Cash is King

Many factors influence a customer’s decision to buy. For example, price, service, convenience and location. These and other less obvious factors, also influence the customer experience through his interaction with the business and use of the product or service. If sellers can identify the key factors that influence customer experience they may well find the means to convert new or one off buyers to repeat purchasers.

To illustrate the point an account of my personal experience is given below. Recently I decided to complete a long overdue paint job. The subject area was painted over 10 years ago. The paint was a non standard mix. Of course, I could not remember the name of the mixture.

The paint used belonged to a popular local brand. The sales representative at the particular dealer shop was quite helpful and after comparing a paint swatch with several color cards he identified the closest match. I purchased a gallon of the paint. However, when applied the color was off.

I stopped and returned to the dealer. Buying paint to find the right color could be costly and wasteful. So I thought maybe I could get samples of paint, apply them and see which matches the color. Even if I had to pay a few dollars for the samples … no problem. To my disappointment, there were no samples. The smallest size on sale was a quart.

Next, I called the head office for expert assistance. I inquired about a technical way to match a color in a photograph to a paint color sold. I texted a photograph containing the color. Unfortunately, only a manual mode existed for matching paint colors. The color suggested was similar to that recommended by the sales representative.

Well as they say there’s an app for that. I searched the App Store and downloaded an app for a popular brand of paint. I uploaded a picture of the color into the app and the app matched the color of the photo to a paint color sold by the company. It even suggested complementary colors one of which I had used in the past. I went to the local color shop, presented the color code and purchased the paint. It was more expensive but it was the exact match.

What an experience! I don't have to remember the name of the paint I used many years ago, now or in the future. So guess which is my favorite paint shop? They solved my problem.

Both manufacturers sell paint, however, one better understands the needs of their customers. This manufacturer provides tools for the customer to match, select and purchase paint that matches a desired color. The manufacturer made what appeared to be a difficult task easy. The entire process was within my control, the app was easy to use, it took minutes and I found what I wanted. With the other manufacturer it took days and not match was found.

App making is not advocated to enhance customer experiences. However, asking a few simple questions will drive you to creative solutions. What challenges are customers likely to face in making purchase decisions? How can you make it easier for customers to make purchase decisions? If you address these questions appropriately, you will enhance customer experience and create long term patronage.

E-commerce is Complex

The complexities in doing e-commerce are not fully understood by entrepreneurs. Of course, you can make money in e-commerce. However, running an e-commerce business is not as easy as it seems. To be successful, entrepreneurs must navigate the legal, technical and operational complexities of e-commerce.

E-commerce legal agreements are among the most formidable agreements found online. However, you cannot afford to click to accept the terms and conditions, and move on, without carefully reading and understanding the agreement. Ignoring the agreement can have serious negative implications for your business. After all, these contracts have a direct impact on the business receipt payments, cash flows and ultimately, its success.

As always seek legal advice. Unfortunately, legal advice cannot advise to change any offending terms and conditions in the agreement. This is a one-sided affair. The payment service provider calls the shots; take it or leave it. However, the advice will help your business understand its performance obligations, the impact on its operations and how certain events, like chargebacks, are handled.

Integration of the e-commerce solution into your website requires a technical hand. E-commerce solutions have two main components: the shopping cart and payment management systems. 

Fortunately, many shopping carts support different payment systems. Selecting the best systems for your business is a function of application, volume, complexibility and affordability. Finding a developer with the experience and knowledgeable to work within your business scope, deliver on time and provide value for money is a challenge.

Legal and technical considerations affect the operations of your business and then some. It is advisable to define all operational procedures before you commence business. So that when certain conditions occur you can refer to the procedures and respond effectively and professionally. The exercise of defining operational procedures beforehand can help your business identify and better manage risks.  

How do you deliver the perfect package? Duh! The typical response is: “Give it to the delivery service”. However, the answer is more complex. Let’s break this down: How does the package arrive in perfect condition? How does it arrive with the right documentation? How do you deliver the package so that it meets the customer’s expectations? What are the customer’s expectations? How do you cost delivery? Would free delivery work for your business? If so, at what order value? Delivery is not a function your business simply hands over to a third party. If anything goes wrong in delivery your brand will pay the price.

The challenges inherent in e-commerce are not insurmountable. They must be identified, fully understood and carefully addressed. There is a learning curve which your business can traverse and find the proverbial pot of gold, at the end of the rainbow.

Faster Deliveries are Bad for Retailers

Recently, I purchased an item on Amazon that took only four days to arrive in Trinidad and Tobago and be ready for pickup. Wow! In the past, this would have taken 2 - 3 weeks. Some deliveries my still take that time but it is a clear where delivery times are headed.  This is a strong testimony to logistics improvements by online retailers and the local delivery services. Soon deliveries of foreign packages could take 2 days or less.

The delivery time for my package was equally shared. Two days from Amazon warehouse to my skybox in Miami and 2 days from Miami to Trinidad and Tobago including customs clearance. So, a 1 – 2 day timeframe is not farfetched.

Amazon has a free two hour delivery service in Miami for Prime members. There are some restriction to the items and postal code. That is, not all items are delivered within the 2 hours and it depends on the location of the delivery address in Miami. However, the items and areas under coverage are expanding.

Same day delivery by Amazon means that packages can be ready for pickup locally in just 2 days. In other words, I can purchase an item on Monday and be wearing it on Wednesday. Skybox services can offer faster deliveries as a premium service to customers; an additional income source.

A drawback to online shopping has been the delivery time. Local brick and mortar retailers have the advantage of buy it now, get it now. However, this is weakening. As the delivery gap shortens more persons will shop online.

This does not bode well for local retailers. Already, they are unable to compete on price, variety and, of course, service. Now their main advantage (ready purchase) is under serious attack. Another silent but dominant factor is search time. It is easier and less costly to search for an item online compared to visiting brick and mortar stores.

However, we cannot discount the shopping experience of visiting the malls and trekking from store to store. Nevertheless, more persons may browse at retail stores rather than shop. The availability of 24 hour delivery service by local couriers means that local online retailers can capitalize on the shift to online shopping too.

Is this the end of brick and mortar retailers? No not at all. However, for some businesses it is a sign that their industry has matured and is on a steady decline.

Make Money! Offer Great Service

Many persons seek a great product to sell. The right product will move quickly and generate a mountain of cash. Some persons find the right product but most don’t. A few persons take common everyday products, deliver great service and build a successful business.

Good service can make a big difference. Whether a service or a product is sold, there is one thing that is essential – the service. In other words, if a service is sold we must deliver good service. If a product is sold, good service must be delivered too. In Trinidad and Tobago, the most neglected aspect of business is the service.  Generally, more attention is given to the physical product than service delivery. That may change if we looked at service as a product (SaaP). 

Service is intangible. However, if we think of it in the context of a physical product we may better relate to the qualities that make service standout. Physical products have discernable qualities like the value derived from its use. Physical attributes determine the utility of the physical product like features, quality of components and design. Service has its own attributes. According to Berry et al (1990) the primary attributes of good customer service are and I quote:
 “
1. Tangibles. The appearance of physical facilities, equipment, personnel, and communication materials.
2. Reliability. The ability to perform the promised service dependably and accurately.
3. Responsiveness. The willingness to help customers and to provide prompt service.
4. Assurance. The knowledge and courtesy of employees and their ability to convey trust and confidence.
5. Empathy. The provision of caring, individualized attention to customers.
”
As can be seen most attributes are human driven. 

Service must be delivered at a predetermined standard. The standard must be acceptable and differentiated. Customers must know the service quality to expect. The expectation must be that of a positive experience rather than a negative one. In Trinidad and Tobago, where service standard are sadly lacking, service differentiation is not difficult. 

Consistent customer experience means that service delivery must meet or exceed a minimum acceptable level every time. Since service is primarily a function of human interaction it is important that the service providers display the right attitudes and behaviors. Moreso, individuals must have the presence of mind and self-control to effectively manage encounters with customers. This is an important skill. Staff training and selection are critical to having persons with the right disposition.

Innovation is lacking in service. Most innovations are product related. However, innovation is not limited to products only. Service is an open field for innovation, especially in-house innovation. Improved customer interaction is not meant to paint a broader smile or extend a longer arm. It means alteration of the customer engagement process. In other words, what can be done to enhance customer experience.

Like everything else service has a cost. There are tangible costs, quantifiable in dollars and cents and intangible costs. Intangible costs cannot be quantified but contribute to the inherent cost of doing business. Intangible costs may not be directly associated with the business but can be incurred by both firm and customer. For example, the cost of telephone calls by a customer to a business. Phone costs may be negligible to the customer but the time taken to make repeated calls can be aggravating. What can be done to reduce the aggravation?

Great service can successfully sell most products. In the online world service matters most. One parting caveat, the customer is not always right, however, the response to the customer, even if he is wrong, should always be the right one. 

Facebook is Not a Shopping Cart

Facebook is a great social tool. Because of this many persons use it to conduct sales. While it offers a great social experience it is not suited for a shopping experience. Facebook is ideal for marketing and advertising. However, it cannot help you manage the sales process.

There are several requirements in the online sales process. This includes product display, product information, the sale price, a payment mechanism, delivery options and after sales support. Sellers using Facebook as a sales channel are unable to integrate the above requirements. The first three are normally seen on the page wall. The other requirements are normally stated in the about page or provided, if a customer ‘inboxes’ the seller.

The shopping experience on Facebook is very disjointed. In this way, Facebook is really used as a catalogue rather than an online store. You scroll though the posts, see what you like, contact the seller and arrange for payment and delivery.

What differentiates the use of Facebook in this way is the social benefit. Facebook lends legitimacy to an operation, especially, where there are numerous followers or likes and the page is quite active. Some sellers do a very good job of showcasing their wares and have engaging posts. Hence, Facebook is used for product identification and seller evaluation. Often not much product information is provided. The other steps in the sales process (payment, delivery and after sales service) are handled offline or face-to-face.

There are major drawbacks to Facebook as a catalogue. Firstly, there is a lack of organization. Items cannot be grouped of categorized. Hence, shoes are found in the same basket containing clothing and accessories. Secondly, a search mechanism is absent. Items posted previously may have shifted in their relative positions due to comments made to the subject post or other posts. In addition, as new posts are made older posts are pushed down. Hence, finding an item you saw previously can be difficult.

Many sellers are not aware that Facebook has third party shopping cart apps. For example, ECWID and Shopify. These apps provide a real online shopping experience for customers. Many of them have a free option where you benefit from the full features of the app with a few restrictions. Typically, the pricing plans are tied to the number of items displayed. Prices are relatively low. Personally, they offer tremendous value for money.

The apps are relatively easy to set up. Within a day your storefront can be up and running. Features include storefront display, integration of standard online payment systems like PayPal and a robust back office system to manage orders and fulfillment.

Including an online payment system is not necessary. That is, the apps allow you to offer traditional payment options like cash-on-delivery and bank deposits. They allow Facebook sellers to conduct sales in a professional manner and give their storefronts a well-deserved facelift. Yes, they are customizable.

The benefits of the apps go beyond the aesthetics. They provide a cheaper alternative to building a website. Successful Facebook sellers eventually migrate to a website, mainly, to better manage the sales process when demand increases. This can be a nightmare and there is always the challenge of migrating customers from Facebook to the new website. Because these apps allow you to professionally manage the sales process in Facebook there is no need to build a website which can take a long time. With these apps sellers can market to customers in Facebook and manage an integrated sales process in Facebook.

The apps save you time, money and of course, the headache of building a new website.

Understanding the e-Commerce Industry

To understand the e-Commerce industry one must understand the e-Commerce value chain. The value chain has three main stages: order processing, payment management and delivery. The payment management underpins the value chain. The lack of an effective payment solution has stymied integration of the stages in the local e-Commerce value chain.

Order processing is the process of selecting, ordering and delivery of an item to the shipper. Generally, this function is managed using a shopping cart. For example, ECWID, Shopify and WooCommerce. The shopping cart has two parts: the front end (or store front) and the back end. Customers see the store front; it facilitates item selection and order placement. The back end allows the seller to manage the product catalog, customer information and order status. Tied to this is the warehouse function to manage inventory. Customer support is important to handle queries and order issues.

Payment management deals with payment collection. Third party payment systems, like Paypal, facilitate online payments using credit or debits cards. Payments are processed through intricate layers of security, authorization and third parties (financial institutions) to the transaction. There is usually a delay between the payment by the customer and the receipt of funds by the vendor. This can take weeks and other hidden fees can increase the transaction cost for the seller. Other means of collecting payments include COD or bank deposits.

Delivery gets the paid order to the customer. This process can be handled by the seller or by a third party service. The latter can provide online tracking information for packages. The key to delivery is time and cost. Standard delivery times are normally free or at a low cost. Faster delivery is more expensive with customers paying a premium for same day delivery, if possible. Free service can be used as a sweetener to encourage sales. It is important to understand the economics of free delivery and how it impacts your profit.

A critical aspect of delivery is packaging. Packaging can reduce weight and increase space usage thereby reducing cost. Packaging has evolved into a science with Amazon recently revamping its packages for optimal use. Finding the right package sizes is important. Generally, sellers do not have the volume or capital to invest in packaging, nevertheless, it is a very important consideration. Finding packaging suppliers with the right sizes and fillers is also important.

Assurance is given to the customer through a process called chargebacks. A chargeback occurs when funds paid to the seller are reversed and returned to the customer’s account. This normally arises from dissatisfaction by the customer. The reversal is not issued by the seller but by the payment processor. The payment processor acts as a guarantor providing additional comfort to the customer. Chargebacks works against the seller but it is a cost of doing business from using a payment mechanism that increases sales.

In subsequent posts I will explore each of the stages in detail.

Local E-Commerce Market Potential

The potential for local e-Commerce is significant. In 2013, the foreign e-Commerce market size was $530 million. In 2014, the estimated market size was $621 million; an estimated growth of 17.1%. Despite any supporting data and based on its infancy, we can safely say that the market size for local e-Commerce is considerably less. My opinion is that the market is less than $10 million. However, there is substantial room for growth.

Based on a report by Ecommerce Europe, the European retail online revenues for goods and services in 2013 were €363 billion. This represented a 16.3% increase from 2012 and 2.2% of European gross domestic product (GDP). In Europe the top 5 mature e-Commerce countries are the U.K., Germany, France, Austria and The Netherlands. The first 3 countries account for about 61% of the market. In Europe, internet penetration is 74%.

According to emarketer.com, U.S. retail e-Commerce sales were $263 billion in 2013. This represented an increase of 16.9% from 2012. In 2012, the growth rate was 16%. In 2013, the top categories were computer and consumer electronics (21.7%) apparel and accessories (16.7%) and auto parts (10.2%). The categories that saw the largest growth were books, music and videos (18.5%), apparel and accessories (17.6%) and auto parts (17.3%). In 2013, e-Commerce represented 1.5% of U.S. GDP.

No doubt e-Commerce can play a significant role in the economy. According to the international consulting firm, McKinsey and Company, e-Commerce can contribute as much as 3% of GDP for developed countries. For developing countries it is much less. For example, in African countries it is 1.1%; for Nigeria it is 0.8%. The lower the contribution the greater the potential for growth. Of course growth is dependent on the ICT infrastructure and internet penetration in the country.

In 2013, foreign e-Commerce represented about 0.37% of Trinidad and Tobago GDP. Certainly, local e-Commerce is a fraction of that. It is unlikely that the local e-Commerce market size will exceed that of foreign e-Commerce. Nevertheless, this new industry can generate considerable revenues. As can been seen by the growth rates for foreign e-Commerce and that of the US and Europe, local e-Commerce is likely to experience explosive growth.

Let us gain an appreciation of the potential market for local e-Commerce. From 2009 to 2013 the average GDP in Trinidad and Tobago was TTD 140 billion. Assume the market can grow to 0.1%, 0.15% or 0.20% of GDP. The potential market size in the short- to medium-term is TTD 140 million, TTD 210 million or TTD 280 million, respectively.

As you will agree we are a long way from the horizon. Nevertheless, as we develop the local e-Commerce industry do not lose sight of the high stakes.