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Can you still enter the online retail market?

RZW pasfoto 2020
Ruben van der Zwan
CEO & Co-Founder
too late to the party
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can you still enter the online retail market or are you too late to the party…or are you too late to the party?

With the Internet celebrating his 25th birthday we have seen organizations pioneer the Internet and grow with it. A company like Amazon was among the first companies to do business on the Internet and over the last, let’s say, 25 years they’ve learned and grown immensely.

Although Amazon started out as an online retailer selling books and CDs, they morphed into something much much bigger. On the one hand, there is of course the Amazon Web services unit that is the market leader in cloud performance but in this case, it would like to talk about Amazon the retailer and what they are doing. Amazon quickly moved out of books and CDs into all other categories that you can imagine.

They introduced Amazon prime that will offer amongst others free shipping for a fixed fee per annum. They are offering home delivery even if you’re not at home or delivery in your car, again without you being present. They are looking at delivery by drone and a whole lot more as part of their research efforts. With revenue of hundred and $87 billion in 2017 a profit of $3 billion and a market cap of 700+ Billion dollars you are looking at the proverbial deep pockets company.

With the company’s powerful and as big as Amazon it is almost impossible as a new entrant in the market to be successful.

But it’s not only Amazon that is a player in the market. Locally you have players like Bol.com and Coolblue in the Netherlands (and other local players in other countries) who are fighting for each and every customer. So, is there still room for newcomers in the online retail market or are you too late to the party? And if not what should you do? When you want to enter the retail market like UK retailer AO wants to do in the Netherlands, you need to do a number of thing. In this blog, I will talk about some of those choices.

Three choices

Basically, you have three choices:

  • do it better
  • do it cheaper
  • do it differently

Doing it better seems to be logical step.  But doing it better also means, and I’m running I’m using a running method for in this case, that you have to go from the back of the pack to the front, stay there and become the leader.  Customer satisfaction is not enough what you need is customer delight, offering a service that goes beyond the expectations of your customer.  Most of your improvements offering a better service are easily copied.  Every company has the possibility to leave a review, connects with social media services and so on.

When you look at the second option do it cheaper, for new entrants into a market that is going to be a challenge. Why? First of all, you of course are competing on something where the companies can undercut you. It’s very easy to often an even lower price especially when you have deep pockets [or the parent company has deep pockets].

Furthermore, you are looking for customers who are only interested in something one-dimensional namely price. Loyalty to a vendor is something that exists only as long as that vendor has the lowest prices overall. And there is of course the issue of volume the more you buy and can sell the better the deal you can make with the supplier.so let’s say your startup wanting to buy 500 TVs, that is easily dwarfed by the volume of any of the large retailers.

The final option is of course doing it differently. This is also the hardest option because you’re selling the same products, using the same roads to deliver the goods at roughly the same price that your competitors are charging as well.  You can only go so far with all the fun and frolic’s in the delivery ordering and installation of washing machine.

Appliances online

The UK company AO, the acronym stands for appliances online, went across the channel to Germany to start their business there is well.  In the UK, they are a well-known player especially in the area of something we call white goods, stoves dishwashers and washing machines.  They pioneered the next day delivery as well as same-day delivery.  Big deal you would say, how simple is it to just deliver a package? But in this case, the delivery is not only delivery it’s also installing it for which you need a trained service engineer. In 2016 they also moved to the Netherlands opening up their offices and focusing on the Dutch market.  What they found out, is that having the lowest price is something that is a hygiene factor in other words, you almost need it in order to be viable as a player.  Another necessity is to have your logistics in order.  When consumers want something, they want it now or as soon as possible.  And finally, you need to have a support staff that can help customers when something goes wrong.

So, what is the secret sauce for appliances online? A part of the secret sauce is that you need to be there where consumers are at.  So this does mean that they are a seller within the Bol.com domain.  Bol.com like Amazon also sells products from competing web stores.  The idea is that although you don’t do delivery yourself you get a piece of the margin which would be that if it was sold through the competing web store.

Another part is how to make a difference? One of the things that AO is focusing on is solving the problem for the customer.  If something goes wrong they will fix it (according to the general manager).  Rather than having scripts in the call center they have problem solvers there was selected on the problem-solving skills and are less bound by rules that don’t allow them creative solutions to problem.

Top-notch IT

Whatever you do, top-notch IT is key. I’m not saying this because I’m the CEO of a company whose businesses is to do system integration but I’m saying this because it’s true.

Without IT, in almost every aspect of the business you won’t be able to compete in the market.  You need to connect to different services and systems, ranging from an e-commerce website to partner connections to logistics companies.  You need to have integration with social media players like Facebook Twitter Snapchat etc. you will need APIs that will allow partners and third parties to connect to your systems gather or share information with you.  You want to be able to tell you customers when their new washer is going to be delivered.  And by that, I mean not “sometime tomorrow” but real time (delivery is 10 minutes out).  Utilizing data streams can provide you with new insights into all kinds of processes, either what humans are doing or how systems are functioning.  Companies will master this will almost get exclusive insights into what’s happening.

And of course, one of my hobby horses, digital imagination.  Without digital imagination, it’s very hard to become a leader because you’re basically on par with all of the other vendors.  So, what could AO do, from a process perspective, from an IT perspective to become a leader? And that is indeed the million-dollar question.  Answering the question might not be easy, might not be cheap but it does give you a good chance to become the leader.

A good start is a white paper on going digital.  But going digital is just the first step, it’s going beyond that that will reap the most rewards.