Building a European eCommerce Heavyweight Digital Transformation for European Retailers
The Retail world is changing very fast. Amazon, Alibaba are the big players who will dominate in the near future some eCommerce segments. ECommerce is gaining more market share across Europe over the traditional sales channel. Retail companies with brick and mortar store model are struggling with their business model. Their adoption of eCommerce is bound to their historic legacy and not technology and user experience focused.
The European market is not a homogeneous retail market like the US or China is. Across all segments the market is very heterogeneous. This heterogeneity prevents that Europe will create a single strong eCommerce player which could be dominant player against Alibaba or Amazon. Since the heterogeneity is a fact which can’t be changed, to create a European eCommerce champion a different approach is needed. Otherwise Amazon and Alibaba will become a serious threat to the diversity of the European retail market, not only for the eCommerce segment.
Through the heterogeneity there will be no single company which can dominate across most retail segments. The local niche products are part of our life and make up our cultural identity. Global unification of products will damage our cultural identity and will split our society into the poor mass, which can’t afford regional products and those who are interested in local products and can spend the money on the premium. Beside this we will lose the war about technology to the US and China.
From a business perspective the window to establish a European alternative to Amazon and Alibaba will close quite fast. To establish such alternative the required investment budget is bigger than this of a single retailer. A European alternative to Amazon and Alibaba can only build as a platform which defines the user interaction point and act as end to end process Integrator from producer to end customer.
Below we describe the key elements of such a platform and what does it mean for the partners participating in such a platform.
User Experience view
To the end customer such a platform must be able to satisfy 60% of the retail needs of a customer. This means that the product mix depth must suit the different customer groups, deliver search results which map to the user preferences without overwhelming them with variants, identical offers from different suppliers and products which are not considered by the customer group. But the user experience is not only defined by the search experience. The platform has to set the standard for accessing information and to build the awareness for offerings.
The current approach of comparison portals to offer direct buying capabilities are below the approach described above. A portal must offer the brand more distinction than only the price and has to offer brands and producers the ability to promote their offerings. A pure comparison approach will limit how customers are informed about new offerings. The platform must fulfil the aspects from retails marketing about awareness and information. Any brand can add additional information, when the customer is getting into the brand world.
Since this experience is not only focused to our current app and website-based approach. The platform has to define through which technology, the information is accessed. Digital Assistants, Smart Home Appliances or cooking- and styling guides can be the interfaces to interact with the information of the product catalogue.
This platform will free the retailer to attract customers to his site. The retailer must care about the competition on the price, quality or on the customer service domain. Here he can strengthen his brand profile within his target customer group. The retailer will maintain information into a global product catalogue maintained by the platform, but will be the master for CPQ (configure price quote), recommendations and user flow within his offerings. Like Amazon the basket and payment processing must be owned by the platform to allow an uninterrupted user experience. User information is shared across the participants of the basket and added to KI knowledge provided to all participants.
From the user experience perspective retailers can focus on their primary domain to present the offerings in a competitive way to the customers. The platform must provide an unrivaled user experience which will attract a high percentage of users. Through the cultural heterogeneity, the user experience must match the cultural context. The effort needed here to reach the pole position is economically only acceptable when a large portion of retail segments provided per cultural market.
Retailers view
The platform will free the single retailer from a permanent technology management. The platform will provide the technology offering. The adoption of these offerings in the business processes and offerings tailoring is up to the imagination of the retailer. The retailer can focus his Unique Selling Point stricter to his brand potential.
The retailer has to transform his strategy from brick and mortar first to an eCommerce first strategy. This strategy change will spark a transformation of his organization and business processes. But it will help him to keep his market share. Brick and mortar should be an essential part of an eCommerce first strategy, but they must be connected. Such a strategy change can’t be done in a single fiscal year. There is a roadmap needed how the participation in the platform will transform the retailer.
The platform can help here as a consultant, since all participants will face similar challenges. Participating on the platform without the transformation will not yield any benefits for the retailer. Instead, it will raise his costs, since he has to maintain information twice.
Through the end-to-end process integration of the platform the retailer can change his business model. Warehouses are no longer to key to perform the business. Listing of new suppliers for local products and stores are much easier. Maintaining standard product description must be no longer paid by the retailer since this will be part of the global product catalogue.
The retailer business process will be reduced to the core of retail:
· Assortment definition
· Contract management
· Pricing strategy
· Store navigation (online + brick and mortar)
· Customer service offerings
This will reduce the complexity of the retailer’s technology and focus the workforce on the key aspects of retail. The platform is then an essential part of the business model of each retailer. Retailers are attached to the platform act more as investment partners. They can submit requirements for their business, but are not allowed to steer the platform.
In terms of user experience the platform will set the standard which could be extended by the retailer depending on his brand image. Brands will be a store inside the platform. User data is owned by the platform, but shared if the user performs actions with the brand offerings.
The platform offers the retailer a geographic KI based forecast, which are above the data he gets from his own customer base. Here the platform can provide better and faster data since the all processes from the ground up digital designed. The forecasting and reporting can be tailored to retailer need, but the technology and data is provided by the platform.
Logistic View
The current logistic scheme, where each retailer has either his own logistic department or uses external logistic companies for his needs is no longer suitable because of these reasons:
· The end user must deal with multiple shipments
· The ecological footprint of end2end logistic is no longer acceptable
· Warehouse by retailer doesn’t conform to availability exceptions of end customers
New logistics concept can only develop when the warehouse to customer process can be unified across multiple retailers or from a big player like Amazon.
In the long term the platform will reshape the logistic world through a completely digital integrated end-to-end supply chain process. If warehouse information is present in the platform for any stockist (logistic company or retailer), the owner of the warehouse is no longer relevant for data exchange.
New schemes for warehouse management are possible. Ranging from reserved stock for retailers, sell and buy stock from retailer to retailer dealer with understock but general availability on the warehouse.
Even for return handling is dedicated warehouse management a much more efficient way for processing returns on different retailers. This allows the fast detection of fake customer accounts, since the data are not bound to a single retailer. All the processes Amazon has put in place can be applied through the large database.
On the other hand, the shipment to customers can be optimized to deal with a single shipment per customer defined period. Give the customer a better feel about his ecological footprint and even optimizes the space in long haul transports. Reducing the shipment cost per offering could be achieved since the platform owns the checkout. Warehouse management providers could define new patterns, how they optimize the stock picking and packing.
Optimizing the shipment for warehouses to metro region is another area where the platform model offers new business opportunities. The last mile in metro region could be served by much less providers, when the end-to-end supply process is integrated in a single platform.
The forecast and reporting capabilities the platform provides for warehouse management and supply logistics will help these companies to perform their business models more efficient.
Producer View
For the producer there will be easier integration of his offerings in the end-to-end process. The platform will act as a B2B marketplace where producer can place their products and maintain the catalogue information. Retailers can pick from this catalogue, define with the producers their contracts and assign the warehouse and logistic to the contract.
Small suppliers get business applications provided and do not have to keep the specifics of the stores in mind to which they deliver. Even the producer may no longer need to take care about the delivery. For local available goods, the amount of available products is not based on request it bound to the production capacitiy. With the platform the producer can easy managed demand and supply. Overstock may can be fast sold without the need of discounts.
Summary
The chances that a single European retailer will be a strong competitor to Amazon and Alibaba are very low, since none of these companies have the financial power and management know how to build a technology focused competitor. The user expectation is to have one single entry point which is usable for nearly 60% of their buying needs.
To compete against Amazon and Alibaba a strong collaboration between the biggest retailers needs to start up an eCommerce platform which will be the user's first choice. From eCommerce the link to new concepts for brick and mortar stores is required to raise the revenue for all parties linked to the platform.
An open European eCommerce platform would not transform single companies it will digital transform the business landscape for retailers and logistic companies. The transformation force alone will bring more innovation to market as a single large eCommerce provider can deliver.
The platform will be the major technology provider in the Europe. It will be the driver for KI, user interaction devices and user experience. The platform can’t be delivered by a single company. The platform will be managed by a dedicated company which offer a development platform where innovation can integrate in different domains from different partners.
The scope of the platform is not limited to the European market. Through the heterogeneity, the platform could be pushed to any market, if the market can be transformed with multiple player on the platform.