Ten or 15 years ago, business schools lectured on the challenges of "channel conflict," hoping students would understand the difficult choices manufacturers had to make to keep sales channels pure.
It was then very clear manufacturers, retailers and direct-to-consumer sellers all operated differently from one another. Since then, however, all three are poaching on each other's territories.
DESPERATE ACT BY APPLE?
What is really going on here today? Is Apple's decision to sell direct simply the desperate act of a company in change?
My answer is not necessarily. The blurring between manufacturers, retailers and direct-to-consumer sellers is one of the many profound shifts over the last 10 years -- and one filled with confusion and opportunity.
Conflict in the channels has produced a total blurring of the lines that once separated them. First, there's the blur between manufacturers and retailers.
When Nike erected its Niketown store in downtown Chicago, the spin control to manage Nike retailer backlash was "Nike didn't care about making money. It just wanted a controlled environment to best frame its image in the minds of consumers."
Today, Chicago's Niketown is the city's second-biggest tourist attraction and no longer a single-location store. Profitable? I don't know the numbers, but I seriously doubt Nike would continue to operate it at a loss.
Then there's the explosion of discount outlet malls, which proudly expose the highest image-oriented brand names to the consumer -- direct from the manufacturers. Not long ago, there were legendary stories of how Sony Corp., discovering a retailer discounting its brand, would pull its entire line out of the store to protect the special place the brand held in consumers' minds. Now Sony is in the discount malls.
MALL SALES BONANZA
So is Anne Klein, Ralph Lauren and, of course, Nike. And because of the proliferation of these malls as legitimate channels, sales for the brands in this channel are in the multimillion-dollar range.
Then there's the blur between retailers and direct sellers. In the 1980s, direct marketers such as Talbots broke new ground by using mail-order-generated databases to identify geographic concentrations of customers sufficient to support a retail location. Retailers always modeled customer data to find concentrations of "look-alikes" to determine new store locations. Talbots placed a store in an area where its existing mail-order customers lived.
The challenge in the beginning was to integrate the marketing messages of these direct marketers to their customers; to build one brand across two channels. This is of real importance today to companies such as Eddie Bauer, Spiegel and Victoria's Secret Stores.
Add the discount outlet factor to this and practically everyone in the so-called mail-order business has blurred the lines by opening retail locations -- from J. Crew Group to Lands' End to NordicTrack.
MAIL ORDER AS ADVERTISING
Then there are the retailers that have determined that selling direct is not just an opportunity but a must. Neiman Marcus Co. uses its holiday "Wish Book"catalog to enhance its brand image at the same time it sells merchandise. Once just a transaction, mail order has become "advertising." Bloomingdale's, Nordstrom and Saks Fifth Avenue similarly seek to drive retail store traffic while selling direct to the consumer.
For these marketers, the blurring of sales channels expands their brand contacts with customers, enhancing their ability to build relationships with their customer bases.
Finally, there is the manufacturer and direct-seller blur caused by those manufacturers that recognize the need to gain back some of the control they have lost to retailers. The retailers, with more sophisticated point-of-purchase and credit programs, are capturing data and using them to drive store loyalty rather than individual brand loyalty.
Some manufacturers have mined niches in the market where they believe direct selling is somehow less objectionable to their retail partners.
We may buy computer software from retailers, but many marketers, such as Broderbund, encourage the consumer to purchase upgrades directly from them -- made possible by the database they generate from so-called product registrations.
Mattel sells Barbie dolls in practically every outlet that sells dolls or toys, but it too has built a direct-to-consumer business among the niche of Barbie doll collectors, with limited edition collectible Barbies.
Access to the consumer through the Internet will only continue to blur the manufacturer/direct-seller lines, altering the fundamental selling proposition for manufacturers forever.
Carmakers now use Web sites to make it possible for consumers to ask any question, even design a car of their choice. Why not? Dell Computer Corp. and Gateway 2000 allow you to design your own computer and then buy it.
ADVANTAGE FOR CONSUMER
Is this good news or bad news? For the consumer, this blurring has been a real advantage. It creates increased competition, which forces all marketers to continuously improve their pricing, merchandising, variety, customer service and marketing. That means lots more choices.
For marketers, there are loads of opportunities that were practically unavailable before. Now that the taboos that prevented "channel conflict" in the past are falling away, marketers can go where their imaginations take them.
But the challenges are growing at an equal pace. Marketers, once limited to growth from new brands, brand extensions or global expansion now can (must) weigh new channel options. Do we build our own retail location? Sell direct through mail order? Sell through the Internet? Build consumer databases to partner with retail? Which direction to take?
CHOICES CAN BE TREACHEROUS
The choices open options, but multiple choices can also be treacherous. Consider that more than 10,000 retail operations closed last year.
Less than 10 years ago, Sears, Roebuck & Co. got out of the catalog business after practically inventing it. Then, after a few years, it re-entered it. IBM was -- briefly -- in the retail business. The rewards may be great to try out a new role in the marketing mix, but without core competency the risks are equally great.
For all these reasons, I'm going to keep an eye on the new Apple Store to see how it manages the risk/reward challenge.
Mr. Collinger is associate professor of integrated marketing at Northwestern University's Medill School of Journalism, Evanston, Ill., and a former senior VP at Leo Burnett USA, Chicago.