Channels vs. Merchants

New era, new language

At Violet, we work with two main groups within e-commerce that we call <a href="#link1">channels</a> and <a href="#link2">merchants</a>. In this article, we’ll go over how these groups have interacted in the past, how they’re changing, and the opportunity we see to connect and empower them like never before.

Back to basics

In their simplest form, channels and merchants are a way to talk about how people find what they want to buy: merchants create and provide goods and services, and channels are the ways merchants bring those goods to market. Merchants provide supply, channels provide demand.

Under this definition, a ceramicist who makes clay bowls is a merchant, and the farmer’s market where they sell their goods is a channel. British Airways is a merchant that sells airplane tickets, and travel agents were once a very popular channel until sites like Travelocity, Kayak, and others offered a more direct way to search and make travel arrangements.

In the ever-evolving e-commerce landscape, the relationships between channels and merchants are more varied and complex, making it worthwhile to revamp our definitions for the future of online commerce, not its past.

<a id="link1"></a>Channels

At Violet, we define a channel as any online experience with an audience. That audience part may seem redundant, but it’s critical. A channel without an audience is useless to merchants and customers alike. At the same time, the quality of that audience is just as, if not more, important than its size. And while this definition may seem broad, we believe channels are evolving so rapidly this breadth will actually be useful as new technologies and experiences emerge.

That said, generally, we find channels fall into one of three buckets that we define based on what the online experience offers and how they engage their audience:


Platforms

A platform is a channel that hosts user-generated content, and offers its audiences authentic interactions between its users. In everyday parlance today, we call a lot of these social media channels.

-  Value / experience: Social interaction through text and multimedia

-  Audience engagement: Users generate content and monetize that content. Importantly, most platforms don’t currently offer their users the ability to do true e-commerce directly inside the platform.

-  Examples: Instagram, Pinterest, Twitter

Publishers

A publisher is any online experience that owns the content they produce, and usually have an area of focus and/or expertise.

-  Value / experience: Information, entertainment, or a combination of the two

-  Audience engagement: While there’s some limited interactivity, generally audiences go to these channels to consume content created by the publisher. That publisher usually has some authority or authenticity in a given domain.

-  Examples: Condé Nast, Vox, Traveler, Buzzfeed, Vogue, PCMag

EDE, or emerging digital experiences

Admittedly a more amorphous category than our first two, we at Violet use emerging digital experiences to refer to any online channels where users can discover content and products outside of the first two types of channels. We’ve left this category intentionally open, as we anticipate new kinds of digital experiences will only continue to develop in the next ten to fifteen years.

-  Value / experience: Ranges widely, from a tool like a wealth management app to a VR gaming experience, which is more for entertainment

-  Audience engagement: This can include users creating and monetizing their own content (World of Warcraft, Roblox), but can also include users consuming content or social interactions (CoStar)

-  Examples: Live streaming apps, Pop Shop Live

Array of different emerging digital experiences: social commerce, livestreaming, brick & mortar, messaging, VR / AR, stoppable TV, gifting, and curation

Channels today have a captive audience–60% of the global population to be precise. But they don’t have the products people want to buy, or the ability to give their audience that shopping experience directly. While most of us have likely seen or clicked on affiliate links or ads online, we’re not able to complete that process within a given channel–we have to click out. Without significant technological investment, channels can’t possibly integrate with every single e-commerce platform or merchant, and so lose eyeballs and money when their audience leaves to purchase.  


<a id="link2"></a>Merchants

While channels comprise any experience you can find online, we define merchants as any company or party who holds product and completes order fulfillment. Merchants typically are also marketing products to customers, selling to customers, not 3PL companies just offering order fulfillment logistics. It’s important to note that these “products” do not have to be an object: they can be concert tickets, streaming services, bookkeeping, an NFT, or even donations for a nonprofit can be a product that is trying to reach its target customer, i.e. the donor. And unlike in historic channel/merchant dichotomies, online merchants today can be both a brand that sells direct-to-consumer, and a more traditional retailer like Walmart or Sephora.

With the slate of new tools like Fabric, Shopify, or Stripe, it’s now incredibly easy for merchants to establish an online presence without a very big expenditure. But because of the exorbitant cost of user’s attention, they struggle to reach potential customers. It’s almost like we’re back to an open-air market, but instead of stalls merchants have websites, and instead of 20 stalls there are millions. In this gargantuan bazaar, customers get a near limitless array of options, but merchants are still left with a big challenge: how to reach customers.


The missing link

In recent years, companies attempted to solve the needle-in-a-haystack problem in two ways: centralized marketplaces (a la Amazon) and direct-to-consumer business models that relied heavily on targeted, direct response advertising. Both have lingering limitations: centralized marketplaces consolidate control over who can find which products, and targeted, digital advertising online grows more challenging and expensive every day.

A diagram of Violet connects any online channel (social commerce, VR / AR, stoppable TV, messaging, curation, gifting, back & mortar, and live streaming) with any e-commerce platform with our unified API

Violet came into existence to create a third option, one in which channels and merchants could find each other online without exorbitant ad spend or a megalithic intermediary. With our unified API, merchants and channels can connect without any centralizing marketplace.

In this new model, merchants expand their reach, and channels expand their value as an experience. In other words, merchants do what they do best: make great products/experiences that consumers want. And channels make it possible for people with all kinds of interests to find products directly relevant to them. In fact, we believe that as channels grow increasingly abundant and specialized, merchants will get even more value from connecting with the right channels, rather than trying to compete in all of them.

This is the true potential of what Violet is calling distributed commerce: commerce that is distributed anywhere the customer is. Our API is all about driving artistry & innovation on all sides of the marketplace: for those who create products/services, they can reach their audience more easily for less spend. And for those creating online experiences, through apps, publishing, live streaming, VR, you can enhance that experience by becoming a conduit for your audience’s shopping experience, enhancing your value. Violet is just the unifying conduit, the piping that makes this new relationship between merchants and channels possible, while maximizing agency, reach, and targeted audience on both sides.