Retail in Asia

In Trends

Taking Stock: E-commerce basics for retailers: Keeping it simple, scalable

From mail to logistics to retail to financial services, Singapore Post has gone a long way in its 150-year history, transforming its offerings as the needs of consumers and businesses evolve. It’s newest venture and innovation: e-commerce.

Marcelo Wesseier, Senior Vice President of e-commerce, Singapore Post, said the company today is working with over 200 brands and retailers across Southeast Asia in five e-commerce areas: technology, warehousing, logistics call centers and digital marketing services.

Its transformation is not surprising given that Singapore is now among the top 20 countries in the world in e-commerce readiness, according to Forrester Research. Wesseier cited that according to the research firm the global market for e-commerce is projected to jump from $1.3 trillion annually to $1.9 trill by 2016.

Asia-Pacific corners about 30 percent of the market, with the biggest chunk in Japan and China. In Southeast Asia, the market is only about 10-11 percent or about $40 billion annually but with 600 billion people living in the region, the potential is big.

"We are not huge yet but we see a lot of potential," he said.

For this, he said brands and retailers must be ready for the e-commerce takeoff and benefit from the potential the market has to offer. However, as companies race to put in place an e-commerce strategy, he stressed that the most important thins is to get the basics in place, to make it work for the organization and to use data well to make better business decisions.

"You don’t need to have the greatest technologies as long as you have the basics in place," he said.

At the Retail Innovation & Management Forum 2013 held in Singapore, he shared the following trends that are shaping the e-commerce industry and some of the key factors to succeed in this space:

1. Marketing is significantly getting more expensive, while technology gets cheaper. Thus, he said marketers need to get a lot wiser on spending marketing dollars.

"My first implementation of an e-commerce product in 1998, we spent almost $100 million in just the e-commerce set-up. Today it’s a lot cheaper than that, especially with open source," he said.

2. Build a business that is scalable. One thing that retailers need to be prepared nowadays is huge spike in traffic and the seasonal fluctuations. In 2013, he said there was a 10-fold increase in Black Friday traffic compared to the previous years. This was followed by Cyber Monday, the Christmas shopping festival. In Southeast Asia, he said the shopping frenzy usually lingers until after the Chinese New Year before it tapers off.

"When you set up an e-commerce business, make sure that your business is scalable so you can handle these peaks," Weisser said.

3. Know why people are coming to your site. Product range, price, fast and reliable delivery and convenience are what usually drives customers to the e-commerce sites. Knowing which of these factors bring the most customers into the site will help retailers customize and tailor fit offerings for them.

"They come to your site hoping to find what they are looking for. If you are just offering five products that might not be big enough. So the bigger your product range the better. It doesn’t mean that you have to have everything in the planet but in that specific segment of the market you make sure that you have everything," he said.

Another thing, he added, is that most customers are driven to online shopping because of the price advantage. However, it does not mean that brands need to compete on price alone. There are many retailers that do not compete on price but can offer other advantages including fast and timely delivery of products and making it easy for customers to actually buy things online.

4. Measure everything. This includes paying attention to the number of people that come to the site everyday, the conversion rate and the churn rates as well. It is also best to keep a dashboard where everything can be seen at a glance – daily revenue, key KPIs, and movement of goods

"Many startups actually do not look at profitability yet. However, if your gross margin after logistics and marketing spend is negative that means you are never ever going to earn revenue," he advised.

In Southeast Asia, he said the conversion rate will be inherently lower as a percentage of total retail at only 1 percent compared to around 9 to 10 percent in other parts of the world. However, this is changing.

By calculating a customer’s lifetime value (CLV) or the value of one customer that attract to your site, he said you can determine how much money you can spend on marketing.

5. Search engines, mobile important. "Pay attention to search," he said. "The highest value customer you get is usually from search, but mobile is important as customers are using their phones most of the time. It pays to keep track of all your search tools for conversion analysis. However, direct traffic is also important. If you have 60 recent direct traffic you are doing very well."

Lastly, he said make it easy for customers to re-order goods from the site. This is one sure way to encourage repeat visits and fostering loyalty.

Taking Stock is Retail in Asia’s fortnightly column dedicated to showcasing opinions from experts in the retail industry.