Why has todays’ reality changed the role of e-commerce in your business?
Increasing amounts of organizations are being created leaning on innovative e-commerce-based business models and it is said that traditional retail stores will disappear someday (Jimenez, Valdes and Salinas, 2019). Fortunes are being made and some of the most powerful companies in the world have embraced e-commerce as their main channel to reach their customers. There are three crucial aspects that are revolutionizing the way people shop. Firstly, internet connection is becoming accessible for more people worldwide. Secondly, mobile devices are making their technology user friendly so that anyone, regardless of their age, can be able to use it. Thirdly, it can be seen that for new generations, technology is part of their daily lives, they are digitally native: they can see, understand and use the internet inherently. As a consequence of advancements in technology, the transactions through any digital media are becoming a must for almost any company that provides a product or a service (Sun and Finnie, 2004 in Jimenez, Valdes and Salinas, 2019). According to available data, online purchases have been steadily growing from 2014 to 2019 and e-retail revenues are projected to grow to 3.4 trillion US dollars in the latter year (Statista, 2019 in Jimenez, Valdes and Salinas, 2019). And yet, so many questions remain regarding the importance of implementing e-commerce into multiple B2C businesses.
It is clear that many companies are surviving — and various even thriving — without the presence of an online sales channel. Maybe it is the result of a solid business model or a customer value proposition designed to work with other sales channels. Maybe it is purely circumstantial due to market conditions that benefit a particular business. There is room for a lot of speculation regarding this. However, in our experience, understanding how e-commerce will impact your business is not a choice. Regardless of selling fashion products, groceries, services or travel vouchers, among others, e-commerce is shifting the world you do business in and it is wise to keep an eye on that.
Social media influences the customer’s purchase decision and how it is related with the increasing popularity and preference of e-commerce against the traditional business (Jimenez, Valdes and Salinas, 2019). In e-commerce, products are sent to the customer’s address. This leads to one of the most important benefits of e-commerce for companies, since there is no need for retail employees, generally resulting in cost saving. E-commerce through online services has eliminated some barriers between time and space that has lowered costs in the production process thus becoming a factor in the new economy (Savrula & Kılıç, 2011 in Kamberaj, 2019). However, nowadays, e-business needs to make the most out of social media platforms because it has been found that once online, 76% of internet users use social networks. Rising popularity of mobile devices also has to be discussed. It has been found that 2.1 billion people around the world has access to a mobile device. In a research made by Gartner Group, it was found that e-shops ought to adapt to technology innovation and support interaction with consumers more inclined to using mobile devices (Gartner, 2015 in Jimenez, Valdes and Salinas, 2019).
Within our experience we have worked with companies with plenty of business models. On the one hand, there are those that have an e-commerce site. Some are more modern and technology oriented, selling exclusively through e-commerce. Others come from the world of retail and have adapted into putting an e-commerce process to work side by side with their standard channels. On the other hand, there are more traditional organizations that have put e-commerce on hold for far too long.
The point is not that e-commerce is a silver bullet for all commerce, but rather that it is becoming a piece that businesses cannot do without for too long. This is especially true for companies that have dominated traditional commerce for many years and feel they have a good grasp on the market. As an example, during a prospecting trip a few years back, we came across a company that sold tires since 1949. The company had many stores across the country and was the dominant name when it came to everything related to tires in the country. Approximately a year before that meeting, they had launched a new e-commerce site as a response to a slowing increase in sales. The site was not great since it was a first test, an experiment to see how their business would work in the digital space. During their first year, despite having a solid name in their industry, online sales were low and the situation was not improving. Sales in the traditional space were not growing as expected and the first attempt towards modernization was not prospering. We were brought in to try and find what they were doing wrong. It did not take a lot of research to find out that the tire industry was being dominated by a new competitor that was working exclusively online and had captured a significant market share that would have come to them under the previous circumstances. Being only online, their competitor had a site built to solve all of the nuances of tire buying and installing with the least hassle possible. Browsing and buying online was a breeze.
The difficulty about being in that position is that the effort required to adjust becomes significantly more than if you are taking action early and portraying your dominant position in traditional channels to the online one. In the book Positioning, Al Ries and Jack Trout (1980) explain the importance of being the first rather than the best: “Marriage, as a human institution, is subordinated to the concept that it is better to be the first than the best; the same thing happens in businesses” (Ries and Trout, 1980, p. 23). “The first person, the higher mountain or the first company that occupies that position in the mind will be very difficult to displace… The first thing that the reader needs to “fix their message indelibly in the mind” is not a message at all, but a blank mind in which someone else has already left their mark” (Ries and Trout, 1980, p. 22). When a competitor has already captured that dominance consumers tend to relate the new company with a more modern one, and the traditional one with a laggard, old-school one. If you reach this point, it could also mean that you need to reposition yourself in your customers’ minds. The message is not that experimenting with a site is negative for your business. On the contrary, we recommend many of our clients to start slow and grow based on their customers’ demands. What is important is that businesses know their competitive landscape and make informed decisions. If your industry is being targeted by new players who have an e-commerce site and can offer a modern alternative for your audience, make sure your counter attack is carefully planned to offer a superior customer experience. What if your strengths lie in your brick and mortar stores, and an omnichannel experience can be your superior competitive advantage?
One of our clients in Uruguay, a really traditional office supply company that exists since 1888 named Mosca, had a different approach. Several years ago, they made their attempt to go digital. Although there were other competitors making the same move, there was no clear dominance by anyone. They also made an incremental approach by starting with a SaaS platform and making their latest big push two years ago, in 2019, when implementing Magento. This last push has had a fantastic impact in the company’s strategy. The plan was that the e-commerce site would become the store with the highest revenue from all their sales channels. We implemented an MVP and have been growing their site gradually for the last couple of years. Last year, when the pandemic hit worldwide, the company seized the opportunity by prepping the store for what seemed as great months to come for e-commerce and it paid off. Last year the e-commerce store was ranked as store number three in the overall company revenue. Thanks to being ready, they were able to make the most out of a worldwide situation that has devastated thousands of physical retailers around the world.
Our last example is LentesPlus.com, a rather new business that sells contact lenses online-only in countries in Latin America. LentesPlus.com established its position as a virtual only store with the aim of removing the hassle of buying contacts. After studying the contacts industry, the founders identified many issues in the simple process of buying contacts in a traditional store. Either for availability, prices, deliveries or bureaucratic problems with prescriptions that stalled the process, among others, there was a clear opportunity to disrupt the market by improving the customer’s experience drastically. To do so, LentesPlus.com realized that there was no better way to achieve its goals than offering its service through an e-commerce platform. Its purpose was to simplify the process in a way that it could scale while efficiently solving traditional e-commerce requirements such as payments, quick deliveries and customer support. After their website’s success for a few years, LentesPlus.com hired us to develop their second website, this time pushing their operations to a new level by automating inner processes to continue their growth.
For us, the case of LentesPlus.com shows the hidden opportunity in traditional retail to improve customers’ experience through e-commerce. Even if you are dominating your industry through brick and mortar, consider the risk of having a competitor coming in to disrupt and what you could do about it. Or even better, maybe it is time to consider if you could improve your position in the market by ameliorating your customers’ experience through e-commerce and achieve a bigger competitive advantage.
People are dynamic; which means the world –and more specifically what they do in it — technology, the market, and the way individuals consume is constantly and rapidly evolving. As Darwin taught us, evolution demands adapting. Therefore, if your client has changed and is changing when using electronic devices to interact with the world, adapting to this reality in the best possible way rests with you. Even if your physical store is outstanding, your prices are competitive, and the service does their best, if your target audience is online, there will be no way for you to reach them. You need to talk and sell to them in their language, through social networks, emails, and e-commerce. Observing and adapting to the world and its dynamic around you is key for your business to, not only survive, but succeed with flying colours.
References
Jimenez, D., Valdes, S., & Salinas, M. (2019, 11 march). Popularity Comparison between E-Commerce and Traditional Retail Business. International Journal of Technology for Business
Kamberaj, B. (2019, 20 august). The Importance of E-Commerce. SSRN. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3434315
Ries, A., & Trout, J. (1980). Posicionamiento (1.a ed., Vol. 1). McGraw-Hill Education.
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