Challenges manufacturers face in an e-commerce environment
By Richard Angelo, Director Product Marketing, Jesta I.S. Inc.
Traditionally, consumer product manufacturers have marketed their products through the traditional retail customer channel or in many cases through company owned brick and mortar stores. Companies with strong brand images have been able to successfully market in both spaces by incorporating through line exclusivity offerings or protective pricing strategies. This has historically been received by traditional retailers with mixed reactions running from resigned acceptance to outright anger.
Considering today’s tougher economic conditions, manufacturers see their traditional retail client incorporate more profitable private label goods that are in many cases being sourced by the retailers directly, cutting the consumer products manufacturer out of the picture. Private-label goods accounted for 22% of consumer-packaged products sold in the U.S. in 2009, up from 20% the year before, according to The Nielsen Co. Some manufacturers today are choosing e-Commerce to sell directly to the consumer in order to increase market share and add profitability to their lines. Another impetus to sell via the Web came with the recession, which prompted consumers to do more shopping online, where comparison bargain-hunting is easier. Online sales are expected to reach 12% of the total retail market by 2012, up from 6%, or $211.7 billion, now, according to Forrester Research.
Manufacturer sites are already established as the trusted resource for product information. Forrester Research reported that 77 percent of consumers expect manufacturer web sites to have the best product information and 75 percent say they should be useful for post-purchase information. Because of this existing mentality of trust, manufacturers are finding themselves in a position to influence sales and customer satisfaction in a way that never has been available to them before.
The traditional role of a manufacturer was to mass-produce products and sell them in bulk to retailers (or distributors) who provide the infrastructure and services to consumers that wish to purchase these products in the retail market. There has traditionally been a sharp distinction between the wholesale market and the retail market. However, the advent of online retailing and drop-shipping has blurred these lines to a point where manufacturers are now active competitors in the retail market.
Direct sales by consumer-brand manufacturers are one of the fastest-growing areas of online retail, increasing almost 13% in 2009 to $487.6 million, according to Vertical Web Media, a Chicago-based research firm. Manufacturers such as Procter and Gamble, Levi Strauss & Co, Mattel, and Columbia Sportswear are now positioning themselves as retailers with revised and revamped consumer friendly websites. As a consequence these companies are increasingly looking at direct-to-consumer selling. Six key motivations can be identified:
- Recovery of share of margin
- Increased brand visibility and control
- Shopper experience control
- Strengthened relationship with increased insight into end-consumer
- Improved ability to sell a wider assortment and services
- Improved price and promotions control
The technical and process challenges to the Manufacturer that markets in this space are not insignificant. New data requirements and delivery methods will have to be created and streamlined in order to achieve a high level of success. Some examples are:
- Near real time inventory positions presented to the web front end
- Forecasting web sales to be incorporated into the make \ buy plan
- Inventory reservation \ segregation to support the online channel
- Flexible pick \ pack ship warehousing processes with an emphasis on parcel shipments
- Robust freight and tax calculation processing
- Well thought out returns processing and policies note: some e-tailers report up to 25% return rates
- New CRM data based on end consumer information
- Sophisticated pricing strategies i.e. freight free on xx dollar purchase , BOGO, etc
When manufacturers sell direct to consumers they risk losing their wholesale accounts, as well as tarnishing their reputation. Over the past few years, many manufacturers have struggled with the notion that they’re doing all the legwork (product development, purchasing, warehousing, shipping, etc.) while drop-ship retailers are reaping all of the benefits oftentimes at a higher margin than the manufacturers themselves make. We’re finding that more and more, manufacturers and distributors are turning to retail e-Commerce websites in an effort to expand their customer base and increase sales. And who can blame them?
About Jesta I.S. Inc.
Jesta I.S. is a leading supplier of enterprise business solutions for manufacturers, distributors and retailers primarily in the soft goods and specialty industries worldwide. Jesta I.S. is recognized for its expertise, innovative products and services and its commitment to evolving business solutions in today’s rapidly changing business world. Jesta I.S.’ solutions process essential business management information for well known industry leaders including Perry Ellis International (NASDAQ: PERY), PUMA (German: PUM), Genesco Inc. (NYSE: GCO), Town Shoes Limited, Cole Haan, Haggar Clothing Co., Cavender’s Boot City and DSW Inc. (NYSE: DSW) as well as many others.
Jesta I.S. Inc.
P: 1-888-925-5152
Email: info@jestais.com
Web: www.jestais.com
Copyright (2010) Jesta I.S. Inc. ALL RIGHTS RESERVED. All information contained in this document is the property of Jesta I.S. Inc. All company and product names are trademarks or service marks of their respective owners
What Goes Mobile?
By Leslie Belcher, President, Jesta I.S. Inc.
Ten years after national commercial platforms for mobile commerce were launched in the Philippines and Japan; they are slowly beginning to emerge in the North American market. Residents in rural parts of the Philippines and other developing nations routinely pay bills through their smart phones, while people in Japan and Europe canbuyproducts as well as train and airline tickets using their mobile phones.
The accelerated growth of mobile commerce, combined with the acuity of location-based applications makes it possible for direct response retailers to use the mobile channel for locally targeted mass marketing. One estimate, according to Mobile Marketer, puts worldwide mobile phone connections at 4 billion; while another by Neustar and SMS Mobile Marketing predicts that mobile revenue in the United States will reach $3.3 billion by 2013. SMS text messages dominate mobile advertising in markets like the U.S today, but coupon to phone and location based marketing are emerging.
A recent study by Coda Research agency has revealed that mobile ecommerce in the US shall grow at a compounded rate of 65% between 2009 and 2015. According to this study, mobile phones will constitute 8.5% of all ecommerce revenues in the US. Here is an estimate of the mobile commerce market in absolute terms:
The rapid growth of banking and bill paying activities with mobile phones aside, today’s retailer must be looking towards some rapid development of new marketing strategies. Three areas seem to be emerging as real opportunities: coupon to phone, product locators, and location based marketing. All three rely heavily on existing robust CRM data bases, integrated ERP and POS systems that readily interact with various web services. In the case of product locators, near real time inventory status and true distributed order management functionality are essential ERP functions since the consumer is being directed to sites with product on hand. POS systems are being asked to readily support scanning of bar coded coupons on smart phone displays.
Mobile coupons are the next evolution of the traditional printed coupon and they’re growing in popularity. The YankeeGroup released a consumer survey report in November 2009, which found that 73 percent of respondents were interested in receiving mobile coupons via SMS or MMS. The same report also predicted that mobile coupon redemptions would increase tenfold over 2010. A new report from Juniper Research, forecasts that consumer usage of mobile coupons will generate close to $6 billion globally in retail redemption value by 2014. This new approach to coupon marketing will place tremendous pressure on legacy POS systems to adapt to scanning smart phone displays at the register. Not only will the POS system need a scanner that can physically read the phone display (laser scanners will not), but the POS software will need to be able to handle what amounts to ‘timed pricing by customer’. With this kind of capability being implemented as the cash desk, it is essential to have robust, comprehensive, and real-time accessible CRM databases that can customize campaigns based on customer buying histories and customer loyalty programs.
Smart phone applications now offer various product search tools. Google offers freeware like Barcode Scanner and Googles that can locate a product based on its barcode or a photo image. They offer not only where to buy based on your location, but price comparisons and some retailers offer inventory checking. Product Search for mobile with local inventory lets a user see if, say, a Nikon Coolpix camera is in stock at a nearby Best Buy or Sears and then provides basic directions to get there. Consumers can then tap on an adjacent “in stock nearby” link and navigate to the seller’s page to see whether the camera is in stock. This is approach has exciting potential for the retailer who can provide accurate near real time inventories by product and by site. The obvious risk is alienating the customer who drove out of her way to the store only to find the item was not on hand. The pressure on the ERP system to update the Web Service with accurate on hand inventories by site is critical to success.
The third emerging Mobile marketing strategy involves location based marketing to mobile devices. Google for example is updating its Buzz applications to not only recommend close by retail services, but provide reviews and relevant information along with the obvious directions. Some retailers combine e-coupon pushes to the mobile user to further entice the consumer. The reliance on robust CRM data is critical to the ultimate success of this marketing approach. To be effective, location-based marketing requires the ability to target appropriately, by both geography and context. As much as mobile consumers are looking for places and things, they are also looking for information (directions, reviews, recommendations, help). Part of what makes hyper-local targeting effective is having both the right kinds and the right depth of content to go with relevant ad inventory and offers.
The future of e-Commerce utilizing new smart phone technologies is growing exponentially over the next several years. Retailers that invest in their IT systems to tap into this emerging market can grow market share and revenues successfully.
About Jesta I.S. Inc.
Jesta I.S. is a leading supplier of business solutions in supply chain management systems for manufacturers, distributors and retailers primarily in the soft goods and specialty industries worldwide. Jesta I.S. is recognized for its expertise, innovative products and services and its commitment to evolving business solutions in today’s rapidly changing business world. Jesta I.S.’ solutions process essential business management information for well known industry leaders including Perry Ellis International (NASDAQ: PERY), PUMA (German: PUM), Genesco Inc. (NYSE: GCO), Town Shoes Limited, Tween Brands Inc. (NYSE: TWE), Cole Haan, Haggar Clothing Co., Cavender’s Boot City and DSW Inc. (NYSE: DSW) as well as many others.
Jesta I.S. Inc.
P: 1-888-925-5152
Email: info@jestais.com
Web: www.jestais.com
Copyright (2010) Jesta I.S. Inc. ALL RIGHTS RESERVED. All information contained in this document is the property of Jesta I.S. Inc. Vision Store is a trademark of Jesta I.S. Inc. All other company and product names are trademarks or service marks of their respective owners.
The challenges of internet retailing
By Leslie Belcher, President, Jesta I.S. Inc.
At the dawn of e-commerce, retailers were skeptical about the potential to grow sales via the web. Today, however, by integrating e-commerce into their business models, retailers are realizing the Internet’s positive contribution to overall sales. For many retailers, e-commerce has become the gateway into previously inaccessible markets. However, entering this new world of opportunity comes with some strings attached: the Customer is a significantly more sophisticated shopper; inventory fulfillment needs to be optimized; and existing stores must be part of the e-Commerce strategy. It is not enough for retailers to be Multi-Channel capable. Retailers must be seamlessly ‘Cross Channel’ as well.
Customers that shop in the bricks and mortar stores are also passing through the gates of e-commerce and are becoming better informed about the products they wish to purchase. According to eMarketer.com, 70% of online shoppers are making their purchase decisions based on product/service reviews, ratings, and/or advice from friends or family. Only 3% indicated they would rather have advice from sales people.[1]
While consumers appear to benefit from the competition in the market, they have also been impacted by the economic downturn. Each purchase takes on more meaning as consumers cut back on discretionary spending. They are becoming much more informed, willing to actively research products and the companies that sell them.. The Internet has been critical in giving consumers access to other consumers – allowing them to share a wide variety of information and opinions. As they become more informed they become more demanding; consumers now expect a particular level of not only quality, but social responsibility.
At the end of the day, consumers call the shots. Their spending may be slowing but their product/service expectations are on the rise; they want to be able to buy anywhere, ship anywhere, and return anywhere, and still retain the ability to shop online or in-store.
While it would be reasonable to conclude that consumers’ expectations for uniformity make perfect sense, the reality for retailers is very different. Shoppers often receive inconsistent messages from their experiences of buying online and in-store. It is critical that retailers integrate e-commerce into their business models in order to assure their systems are able to uniformly identify their products, promotions, and customer base. As a result we’ve seen the advent of business intelligence tools as companies actively gather as much information as possible about their products and customers.
Internet retailing requires availability of both internet technology and distance payment methods. In their most basic form, multi-channel retailers are using disparate systems, run by separate organizations (and importantly, separate inventories) for each channel. While each unit may be profitable, finding and harnessing synergies to enhance that profitability throughout multiple channels remains elusive. As a result, each channel is effectively run as a separate business, sharing only a common brand logo.
With regard to manufacturing and production, retailers could face logistical complications, government regulations and communication barriers. Moreover, retailers with stores are forced to maintain a balancing act between lean inventory and production capacity. If they are too aggressive they can lose sales by having too few products in stock, however if they attempt to maximize capacity they increase their chances of being overstocked. Web retailers often avoid this problem by using a drop-shipping model (products are delivered to customers directly from the manufacturer).
Sharing sales, inventory, and customer data is perhaps the most critical first step to achieving the benefits of multi-channel retailing. Even if systems are not yet fully integrated, decision makers, from customer service representatives all the way up to the C-level executives will be more informed.
As noted, business intelligence tools are critical in providing decision makers with accurate real time and consolidated information. Adopting a single integrated ERP platform that can manage all channels with the same toolset has many benefits. All initiatives are analyzed and managed together. Inventory visibility is complete and can be shared with the customer and supplier alike in near real time. Customers can easily check in-store availability or the status of an order on-line. Stores can expand their capabilities by presenting various options to customers when confronted with a stock-out such as reserving an incoming unit, sending the customer to a nearby store, or placing an order.
It is critical that management consider shaping their organizations to encourage the success of the brand, not the channel. Brick and mortar retailers have traditionally fostered a sense of friendly competition amongst stores, districts, and regions. However since each was driven to achieve its own goals for their given geography, cannibalization was not an issue.
The boundaries separating brick and mortar from e-commerce retailers are becoming blurry; both types are in search of new markets and consumers. As a result, competition has increased and consumers now expect store-based prices and promotions to match those found online and vice versa. For many consumers, shopping on the web is equivalent of yesterdays “window shopper”.
Very few small to medium sized retailers have bridged the chasm between multi-channel retailing and cross-channel brand management; they have successfully transformed their organizations to give customers what they want, when and where they want it, and benefit from streamlined, efficient management, and greater inventory flexibility. Ultimately, these retailers will be outperforming their peers.
Transitioning from a single channel retailer, to varied levels of multi-channel integration, to the ultimate in cross-channel optimization, one thing has remained constant: the customer. The truly customer-centric retailer has always understood this, and has built up the technical capabilities as quickly as budgets have allowed. Opening up new channels has opened up a new customer base. Integrated reporting has allowed marketers to better target the increasing client base, resulting in higher margins. Those new profits can help fund an integrated system that leverages an inventory investment that can dramatically increase returns and decrease stock-outs. Finally, an integrated cross-channel ERP strategy/system unites the business, reduces costs and optimizes forecasts and execution. All aimed at giving customers what they already expect: anything, anywhere, anytime.
About Jesta I.S. Inc.
Jesta I.S. is a leading supplier of business solutions in supply chain management systems for manufacturers, distributors and retailers primarily in the soft goods and specialty industries worldwide. Jesta I.S. is recognized for its expertise, innovative products and services and its commitment to evolving business solutions in today’s rapidly changing business world. Jesta I.S.’ solutions process essential business management information for well known industry leaders including Perry Ellis International (NASDAQ: PERY), Puma (German: PUM), Genesco Inc. (NYSE: GCO), Town Shoes Limited, Cole Haan, Haggar Clothing Co., Cavender’s Boot City and DSW Inc. (NYSE: DSW) as well as many others.
Jesta I.S. Inc.
P: 1-888-925-5152
Email: info@jestais.com
Web: www.jestais.com
Copyright (2010) Jesta I.S. Inc. ALL RIGHTS RESERVED. All information contained in this document is the property of Jesta I.S. Inc. Vision E-DOM is a trademark of Jesta I.S. Inc. All other company and product names are trademarks or service marks of their respective owners.
[1]“ E-commerce in a recession”,p.6 www.eMarketer.com,
Transforming Retail from Bricks to Clicks
Transforming retail from bricks to clicks
By Leslie Belcher, President, Jesta I.S. Inc.
The economic downturn has created a challenging environment for retailers as the concentration of consumer spending has had a direct effect on overall retailing. Individuals are looking more closely at their discretionary spending and are cutting back most on non-essential products while performing more active price comparison. Today, internet retailing enables consumers to compare prices, save money and limit their delivery costs.
The traditional brick-and-mortar retailers built their IT infrastructure in a piecemeal fashion using legacy merchandising and planning systems to support their growing business (although now it is becoming more expensive to sustain). In the 1990’s, the catalog/call-centre system was introduced to manage that sales channel. Presently, various new web-based e-commerce platforms are helping to grow the business by effectively tying together processes and procedures for the internet channel, with systems that help ensure service excellence by giving the customer the opportunity to buy anything, anywhere, anytime.
Internet retailing is expected to outpace all store-based formats, as most retailers will either enter or expand in the internet retailing channel, while a significantly higher proportion of the world population will have access to the internet. [1]
By the end of 2010, non-store sales will account for nearly 7% of global retailing. Virtual retailers, which initially dominated internet retailing, are coming under pressure from store-based retailers, as they harness the benefits of multi-channel retail, such as collect-in-store options, driving sales and improving the customer’s experience by eliminating common obstacles surrounding order delivery.[2]
The conventional retailing business model is no longer working as it was. Retailers are seeking to transform themselves into multichannel enterprises that will use new channels to grow and to cut service costs without abandoning their traditional strengths; however the systems that worked once to manage brick-and-mortar, catalog and call center channels are not designed to support the complexity of the e-channel operations. While it is typically not feasible to instantaneously change a promotion or a marketing message within the brick-and-mortar store, the same is not true of a transactional e-commerce site which will often provided up to date information at the click of a button.
The virtual channel is expected to put increasing pressure on store-based retailing in the coming years. If retailers remain stagnant they risk alienating their evolving customer base who are in turn becoming accustomed to enhanced services such as order tracking, customer service and online account management, thus increasing operational expenses, leaving them out of the competition and out of their customers’ scope.
In order to be a successful multichannel enterprise, retailers should follow a four-stage process: Create a multichannel strategy; Determine the relative positioning and priority for the channels; Organize for multichannel operation; and adopt best practices for integrating the traditional and virtual business.[3] Their competitive advantage will rely on how they control their multichannel operations. It is essential to ensure the right offering when expanding via online channels. Moreover companies need to have the capability to capture accurate demographic information about their online customer base in order to meet their expectations and be consistent through the channels. To do this, retailers must have the right systems in place to collect such information therefore improving their customer relationship management and service excellence/delivery capabilities.
Finally, the technology associated with e-commerce systems will support a wide range of retail applications offering the ability to improve product supply, enhance service and/or reach otherwise inaccessible markets. Providing real-time data and allowing customers to access to inventory information is crucial for internet retailing operations because is directly related to the effective execution of customer relationship management practices.
Jesta I.S. Inc.
P: 1-888-925-5152
Email: info@jestais.com
Web: www.jestais.com
Copyright (2010) Jesta I.S. Inc. ALL RIGHTS RESERVED. All information contained in this document is the property of Jesta I.S. Inc.
[1] Source: Global Retailing: Expansion Strategies of the World’s Leading Retailers – Euromonitor International, July 2009. P 31
[2] Retailing: New Concepts in Retailing-The thin line between Success and Failure – Euromonitor International July 2009,p.22
[3] Multichannel Retailing: Bringing the New Into the Old. David Flint, Geri Spieler, July 2001.
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