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eRetail – Competing beyond the “e”

By Sudipta Sarkar the Bangalore city, India.

 

The world of shopping has suddenly gone virtual. Ecommerce sales which “grew at 21.1 percent topped $1 trillion + in 2012 and expected to grow at 18 percent in 2013” (source emarketer).

What is driving the growth? What competitive advantage does going online bring? Are the advantages going online lie only in being virtual?

The dynamics of retail:

Customer

  • Touch & feel in certain segments of retail products is high.
  • Customer demand forecasting is difficult, linking that to profitability is most of the time nearly impossible
  • Reaching to wider customer segment requires large geographic spread

Financial

  • Margins are thin
  • Requires investment in real estate and is capital intensive. High investment risk due to localized influence zones of retailers

Process

  • Requires strong resource consuming on-store customer service capabilities.
  • Product delivery expectation is instant. Very little time between purchase and delivery.
  • Heavy inventory requirement

Learning and Development

  • Trained Shop floor resources are increasingly rare and costly

Comparing advantages of “Ecommerce” and “Brick & Mortar” business models:

Ecommerce benefit

  • 24*7*365 customer reach
  • More customers becoming tech savvy
  • Better data points for forecasting
  • Little on-store operational resources and that significantly helps the margins
  • Trying out new fashion trends can be done at a real low inventory.
  • Lesser cost base and leaner asset structure

Brick & Mortar benefit

  • Better touch and feel for customers
  • Quality assuredness
  • Product delivery cost is less
  • Information driven selling (specially for new and branded products)

Omni-channel (e-com + Brick & Mortar) —-> Cumulating the advantages of physical and virtual retail

  • Better reach to all customer segment (choose your channel)
  • Try out new products online and support stock forecasting with data
  • Touch and feel (try offline and buy online)
  • Delivery facilitated by warehouses at the back of the stores
  • Lesser store numbers catering to a bigger catchment area (lean asset base)
  • Some products sell better online and some offline

 

Suggestions to manage the retail of tomorrow:

Reach the customer

  1. The customer might want to buy on the web and try on the physical world. Mix of ecommerce and brick-mortar business will be help. The shop might be mobile (e.g. vans complementing the web presence.) Reach the customer if he cannot reach you.
  2. Strong brands can create their own online presence while for smaller brands going the e-marketplace/ aggregator mode is preferred.
  3. Customer stickiness due to information asymmetry is gone. Use supply chain capability asymmetry to ensure customer stickiness. Strategic positioning and integration with warehouses, logistics will help customers get a seamless experience.

 

Service the customer

  1. Smarter forecasting and smaller turnaround times. Days of annual forecasting of demand trends are gone.
  2. New products can be tried out online first to understand demand trends. Inventory levels go down and margins go up.
  3. Data analytics to drive business positioning. Lot more data available.
  4. Better 3D technology can be used in ecommerce sites. Give as much virtual touch and feel as possible.
  5. Quality assurance to become a strong differentiator. I need good quality assurance if I need to repeat buy semi-blindfolded.

 

 

 

 

 

Profile of the Author:

Sudipta Sarkar has worked on, setup and managed practices involving Business and Information Consulting, Financial and Data Analytics in Telecom, Consumer Goods, Finance, Manufacturing, Media, ecommerce. He has also provided consulting in areas varying from supply chain process improvement, product strategy and venture funding and has spoken in industry forums. In his current role he has been assigned to conceptualize, set up and grow the business consulting and analytics practice for Bureau Veritas. In his earlier organizations he has played leadership roles in P&L management, consulting, delivery and client Engagement. Sudipta has worked and managed customer engagements in multiple countries across Europe, Asia Pacific and Americas. Sudipta has an MBA along with an engineering degree and is currently pursuing a senior leadership program from INSEAD business school.

 

 

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