of a city, of an autonomous community, of a country. It competes in a space where fit all together, and change of one to another only involves the time that take in moving the mouse and clicar in the competition.

Obviously the physical shops can not carry out these changes of continuous price in real time (neither having electronic labels, because these do not monitor the prices of his competition) and costs them compete with internet because also they find with that need to operate with the margin that had marked to fulfil the term of amortización of the investment in the opening of the point of sale, with the aim to fulfil the term of planned return.

Besides, the punctual offers in the price of product in the network bring achieve another perversion: in front of a descent of price, the competition will proceed following it of form practically automatic because of the agile application of the algorithms. By what, when this company that initially went down his price want to reposicionarse upward again, will not be able to do it, since other competitors will have gone down also his prices. And, when pretending go up to the initial situation, being stuck to them through the tools of monitoring and to the application of the algorithm, the rise will not be able to make, because the price of the competitor or competitors that went down price imitating him the toparán in his replacement of prices upwards in the turn to the normality. Of such form that the punctual offer turns into permanent, no only for his business, but for all the market. Once the low price, that go back to go up is practically impossible in this game that results Machiavellian no only for the shopkeeper, but for the marks, that see like his image degrades and full of complaints of others of his customers that do not play to this leonine game.

Imagine if you add the offers that update daily of all the products in all the companies that sell in the network, which find monitored by his competition… At the end no longer there are possible offers, because it normalises the price recessed like permanent.

To crimp the curl, the companies that play to have the best price also apply additional discounts out of the price of the product (bonos discount, 3x2, carry free, second unit to 50%…) not to be less than the one of at the side, although his neighbour carries out these actions although it do not have prices so aggressive. And it is that it can not play to the strategy of Mercadona (always low prices and elimination of promotions) and to the one of Carrefour (half prices and a lot of promotion) of simultaneous form. It rains on wet…And this is what is occurring in a lot of sectors, and the selective perfumery does not save .

Another fact that improves this difference of prices between ON and OFF is that the physical shops want to position in internet and prefer to lose profitability to win competitiveness. The price is his main driver. They allow even lose money because the weight that has internet in his total business is still small. Until when? It does not remain a lot in my opinion because the development of the sales on line is imparable without going in in the discussion that in the street also exist capacity of development. We have to take into account that a lot of companies have seen forced to have to digitalizarse to rhythms forced and have gone in in the channel like an elephant in a cacharrería and with suicidal commercial strategies. The ignorance is the happiness, but the reality can wake up of hit of the bed to any when it fine-tune his numbers and make a good control of the account of exploitation of his on-line channel.

Incidentally, in spite of the rise of prices by part of the marks because of the inflation in all the chain of supply, the available prices in internet do not go up (the algorithms fix in the available prices, no of purchase…), and is the retailer the one who has to assume the cost of said rise (and here do not go in to report if the rise of price is necessary or no, because it would give me for another publication).

What is occurring, because of the ease of access that has an individual to all the on-line shops from a mobile, is that the prices will finish them marking internet in the market, by what the prices of the street go to finish depending on the network because the consumer does not go to understand that they exist 2 levels of price or a channel canibalizará definitely to the another. By which, in my opinion, this current difference of prices would have to go normalising and orquestándose of simultaneous form in both channels of distribution.

Which are the consequences of this derivative situation of the strategies of pricing already standardised in practically the main e-commerce multiproducto of the world?

That the businesses of companies of and-retail, pure players and native digital, when measuring with all the universe of competitors, in all the products, the prices go down drastically of form generalised, and therefore the margins of these shops that operate in the network. This descent is a perverse spiral that besides has difficult solution to reestablish values and initial margins by the perversion of the algorithms of application of prices by the already commented reasons.

That the businesses brick and mortar (those that coexist in a business ON and OFF), see like his customers migrate to his web (by the differences of price that go growing strongly from the confinement), where by this aggressiveness in his on-line shops the majority are not profitable. This situation of canibalización between his marketing venues (because in our Industry, as in many others, the strategies omnichannel are an utopia…) generates besides a grave damage to his business on foot of street, since it hampers that rentabilice his cost of structure (by the decrease of derivative sales of the canibalización of his own web), that already came being high by the weight that occupy on the income in his accounts of results, but that still his ballast is greater from the start of the pandemia, mainly by the education to the consumer to the on-line purchase, and increased recently by the rise of the light, the increase of the IPC that affects to his incomes of direct form and the change of agreement of his on the dot available employees among others factors. The inflation that is promoting to his time a rise of types of interest to control it, a possible recession by the estimate of brake in the consumption, increase of costs of the energy and other effects macroeconómicos vaticinan a difficult and uncertain future to short/half term for this type of operators and that they will have to resolve fast if they do not want to lose one of his two legs. Especially, that that has a high CAPEX and needs of a high volume of income to absorb his fixed costs and achieve the profitability. Each fallen off of margin involves a big increase in his turnover to compensate it and the traffic in the street for many does not grow as it would owe to cover these high fixed costs.

The advantage of the on-line operators roots in that the majority of costs are variable and these do not grow if it does not do it the production.

That the marks see denigrada his image of mark and on a long-term basis lose value, as well as in the short term it affect to his quota of market with respect to the marks that take care his image through the price controlling (of the form that willingly can) the discounts, since although in the market are selling more units, these, when invoiceing to an inferior price, achieve that the mark lose GMV and share.

Precisely, the most opened marks to his distribution are those that more go to suffer because in his commercial politics, the growth in sales is by on to the generation of value of mark (although some dissemble it very), and this causes that the aggressiveness to sell more and of this form can earn the rappel (that a shopkeeper needs to be able to compete and be "profitable"), translate in stray of margin by part of the retailer. Has felt that a shop want to work with products that contribute him sales but no margin? Or worse even, marks that attract trafico and eat sales of products that if they contribute margin? These marks will have to be in the linear or the retailers will finish for hiding them under the shop window?

The sector of the perfumery of luxury, already remembers to the industry of the ganadería or the agriculture, where the peasant (in this case the retailer) is tightened by the manufacturer and the chain of distribution (the marks).

Which is the solution?

For the shops that find in the street, in the network or in the metaverso, will be to leave to work the marks that allow in his commercial strategies this situation in which a trade see forced to work without commercial margin. If you are manufacturer and searches that your products commercialise them a distributor, will be better that controls that in all the chain exist value for the intermediary.

For the marks that do not take care his chain of distribution, better will be that from already begin to sell in direct and go up to the car of the D2C, but doing the harakiri to his current network network of distribution. As it is a difficult step when you already have a network of sales consolidated, the most intelligent will be to take care to your customers and contribute them value so that have win to generate trafico to your mark and promote them above others. Like this it will be the form to win the game to your competition. And it is that 1+1=2.

I do not refer me to sell cheap, neither to control that it respect your brand equity, neither that help to promote the mark with actions of coomarketing; but you do it everything. And better that your competitors.

It does not have sense has for a shopkeeper promote products that do not generate margin, with which the marks that do not take care his distribution and his value of mark, will have to be expelled of the shops by marks that contribute margin, that do not forget that it is it everything for a business.

Or if you desvirgas in the market, better go out from a first moment without intermediaries like a digital native vertical brand (DNVB), using this margin to position you through your campaigns of advertising. To see if like this you have more luck.

Or have been as Zara, that manufactures and distributes controlled his chain and being able to carried out strategies omnichannel for real.

Dear mark, if you can not control your distribution, or your aims are the ones to grow in quota at all costs, have to know that tomorrow you go to finish disappearing unless your strategy was the one to finish doing without your distributors once that these have helped you to create the mark.

We like distributors, understand that we are seen for a lot of marks like necessary evils. Today we are more necessary that evils because it needs to some pringados that carry out investments to generate you sales and build your marks, but arrived the day that if the distribution feed these practices and participate of the crime, will be but evils that necessary. To my do not deceive me. To many sees you the feather duster. I prefer not going in in this battle, and invite to the rest of the distribution to go down of the ship. Or but well to go up to the and row all together. We would have to be as these aldeas of of Galia that they joined to struggle against Julio Cesar and no suicidarnos between us.

And to the marks, suffices to say that they can not control the prices and the aggressiveness of some operators because this forbidden by the laws of competition. If you are a mark that looks on a long-term basis and rewards to the people that helps you to build it, penalises to the one who destroy you value and rewards to the one who help you to create it. But, in little time will see like the industry left to support you and to bread for today, hunger for morning.

You have posed you sell without discounts to your distributors and contribute 100% of the margin of these in function of the value that contribute to your mark? Throw him noses and those that for real are your partners will appreciate it to you.

Dear mark, also invite you that you go up you to our ship now, or perhaps already was too late and finish being shipwrecked with your lovely galleon and your fine-tuned compass, but alone and changing of course constantly.