I undertook a presentation giving my thoughts to a customer’s board of Directors the other day. It was a thought provoking process and allowed me to bring various thoughts together on business in particular business on the Internet.
The existing big businesses have been very slow to capitalise on the Internet, allowing the rise of new Internet giants such as ASOS, ebuyer et al, all taking the place of existing retail giants such as PC World and High Street Fashion retailers.
Internet businesses / sites have been able to take advantage of the fact that they are able to rent much lower cost warehouses (rent and business rates), have less shoplifting (though on-line fraud is a headache) and lower overheads delivering the goods to customers. On the flip side there is the distance selling regulations to take heed of though fortunately these are not currently abused by consumers.
The thing about the Internet is, that it is primarily about price whilst also ensuring good service (handling of communications and delivery to the customer – though delivery you are in the hands of the third party couriers).
Ebay is also another interesting channel as it allows very small sole traders to specialise in one specific product and sell relatively cost effectively. This is particularly interesting as it is sole traders who cannot buy particularly competitively but have no overheads compared with the established ebusinesses and retail outlets who have much higher overheads but can purchase more competitively. The trick for a profitable Internet business is to sit in between these and have low overheads with purchasing power.
A new phenomena that could turn the whole thing full circle is the increasing reluctance of manufacturers / importers to supply pure e-commerce businesses. I first noticed it at the Spring Fair trade show, where as soon as the reps spotted you were an e-commerce business you could see them walking away from you – they are increasingly only interested in dealing with businesses that have a retail presence. I have also increasingly heard of some manufacturers not supplying product if there isn’t a display and pure e-businesses being charged a lot more unless they have a showroom / display etc.
I’ve previously posted on Google and its results are becoming increasingly erratic and I’m wondering whether everything is indeed going to go full circle – it wouldn’t surprise me at all. A high profile example is Screwfix which I believe was a pure mail order / internet business, but has now opened a whole chain of outlets to compliment its direct channels.
This area particularly interests me, not least as my original degree dissertation was distribution / channels to market which I wrote in 1994 and quoting the Internet as a game changer back then.