eCommerce is Not an Online Shop

 

04
Dezember
2019

eCommerce is Not an Online Shop

Changing Expectations, Changing Behaviours

This post contains parts of my recent talks on „eCommerce and the Digitalisation of Retail“ held at Jacobs University in Bremen as part of an executive education program for visiting faculty from China. Image designed by senivpetro / Freepik

We are Here

We are living in an age of unprecedented technological change.

The Internet and the devices which connect us to it, have profoundly changed our lives.

No other technological advance has had such a mass transformational effect on the world, the economy, our political systems, education, or how we interact with another.

Look at our lives today compared with say, 2007 – when the iPhone was introduced.  That was only 12 years. Today there is no aspect of our life that is not connected with the internet in one way or the other.

Every minute hundreds of millions of people from all over the world are logging into the Internet or connecting through a smart device. 

They are looking for information, products, services, entertainment, friendship – the connected web is now the main facilitator for all our needs.

Every individual is looking online for something that they would like to do, or obtain, or buy and most of the time this is instead of having to go through a physical transaction.

If businesses and organisations can identify and access those individuals, and steer the trends that are being set in motion, they have a ready customer in waiting.

Our intent (internet search), and our attention (social media), together with the ambient world of data collection in our phones and other smart devices are paving and connecting the many smaller roads which make up the eCommerce superhighway.

Technological developments provide the backbone for business to take place online, but it is the vast numbers of individuals buying, searching, collecting, transacting, and communicating online who are providing the untold amounts of quantifiable data which will take eCommerce into the future.

What is eCommerce?

So, what exactly do we mean by eCommerce? What service, product, technology, or skill do we mean when we talk about eCommerce in our vocational training or our business planning?

eCommerce is usually defined as the sale or purchase of goods or services, through electronic transactions conducted via the internet or other computer-mediated (online communication) networks.

However, an important characteristic of eCommerce is that it is not really a distinct sector.

Rather it is a diversification of the supply of traditional so-called ‘brick and mortar’-shops.

I think we are very familiar with the B2C model for banking, online shopping, online bookings, that have become accepted modes of interaction in our daily lives.

Obviously a very inspiring example is Alibaba’s “New Retail” concept Hema stores, that combine digital shopping with brick and mortar stores to achieve a very successful and exciting customer experience.

eCommerce draws on technologies such as mobile commerce, electronic funds transfer, supply chain management, Internet marketing, online transaction processing, electronic data interchange (EDI), inventory management systems, and automated data collection systems.

eCommerce typically uses the World Wide Web at least at one point in a transaction’s lifecycle, although it may encompass a wider range of technologies such as e-mail, mobile devices, social media, and telephones as well.

eCommerce also consists of the exchange of data to facilitate and control the many aspects of business transactions.

So, when we talk about eCommerce, I think most people think we are talking about an online shop. When someone enters the vocational education system, their focus is probably quite narrow, but I would suggest that it should probably be quite wide.

We know that the future of successful eCommerce will be much more than just an online business, it will be a hybrid, blurred version of what we currently understand.

And, it will be necessary for organisations, businesses, schools, to change their business models and strategies as well as how they integrate with technology.

Businesses that have adapted to and embraced eBusiness and eCommerce practices and strategies have managed to stay ahead in their industries.

They have also been able to leverage their success and in some cases move across the value chain to penetrate sectors traditionally not connected to their own.

An example of this disruption would be in the Telecommunication industry.  Normally Telco battle Telco for market share. 

Today, companies like skype and WhatsApp can challenge tradition Telco companies for market share. 

Another example would be amazon and Netflix taking on the traditional movie making and distribution activities.

Businesses were traditionally product oriented, but eCommerce and our digitally connected world have changed dramatically this.  

Technology has changed the power equation from traditional products and services to focus on information and experience – and here speed and transaction costs are the real metrics with which we can measure success.

Speed of Technological Change

Moore’s law is the observation that the number of transistors on integrated circuits double approximately every two years.  This law was described back in 1965 by Intel co-founder Gordon E. Moore.

Moore had seven observations between 1959 and 1965 – and he noted “I have no reason to believe it will not remain nearly consistent for at least ten years”.

He was not only right about the next ten years, but what he found has held true for more than half a century.

The biggest change in technology for us would arguably be our smartphones. There are more phones sold in the world each day than there are babies born. 

50% of the time we spend online is via our phones, and 40% of our online purchases are made using this little device.

Our phones provide us with information, entertainment, social connections, navigational resources – they combine TV, radio, movie theater, encyclopedia, storefront … and let us via apps, connect with our other devices at home such as our refrigerator, or our car – or even around the globe.

The incredible technological advances that we have seen since the 1960s, which have gone into this device, have reduced the price of a gigaflop of processing power from billions of euros to a fraction of a cent.

Well, If we were to turn this example let us say to cars, we would today have a car that cost us 4 cents, require gasoline only once in its lifetime, and have a top speed of 430 000 kilometers per hour.

It is the exponential speed and flexibility of technological change that is most interesting, and challenging consideration, when we think of the demands we face in our digital world.

Digital Transformation

We have seen the exponential rate of change in technology, and how that speed and flexibility is in many cases lowering costs. But, how is it doing that?

The most fundamental impact information technology has is to radically transform our ability to transact. Specifically – technology massively lowers transaction costs. 

It is transaction costs however that are the basis for our business strategy. Knowing how much we will or will not earn on a given transaction. As technology lowers these costs, our plans are put into question.

I think for most of us, the speed and cost in which technological change is happening can be a bit daunting. 

That is coupled with the fact that most of us are using devices and relying on technology – or perhaps being asked to work with technology – about which we have less understanding, or training, than perhaps we would like. 

The current transformation will give us the opportunity to tackle some of our biggest problems – food production and distribution, disease, pollution, sourcing of required resources.

At the same time, it can and probably is creating a digital divide in our schools, businesses, and in society in general. Who can or cannot make transactions online? Who can or cannot facilitate them? Who has the skills to use a certain device or framework?

When it comes to vocational education and training, it becomes more difficult to know how we should plan for tomorrow – in which skills should we invest?

Which skills will be required tomorrow? Which will be carried out by A.I. in five years at a fraction of the cost of an employee?

By 2030 it is expected that we will have half a trillion devices around the world connected online.  The urgency and immediacy of digital change is all around us.

Digital transformation is much more than a paperless office, or an online shop.

What do you think digital transformation is really all about? Specifically when we think of training future workers?

We know that digital transformation is about software. 

But what we overlook – and being in a people business this is empowering – is that time and the creative potential of people, or employees, or students, these are the truly valuable resources, that software is merely a force-multiplier for that creative potential. 

So, the most important part of digital transformation, I think, is actually the use of software to unleash the most creativity, across the most people.

And, because we can’t buy time, the second biggest contribution is to accelerate the pace at which those people can take their insights from idea to production.

What is Changing: Expectations

The need to be customer-centric and to make customer relationship management a key focus in our businesses has been clear to us for some time.

Digital media and tools are giving us the chance to understand Customer’s needs, preferences, and buying behaviour in a drastically new way.

We, as consumers, are becoming accustomed to technology’s speed, lowered costs, flexibility, and variety in the same way as we flip on a light switch in our homes.

Digital has changed our expectations and in doing so changed our behavior and our expectations.

Those expectations are forcing businesses, organisations, schools, to change their value propositions. They are being challenged to re-engineer their business strategies and functions to deliver ever more “Value Innovation”.

We know that the most important consideration for online purchases is speed, and the convenience of the eBusiness model.

The next criteria that drives the customer here is that they can quickly compare amongst competing items and get the cheapest price.

I think a very important, if not the most important consideration is very quickly becoming the Customer Experience. This, I believe, has surpassed or is surpassing, product and price as the key differentiator in how we perceive value.

Our expectations have left companies with no option but to try to keep ahead of the game with even greater “Value Innovation” schemes.

Seamless shopping, multi-channel strategies, digital payment options, smartphone services, in-house digital services, customized solutions are among those value innovators.

The future looks already much more interesting – and I have to wonder if, once we have customers and user at 110% satisfaction, how easy will it be to keep them there?

Customers, or users, are challenging us to use technology to build and deliver more than their expectations – they are challenging us to achieve “Customer Delight”. 

What is Changing: Relationships

Our changing expectations mean that our relationship with organisations area also changing.

We are quickly moving from mass appeal to a very customer-centric business model.

eCommerce is redefining the Customer Journey, and specifically our interactions with customers, or users.

Data collected from our interactions with them, serves as a basis for future product offerings, product differentiation, and a wide variety of personalized services.

A new, digital, relationship is developing. The focus of this relationship is of course the Existing Customer, or the Extension of the Customer – their customer profile.

The Existing Customer means no customer acquisition cost, there is reduced price sensitivity, increased probability of referral, and (almost) assured revenue growth.

As we undergo the current digital transformation, our relationship with customers hinge more and more on retaining the Existing Customer, and ever more so their Acceptance, and their Trust.

Acceptance that business will provide what customers want, before they want it – and that business will safeguard customer’s personal data, and Trust that business will use customer’s shopping profiles and their data for only the expressed purpose for which they collected it.

To create differentiation and retain a loyal customer, companies are investing more and more in this relationship market.

eCommerce provides an effective way through which this can be achieved – for example via personalized inbound interactions.

As customers become more digitally savvy, the relationship customers have with businesses, will become more and more granular and the retention game more competitive.

What is Changing: Behaviours

While the current paradigm shift in technology may seem daunting, for eCommerce, the underlying theme is the same: the informed and demanding customer. 

Digital means that we – users of services or tools, customers – we are becoming more powerful in making our own purchasing decisions.

This means that business and organisations will need to do more than just focus on making products and services more personalized so that customers remain “the existing customer”.

But there are definite limits to personalization. 

First, Personalisation is costly, and second, specifically in the EU, data protection makes it more difficult to be too “personal” with customers.

However this scenario plays out, as the information available to business proliferates, the trend will only accelerate, and “customer centricity” will become an even bigger focus for companies.

What is Changing: Business Models

Technology and global business scenarios are changing, business rules are being re written. There is no business that has not been affected by technology.

eCommerce is changing the context in which consumers, workers and companies interact.

We see the change and transition from production and product-oriented businesses to high tech, information and service-oriented organisations.

Expectations are changing, keeping in line with the need to adapt to the tech environment.

We need to build the capability to assimilate new trends, adapt ourselves, our products, people, education, and business if we are to survive.

Why? Because, digital change is immediate, it is urgent, and it is constant.

It is the speed of adaptation and change will determine the success of any given business.

If we are to adapt our business models, we must be forward thinking and understand the technology trends of eCommerce.

Traditionally, it has taken time to plan, research, implement, obtain results and analyze the results.

eCommerce is different – today the whole process is streamlined, sped up, and the results and response are almost immediate.

Trends Impacting eCommerce

If we were to start a company here in Germany, using an eCommerce business model – or any business model for that matter, we would be impacted by current trends not only in technology but also globalization.

If we are to look at the German vocational training model, it would also be a good idea to look at some of the challenges that we are facing here in the EU. 

I think these are relevant trends, not only for the EU, but if we are talking about globalization and eCommerce, probably for many other areas.

According to a 2017 EU labour market analysis, significant factors will challenge us going forward.

These revolve around five major clusters – Demographic, Economic, Technology, Ecological (Climate), Regulatory.

Like eCommerce, these trends are highly intertwined. They must be viewed as a complex network of drivers of change, both from within the sector as well as from outside.

In our curriculum and our training, we need to be diligent in avoiding black-boxing any one task or track, because as lines blur between these trends, so too do skills and tools. 

Digital Competencies – the eLearning Curve

We have already talked about the Digital Divide. The digital learning curve has at one end, for business both the challenge to stay up to date with technological trends and required skills, and to find and train young people.

On the other end we have a growing ageing demographic who were introduced to digital later in life and whose media competencies are in question.

For education and business, both situations are verticals, that are increasing.

Over the last 50 years, we have had to reinvent our businesses and write new rules of the game. Everything about business, everything about education, is changing rapidly.

Digital Transformation has brought undreamt of changes in markets, products, and organisational structures as well as approaches to business.

When we talk about eCommerce, as we said, the concept that usually comes to mind is of course online shopping.

But, the larger perspective is how the organisations and businesses work, is the networking with multiple applications and integration that makes things work at the background.

We have moved from task-oriented operations, to management resource planning, to cross-functional enterprise resource planning systems.

eCommerce means enabling all of an organisation’s operations. It is not enough to just set up an online shop.

The challenges of Double 11 are the event’s primary value-add. Singles Day is a stress test that forces the entire organization past its limitations.  “Double 11 becomes an entire ecosystem’s exercise.” 

#ecommerce not just an online shop.

(Alibaba 11.11 Singles Day 2019 had 38 billion in sales in 1 day. Germany online sales for the 2019 year will be circa 80 billion), and btw this attitude is also reflected in NetFlix and their „Building for Failure“ DevOps culture.

https://hbr.org/2019/12/for-alibaba-singles-day-is-about-more-than-huge-sales
https://amido.com/blog/a-case-study-of-devops-at-netflix/

Post image is courtesy of Freepik. Designed by senivpetro / Freepik

Further Reading / Sources

https://warrenlainenaida.net/tag/ecommerce/

https://warrenlainenaida.net/tag/digital-culture/

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