eCommerce is Still Commerce!

When I joined the technology oriented Rensselaer Polytechnic Institute for my PhD two decades back, I discovered this new technology called email using which I could contact all my friends in other schools for free. I was so excited by this discovery that I called home that night (at $1.60/minute) to report this to my parents. Today, students sitting in my class can verify every word as I speak using Google/Wikipedia and order any book I mention on Amazon — overnight delivery, of course. Such has been stunning progress of the e-world. The eCommerce field, particularly the B2C variety is the most buoyant sector of the Indian business landscape today. A recent study by E&Y valued B2C eCommerce in India at nearly $10 billion/year but growing at a blistering 50% per year. The key drivers being rising disposable incomes, increasing broadband connectivity, the mobile platform and business innovations by market players (COD delivery, etc.).

Expectedly the field has attracted many players—from home grown Flipkart to international players including Amazon, and the current super-nova, Alibaba. These span soup to nuts players such as Flipkart to specialized vendors such as Pepperfry. Indeed, no week passes without some big news from one or the other – if it was big plans by Amazon last week, this week it is the Softbank investment in SnapDeal. These players are also making news for their splashy recruitments from leading B-Schools.

The business press is agog, with discussions about the chances of success of these players perhaps rivaled only by discussions about the national cricket team in the upcoming World Cup!

However, it is prudent to remember that despite all the excitement, eCommerce is still essentially Commerce and not exempt from the basic principles and practices driving commerce. The e- component provides certain capabilities to the vendors to reach and service customers and also has created certain expectations in buyers. Success of a vendor would depend on harnessing these capabilities to meet basic business requirements as well as enhanced expectations from customers. Based on my experience at some of the top companies in the world, I’d include:

Product Mix: Given the characteristics of an eCommerce business, it would be tempting to offer everything to everyone. But this should be conditioned on the vendor’s capability to fulfill these orders. The backend supply chain for mass market products is vastly different from those of long-tail  products.

Pricing: As in all business, offering the right products at the right price is critical. Currently, most vendors, especially the big ones are offering deep discounts to capture market share in the hope that buyers will be sticky. This may have created an expectation in customers of ever-low prices. Clearly this is not a long-term sustainable strategy.

Marketing: The online media including social media makes a natural fit for marketing eCommerce offerings. However, this also requires that most of the population have broadband access – not yet in India. Hence those players who best leverage a mix of online and offline media for marketing would fare best. I repeatedly impress this upon my students in the course on eCommerce that I teach at MYRA.

Customer Experience: Nothing can ensure that customer will not return as a page that loads very slowly or a site that returns some inane error after you have filled all order details including the 16-digit card number. Hence, great companies pay a lot of attention to this factor – for example, at JP Morgan Chase, for customer facing web pages, our mandate was to ensure that page loads in 7 seconds or less as research had indicated that anything longer will result in visitors browsing away.

Order Fulfillment: Ultimately, it all comes down to order fulfillment. Delayed delivery, mis-delivery, non-delivery, all are killers of customer loyalty. As vendors shift to a marketplace model from stock and sell model, this gains additional importance since a player’s credibility depends upon the capabilities of suppliers.

Customer Interaction: Managing customer interaction including enquiries, product information and grievances make the difference between one-time and repeat customers. Online tools greatly enhance a vendor’s capability for a deep customer engagement and must be leveraged. Companies such as 3M and Honeywell where I spent couple of years leverage their eCommerce sites to make available the most detailed information on their complex technical products – something simply impossible in the paper world.

The above is sufficient to show that eCommerce must cover the requirements of basic commerce and more. What does all this mean to an MBA student?

For an MBA student being recruited by an eCommerce player, it is very difficult assessing the employer in terms of their future growth, survivability and so on since few publish verifiable financial and other metrics. But you can evaluate them on factors such as those discussed here to assess the desirability and possibility of success of the employer given your aptitude, career plans and aspirations.

dr-s-h-rao

Dr.Sudhendar H Rao

Professor of Information Systems

MYRA School of Business