What CEOs Need to Know About E-Commerce Ray Alimurung | DCOM Summit | Aug 2014
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Agenda
Defini5on & Business Models
Market & A=tudes
Building an E-‐commerce Business
Trends
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Definition 4
E-‐commerce. Type of business model wherein a firm or individual trades products or services over the Internet [Addendum for emerging markets] … regardless of whether the commercial transac5on is completed online or offline
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Rationale
To harness the power of the Internet to drive reach and the number of simultaneous transac5ons
426 Amazon transacBons per second on Cyber Monday 2013
37m Amazon items sold on Cyber Monday 2013
$5.8b Alibaba sales volume on Singles’ Day 2013
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Business Models: Product Offerings
Digital Goods Digital Services Physical Services Physical Goods
B2C
B2B
C2C
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Business Models: Revenue Streams
AdverBsing Commission SubscripBon Retail (Goods & Services)
B2C
B2B
C2C
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Marketplace / Classifieds
Marketplace + Merchant Services
Single brand / MulB-‐brand
Retail
MulB-‐brand Private / Flash Sales
Merchant Services
C2C
B2C
B2B
Business Models: Traditional E-Commerce 8
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Attitudes Towards E-commerce 10
Why don’t you shop online (more oYen)?
Security
Payment op5ons
Payment convenience
Want to handle/view product
Speed
Source: Surveys within several top PH corpora=ons; TNS Online Shopper Study: Philippines, Feb 2013
Why didn’t you do your last non-‐necessity purchase online?
Selec5on/Availability
Payment convenience
Pricing
Want to handle/view product
Security
40% of online Filipinos who have never shopped online expect to buy online in the next 12 months
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S.E. Asia E-commerce Market (2013E) Unit ID SG PH VN TH MY China US
PopulaBon M 248 5.2 95 88 67.5 28.9 1,350 315
# Online M 75 3.9 33 31 32 18 513 246
% Online % 30% 74% 34% 35% 46% 63% 38% 79%
# Social Media Users # 66 3.6 38 24 27 17 NA 168
# E-‐commerce Shoppers # 5.6 1.8 5.8 13.2 14.5 10.5 164 184
E-‐commerce Shoppers % 2.3% 34% 6% 15% 21% 36% 12% 58%
Retail Sales USD B 134 31 34 108 139 51 2,380 4,700
B2C E-‐commerce Market USD B 0.9 1.1 0.4 0.5 1.1 0.7 190 343
E-‐commerce % of Retail % 0.7% 3.5% 1.1% 0.5% 0.6% 1.4% 8% 9%
Annual Customer Spend USD 252 917 172 42 365 68 726 1,864
Source: UBS Research, Nielsen, Comscore, PWC HK, ATKearny, researchandmarkets.com, Dailysocial, smu.edu.sg, E-‐commerce.org.sg
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US retail growth is driven mostly by e-commerce
Source: US Census, Internet Retailer, BI Intelligence es=mates
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Amazon 15%
Rest of North America 85%
Amazon Market Share of North America E-‐commerce (2013)
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Amazon is only 15% of North America e-commerce
Source: BI Intelligence es=mates
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E-commerce Activities
Customer Service
CopywriBng & Content
Web & Mobile Design IT Development
ProducBon & Photography
Sourcing & Merchandising Payment Processing
Business Intelligence
MarkeBng
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Customer Ordering
Storage Packing
Order Processing
Picking
Cash on Delivery Delivering Dispatching
Inbounding
E-commerce Activities (2)
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E-commerce Challenges for Brands & Retailers
Lack of in-‐house talent – Current organiza5on may not understand e-‐commerce complexity and may lack a leader for its strategy and execu5on
Fulfillment is not set up for single orders (B2C) – Set up to fulfill B2B bulk orders on pallets, not individual customer orders; need separate processes and systems to manage B2C handling, storage, delivery, returns.
Customer service must respond to high demands – Need phone and email team that can handle high volume and personalized service such as product ques5ons, website how-‐to’s, order status, and aYer sales
Channel conflict – Mul5 channel is not omni channel. Need a unified view on assortment, pricing, returns
E-‐commerce plaiorm implementaBon – Current technology does not support online; need new implementa5ons for order management, warehouse systems, customer service, CRM, etc.
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Functional Organization
CEO
Buying & Sourcing
Store Opera5ons
Warehouse Opera5ons Marke5ng
Offline Marke5ng Digital
Online Marke5ng
E-‐Commerce Head
Online Customer Service
IT Finance Customer Service
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Functional Organization (2)
E-‐Commerce Head
Buying & Sourcing Marke5ng IT Opera5ons Business
Intelligence Finance Product Management
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Functional Organization (3) E-‐Commerce
Head
Buying
& Sourcing
Buying /Merchandising
Buying
Opera5ons
Inventory
Planning
Inventory Management
Pricing
Marke5ng
Online Marke5ng
SEM / Display Ads
SEO
Social Media
Affiliates
Crea5ves
Design
Copywri5ng
Branding
Offline Marke5ng
Category Management
IT
Development
Network
Systems
Database
Helpdesk
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Functional Organization (4) E-‐Commerce
Head
Opera5ons
Warehouse Opera5ons
Order Processing
Inbound
Inventory
Outbound
Logis5cs
Returns
Content & Produc5on
Content Management
Copywri5ng
Photography
& Edi5ng
Customer Service
Inbound Phone
Outbound
Phone
QA / Training
Business Intelligence
Repor5ng
Marke5ng Analy5cs
CRM
Analy5cs
Finance
Payments / Fraud
Refunds
Product Management
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Benefits of Outsourcing E-commerce
Go-‐to-‐market faster
Limit need to recruit and build in-‐house team
Access industry best prac5ces
Research, test, and learn before over-‐inves5ng
Lower costs due to economies of scale
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Selecting Outsourcing Partners
One-‐stop Shop
Web Design, Devt, Maintenance
Delivery
Order & Inventory IT Systems
Copywri5ng & Produc5on
Online Marke5ng
Payment Gateway
Warehouse Storage & Fulfillment
Customer Service
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Trends
• Mobile is 25% of global e-‐commerce traffic… and growing
• Marketplaces dominate Asian e-‐commerce § Alibaba drives $157b in GMV à 43% of B2B; 50% of B2C; 95% of C2C
• Cash on Delivery (COD) accounts for at least 50% of PH tradi5onal e-‐commerce, while escrow is preferred in China § Alipay is used for e-‐commerce, remilance, bills payment, bus 5ckets
Source: “The Future of Retail: 2014”, BI Intelligence
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Key Takeaways
• The opportunity is huge and the market is ready
• E-‐commerce is complicated; be open to outsourcing
• Structure your opera5ons and organiza5on accordingly
• Now is the 5me to research, test, and learn
There is so much stuff yet to be invented.
There’s so much new that’s going to happen.
People don’t have any idea how impacnul the Internet is going to be and that this is s5ll Day 1 in such a big way.
Jeff Bezos, Founder & CEO, Amazon.com
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