Retail ecommerce thoughts

This is just a placeholder for a discussion or topic which I would expand on later.

Shrinkage is the bane of all store managers. It is the percentage difference between the actual stock for items in a store and the expected stock volumes. Caused due to internal or external theft or lousy book keeping, it eats away from the bonuses of a store manager more than any other factor. (The other KPI’s for a store manager would be things like wastage and profits which are more beyond their control or line of influence.) It’s the most frustrating thing for a manager since all the causes of shrinkage point to his inefficiency ( By motivating the employees and encouraging values, you can prevent internal theft (employee); By briefing the store security, you can reduce shoplifting or external theft; By educating store employees or supervisors, you can have sound stock tracking to ensure correct recording of stock levels)

Though fundamentally different, Fraud in ecommerce can be an appropriate analogy for shrinkage. It could arise mainly by payment card misuse or returns misuse. The retailer can attempt to reduce fraud, but using software like ReD or 3d man, you may be faced with a small risk of losing genuine business too. (Since the software works on an algorithm based on many things like the order details, the items, customer name and mail ID, customer card details, IP address, billing and delivery addresses, and generates a score which leads to a transaction being accepted, denied or challenged, your genuine customer may well be identified as a fraud if there is a previous history of fraud from that particular portion of the city that he hails from!) Chargebacks for card payments could also be a way of initiating fraud. (where the customer claims fraud and challenges the funds). Advanced mining techniques should be employed for preventing for open community efforts (like amazon, ebay, where the control is lesser than a traditional direct business)

I have a good insight into both these from the work that I did for a couple of popular retailers (one – a grocery chain – where I learnt to count shrinkage, and the other – a direct online business – where I learnt about Fraud). Hope to be sharing more on this soon.  

There was a time during the nascent stages of ecommerce where the entrepreneurs were all too enthusiastic about enabling a working version of a transactional website. There were numerous successes and all too many failures. But as the web went maturing to a social model, what is paying the returns is a very lightweight thing. Content. Sites have found out that the pages that they built into their site giving rich commentary and eminently useful information for the customer is bringing in more visitors and loyalists than their expensive marketing campaigns. Research tells us that the loyalty when a person discovers your site is way higher than if you push your site to the user. The statistics of a 2 way engagement shows the amount of trust that a person places on content. If you mix content and transaction in a subtle way, your ecom site could grow manifold!

Grocery sites can build up a strong community by building content in a collaborative mode – by inviting some of their forum contributors to post guest posts – by inviting critics for sampling, etc. I loved one of the examples from waitrose (a genuinely good UK high end retailer). When they introduced a cost-effective ‘Essentials’ range, they gave a party of sorts when their chefs prepared lots of goodies using the essentials range – and promptly invited the press for a review. The press were convinced and gave them lots of positive impression. (That is responsible for atleast a bit of the resounding success that this range became)

Again, a potential way of success is to engage your online customers in offline tasting or store walkthroughs. Multi-channel shoppers tend to be more loyal – and if your brand is worth anything, now is the time to invest in multi-channel. I have this strange gutfeel that we will see more multi-channel efforts (not just in marketing and selling, but also in operations and other areas) being put in place by retailers.

I have learnt a lot about wines in the last few months. Ironic – since I am a teetotaler – but I was involved in replatforming a popular wine site. This is another area where community can play a huge role. Apparently the wine lovers appreciate the comments of other wine lovers – and feel a stong camaraderie in downing a tipple with their pals online. I have browsed a lot of wine sites and realized that one defining success factor is the amount of transparent community involvement in the content as well as product (rating, review). I guess we’re going to have more job postings like this. Wanted people to sip and blog about our 2000 wines, spirits and champagne. Sounds like quite a dream job !