Where's the Money?
We hope that our Food for Thought finds you well and experiencing continued success.
Whether or not your business is directly related to the retail business, you and your partners may have questioned lately “Where’s the money?” Please take a look at the graphic below.
Key Differences between Traditional Retail and E-commerce in Performance
Note: The aforementioned information only represents the most cases and performance related differences, complying with the 80/20 rule. Key profits generator and sales drivers written from the point of view of retailers.
For retailers: As the saying goes, “Timing is everything”, and this is especially true when applied to business, where we should incorporate our strategy complying with the timing. According to our research findings, in the traditional (physical) retail model, product and franchise oriented retailers are struggling to improve their performance in the current maturing market and now need to consider shifting towards the consumer oriented model, which relies on extensive category management knowledge and diligent practices. On the other hand, for those who have already adapted the consumer oriented model, it is time to start incorporating the virtual retail model (E-platform traffic oriented model) into their business. A key indicator of success in the e-commerce model was the adaptation of divergent thinking in its practices; for example in the traditional retail models, it was consumers who were going to the retailer but today, with the e-commerce model, it is the retailers who are going mobile and going to the consumers.
For suppliers: Strategically selecting and optimizing retail partners and allocating your sales across overall distribution channels are key performance indicators of your business. In a recent project, we took a deep dive into the e-commerce in China and found that there are generally 7 basic business models, some of which are unique compared to the rest of the world. These include, but are not limited to, models which mixtures of online and offline stores, and specialized and diversified (single or multi-brand or industries) online platforms, each of which has its own different pricing and margin structure. The results show that not all models are profitable and optimal for all products; therefore, a strategic assortment of retail partners, product categories, as well as pricing benchmark and margin should be taken into serious consideration in a supply chain.
Money is like water - it always flows to the lowest point, and as such low cost always drives out high cost;. We hope this Food for Thought will be inspirational to you.
Thank you and best regards,