cloudBuy’s Nilesh Gopali writes about eCommerce innovation and the Indian economy

Editor’s Note: Nilesh Gopali was recently appointed to the position of Country Head, India for cloudBuy, based out of Mumbai. Below is the the first in a series of articles he has written for Brokers Forum magazine regarding how eCommerce innovation is both influencing and redefining the Indian economy. 

 

There are obvious links between my present world of eCommerce and the financial community to which I once belonged.  After all, one would be hard pressed not to have seen the ever growing number of stories relating to supply chain finance and the rapidly evolving Purchase-2-Pay industry.  But as important as these areas of connection are, they are transactional in focus.  In other words, they represent the nuts and bolts mechanics of how the new global economy works.

To me when you talk about finance and the economy, we have to look beyond the mechanics of how eCommerce works, to see the actual impact in terms of how eCommerce affects business as an extension of our daily lives.

So here is the vital question . . . how does eCommerce go from being viewed on an individual transaction basis, to having a positive impact on a company’s bottom line, and ultimately the overall economy?  How do we in essence connect the dots?

In contemplating the alignment of these connecting points, I had to consider them both individually as well as collectively.  It is through this dual lens of synchronized understanding that I will hopefully provide you with a big picture view of where economies of the world are headed.

What is eCommerce?

Perhaps an overly simplistic question, your answer would obviously be something along the lines that electronic commerce is trading in products or services conducted via computer networks such as the Internet.  But this is not the end of the answer it is actually just the beginning.  This is because it is not so much what is done, but how it is done that matters.

Connecting Point 1: Wired for business – carrying virtual storefronts in our pockets!

In his May 16^th, 2014 article The Internet of Things and M2M – Some Predictions for a Bubbly Next Few Years from http://bluehillresearch.com/, Tony Rizzo talked about the fact that by “2020 wearable technology alone will be generating 1.2 zettabytes (yes, zettabytes) of data.”  Think about this for a moment in the context of how people will interact in an eCommerce world.  Specifically the devices they will use to buy and sell.  This is the backbone of the new economy, where bricks and mortar storefronts will cede way to virtual stores where buying and selling can happen with a click of a button.

I know, many will say that the shopping experience of actually visiting a store will always have a certain appeal.  While I am inclined to agree with you to a point, we simply have to consider what has happened in the newspaper industry to see that tactile interaction is more of a luxury than it is a convenience.

In talking about the future of the news print industry in his July 22, 2009 address at the Commonwealth Club of San Francisco, media industry veteran J. William Grimes had predicted that there will be no daily newspapers in the United States within 5 years.

Referencing statistics which indicated that print newspapers’ share of the $37 billion spent on advertising was 15% – down from 25% a decade earlier, Grimes pointed out that only 5% of our collective time is spent reading newspapers.  This he concluded “is not a sustainable model.”

Even though Grimes’ apocalyptic prediction regarding the demise of print media, as cited above, hasn’t materialized to the degree he had expected, no one doubts that electronic media is the wave of the immediate future.  And while the newspaper industry has mostly struggled with making the necessary transition to the virtual realms, it has nonetheless pursued the transformation to its new reality.  We of course see practical evidence of this transformation every day when, instead of purchasing a print newspaper, we simply look at our iPhone or tablet to read the latest news.

Within the same context of the Grimes’ prediction, a parallel between the newspaper and retail industries was drawn when AP Retail Writer Mae Anderson wrote; “No one thinks physical stores are going away permanently.  But because of the frenetic pace of advances in technology and online shopping, the stores that remain will likely offer amenities and services that are more about experiences and less about selling a product.” Like the newspaper industry, changes to the retail business model have to be made to reflect this new reality.

Connecting Point 2: Structuring a new business “service” model that’s truly “wired” to connect with the consumer

In considering the form that these new business models will take, Forrester analyst Sucharita Mulpuru indicated that bricks and mortar stores of the future will be more about “services, like day care, veterinary services and beauty services,”  while the “online and offline shopping experience” will feature more drive-thru pickup and order-online, pick-up-in-store services. Even when we physically visit stores Mulpuru concludes, “Checkout also will be self-service or with cashiers using computer tablets.”

In short, and like newspapers, the way we transact business will change dramatically requiring the development of newer more robust business models to create new streams of revenue to replace the old.

All of this as cited above will have a major impact on a company’s bottom line, but not in the traditional manner one might expect.

Referencing the newspaper industry once again, one may wonder why the Grimes prediction did not come to fruition.  The answer can be found in the following excerpt from a recent (2011) article in Publishing Executive:

“Digital publications are not necessarily more profitable or even less expensive for publishers to produce than their ink-on-paper counterparts. But don’t tell that to the folks who shelled out hundreds of dollars for a tablet or e-reader under the often erroneous assumption that they would end up saving money on publications. Even media experts are confused on the subject.”

So if the issue is not one of cost in the traditional sense, then what are the underlying factors that are redefining the print media model?  It is the connection with the reader themselves.

The Electronic Journal of Communication identified this readership connection – or disconnection as it can be called, when they reported the following:

“Similarly, Lain (1986) states that “newspaper editors and publishers have been aware for some years that their audience, if not actually slipping, is not keeping pace with the growth of the population” (p. 69). Katz (1994) writes that “for millions of Americans, especially young ones, newspapers have never played a significant role” (p. 50), and that this is but one aspect of the larger problem, that “newspapers have been foundering for decades, their readers aging, their revenues declining, their circulation sinking” (p. 50).”

In similar fashion, the everyday retail consumer is moving away from the traditional in-store shopping experience to one of virtual convenience.  But similar again to the print media world, it is not an either or proposition, but one of blended service capability.

In a March 20^th, 2014 Financial Post article titled “How bricks-and-mortar stores are looking more and more like physical websites,” the blended model brings the physical and virtual realms together as a compliment to one another.  By capitalizing on the unique strengths associated with an in-store experience, stores now see the Internet as a means to boost both customer service and sales through advanced services such as pre-store visit express check-outs.  This of course reflects Forrester’s Mulpuru’s take on where the retail industry is headed.

Outside of the consumer or Business-2-Consumer relationship, the same operational framework of technological convenience also applies to Business-2-Business interactions between buyers and their suppliers.

In fact, and as pointed out in their company blog article ‘Risk awareness versus risk aversion in the emerging B2B Marketplace’ written by cloudBuy Chairman Ronald Duncan, “Consumer experience, it is safe to say has forever changed the business world’s approach to B2B engagement.  Specifically, people now ask the question “why can’t we have the same experience sitting at the office as we do at home?”

In the end, the coming together of the traditional retail storefront and the eCommerce world will enable businesses to streamline their existing operations to create a far more robust cost model that delivers solid profits and exceptional customer service.

Connecting Point 3: The Smaller Engines That Drives the Bigger Financial Picture

When I initially took a step back to identify the connection between individual company financial performance and the collective impact on the general economy I was immediately reminded of an article I read which talked about the “Bike Rack Effect.”

It is a compelling read that talks about a city council meeting in which a larger more expensive project regarding a $100 Million power plant zoning change took less time to approve than the a request to build a $10,000 bike rack for city sidewalks.

In referencing British historian and operations researcher Cyril Northcote Parkinson’s book Parkinson’s Law, the author explains that while the power plant is so expensive to the point that the sums of money are hard to frame, the bike rack is more tangible.  In other words council members did not likely understand the complexities surrounding electronic power generation and the related costs but, they almost all have a bicycle and bicycle rack.

When we talk about eCommerce and the economy, Parkinson’s Law equally applies.  As such we tend to get locked into the minutia of the mechanics of eCommerce such as ordering on line, while overlooking its broader economic impact.  This doesn’t make the latter point any less real, it just means that it is less accessible in terms of understanding – or connecting the dots.

So how does eCommerce drive the economy . . .  by empowering small business growth!

According to just one of the many reports on the importance of small business to a nation’s economy, 50% of the United States’ gross domestic product (GDP) is generated by the nearly twenty-seven million small enterprises in that country.  The numbers while different, are no less influential in the robust economies of other countries around the world.

The advent of eCommerce has played a significant role in stimulating small enterprise or non-employer business development and growth as reported in a 2013 Forbes article The Rise Of The Million Dollar, One-Person Business.  In the article, Elaine Pofeldt talked about how an increasing number of non-employer or sole proprietorship enterprises had for the first time broken the $1 million mark in sales.

In explaining the breakthrough Pofeldt indicated that “technology is probably helping some entrepreneurs break sales records that they might not have been able to achieve before the internet era by expanding their reach.”

The fact that total revenues from these microbusinesses rose to $989.6 billion, up 4.1% from 2010 speaks to the importance of the eCommerce influence.

It is also at this final connection point that it all comes full circle through the introduction of facilitation platforms such as a cloudBuy.

Concluding Remarks

In the end, eCommerce brings together more effectively than any other vehicle in history, the different yet complementary strengths of large and small businesses respectively.

In a recent Houston Chronicle article by Stacy Zeiger she writes; “For high-value items such as designer clothing, antiques, jewelry, furniture and cars, a retail storefront will appeal more to customers and generate a higher profit margin on individual items.”

Zeiger then goes on to say that while “A retail storefront will perform better for a business that sells a select amount of products, an online store may work better for a business that carries an extensive selection.”  The reason is that on-line businesses are generally cheaper to open and run than their physical storefront counterparts.

By enabling each business model to play to its strengths, it is clear that everyone benefits.

Or to put it in more precise terms, these same small business owners are also themselves consumers.  The more successful they are in their business endeavors the more money they will spend in their personal lives.  And the circle connecting all the points from consumer to business to the overall economy will continue to turn.

In my follow-up article in August, I will examine more closely the B2B connection, and how the eCommerce evolution is redefining the buyer – supplier relationship model, including what it means to the consumer.

 

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