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7 reasons why traditional retailers would fail in e-commerce

January 13, 2016 CK Wong Category : , , , , ,


We have done a compilation last year that more than 50% of top retail brands in Malaysia have started e-commerce, be it own online store or selling via e-marketplaces.

As compared to pure e-commerce start-ups, retailers do have some advantages venturing into e-commerce:

• Better understanding on consumers demand.
• Existing merchandising and product knowledge.
• Established suppliers & partners relationship.
• Physical outlet to support O2O marketing.

However, as we have recently shared via BFM last month (podcast part 1, podcast part 2), most of the physical retailers do carry baggage hampering their e-commerce business growth.

We summarize those baggage in 7 points below.


#1. eCommerce is neither easier nor cheaper


Is e-commerce easy?

Contrary to what many are thinking, e-commerce is neither an easier nor cheaper route of traditional retail.

It is the same with brick & mortar or any kind of business whereas investment and commitment is necessary, don't hope for e-commerce success with halfhearted attempt.

For example, a traditional retailer might be willing to invest hundreds of thousands on a new retail shop, or A&P (advertising & promotions) budget. On e-commerce? Perhaps just a fraction of it.

E-commerce shouldn't be just an experimental project, it should be done with full commitment with speed, and long term vision. This is especially true on ROI as e-commerce is more like a marathon than sprint.


#2. No one is good in e-commerce internally


The old blood?

Many traditional retailers especially those established ones started their business many years ago, some even before the Internet became popular. Therefore, it is difficult to ask existing retail experts to master e-commerce.

If there is some one good (in most cases younger) within the organization, empower them, otherwise hire talents from external.

We have seen companies engaging big consulting firms on e-commerce setup, it is more important to get some one to do it instead of getting research papers and strategies.

E-commerce success requires money, experience and knowledge, the latter two contributed largely by the people you entrust to drive your e-commerce business.


#3. eCommerce setup often overlooked


The show-stopper?

Never wait for the website to be perfect before launching (as it will never be) but at least the basic features need to be there. There are 3 fundamental areas which are always overlooked:

• Payment methods: Many e-commerce sites here are launched without facilitating online banking payment, in most cases waiting for approval by bank and authority.

• Shipping fees: Some websites charge more than RM10 for a standard parcel delivery, it might be few ringgits costlier but this could be the show-stopper.

• Fulfillment process: Workflow will never be optimized from the start but don't let your customers wait for days for your shipment to arrive.

Whether the e-store is designed responsive to mobile is also important nowadays.

Therefore, it will be great to plan and test months before the launch. If you are not sure, always good to beta or soft launch first as your prospects might only give you one chance, and they never come back if you screw up.

Read also: Top 10 eCommerce sites by big retailers in Malaysia


#4. eCommerce is not eating your retail


eCommerce eating retail?

We tend to see internal conflicts within the retail organization, in which the existing stakeholders and departments are "over-protecting" their traditional retail sales and assets. It gets even more tricky if there is a franchise system in place.

It is challenging for e-commerce business to grow in such circumstances and this is down to the boss or management's determination to manage and drive this forward.

E-commerce cannibalizing retail? It is great to know that more and more retail business owners (including Popular bookstore's) who see otherwise. Online is just 1% to 2% of total retail transactions here as it stands.

With the change of consumer behavior, retailers can be more innovative in their offerings and shopping touch points. Be there when online grows to 5% to 10% of retail otherwise some one else would.


#5. Misunderstood strength of doing e-commerce


The long tail

We don't deny price competitiveness is crucial but it is not all about price war for online retail. Brick & mortars do have some advantages going online:

• Consumers might trust you more with physical presence.
• Buy online and collect in-store.
• Visit your store for after sales services.

It is about extending your catalog online too, how many SKUs can you fit in your physical store? With e-commerce, it is unlimited shelf space online.

Again, younger consumers spend more time online so your business just need to be there regardless. Besides age group, e-commerce enables you to overcome the geographical boundary too.


#6. Pricing & promo strategy for online vs offline


Fun of online shopping

Pricing control can be another hotly-debated topic for retailers when they go online. While we understand the reason behind price control, online shouldn't be identical with offline.

It is best to provide your customers the fun and excitements while shopping online, give them a good reason to anticipate your offerings.

For example, online can be another "outlet" of yours with the flexibility of running its own promotions. Just put yourself in your customer's shoes.

On another hand, this can be challenging for most retailers but membership and loyalty programs should be consolidated and available online too.


#7. Market your online store the traditional way


Retail store heat map

Last but not least, marketing for online vs offline store is totally different but the goal is the same, getting footfall (traffic) to your store.

If you are selling in e-marketplace, it could be similar with the way on how you liaise with the shopping mall management to attract traffic to your store.

If you are selling via your own online store, while traditional media (like print, broadcast) might be good for awareness campaign but priority should be leveraging on online media.

Online media like Google, Facebook etc. is a must for all e-commerce businesses to acquire traffic and leads, we have also shared earlier on how LINE can help both your online and offline business.


Read also: 5 e-commerce marketing tips for physical retailers

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