Tuesday, January 8, 2013

Leaders in E-commerce

imageRetail is big business in America. It amounts to almost a third of the national GDP. Within retailing though, e-commerce is the fastest growing segment. Data from US Census Bureau shows that e-commerce sales being equal to 5.2% of total retail sales in the latest reported quarter Q3 of 2012 (see chart below for more numbers). This figure has grown from 0.6% in 1999. So who is leading the e-commerce revolution in the US?

According to Morgan Stanley, Amazon leads the pack. This is not surprising given their online origins! Some other well known names from retailing include Costco, Macy’s, Nordstrom, Wal-Mart, Williams-Sonoma, and Under Armour. Check out the whole list of retailers by following the link to the original story below.


What makes them successful? In one word – Following their customers. The new world of retail is very different from the old (and cold) brick-and-mortar store-centric retailing. The new retail is very personal and very ubiquitous. The social networks now make or break brands and commerce is 24/7. The customers have merged their views of retail: Physical stores, online stores, catalogs, call-centers and mobile. To them, irrespective of the channel they choose to interact with, they are dealing with a single retailer and they expect consistent experience for sales, shipping, returns, brands, assortment, and customer service.

That is the challenge of the new retailing. The omni-channel, omni-present commerce! The companies in Morgan Stanley’s report reflect what it takes to be a leader in this new world of retail. Each of the companies understood the opportunity and has been instrumental in enabling that single/merged view to the customer that has become the necessity in the omni-channel retail.

  • Wal-Mart was among the first of the largest retailers to enable ship-to-store (and pay no shipping at all)! They also enabled returns in store for items bought online.
  • Costco.com displays all prices delivered to your door, no more wondering about how mush shipping will be added once you are through to the last step!
  • Amazon has many firsts – but since they have no physical stores, the concept of omni-channel retailing is hard to align align. However, it is Amazon has to its credit, demand management techniques like “subscribe and save”, free shipping over $25, standard two-day shipping with Prime (along with a whole host of other goodies such as streaming videos and books that you can borrow!). While they may not quite fit in the traditional “omni” channel model, their business model of providing a store-front for millions of merchants and enabling a whole host of services for payment processing, returns, logistics, and fulfillment is likely to continue to be disruptive to conventional retail. Their unambiguous focus on improving customer experience through faster deliveries, delivery boxes, easy returns, almost infinite assortment, low prices, reliable shipping and so on is going to continue to push conventional retailers to find niches where they can excel in the new omni-channel world.

Enabling such customer experience takes seamless processes and services at the back-end, tied together with gobs of enterprise data and cutting-edge technology. It takes a supply chain that provides true visibility into inventory, demand, and supplies; manages variability, optimizes operations, and allows a 360 degree view of the customer no matter how that customer chooses to interact with the retailer. It challenges the conventional supply-chain view focused on creating operational excellence and stretches it to create excellent customer experience. 

The companies in Morgan Stanley report have understood – that being successful in the new world of retailing takes creating excellent customer experiences. And that is the lesson to take to heart. If you are in retail and not working towards creating that excellent customer experience, you are regressing! 

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Want to know more about supply chain processes and supply chain strategy? Check out my books on Supply Chain Management at Amazon.

© Vivek Sehgal, 2013, All Rights Reserved.

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