The power of high-speed Internet connection is redefining the
retail market for consumers and companies. The retail marketplace has now
transformed into an online market place, creating vast networks linking buyers
and sellers with unheard-of efficiency.[i] Naturally, in the online marketplace companies
and consumers are entering with two different goals. For companies the goal is
to maximize supply chain efficiency, while for consumers the focus has become customizing
an individualized retail experience.
Today’s retail experience is reliant on the increasingly
inseparable online and in-store experiences. Take Home Depot for example, today
about half of their customers go to HomeDepot.com to research products before
making an in-store purchase, one-third of online orders are picked up by
customers at a physical store, and about 35 percent of online sales traffic
this year will come through mobile phones and tablets.[ii] With this shift to online increasing, many companies like
Home Depot are realizing that “customers aren’t concerned about whether a
product came from a direct fulfillment center or a store.[iii]
They are concerned with getting the product within the time they were told they
would receive it. To meet the
expectation of customer’s, companies are using a centralized electronic
commerce (e-commerce) fulfillment plan to help improve its supply chain
utilization, and lower overall transportation costs.[iv]
The plan, however, is not easily implementable, due to the need to balance
expanding online business with traditional storefronts and configure supply chains
for optimal support of both. However if
successfully implemented this strategy will speed up the flow of online orders
significantly, cutting shipping time from three to five days to two days.[v]
The current generation of customers has grown up with the
Internet; therefore they are expecting a personalized retail
experience, due to the Internet’s personalized delivery of information and
recommendations. Industry estimates indicate that online retail sales in the
U.S. will grow to $370 billion in 2017 from $262 billion last year, increasing
at a 10% compound annual growth rate over the next five years.[vi]
Similarly, European online retail sales are expected to increase to
approximately $262 billion by 2017, while China is expected to sell $650
billion in goods online annually by 2020.[vii] Much
of the growth that is anticipated is correlated with the allure of the
individualized customization experience that companies are increasingly offering.
Through customization companies can increase revenue and
gain a competitive advantage, improve cash flow, and reduce waste through
on-demand production. [viii]
The customization that online retail shopping provides allows customers to
build uniqueness into their product of choice—whether it be picking a specific
color, textile, or logo. But most importantly, customization can generates
value for the customer in both a configured and individualized ways. However, in order
for customization to yield success, companies must understand what customers
want to individualize and what do they want to configure. Once this is
determined companies have to decide which options should be offered and how
they should be priced. To make these big decisions companies lean on the
valuable data that customization generates. Moreover, customization data is a useful
instrument in the development of standard products and in online marketing and
public relations efforts.
Interior designer Shelia Bridges is an example of
customization at work. Bridges took on the challenge of furnishing a Martha’s
Vineyard beach home almost entirely online.[ix] Bridges
was able to better zero in on the items that she needed—and substituted the
color of items, to establish a preferred color scheme—online. Bridges’ experience
highlights that online shopping now has the ability to reshape how one does their job, shifting customers away from needing items to be
physically tangible before being purchased. One can argue that the
customization experience gives customers a sense of confidence in their
decision-making abilities. An assertion
closely in line with that of companies, who have been very intentional in
supporting online customization; to the point that even interior designers can
perform a vast majority of their client related shopping online.
Ultimately, many companies have realized that “if you can’t
grow the top line, you can save money through improving bottom-line business
efficiency issues like managing cash flow, which is a big incentive to using
electronic commerce.”[x] An approach that fosters an online marketplace
that values the customer’s need for a customizable shopping experience based on
stylistic preferences and needs. E-commerce
and customization have shown positive upward trends for both consumers and
companies alike, over the years, but one cannot help but wonder what the future
implications are for companies that are not able to find the balance between
their storefronts and online retail or even companies that cannot provide a
wide array of options to support customization needs?
[iv] Home Depot’s New
Strategy Tied to E-Commerce Growth (Journal of Commerce, August 18, 2014)
[v] Home Depot’s New
Strategy Tied to E-Commerce Growth (Journal of Commerce, August 18, 2014)
[vi] Home Depot’s New
Strategy Tied to E-Commerce Growth (Journal of Commerce, August 18, 2014)
[vii] Home Depot’s New
Strategy Tied to E-Commerce Growth (Journal of Commerce, August 18, 2014)
[viii] How Technology Can Drive the Next Wave
of Mass Customization (McKinsey Quarterly, Winter 2013)
[ix] Point-and-Click Decorating.
(WSJ, September 17,2014)
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.