Friday, November 28, 2014
Learnings from Managing Ecommerce
This is the final required post for the Managing Ecommerce course. However, I liked
writing a blog so I’ll continue. I don’t consider myself tech savvy or having that natural
tendency to keep up-to-date with technology, but I’m conscious of its increasingly huge
importance and that was the main reason for taking this course.
Doing research for this blog, allowed me to catch up on current trends such as Apple
Pay, Shopify and Alibaba, and share it with that anonymous audience of 179 people
that Internet allowed me to reach. After all, technology is not something you learn
once; you need the curiosity to keep learning by yourself as it evolves. I
developed that curiosity attending the classes and writing these posts.
Even though as future managers and entrepreneurs we will probably rely on experts to
take care of the IT aspect of the business, it is extremely necessary to know the tools
that are available and the basic functioning of them. This allows you–at the very
least—to know what questions to ask. (I’ll put in italics some of the most important
concepts I learned and if you’re still not familiar with them, you should definitely
Google).
Knowing the basics behind the “magic” of the Internet (client-server model, HTTP,
TCP/IP, gateways); the use of some IT business tools (CRM, ERP, Open source
software, Cloud computing, BI); and how to protect yourself against the risks involved
with the dependence on technology (firewalls, BCP and DRP), gave me the high-level
understanding on how to take better decisions about which tool to use.
Thursday, November 20, 2014
Apple Pay: Your wallet. Without the wallet.
Apple Pay, Apple’s contactless payment technology launched
one month ago—on October 20th—allows iPhone 6, 6 Plus, and Apple
Watch owners make payments using their devices’ NFC.[i]
NFC is a short-range wireless communication that uses a smaller antenna than
the wavelength of the carrier signal.[ii]
To pay, Apple Pay users just hold their iPhone near the
contactless reader at the POS while placing their finger on Touch ID and a
vibration and beep will confirm that the payment was successfully sent. To set up
Apple Pay, users store their credit or debit cards on Passbook. They can add
the card from the iTunes account by entering the security code, and additional
cards by taking a picture or typing the number.
The main benefits Apple Pay offers are convenience and security,
since you don’t have to expose your card and personal information and it won’t
even be stored by the store nor by Apple. If the phone is lost, the user can deactivate
it online.
Apple has partnered with Visa, MasterCard, and American
Express and has signed deals with major banks such as Bank of America, Chase,
Citi, and Wells Fargo, which are responsible for 83% of all credit card volume.[iii]
Because Apple Pay is based on already
existing NFC technology it works in more than 220,000 locations that accept
contactless payments.
The question arises: How long will it be until Apple’s
competitors copy this system? Will this achieve a really high penetration,
making the use of physical credit cards obsolete any time in the future?
Thursday, November 13, 2014
Shopify: Making ecommerce accessible for everyone
Shopify is a computer software provider that powers both
online stores and retail point-of-sale systems. It is based in Ottawa and was
founded in 2006 after the owners, Tobias Lütke, Daniel Weinand and Scott Lake
developed the ecommerce platform for their own store and realized the market need
for a user-friendly ecommerce platform. They provide their services to more
than 120,000 store owners including General Electric, Amnesty International,
CrossFit, Tesla Motors, and others. The company has received $122 million in
Series A, B and C funding from well recognized venture capital firms.
Shopify is a good option for companies that want to start selling
online but do not have the infrastructure needed to set up their own ecommerce
website. They offer very convenient features to make the website creation
process easy. This includes a collection of over 100 free ecommerce website
templates with themes created by world-renown designers. Shopify’s Liquid
templating language, as opposed to HTML, makes it easy to customize every
aspect of the online store.
Store owners can start receiving orders from day one. They
only need to choose a template and add their products. The company handles
payments directly from Visa, Master Card, American Express and Paypal. Shipping
rates can be set up in a number of different ways, including fixed-price,
tiered, weight-based and location-based rates. Another very useful feature is Shopify
Reports, which allows store owners get a better understanding of the month-to-month
sales performance. Shopify makes ecommerce even more accessible for everyone,
lowering entry barriers.
Thursday, November 6, 2014
Staples.com is much bigger than what I thought!
It may look counterintuitive that Staples –an office
supplies retailer- is the third largest online retailer with $10.4 billion
online sales in 2013 (45% of total revenue)[i].
After all, office supplies doesn’t sound as the first thing to be bought online
nor are the most expensive items. However, it was only last year that this retailer
lost the second place among the biggest online retailers, being surpassed by the
giant Apple. Staples’ products also include computers, cellphones, electronics,
furniture and many others, which I thought could explain the outstanding
company’s online revenue. However, office and school supplies account for the biggest
percentage of total sales (45%).[ii]
In 2013 Staples announced a new type of smaller stores that
engage visitors with interactive kiosks aimed at driving more sales to Staples.com.
An important role in online sales is also played by Staples Rewards program,
which offers customers 5% back in online/offline purchases as well as free
shipping.[iii]
While the rise of ecommerce has been seen as a threat for many
retailers, Staples seems like it has managed to successfully use this trend in
its favor. Nevertheless, everything has a price (especially for store
employees). In 2013, the company had 40 net store closures in North America and
40 downsizes and relocations. It also initiated a plan to close up to 225
stores by the end of 2015.[iv]
This demonstrates a progressive migration from a brick and mortars business
model to online. Will that be the fate of all the retail giants?
[i] http://marketingland.com/apple-takes-2-position-internet-retailers-list-e-commerce-sales-leaders-82991
[ii] http://netonomy.net/2013/10/04/selling-office-supplies-online-an-ecommerce-market-report/
[iii] selling-office-supplies-online-an-ecommerce-market-report
[iv] http://www.marketwatch.com/story/fitch-withdraws-ratings-on-certain-utica-ny-municipal-bond-maturities-2013-03-06
Thursday, October 30, 2014
The war for the scarce consumers' attention
Last week the digital marketing guru, Mitch Joel came as guest
speaker in our E-commerce class. He was Chairman of the Board of Directors of
the Canadian Marketing Association. Mitch has advised many important companies such
as Walmart, Starbucks, Procter and Gamble and Unilever.
According to Mitch, now that companies are making extensive
use of internet and social media to connect with consumers, many senior
executives say they feel they’re “in hell”. Why? The fact is that every single
stakeholder (brands, sub-brands, retailers) is asking their customers to
connect with them in social media channels, so the competition for attention is
fierce. More importantly, not only companies
have the power to reach millions of people through media channels, now anybody can
do it.
To illustrate this, the Mitch gave the extraordinary example
of Bethany Mota, a YouTube “personality” who has gained the attention of more than
7 million subscribers on YouTube and other few millions in other social media
channels by talking about teenager’s banalities. The most interesting part is
that all this success could permeate the digital stage and some companies actually
used it in their favor. For example, Aeropostale asked Bethany to design a clothes
line that was sold out short time after it was released.
This is a great example of the importance of trying to
deeply understand the consumer in order to talk to them in a way and with a
message that can create a connection, obtain their attention and ultimately,
their purchases.
Thursday, October 23, 2014
Key differences between Alibaba and Amazon
While Alibaba is
successfully entering the US, Amazon is making efforts to expand in the
profitable Chinese ecommerce market.
Both companies are
leaders in their home markets, offer a wide variety of products to be bought
online and have a big customer base and top level data infrastructure. However
there are some big differences between both companies:
-
Type of operation: Alibaba operates an “open marketplace” that connects buyers and sellers. It doesn’t sell
anything directly nor have any warehouses. Amazon operates a “managed marketplace”, selling most of
their products directly and owning distribution centers. It even manufactures
some of the products. In consequence, Alibaba
has much higher margins than Amazon (~40% vs. ~1%) but the latter has a
better reputation in customer service because it controls most of its
processes.
-
Competitive advantage: Alibaba’s competitive advantage in the Chinese
market is given by its understanding of
the Chinese consumer and its mastery of the “intricacies of Chinese regulations” and how to work
with governments. Amazon’s competitive advantage in Western markets is given
mainly mastering logistics and supply
chain management. Both would have a hard time trying to acquire the needed
capabilities in each other’s home markets.
-
Scale: In 2014 Alibaba has 24,000 employees while Amazon has 88,400 (almost 4
times more). In 2013 Alibaba’s revenue was $7.95 billion and Amazon’s was $7.95
billion -almost 10 times more. This is given in big part by their type of
operation.
Sources:
Business
Insider. http://www.businessinsider.com/alibaba-vs-amazon-2014-8
Thursday, October 16, 2014
Alibaba's worldwide IPO record
Doing some research for my last week’s post
about Amazon, it was impossible to miss out the Chinese e-commerce giant that’s
making news: Alibaba. Its recent IPO
less than a month ago (Sep 19th) became the biggest in the world.
The fact that this record is held by an E-commerce company is another sign of
the digital era that we’re living.
Initially
raising $21.8 billion, Alibaba took over the record of the biggest U.S. IPO previously
held by Visa ($17.9 billion). Shortly after, the company was able
to sell more shares due to its over-allotment option, which allowed it
to boost the total amount raised to $25 billion and break the worldwide IPO record previously
held by Agricultural Bank of China ($24.3 billion).[i]
However, the stock price started declining very
soon (remember what happened to Facebook's?). After achieving a closing price of $93.89 at its first day of trading[ii], it
closed today at $88.85 per share. According to some experts this is a normal
adjustment that can be due to sales from investors “who bought shares in the
IPO and are now selling with a profit”.[iii] Below
is the stock price performance since the IPO.
The challenge that this Chinese company
presents to Amazon is eminent. However, even though this two companies can be
seen as direct competitors they have some important differences in their business
model. I’ll write about them next week.
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