Brian Richards

E-commerce Crossroads — Balancing the Risk

In the last few days, I’ve been thinking carefully about advising a client regarding online presence. The Internet provides unparalleled global opportunity as the shop window, with e-commerce platforms now established as part of most brands' strategies. But what's missing for me is a strong downside argument to balance the challenges the Internet poses from a strategic and regulatory perspective.

The fast moving and ever evolving choices in categories today demands a much higher level of energy by online brand owners to keep up with consumer preferences where loyalties are more wafer thin than ever. 

The big difference between business then and business now is that brand owners need to understand the measure of investment to continually engage with online audiences.

Recognising the power of social media and smartphone usage means you must have the capacity, money, and expertise at your fingertips to ensure your brand and trademarks are appropriately represented online.

I have noticed in talking with experts in the web-space that they are often too narrow in their understanding of the client’s capability to implement even a modest digital strategy. It is such a new field often staffed with young digital developers. Although they are well-qualified, they have limited knowledge of traditional businesses and their operations, and are ill-equipped to build a well-rounded case in a boardroom with the appropriate metrics. Supplying a good design and technical solution I would suggest is only one third of the answer. The remaining two thirds needs to thoroughly understand and resolve the company's ability to fund, fuel and develop an internal online capability. For example, considering the complexities of product cataloguing, inventory and fulfilment are critical in deciding on the appropriate digital path.

This void of in-depth understanding of a business and its digital appetite can generate significant risk. 

The developer is always keen to encourage the client out into open water with all the bells and whistles, but gaining a measure of their ability to swim into this digital ocean with its brand requires more than an IT perspective. Rather, a collaborative set of skills are required in specifying the right solution which must engage the client.

The more you use the Internet, the more you see a world of marketplaces, mobile apps and social media. But in this digital realm, there is still the nefarious distribution of counterfeit products and the challenge of enforcing trademark rights. From Viagra to milk formula powders for young mothers (no connection), the brand horror stories are legendary in Asia's online marketplaces.

There are now e-commerce marketing platforms fast becoming real success stories, and businesses striving to legitimise their activities understand the importance that trust brings to online engagements. The most visible of these marketplace platforms is undoubtedly the Alibaba Group. Started in 1999 by an always cheerful Jack Ma in his flat in Hangzhou (China), the group has grown into one of the world’s biggest online companies. On November 11, 2014 – the newly promoted ‘singles day’ in China when consumers who are not in a relationship are encouraged to go out and treat themselves – the Alibaba Group took more than $2 billion in sales in the first hour of trading and over $9 billion by the close of business. No longer the Wild West, we are beginning to take China seriously and they us in terms of respecting our intellectual property.

Whether you go it alone or join a platform, there are many major credible players well beyond Amazon and Alibaba.

I particularly like well-organised specialist platforms. Listing your pet food on Chewy or your lovingly crafted jewellery on Etsy, they take you to a community of interest obviating the need for product knowledge transfer – which is always a challenge in the traditional department store. 

The Internet has provided unrivalled opportunities for brand owners to operate their businesses on a global scale without significant investment in infrastructure. Businesses that did not exist 10 years ago are now some of the biggest and most respected brands in the world, thanks to their adoption of e-commerce as a core part of their strategy. 

However, the risks that present themselves daily will not simply go away. Brand owners must have clear objectives and an online strategy that both exploits the opportunities offered by the Internet and mitigates the risks.

Click to go back to collection