Electronic retailing and the e-tails

(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)

The sequence in e-tailing business starts with a customer visiting an e-store, choosing products or services, adding them to the cart, completing a secured payment, and then the final leg is the product delivery ending with the customer providing feedback. 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 e-tails thrive on customer satisfaction and review ratings above all.

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; and (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?'
e-tails & customer needs

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'. As consumer needs change 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 patterns and frequency of consumption. At the core of all this, however, visibility is the most important requirement 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 omnichannel (i.e., a multi-channel 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.

Examples & determinants of e-tails: 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.com) in China have skyrocketed their sales, performance and scale of activities within a very short period 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 the 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.

Recently, US-based research conducted by the Boston Consulting Group, 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 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 before visiting the physical store. For example, a café specialising in desserts that 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.

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 models. What's more, e-tailing is not simply 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 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.

e-tails and COVID-19

Since the pandemic started, the demand for products related to personal protection (e.g., disposable gloves), home activities, groceries or ICT equipment, had skyrocketed while demand dropped for items related to travel, sports or formal clothing. Generally, however, the e-tailing industry did particularly very well due to and during the pandemic. For example, in the USA the share of e-commerce in total retail had only slowly increased between the Q1 of 2018 and the Q1 of 2020 (from 9.6% to 11.8%), while it spiked to 16.1% between Q1 and Q1 of 2020. In the UK, the share of e-commerce in retail jumped from 17.3% to 20.3% between Q1 of 2018 and the Q1 of 2020, which spiked to 31.3% between Q1 and Q2 of 2020.

The pandemic infused several new industries to pop up within the e-tailing industry, not only that it identified new consumer segments (e.g., elderly) but also a new range of products made available that was not typically meant for e-mailing (e.g., groceries). At the same time, data shows that the focus of e-commerce particularly during the pandemic shifted from luxury goods to delivering essentials. And some markets responded to these changes, really well and quick – e.g., Latin America's online marketplace Mercado Libre sold twice as many items per day in Q2 of 2020 compared with Q2 of 2019.

And African e-commerce platform Jumia reported a 50% jump in transactions during the first six months of 2020. China's e-tail sales (largely via Taobao, Jindong) rose from 19.4% to 24.6% between August 2019 and August 2020. In Kazakhstan, the online share of retail sales increased from 5% in 2019 to 9.4% in 2020. Thailand saw downloads of shopping apps jump 60% in one week during March 2020. The numbers maintain in 2021.

However, there remains a lot of developing markets where barriers such as costly internet services, overreliance on cash, lack of consumers' trust, poor digital skills among the population and governments' limited attention to e-commerce. In particular, regulations that are not adapted to e-commerce create significant barriers to firms, such as in the case of emerging omnichannel sales models or new modes of delivery. These challenges are nothing new for some markets but the current crisis and the new role of e-commerce for individuals and firms calls for progressive policy action. Governments need to identify the many benefits of supporting SMEs going into the e-tailing business, and the consequent effects on the supply chain and regional job creation. Therefore, creating an enabling environment for e-commerce, including enhanced communication services, convenient logistics and procurement channels could be a 'win-win' situation.