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November 10, 2014

Retailers Are Rewriting The Rules Of E-Commerce

Posted by Dinesh Bajaj (View Profile | View All Posts) at 8:52 AM

eBay: How online boosts offline sales [Source: http://www.youtube.com/watch?v=rWoQ304VS2A]

There's an old proverb that reads: May you live in interesting times. I always think of that saying when I consider the exciting changes taking place in the retail industry. Look around at any global chain or online retailer, and you'll find that we're living in times that go beyond interesting.

Consider the giant online retailer Amazon.com. Its financial performance has been less than stellar, yet its stock continues to trade in the stratosphere. That sign of investor confidence is based, I think, on the premium placed on innovation. Their CEO and founder, Jeff Bezos, is so committed to the rapid delivery of merchandise ordered online that he is flirting with deploying a fleet of unmanned drone aircraft that can airlift orders straight from warehouse to front door in minutes. Indeed, investors are rewarding Amazon's penchant for innovative thinking when you consider the multiple at which the stock continues to trade.

The delivery drone concept is a one that elicits extreme views. People think it's crazy or downright genius. Either way, it points to the fact that online retailers are no longer thinking about their customers as floating around somewhere in cyberspace. They're thinking about where those customers are in relation to their fulfillment centers. That's a huge advancement and evolution in the story of e-commerce. It used to be that no consideration was given as to where the order originated. But now, online retailers are thinking in much the same way as traditional, bricks-and-mortar retailers do. They want to get as physically close to their consumer base as possible.

A traditional retailer studies demographic charts and builds or leases a store in what it thinks is the optimal location for foot traffic. Straightforward enough. But what fascinates me is that the China-based Alibaba, another e-commerce giant, wants to know the same information. Why? Well, its online-to-offline strategy will succeed on a global scale if it can get its goods to kiosks and nearby pick-up points very quickly. That means knowing where its online consumer base is physically speaking. Amazon's drone concept is based on the same idea. You wouldn't want a small aircraft lugging a box for hundreds of miles. It defeats the purpose of flying the delivery to the customer's doorstep.

Whether pick-up kiosks or delivery drones are in our future, it's anyone's guess. But one thing is for certain: Retailers need robust Information Technology like never before. They need to get inside the heads of the people browsing online so that they can best configure their delivery systems. To become the most efficient online retailer in the world, you have to have a good command of the offline space as well. As a result, enterprises are leveraging Big Data, behavioral science, and mobile technology with a newfound passion. Interesting times, indeed.

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