It's a bird, it's a plane, no it's my Amazon delivery: Understanding E-tailing

Dr B K Mukhopadhyay

(The author is a Professor of Management and Economics, formerly at IIBM (RBI) Guwahati. He can be contacted at m.bibhas@gmail.com)

Dr. Boidurjo Rick Mukhopadhyay

(The author, international award-winning development and management economist, formerly a Gold Medalist in Economics at Gauhati University)

Electronic-retailing or simply 'E-tailing' uses web-space for creating virtual shops where intended products and services are displayed through images, listing adequate features, price, and above all the value that it creates for customers along with other businesses like suppliers and distributors to name a few. The general steps involved in e-tailing starts with a customer visiting the choice of an e-store, choosing products or services and putting them on a cart, completing a safe payment, and then the final leg is the product delivery ending with the customer providing feedback. The etails thrive on customer satisfaction and review ratings above all. The electronic word of mouth (E-WOM) marketing is therefore something constantly emphasised in these businesses.

Typical benefits for going the e-tail way, i.e., setting up virtual shops instead of the traditional stores includes A) Reducing the hassle of creating, renting, maintaining space occupied by physical retail outlets, B) Instant and easy access to a shopping space from anywhere and anytime, C) Saving transit and logistics for customers, D) If the e-tail is global with foreign distribution networks, the scale of the market is ever-growing every day.

So, the question for today's entrepreneurs who would like to set up something similar would be 'How do I become the Uber or Amazon in my given industry category using a smartphone to transform the customer experience today and tomorrow?'

When launching a new product on an e-commerce online space, target customer analytics and perception of the customers' product/ service engagement online is of paramount importance for e-tails. A huge amount of stress is given to ensure a rapid response rate from the customer on the 'ratings' and 'service experience'. Therefore, having artificial intelligence (AI) today to come up with newer push notifications, adverts, and alerts from these companies on our smart devices are a constant reality. As consumer needs change every now and then, the new analytics should be able to understand the origin and nature of new needs than simply reading the data looking at demand pattern and frequency of consumption. At the core of all this, however, visibility is the most important element for the e-tails to be able to make data-driven, fact-based decisions that can potentially enhance market scale, sales, and consequently profit.

Apart from customer analytics, identifying and acting on newer forms of demand and needs, the e-tails make the best use of available omni-channel (i.e. a multichannel approach whereby consistent information and experience is provided to customers at both physical stores and online platform of the company) and working with innovative partners with their demand forecasting and inventory optimisation strategies on an ongoing basis. Part of the planning involved in the strategy, however, is constantly in a state of flux.

Amazon, for example, by and large, has set the bar for customer expectations. There are local variations of it in many markets today. But also at the same time, e-tail capabilities of Flipkart or Myntra in India - and Alibaba, Taobao or Jingdong (JD) in China have skyrocketed their sales, performance and scale of activities within a very short period of time redefining the face and future of e-tails. Not to mention, the rising hope for new upcoming e-tails who would like to taste a slice of the ever-growing pie?

'Same-day delivery' gives an e-tail a greater competitive advantage over the rest, e.g., for a conventional physical store/ supermarket – 'location' is a critical factor, similarly for an e-tail, 'delivery time' and 'convenience' are factors that are of primary significance. Timing is critical. Therefore, maintaining a strong network and relationship with fulfilment centres in regional hubs would mean faster delivery while also having to pay minimal shipping costs. The other thing to factor in would be the facility location which should ideally be considering proximity to air and ground small-parcel shipping hubs for speedy delivery. These factors show how instant, reliable shipping with a cost advantage will bid farewell to full truckload shipping.

By going beyond the traditional, wholly-owned and operated model, distributors are attempting to create a more immediate customer and fulfilment experience relative to the competition. And outsourced distribution models like 'fulfilled by Amazon' and similar services are filling the void of traditional models. Reducing transaction costs due to the increased transparency and availability of information is also another huge plus. This adds to the overall 'value' created in the process. These e-tails operate in B2C, B2B, and C2C models.

In a recent US-based research conducted by the esteemed Boston Consulting Group (BCG), a survey of 63 retailers of various sizes and categories, shows that the most valued customer is the multi-channel customer. Both e-tailers and now retailers are utilizing cross-channel coordination whereby their website primarily focuses on promoting stores and catalogue offers. It is not unusual for customers to walk into stores with website printouts illustrating a particular product, service, or offers that they have found prior to visiting the physical store. It is also very common in the restaurant business also, let's assume a café specializing in desserts who unendingly post their new products and details on Instagram and Facebook. So, the customers who follow the social media platforms of this cafe can visit the store later and show one of the products that they liked online and have it either delivered or consume in person with good company.

'Returns management' or reverse logistics invites a big discussion for corporates who are engaged in e-tail. Research shows that around 25-30 per cent of all goods purchased online are returned, hence the ability to handle returns can improve customer retention. Customer satisfaction doesn't end when the product or service is returned, but also the following steps – i.e., returns management, returning payments, acknowledging the steps involved one at a time to ensure transparency and goodwill. For example, Taobao, a wing of Alibaba, sells in billions on the Chinese singles day (11th November, i.e., 11.11) and the number is skyrocketing every year. However, the product returns hit about 50% almost every year which goes unreported in media. Still, Taobao remains extremely popular for daily shopping in all customer demographic groups as the company manages the entire transaction process, starting from placing an order to returns management very well. The same goes for Amazon with their 30 days' returns policy and also handling the logistics of it.

Research also shows that despite lower incomes, consumers in small and midsized cities spend almost as much online as those in larger, more prosperous cities. Apparel, household products, and recreation and education are the categories where price discounts are greatest. They are also the three largest online retail segments.

The combined effect of the complexities of store expansion, managing, costing and low returns at shopping malls combined with a distinctive model of e-tailing could lead to a different retail dynamic. Projections show that the e-tail industry in India may leapfrog the second stage, passing directly from the regional to the multichannel one surfeiting newer target demographics and innovative product offerings and delivery model. What's more, e-tailing is not just replacing traditional retail transactions but also stimulating consumption that would not otherwise take place. Finally, e-tailing may catalyse a 'leapfrog' move by the broader retail sector, putting it on a fast track to a more digital future.

For these e-tails, however, the mad run for 'likes' and 'comments' continue at a faster pace. The future of the e-tails 'favours the fast', as has been commonly agreed. For the e-tails who are constantly advertising and pushing new products, introducing product lines, advertising offers and also informing customers and clients about any changes in their company policy and new value creation - the use of cross-platforms, multimedia, brand names, and hashtags likely will produce more electronic Word-of-Mouth (WOM), i.e., more likes and positive comments. The addiction with our smartphones today would help the cause to go further ahead and relentlessly so.