PAST & PRESENT-DAY E-COMMERCE
Over the past decade, the evolution of customer purchasing behavior has significantly led to a growing preference for online shopping. Yet, most organizations could not complement their offline sales channels with the digital ones up until the pandemic hit in 2020, and organizations were left with no choice.
The strategic impact of COVID towards eCommerce and organizations is likely to be long-lasting – let’s take the GCC for instance – the Gulf was never deemed as a desirable market for eCommerce by the majority of firms; yet due to the above factors, the eCommerce market has undergone a massive boom with a size of $5.3 Billion in 2015 rising to $24 Billion in 2020 with an annual growth of 20% expected to continue for the next five years.
Remarkably, within five years, GCC countries – notably – KSA & UAE are now benchmarked against matured eCommerce countries such as China, the US & UK; yet, the eCommerce growth in the GCC still possesses incredible potential which is still to be materialized. Furthermore, organizations have shaped the eCommerce dynamics to include industries that were considered non-eCommerce viable; for instance, the SMCG industry is now a significant growth attributor towards the overall market, hence, the evolving purchasing habits are now applicable in different industries.
During the commencement of the pandemic, the majority of firms were left with no alternative but to rely on eCommerce. Back then, it was the perfect choice to bring eCommerce to life as soon as possible. Today, it is very important to step back and rethink our strategies.
- We were successful during the complete lockdowns; but are we still seeing growth in the eCommerce channel?
- We believe that we are doing well, but the potential is much more. What can we do to leverage the full potential of eCommerce?
Many strongly believed the solution to addressing the discussed challenges lies in the development of an eCommerce platform. Many times, having your own eCommerce platform is not the right thing to do but rather benefit from the existing Online Marketplaces such as Amazon, Namshi, and Noon.
FACTORS INFLUENCING THE SELECTION BETWEEN E-COMMERCE AND
In the midst of eCommerce ventures, firms do not extensively assess the various launching options – in-house eCommerce versus Online Marketplace – and instead, opt for either of them or both without further study.
The selection criteria should be evaluated subject to the following 3 step approach:
Where does your company stand within the supply chain?
A firm’s relative positioning within the supply chain can be classified as either a manufacturer, distributor, wholesaler, or retailer. Typically, all consumers possess a similar customer purchasing behavior mindset in the retail world – they might be interested in a particular branded item and can resort all the way to acquire it; however, during repetitive purchases, the primary thought appearing on their mind is the outlet from which they obtained this item from with less emphasis on the item’s brand. This thought procedure provides an upper hand to retailers as it favors them in adopting an in-house eCommerce platform given the strong affinity consumers display towards the retailer while the opposite can be inferred for manufacturers. In conclusion, as an organization becomes closer to the consumer – going for an eCommerce platform should be strongly considered while it becomes more difficult for companies located further away from the consumer.
Does your product offering match with what consumers are ready to buy online?
An organization’s focus industry and its respective product offerings can influence its eCommerce platform proposition. Purchasing behavior strongly varies per industry type; for instance, in the FMCG, consumers frequently acquire most of their desired FMCG products all together under one basket mix from a single source. Hence, the said customer will prefer purchasing from a single source sales channel as opposed to multiple sources with each one providing a portion of the desired quantity even though the second alternative fulfills consumer needs. The latter is exactly where stakeholders of the FMCG supply chain excluding retailers stand; their product offerings are limited so they rely on offering their products via an online marketplace to complement their limited array of products with a full range of other FMCG products thus fulfilling the desired customer behavior.
The above interpretation is subject to industry types; let’s take the SMCG, typically, consumers acquire products such as furniture, household appliances, or smartphones from multiple purchase sources. Thus, most firms within this supply chain can sell their products through their platforms.
What are your company priorities from the eCommerce strategy?
Company-specific priorities also play a key role in the selection criteria. The priorities are subject to the type of enterprise – large or small-to-medium (SME) – and as showcased in the above figure, large enterprises usually prefer having full ownership over their eCommerce operations, leveraging their customer data to extract insights with less focus attributed to capital expenditure or a fast customer reach. The opposite of these priorities are usually associated with SMEs, thus, it can be summarized that large enterprises have a stronger tendency towards developing their platform while SMEs prefer launching their online presence through a marketplace.
Some well-established manufacturers/brands such as the likes of Nike, L’Oréal, and PepsiCo have all developed their own eCommerce platform with the rewards being substantial. Nike has seen 84% growth in digital sales with record sales during Black Friday while L’Oréal has witnessed a 750% online sales growth just in the Middle East.
What they have done is much more than building their eCommerce platform; they transformed into the D2C model.
THE D2C MODEL
Direct-to-Consumer – D2C is an eCommerce strategy that enables manufacturers with the right product offering to sell directly to the consumer thus eliminating traditional supply chain intermediaries such as the distributor, wholesaler & retailer. This model isn’t solely dependent on developing an eCommerce medium to offer your products online but also to blend in a seamless client-centric process – that is – fostering a positive experience across each stage of the customer journey.
Statistics show that 55% of shoppers prefer to buy directly from the manufacturer rather than a retailer. This makes it a win-win strategy for both consumers and the brand, making it the popular way of shopping. The ideal embracement of a D2C strategy can result in worthy benefits for an organization; the below exhibit provides a clear outline.
The gains attributed to a D2C model might be enough for you to follow such a pathway; however, this decision is also subject to the evaluation of other key factors. Such considerations can include your organization capability to implement a hybrid business model (D2C & Traditional Retail) that can be operated efficiently and successfully, the ability to run a D2C model without compromising your relationship with retail partners, your stakeholder’s joint approval, and last but not least, your organization’s competencies in elements such as speedy order fulfillment & shipping, customer data management, and customer experience.
ENABLING A SEAMLESS D2C EXPERIENCE
A seamless D2C experience can be facilitated through a four-way approach as displayed in the below process.
D2C eCommerce Strategy is rapidly becoming a norm in our era and the integration of digital technology to an organization can significantly facilitate the collection of big data, achieve proper data governance and result in a seamless client-centric process. Digital-enabled initiatives such as personalized marketing content, Artificial Intelligence based pricing models, and customized predictive offering can ensure your D2C strategy is on par with customer expectations.