[TLD Weekend] Why most companies are bad at ecommerce

At Momentum Works, we have written extensively on ecommerce, simply because we’ve seen it, eat it, and lived it. This post will be slightly different than previous ones, for a change. Let’s consider this as a guide to ecommerce, for beginners.

Truth be told, there’s no shortage in players who’ve done well in retail, only to decide to launch an online store. These companies simply launched a website, put some inventories online, and branded themselves as ecommerce.

The truth is, they’ve got no idea how to run an ecommerce, and after a few months they simply just shut down, or become zombies. Let’s examine where these companies failed.

1. Speed of service

Too many “small” players (we call them small because if they were big, it meant they had most of their shit sorted out), think their job is done, after the customer check’s out (and pays for the product). Instead that’s NOT the case. Infact, what happens after the check out process determines if the customer decides to come back again or asks for a refund.

For one, the speediness of the product arriving to their doorstep is the number ONE priority for the customer. After all, it’s probably the first time they bought from you, and scams are still quite prevalent (in Southeast Asia and many countries). To remedy slower shipment time, big players have resorted to establishing proper CRM systems to communicate with the customer after he/she places an order. This is not usually the case for smaller players.

But, really think about it – a simple SMS to confirm the order goes a long way in assuring your customer. The cost? A mere few cents.

Orders arriving on time – is actually the main bottleneck for many ecommerce players. Complex operations may be needed to process orders speedily – from order processing, procurement, warehousing, even to delivery. Gone are the days where you receive an order, drive to the post office and send the parcel out. You could do that for your small business, but definitely not for a complex ecommerce operation with hundreds/thousands of orders per day.

Again, it’s true customers these days are spoilt and often impatient, but smaller players are up against bigger players who typically deliver within a few days. So this sets the bar pretty “high” (or low, depending on where you are staring from).

2. Quality of product and service

These days, we’re all too familiar with products which are made in China. Quite often, the cheap ones are mostly synonymous with inferior product quality. Ecommerce sites are definitely not immune against inferior products.

One simply needs to go onto Taobao or Alibaba – there will so many sellers selling one specific product, with varying prices. So, how do people know if the product is of good quality? We would contend it’s quite difficult, and most often, consumers will rely on pricing of the product (the more expensive, the better), and seller ratings – but it will not always work.

To remedy this, product refunds are often offered by big players (such as Lazada). Simple processes for refund also makes the customer shopping experience a pleasure. Suffice to say, not all companies readily offer refunds, or product exchanges. For ameteur players, even if they do offer refunds, their call center line requires you to wait for hours. Even their support emails go unanswered for days. If you’re the lucky few, and you successfully got to speak with their representative, the refund takes FOREVER.

In addition, most ecommerce companies are not aware that they are sitting on tonnes of actionable information/data. It may not strike them at all that these “complaints” are customers’ feedback for their product quality or service. A smart operator will use these information to improve their business, as very often complaints will range from bugs on the website, to faulty products. The fact that many players choose to ignore these issues – is quite truly astonishing!

3. Price – of product and service

One way to gain an edge in ecommerce is to offer product and services at a price more competitive than your competitors. To be honest, cheap and good works! While experts might argue that this is easy to do (by giving discounts) – we suggest otherwise, that this is an overly simplistic way to frame the issue. Unless you have deep pockets of course, then please disregard this point altogether.

After all, long term savings (which can be passed on to consumers) can only be attained when operations are properly laid out and executed. For one, ecommerce is a living, breathing animal. If you don’t move items (sell tonnes of products), you don’t get good price from suppliers. Even your logistics partner is willing to give discounts if you move more volume (economies of scale – the basics, right?) The only way to succeed is to sell, sell, sell – and that means to always looking to grow your business.

Of course it goes beyond just SELLING. To have an edge in pricing, is to invest in sustainable practices. An example would be NOT to invest in vouchers to drive sales. What if instead of investing into vouchers, the company chooses to give free order pickup at selected collection points? The cost of running the collection points could be large at first, however, it could promote further cost savings for the company, and eventually the customer.

For example: those who are familiar with last-mile logistics should understand that last mile delivery is often expensive. Customers are often not “at home” when the delivery guy arrives. It costs the ecommerce more money to schedule for a “re-delivery”. How about if we mention the cost of cancelled CASH ON DELIVERY orders – more logistics costs which were not even factored in.

As such – things are not really that rosy for “successful” ecommerce companies out there. Now you know where some (or most?) the cash burn goes to. We believe many companies only publish order numbers which are pre-cancellation (especially in Southeast Asia where Cash on Delivery is prevalent). Wouldn’t it be easier to just invest in the sustainable, by simply offering free pickups (or pickups at a low fee)?

Conclusion

In closing, we wish to iterate that operating an ecommerce is not as simple as sell and ship. Hopefully this slightly in-depth commentary helps to shed some light in this industry, and why many players have fallen. If you need any help, you know where to find us.