E-commerce is not for you. Here’s why!

Omnichannel commerce has been a ubiquitousterm in the industry since the last decade. Middle-East online spend is expected to reach to $29 billion by 2022, increasing online’s share of the total retail sales to upwards of 3%. A report by Bain & Co, however, estimates that UAE will grow 31% annually to reach $9 billion , Saudi ecommerce market will grow 27% annually to reach $10 billion which is  8% of total retail sales, and Egypt 33% annually to reach $3 billion – by 2022.. The success of Amazon has generated a post-truth that, if run intelligently, an ecommerce business can yield high returns in the long run. However, looking at the numbers objectively we found out that there’s more to this than meets the eye.

During our discussions with industry leaders, we noticed a coherent desire to venture into the ecommerce space and target the customers even from the remotest of locations. Most of them ask us the same questions – “Do you think we are ready to go for an ecommerce solution?” In this article, we’ll cover the challenges that any brick and mortar retailer faces when venturing into ecommerce, and how they can opt for a full-fledged solution instead!

Challenges in launching an E-commerce portal:

  1. Target Audience

Although online shopping is the millennial’s darling, there’s more than enough customers who need the touch-and-feel of the product. It could be argued that these customers are experience-driven than convenience-driven. It’s hard to push these customers to transact online unless targeted through some lucrative online-exclusive deals. Another challenge we witnessed is secure payments. Beyond a certain price, especially in the case of luxury products, customers prefer paying a hefty amount once the product has been delivered to them. Allowing Cash/Card on delivery will help in mitigating this challenge to a reasonable extent.

  1. Capex

A well-functioning ecommerce platform requires significant upfront investment. These include the platform cost, infrastructure cost, logistics, packaging, digital marketing, and human resources. Adding on, there are a few recurring hidden costs that usually come into play once the brand and the product are taken live. Most importantly, ecommerce ventures are nothing like opening a new retail store – the Capex is disproportionately higher to Opex. Strike a balance between the Capex-to-Opex ratio , typically 75:25 for the first year because ecommerce is generally challenging to retailers who have never ventured in this space.

  1. Price-Point

Here’s where online shopping gets tricky. Customers often arrive at  a pre-conceived price-point for the desired product before they make a purchase, or browse through multiple websites. Traditionally, brands arrive at a  price-point for the product based on the appetite of their target customers; with the help of data. Studies suggest that localization of price-points improve ecommerce sales by 10%-12%. Meaning, prices of products should vary based on the region, and the demand for the product in that region, eventually leading to better conversions. Identifying that right regional pricing has become increasingly difficult due to change in the user behaviour across different channels and platforms.

  1. Product

For a successful ecommerce venture, it is pertinent to identify the right product mix. This point is an extension to the previous point which translates to localization of the products. Through our internal studies, we have observed that 12-15% of the customers don’t end up making a transaction due to unavailability of the right product or the desired product. Millennials expect more than just the quality of the product, they want an experience and a value proposition. Apart from offers, discounts and coupons as a strategy, showing favourable product reviews helps immensely moving the needle towards your brand, and establishes credibility.

  1. Logistics

Post-sales operations have been optimized to a great extent in the last decade. As soon as users make a transaction, it hits the warehouse which in turn passes on to the logistics provider, be it in-house or outsourced. Sounds great, huh? Well, not so much.

Seamless logistics comes at a cost, which retailers consume partially and pass on the rest to the end users. In case of white goods and furniture, this cost becomes significantly high. If a customer were to ask for a return, the margin takes a heavy blow! Few retailers allow international shipping to cater to a wider audience, wherein the custom duty charges and any additional expense is borne by the customer, and that’s why when a product is returned, it leads to poor consumer experience. Last but not the least, cash-on-delivery frauds are not very rare either. All the aforementioned scenarios make it compelling for the retailers to get their logistics right.

When a business is ready to go online:

If you’re still reading this, hope you related to the challenges identified above, and if you didn’t you can always reach out to us for further input! All these challenges, by no means, should discourage a retailer from venture into the ecommerce space. In this rapidly changing ecosystem, we must also try to elaborate on whether the business is ready to go online and what are the precursors to an omnichannel commerce approach.

Understanding your Existing Customers

Retailers tend to capture the customer info at the time of transaction and in more often than not, this remains the primary means of customer engagement. However, capturing customer foot-prints across multiple touch-points, understanding their shopping preferences, and personalized targeting across multiple channels have been instrumental in generating a topline growth of 4-5%. Having said that, before venturing into a new business, it is essential to reach the utmost maturity in the existing scheme of things. Brick and mortar players need to focus their time, money and energy first on understanding their offline customers better and engage with them continuously before opening a new channel, which will come with its own set of challenges. Want to know where your brand stands? Take this test and find out! Check what your CRM score is.

Winning against Competition

Unlike North America, Middle-Eastern markets haven’t yet been monopolized and hence, there’s enough space for a niche online player to make a mark through the right mix of product, price and customer experience. However, niche retailers are expected to face heavy competition from the marketplaces like Souq, Noon etc. due to wide variety of products and affordable prices. In such a scenario, what truly turns the game in your favour is the customers’ loyalty towards the brand. Identifying the top 10% most loyal customers and giving them a differential experience can yield results in unimaginable ways. Loyal customers don’t just buy more and more frequently, they also act as the vocal brand advocates and refer the brand to their friends and family – basically word of mouth!

Seamless, Integrated, Omnichannel Commerce

We’ve seen retailers succeeding through an O2O (Online-to-Offline) approach where the users can order from anywhere and pick it up from the nearest store. No wait time, no unnecessary order updates, no post-sales replacement hassles and 5-6% boost to the topline sales. Hence, unless the organization envisions their omnichannel strategy and how they are going to offer a one-brand-one-experience,  be it in terms of seamless payment options (Card, Wallet, COD), seamless logistics (quick delivery, quick return, realtime order tracking) and seamless fulfilment (order from anywhere, fulfilment from anywhere), ECOMMERCE IS NOT FOR YOU.

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