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Diversify to Thrive: Why Channel Diversification is Key to Growing Your eCommerce Business in 2023

As eCommerce continues to grow and evolve, it's more important than ever for businesses to diversify their sales channels.


Channel diversification means selling your products or services through multiple channels, such as your own website, marketplaces like Amazon and eBay, and social media platforms like Instagram and Facebook. In this blog post, we'll explain why channel diversification is important in 2023, and explore the benefits, drawbacks, and strategies for implementing it in your own eCommerce business.


One of the primary benefits of channel diversification is that it can help your business grow by expanding the number of channels through which you sell your products or services, you'll be able to reach a wider audience and generate more sales. When you sell on your own website, you'll be reaching customers who are actively looking for your products or services, but by also selling on marketplaces and social media platforms, you'll be able to reach customers who might not have otherwise found your business. The increased reach also allows you to test new channels and markets that you might not have had access to before, providing you with an opportunity to find new customer segments and grow your revenue.


Another benefit of channel diversification is that it can help you to increase your average order value and revenue per customer. By having multiple sales channels, you will be able to reach different types of customers and therefore increase the chances of upselling or cross-selling products. For example, a customer might find your product on a marketplace but decide to buy it from your website to take advantage of free shipping or special promotion. By having both channels available to customers, you'll increase the chances of making sales at different price points.


By diversifying your channels, you can increase your brand visibility and build trust and loyalty with your customers by reaching different audiences, establishing a professional image, and creating a consistent brand experience. Diversifying channels also allows you to take advantage of different sales promotions and campaigns; for example, social media platforms are great for visual marketing and can increase sales of visually appealing products like clothing or home decor, while marketplaces like Amazon and Walmart have their own unique promotions that can drive sales, such as lightning deals and prime days.



Channel diversification can also help protect your business from risks. Here's how:


1. Mitigating risks from changes in a single channel's policies or fees: Diversifying your channels can help you mitigate the risks of changes in a single channel's policies or fees, by spreading out these risks across multiple channels. For example, if you only sell on a single marketplace, you may be at risk of losing all of your sales if that marketplace suddenly increases its fees or changes its policies in a way that harms your business. But by also selling on other channels, you'll be able to maintain a steady flow of sales even if one channel is affected by these changes.


2. Reducing the impact of fraud: By diversifying your channels, you'll be able to spread out the risk of fraud and reduce its impact on your business. If you only sell through one marketplace, you may be at risk of losing all of your sales if that marketplace's fraud detection system flags your account. But by also selling on other channels, you'll be able to maintain a steady flow of sales even if one channel is affected by fraud.


3. Reducing the risk of competition: By diversifying your channels, you'll be able to tap into different markets and avoid direct competition with other businesses. If you only sell on a single marketplace, you'll be competing with every other business that sells on that marketplace. By also selling on your own website, you'll be able to reach customers who are specifically looking for your products or services, thus reducing the competition.


4. Reducing channel dependency: Diversifying your channels can help you reduce your dependence on a single channel for driving traffic and sales to your business. For example, if you are heavily dependent on Google ads to drive traffic to your website, a sudden change in Google's policy could greatly harm your business. But by also having an active social media presence or a marketplace store, you'll have different sources of traffic, which can help you maintain steady sales.


5. Insulating against channel fluctuations: By having diversified sales channels, your business will be less vulnerable to fluctuations in any single channel and can maintain a steady flow of sales. It's not uncommon for businesses to see a decline in sales on a channel that once performed well, but by diversifying channels, you're insulating yourself from such fluctuations and will have a better chance at maintaining stable sales over time.



However, it's important to note that there are drawbacks to implementing channel diversification. Some drawbacks include:


1. Difficulty and time-consuming to set up and manage multiple channels: Each channel will have its own set of rules, policies, and processes that you'll need to learn and follow. This can be a lot to keep track of and can take up a lot of time and resources to manage effectively. Additionally, Keeping track of sales and inventory across multiple channels can be a complex task, requiring specialised software and tools to help manage your sales and inventory effectively.


2. Difficulty in creating a cohesive brand image: It can be challenging to create a cohesive brand image across multiple channels. For example, different channels have different layouts, and design guidelines that need to be followed to ensure a consistent look and feel of your brand. This can be difficult to achieve, especially if you're not familiar with each channel's design guidelines.


3. Additional Costs: Selling on different channels can require additional costs such as fees, commissions, ad spend, and other expenses. Some channels such as marketplaces may require you to pay a commission on each sale and use certain shipping or return policies. These additional costs can eat into your profits if not managed carefully.


4. Difficulty in measuring the ROI: It can be challenging to measure the return on investment (ROI) for each channel. Each channel will have different metrics for measuring success, such as website traffic, conversion rates, or customer reviews. This can make it difficult to compare the performance of different channels and make informed decisions about which channels to focus on.


5. Risk of oversaturation: Diversifying channels can also lead to oversaturation if it's not done strategically. For example, if you sell a product on too many channels, the market can get saturated, and you'll end up competing with yourself.


To implement channel diversification in your eCommerce business, it's important to start small and focus on the channels that make the most sense for your products or services. For example, if you sell clothing, it might make sense to start selling on Instagram and Facebook, as these platforms are popular for fashion businesses. Once you've mastered these channels, you can expand to other channels like marketplaces. It’s also important to ensure that you have the right tools and technology in place to manage and track your sales across all channels.


Channel diversification is an essential strategy for eCommerce businesses looking to grow and protect their business in 2023. By diversifying the channels through which you sell your products or services, you'll be able to reach a wider audience and generate more sales, while also mitigating risks. However, it's important to be aware of the drawbacks and to implement it in a strategic and manageable way.


Need help with your MultiChannel strategy? Get in touch today!





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