E-commerce continues to grow faster on a percentage basis than traditional retail. Even though E-commerce currently contributes only 6-12% of a traditional retailer’s revenue, it is expected to more than double in the next five years. More growth in sales is expected in the near future from online channels than traditional brick-and-mortar channels. New online store brands are creating growth from differentiated business models with higher customer satisfaction thereby generating business from repeat customers.
Subscription model
Earlier companies, notably Pets.com, rose to peak of pet supply success and then fell. But the new online start-up Petflow is taking a different model, with a subscription that offers scheduled drop-offs based on the client’s request. About 50% to 60% of customers automatically enroll to have pet food delivered to them on a regular basis. Petflow has managed to achieve this by optimizing cost. Instead of setting up its own warehouse the company hired a third-party company, Capacity LLC, to store and ships its products to customers. The company economizes on the cost of delivery by leveraging Amazon’s cloud computing services, thereby saving thousands of dollars each month.
Coupon model
Consider a coupon based model in which offering voucher through a company provides two potential advantages: price discrimination and advertising. For example Groupon a e-commerce portal that connects consumers to merchants by offering goods and services at a discount via online discount vouchers on pre-payment. Groupon?s business model is based on a combination of "economies of scale" and "economies of networking".
Cash on delivery model
Popular portal in India such as Flipkart are spearheading the conversion of offline shoppers into online bargain hunters with new cash on delivery model (CoD). However Cash on delivery defies the traditional e-commerce model. It increases the risk of working capital management, and hence is typically an unpopular model with merchants. Though inconvenient, the objective of cash flow model was to create confidence amongst Indian consumers to start using the online model. Today, almost 65 per cent of Flipkart''s daily shipment items is based on CoD.
M Commerce
According to Forrester Research, Mobile commerce(M commerce) spending on smartphones is expected to reach $10 billion this year. Sites such as eBay, Amazon and Macys have outpaced the growth of smaller players. Further growth in mobile commerce in 2012 will be fueled by offering exclusive offers to consumers, merging in-store with mobile shopping experience, and broadening the mobile and tablet capabilities. eBay reached a record $5 billion in mobile purchases (from smartphones and tablets) in 2011 and predicts this number will climb to $8 billion by the end of this year.
QR Code: In Korea, Tesco has introduced its Homeplus virtual store, an innovative business model for shopping via app. In this model, shopping is done through an app, in which user can scan the desired goods using QR code, pay online and the goods get delivered to home. Between Nov 2011 and Jan 2012, user engagement has reached to over 10,000 people, and online sales have increased by a whopping 130 per cent.
Final Thoughts:
In order to be successful in executing a new online business strategy requires changes to the traditional retail models. The good news is that retailers have already laid the foundational e-commerce elements, such as web and customer order fulfillment, over the past decade. The challenge now is to merge the online and store models in ways that would enable rapid scaling.
References:
http://online.wsj.com/article/SB10001424052970204778604577240261600840678.html
http://www.thesun.co.uk/sol/homepage/features/4169314/Snoopers-who-track-your-online-browsing.html
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