Competing with Amazon

If you are starting an e-commerce firm, the first thing you should ask is how can you compete with biggies like Amazon? Obviously big players get large discounts from suppliers, in some cases from direct manufacturers.  Because of the large volumes of orders, they can save more on transporting, storing and promoting, and optimise many more things.  Your business model should tell how you can compete? What are your core competencies that  can compete with them. 

There are few thumb rules which can help you in making decision, or come up with ideas

• What are the things biggies cannot do better?

• What are the things you can do better than biggies?

• If you cannot compete, then at lease can you co-exist along with them?

One important  quick tip is to research on the companies which were acquired by Amazon and investigate why? Study  e-commerce companies which are co-existing even in the presence of biggies, try to understand their USP.  We are listing few  such methods

Unique Business model 

Can you think about different model? It can help you to co-exist as you are avoiding the competation. Groupon, and Woot.com  are result of that attempt only. Woot basically sells limited, offbeat products for limited period. Selling customized or personalized products or subscriptions also part of this.

Creative merchandise

Have you seen many websites which sell different 
T- shirts? Customre can select the image or quote and you can print it on the T-shirt and ship. Similarly coffee mugs and tea mugs which sell different articles.  Gifting selection is another interesting field.  One sample such site is Spreadshirt. Fancy.com offers creative and unique products which are readily not available in the outside market to purchase.

Launching your private label

Say you have some geographical advantage about sourcing few materials, or you have good knowledge of assembling or manufacturing different things,  then definitely you can think of launching your own brand. Bonobos is one of first such company. One very good talk about the same from the founder:

Selling niche segment products

Target a niche segment, focus on that. The best example is  Diapers.com. Finally, Diapers got acquired by Amazon. Either you will be a leader in that niche segment or you are going to be acquired by biggie because of large base of suppliers, vast categories and user base.

Can you sell as marchant on Amazon?

Yes, it is true. Intially focus as merchant, build your competency in suplly chain, procurement or manufacturer. Once you are done, got the best skills, slowly you can start selling from your own site as another channel. 

References

Amazon.com acquisitions

Why did Amazon buy Woot

Product page

Product page contains the information about product, it's description, images and its attributes. The good product page is direct representation of your website or business quality. The bad product page makes your web site untrustworthy.

Importance of Product page

• Incomplete product page drives so many customer calls to ask about the product page. The good lean business culture directly sees the root cause as bad product page and corrects it.
• Incorrect product page or non-availability of product images, can causes wrong or misplaced product ordering and product returns. 
• Visitors may leave your website, if they could not find enough information about the product

Every product is uniquely represented by one product id. An order consists of list of products. In the website database, one order id should be mapped to multiple product ids. The product data is added to the database in multiple tables. The data is extracted to show in case of page view.  So the important issue is how to get the accurate product data. We are listing few methods

How to get the product data

• Get the data from the supplier:  Ask the supplier - person who is selling you the product, to provide the data

• Get the data from Manufacturer’s website:  Nokia phone details you can get from Nokia website. Similarly Nikon camera details you can get from Nikon website

• Crawl another website: Only if they permit: Usually after certain calls the big websites block your IP. Please do check robots.txt file before doing that.

• Take help of other B2B services. See Diffbot ,  PromptCloud and Grepsr

Please let us know if you know any other ways, we will add the same.

On the general side of knowing, one very good article explaining the good product page from beingpractical.com

E-commerce shopping cart software

The Shopping cart software allows online shopping customers to accumulate a list of items for purchase, described metaphorically as “placing items in the shopping cart” or “add to cart”. Upon checkout, the software typically calculates a total for the order, including shipping and handling (i.e. postage and packing) charges and the associated taxes, as applicable.

Some set-up must be done in the HTML code of the website, and the shopping cart software must be installed on the server which hosts the site, or on the secure server which accepts sensitive ordering information. E-shopping carts are usually implemented using HTTP cookies or query strings. In most server based implementations however, data related to the shopping cart is kept in the session object and is accessed and manipulated on the fly, as the user selects different items from the cart. Later at the process of finalizing the transaction, the information is accessed and an order is generated against the selected item thus clearing the shopping cart.  Although the most simple shopping carts strictly allow for an item to be added to a basket to start a checkout process (e.g. the free PayPal shopping cart), most shopping cart software provides additional features that an Internet merchant uses to fully manage an online store. Data (products, categories, discounts, orders, customers, etc.) is normally stored in a database and accessed in real time by the software. Shopping Cart Software is also known as e-commerce software, e-store software, online store software or store front software and online shop.

Shopping cart abandonment

It means customer adds the products to shopping cart and quits without making purchase (payment). It can be due to various reasons.

1. You are not displaying the shipping cost and other info on the product page and the customer is going to final page just to know that.
2. The hidden information was displayed only at final payment (like shipping charges) and the customer suddenly back off.
3. Final checkout is error prone, or confusing, or distracting. 
4. No proper payment methods
5. Customer forgot due to other interruptions. 

The final goal should be reduce the drops, minimise the m. Finally the abandonment should be due to only "customer forgot".  In that case you can send a remainder mail to customer about the same.  Sudden and drastic increase in shopping cart abandonment indicates some thing is wrong or failed at the checkout process ( say payment gateway is down), and you have to solve the issue with high priority. This can be act as good functional alarm. Please do read out previous post on the functional alarms.  You can read more about shopping cart abandonment here: Quora article-1,  article-2

B2B products

You can take the help of B2B products as well. But before that you have to sure that It will suit you. If your website code is in PhP then you can choose shopping kart software which is written only in PhP. The software should be able to integrate with the your preferred payment gateway as well. Few of well knows products are Commerce sciences, Cs-cart, 3dcart, Magento, X-cart, Opencart, Prestashop, Zeuscart.  You can read more about good products here: Quora article-1, article-2

References

Wikipedia      Web Marketing article

E - Wallet : The Retailers view

In this post we will discuss the about E-wallet. It also known as Digital wallet, or cash basket. E-Wallet is kind of money account of customer dedicated for your website. Customer can transfer or deposit money into your website E-wallet. They can see the balance in the account after the transfer.  Customer can use the amount in the account for any purchase on your website.  Linking your credit card with your website also considered as one type of E-wallet.

Consider an example, Bob transferred 1000$ to your website’s E-wallet’s account.  Now onwards, whatever he wants to buy from your website, in the payment option he selects E-wallet and money is directly debited from the E-wallet account.  Say he purchased 100$ mobile phone from his E-wallet account, then the remaining balance will be 900$. Let’s see the pros and cons of allowing E-wallet facility.

Pros

• It promotes the compulsive purchase.  They can buy very easily, they need not go throw lengthy process of Payment gateways for money transfer (in case storing credit card is not allowed)

• If people are not comfortable about sharing their credit card,  at least they can transfer some money to E-wallet account and keep it. It will help both the customer and company

• You (the merchant) get the interest free money

• The number of payment gateway transfers are reduced, ( instead of 10 times transferring 100$,  customer is transferring 1000$ in one stretch)

• As they customer already transferred some money, sooner or later he will buy something from your website, he will stick to it (unless money withdrawal option is not available)

• You can link this account with store credit. So in case of customer returns, refunds – you can directly transfer the money to the E-wallet.  Please do read our previous post on store credit concept.

Cons

• You need to provide the security and safety of E-wallet accounts, almost equal to bank accounts. In case of any hacking of the data, the customers will sue you. You need to have continuous back up of account balances as well.

• There can be legal issues specific to the region to create E-wallet account or ability to provide the withdrawal

References

Wikipedia

Supply chain concepts: Push and Pull based supply chain

In this post we will discuss push and pull based supply chain concepts.  

Pull based supply chain

In this model of supply chain the products are procured when the customer ordered them.  The well-known examples are car manufacturing; many spare parts are procured only the customer orders a car.  This model is very useful in case of uncertainty in the demand and high rate of customization. It reduces the inventory holding cost.  Product is getting procured only the customer order comes. So it is cost effective. At the downside, it will affect the delivery time. The customer have to wait until the product is procured, these long delays affects the customer service quality. 

Push based supply chain

In this model, you expect or predict the demand and procure the items, even before the customer order comes.  So when the customer order comes you can ship the products immediately, at the same time the down side is inventory holding cost.  Before winter you can anticipate more winter wear and procure them, similarly umbrellas in rainy seasons,  SAT exam books before the exam time.

Push Pull Supply chain

In reality all the supply chain systems are hybrid systems, have both Push and Pull based models.  A company’s success depends on decreasing the pull based procurement at the same time having low inventory and lean ways to achieve it.  The inventory prediction system or demand forecasting should inform the predicted items in each category and procure the items (Push based model).  When the demand goes beyond it, you need to procure the items (pull based model). We will discuss more on inventory prediction in our future posts.

 

References

Wikipedia  Article-1   Article-2   Article-3

Supply chain concepts: Drop Shipping

The first question comes to your mind is what exactly is drop shipping.  In simple terms, you do not own the inventory, you simply forward the customer purchase request to the wholesaler and take the commission.

From Wikipedia “Drop shipping is a supply chain management technique in which the retailer does not keep goods in stock, but instead transfers customer orders and shipment details to either the manufacturer or a wholesaler, who then ships the goods directly to the customer. As in retail businesses, the majority of retailers make their profit on the difference between the wholesale and retail price but some retailers earn an agreed percentage of the sales in commission, paid by the wholesaler to the retailer.”  This concept is very famous because of the following reasons

• You don’t need to own the inventory. So there is no cost to acquire the products, no question of returning the products to vendors in case of no sale, no inventory transshipment cost, no inventory holding cost, no inventory damage or management costs.

• No pick, packaging of customer orders, no dealings with courier or logistics companies

• You can start with very little investment

• You can scale very fast by adding more and more merchants or wholesalers

Life looks pretty simple, all you have to manage is front end website, branding, promoting, handling the customer queries and collecting the commissions from the Wholesale merchants.
But there are downturns of it as well.

• The most important thing is it affects your brand name.  You cannot maintain a common standard, or quality.  The kind of packaging, invoice, shipping all these things depends on merchant to merchant.  You cannot establish a brand name due to these asymmetries.

• Fulfillment errors, mistakes by third parties, logistics mistake affect your customer service and brand name

• Out of stock items.  When wholesaler cannot fulfill the order because it is out of stock it impacts your customer.

• Less margins

Because of all these it may not be liable to have drop shipping.  Shoes ecommerce giant that’s why avoided drop shipping.

References:

Wikipedia   Quora   Shopify article

Customer reviews

Customer reviews help the customer to decide whether the product is good or not? Will it suits him? Today many customers are deciding based on customer review. If your website do not have reviews, they may go to another site to read them, and perhaps buy from there only.
Types of reviews

1. Direct customer reviews: The reviews written by the customers or users
2. Editorial reviews: Reviews done by other firms or editors of books
3. Certified user review: The review given by the actual purchaser.
4. Fake reviews:  Review written by some one related to product owner, masking as non related customer

Customer can give ratings say one star to five star, and you can classify them as per ratings and show them.You can learn a lot from seeing Amazon customer reviews, as they have one of the best review system. Priorities the most helpful reviews on front page. The Alchemist book customer reviews screen shot is mentioned below

How to build such review system

• First you need to build Review collection mechanism.

• First send invitations to product purchasers to  review the product 
• Review submission form/UI. Initially you can just start with Google forms
• Enter those reviews in the DB

•  Show the reviews on the product page, prioritise the helpful ones, and classify based on the ratings.

 B2B Products

• There are few products which help you in collecting the reviews and displaying the reviews.
• There are few firms which sells direct reviews collected from their website. One of such product is Reviews42 and Powerreviews

Please do let us know if you aware of other such products.  Check these things before you decide on one vendor

• It is better to do A/B split testing to see the reviews effect on the conversion ratio.

• Is there any change in customer behavior, engagement time after the reviews?

• Complexity of integrating with the system?

Product recommandations

You have hundreds of categories of products, and in each category thousands of products. Helping the customer to get what he wants, i.e personalized or useful recommendations boost your conversation ratio. Product recommendations solve this problem by learning the behaviors of your site visitors on an individual and aggregate level, and understand product correlations and suggest suitable matches. Let’s see few examples:

If I see product page of Alchemist book on Amazon, it recommends other books of its author and other same genre books. 

On Boss audio system page few of its accessories and similar products in other brands.

 

 
For a Samsung mobile phone page, its flip cover and similar products 

How to build such Product recommendation system

Collaborative filtering

Collaborative filtering methods are based on collecting and analyzing a large amount of information on users’ behaviors, activities or preferences and predicting what users will like based on their similarity to other users. A key advantage of the collaborative filtering approach is that it does not rely on machine analyzable content and therefore it is capable of accurately recommending complex items such as movies without requiring an "understanding" of the item itself. Many algorithms have been used in measuring user similarity or item similarity in recommender systems. For example, the k-nearest neighbor (k-NN) approach[13] and the Pearson Correlation.

Content-based filtering

Another common approach when designing recommendee systems is content-based filtering. Content-based filtering methods are based on a description of the item and a profile of the user’s preference.[20] In a content-based recommender system, keywords are used to describe the items; beside, a user profile is built to indicate the type of item this user likes. In other words, these algorithms try to recommend items that are similar to those that a user liked in the past (or is examining in the present).

Hybrid Recommender Systems

Recent research has demonstrated that a hybrid approach, combining collaborative filtering and content-based filtering could be more effective in some cases.
Netflix is a good example of hybrid systems. They make recommendations by comparing the watching and searching habits of similar users (i.e. collaborative filtering) as well as by offering movies that share characteristics with films that a user has rated highly (content-based filtering).

Fall back

If you are not able to find any products recommendation related to that product, it is better to show bestselling products in that category.

You can read more about this on Wikipedia

Few open source implementations

• Mymedialite 

• Mahout

• Graphlab

 

Choosing the B2B products

There are many products that help in the recommendation system, we are listing few of them

• IGoDigital
• Strands
• Predictive Intent
• Linkcious 
• Rich Relevance
• Peerius
• Barilliance
• Baynote
• Direct Edge
• Certona
• Vibetrace

Check these things before you decide on one vendor

• It is better to do A/B split testing to see the recomandation effect on the conversion ratio.

• Is there any change in customer behavior, engagement time after the recomandation system?

• Level of customization and control they offer?

• Complexity of integrating with the system?

References

• Which is the best personalization solution for fashion ecommerce?  
• What examples are there of great e-commerce product recommendation or personalisation strategies?