I admit it. I'm an on-line shopper. That's right, I'm the 2% of the population that the research companies claim buy items through the Internet regularly. In fact, in the name of research I've bought an awful lot of things through the 'net: Cameras, PC's, groceries, software, airline tickets, books and yes, I even sold my last car on the web. With my own little focus-group-of-one I noticed a trend developing that differed from my off-line shopping habits. This led to this month's hypothesis which we will discuss here: In the future, the success or failure of a company's branding efforts will become their single most important differentiating competitive advantage.

That sounds like a pretty strong statement, but after working through the arguments I think you will agree that the hi-end and established retail brands in the market are bound to come out ahead.

The argument starts with not with the Internet but with a bit of history of the competitive landscape in selling consumer goods. Of course we all know that branding, as we now call it, is an important competitive factor, but in the past it has taken a back seat to the factors of price, distribution networks, and the product itself.

On the Internet we see these traditional advantages disintegrated until all that remains is the respect for the product/retailer's brand.

Let be clear, price will always be an important factor in the purchase decision. However, the Internet and the impact it is having on markets is dramatically changing how pricing can be used as an advantage. The first impact is complete transparency. In the past it was possible to lower your prices and for a period of time enjoy a competitive advantage. Or, conversely offer a higher price and hope that your customers' don't know they can buy cheaper elsewhere. On the web though, there are services like MySimon.com which, with a single click compare the prices on hundreds of sites for a given product. There is even a wireless version that you can carry with you on your Palm into stores. If Amazon.com has a book cheaper than your local bookseller you can find out and order it right there, while standing in the competitors store.

New on-line market tools such as Dutch Auctions and buyer's circles are putting the pricing power into the customers' hands where they now determine your prices. If you don't like that, so be it, they'll just buy your products from someone who does.

Therefore, price is no longer a major competitive advantage.

Next is the distribution channel. The power and effectiveness of a company's channel affects every part of the sales & marketing process. To the retailer, location can mean everything. The best store front, in the best spot of the best mall assured an easier time than the competitor on the far side of town. On the Internet though, all retailers are equally accessible. The standard UPS-style home delivery service, means all are also equally convenient.

Distributors often hid their inefficiencies or price gauging behind exclusive representation contracts. Parallel importing has always been a problem, but it could often be kept to a certain level with manufacturer's muscle and import tariffs. On the net though a foreign dot-com is as easy to buy from as a local company. I recently saw a Singapore manufactured Palm sized PC on the web for $250 less (with shipping) than you can buy it from a local reseller. This is a beautiful demonstration of the power of a larger market, and the present collapse of borders between markets.

This last point will have a major impact on product managers as well, who for years have relied on artificial (or actual) borders between markets to protect their pricing strategies. Today, an Indonesian woman can by an Italian handbag from a Japanese dot-com and bypass all of the barriers that we have been put in place to protect the local markets.

Assuming that we are looking at the same product across multiple suppliers, this leaves only the power of the brand. Branding will help a customer determine who can be trusted, which repeatedly lands in the top spot on surveys of why people don't buy on-line.

Strong corporate branding and awareness building campaigns will drive the traffic numbers up to the necessary critical mass points that eTailers need to be profitable. So, if you are trying to determine how successful your company may be on-line don't forget about creating solid strategy for your branding efforts. In the end, it may be what matters most.