Jumping onto the eCommerce bandwagon
Ian Dyason. 1 August 2021
Last Friday (30th July, 2021), I was the main speaker at the Singapore Business Federation’s webinar entitled, “Supercharging your business with B2B eCommerce (PCP)”. This is the launch event for the Internationalisation PCP (B2B eCommerce), which Growth Consulting Asia is a proud partner with the SBF (more announcements to come for this!). The following is the full content of my webinar.
Many of you would have purchased something from a marketplace or an online shop this past year. Be it groceries or electrical items or clothing, the pandemic has forced many people to move from the offline to the online buying stage. As a result, we have also seen many long and famous brands capitulating as a result – Robinsons is one of the most famous examples. Yet, the brand has gotten a revival with its acquisition by the Prainito family and it has gone fully online! That just shows how powerful brands and ecommerce can be!
But all these are in the *2C space – either B2C or D2C. B2C is Business-to-Consumer space, and D2C is Direct-to-Consumer space. B2C is simply a business selling directly to their customers. A D2C business is an individual selling directly to buyers. Yet B2C or D2C, the business model is the same; both of these deal with end users as your target market, and there are many platforms available to deliver results. Then there is also the P2P space – Peer-to-Peer, which may be similar to the D2C space. This is where an individual sells to another individual.
My eCommerce Journey
I was one of the earliest PowerSellers on eBay in 1998. This is a P2P platform that heralded the advent of online markets as we know it today. In those days, my partner and I were able to generate more than $1M in sales in just one year. Of course, we were dealing in high end collectibles and the business model then was you sell your items through an online auction. In the early eBay years, we did not have PayPal, so we had to deal with bank transfers. Of course, the ability to accept credit card payment would have been great, but with some items going for more than $10K, even credit cards could not facilitate. Needless to say, it was cowboy town at that time, and we had to establish ourselves as trustworthy vendors. Hence, the reviews were extremely important to everyone on eBay, buyer or seller. PayPal came later, and that significantly solved a lot of problems for us, especially in having the escrow. But PayPal service is not cheap. But they did serve a very important bridge to enable the sustainment of our online business and that became a necessary business cost.
Of course, once payment came in, we had to ensure that the item can be delivered. This opened up a lot of challenges. (1) Which carrier should we use? Different carriers had different rates. There was a huge difference between DHL and SingPost and we tried to use SingPost as much as we could, until we could not. Why? Because of (2) speed of delivery and trackability. At that time, SingPost was a “fire and forget” type carrier. Their tracking was non existent, and if you wanted to know where your shipment is, you will have to call the customer service hotline, and they were almost as clueless as you. Hence, reliability of the carrier is so important. Then we had another issue, (3) customs clearance. It should not be a big deal who the carrier is, right? Afterall, the item is there, and customs just clears it, and seeks customs duties from the carrier, which had already been paid for through the shipping fees. But no…. It does not work out this way. Some carriers have better connection with customs department, better reputation, better payment practices, and hence, better chance of getting the item cleared. The problem with not having the item cleared is that it will have to be sent back to the shipper, who would then have to refund the money to the buyer. All this takes about 30 days to and fro, and affect the review status. A hit on the number of stars is a hit on our ability to continue this business!
Then, we had a problem of (4) insurance. Carriers have their agreements with different insurers to provide transit insurance, and they can offer the coverage on behalf of the insurers, based on a set of guidelines. Anything that is outside of this will have to be sent over to the insurers, who will then agree to underwrite it or not. If it cannot be underwritten, the sale cannot proceed and we lose it, not to mention any poor reviews! Problem is, even if the insurance is being underwritten, who is going to pay for this insurance? One thing for sure, if we transfer the cost of shipping and insurance to the buyer, the total cost of the item will be prohibitive, and hence, no one would bid on the item. As a result, we decided to absorb this cost, cutting deeply into our margin, but we figured that it would give us a level playing field with other overseas sellers. But you know what is the worst problem? (5) Seizure by customs. Because we were dealing with high end collectibles, it can be open to fakes. The market then was already rife with that and towards 1999, we had several of our products seized by customs. This is a quadruple whammy for us because we would have lost on our sale, lost on the cost of shipping and insurance that we paid, lost on the amount we paid for the item which we could not recover, and then be open to a negative review! As it drew close to the dawn of the new millennium, more and more of our items were seized (as though we had been blacklisted or someone had complained about us) so we decided that the cost of losing the shipments became too high a risk for us, and we closed the business.
What did we learn from this?
(1) Even though there is a business opportunity selling through the online platforms, it does not mean that we can do it, because there are intricacies that we are unaware of. This means that we need to uncover those intricacies either by market experimentation, collaboration with someone who has already done it, or through learning.
(2) Understand what the business analytics. Who are your customers? Where are they? What do they want? How can you fulfill their wants? How can you make money? How can you maintain your margin? How do you ensure high transaction volume? How do you ensure that you can meet volume demand? What is the minimum order quantity that will make sense to you to go into the market? How does that compare with the numerous different suppliers out there? There are indeed so many questions that we did not get answered and we slowly plodded our way through the minefield of online commerce.
(3) You need a unique, differentiated value. When you jump onto the eCommerce bandwagon, you will face many MeToo sellers. Almost everything is made in China now, so how different are your products to others? For a while, we were able to offer a unique blend of product enhancement, quality assurance, and lower relative price to our competitors. But that only got them to start offering these too, and our value proposition vanished. If we are unable to maintain that value, by constantly adding your unique touches, you will soon be eaten up by the MeToos that have more resources and deeper pockets than you.
(4) Choose the right geographical market. Being on eBay.com (and this was before the time of eBay.com.sg), we naturally participated in the US market. Which is great because it is so much bigger than Singapore! Yet, there are so many issues when the market is so far – from speed of delivery, customs requirements, and costs. These have the potential to cut into your margin very quickly if you are not wary.
(5) Source well. One of the hallmarks of arbitrage business is buy low, sell high. And you need to be able to keep the two markets apart. That was possible in the late 1990s, but with today’s internet penetration, information is everywhere. Whomever you source from, others also source from as well. This means that you must either have a superbuyer relationship with the manufacturer – either with astronomical order quantities so that you basically control the supply – or you own the manufacture.
(6) Ease of payment. When Paypal came about, we hesitated to use them because of the high fees. We preferred bank transfers. Initially the buyers were okay with that, but as online payment became more widespread, it was difficult to avoid that cost because if we did not accept Paypal (this was before PP acquired eBay), we would have limited our market. As such, we took another hit on the margin and accepted Paypal. Then we saw more people bidding.
(7) Good distribution network. Sometime close to the end of our eBay excursion, we moved into the B2B space. We decided that it would be better that we had an agent in the US who could list the products for us and we split the profits. This is because he was much closer to the market than we are, and he can react much faster to customer issues. Also, he handles all the customer service issues. And if he already holds the stock, there will not be any customs delays. It took a while to get a reputable agent, and we had to take some hits. Some items he made an outright purchase, and then listed it and made the arbitrage on it. Others, he was not so sure about the demand, so he took them on consignment. Those were the super risky moves, since each item could cost upwards of $20K. But when we had the opportunity to bring it into the country through hand carry, we took that risk! Better that it is in the country than get stuck in customs or worse, confiscated!
(8) A strong brand. Because we built our online business on the back of superior service, fixed delivery charges and fast delivery, we gained a very good reputation. People bidded with confidence. And the left positive reviews. This is KEY to building a strong online presence. Of course, you do get some rogue buyers who hold you ransom for the 5star rating, demanding stuff that you cannot provide. That you have to properly manage. There was a time we could not appeal to a bad rating, but these days you can and that rating will be taken down by the platform if you can show proof that you were held to ransom.
Whilst that is a P2P model, you can realise that this can be a B2C model too. But, when I increase the scale and the number of SKUs to a particular customer, I suddenly transition to the B2B model. And that is where I would like to focus our discussion today.
The Different between a B2B and a B2C eCommerce model
Many people are of the impression that getting onto B2B eCommerce is the same as B2C eCommerce. That cannot be further from the truth. While the technology can support both types of transactions on the same platform, it was also seen that there was a need for segregation. Hence, Alibaba.com is Alibaba’s B2B platform, TMall (or now called Tian Mao, or Sky Cat) is the B2C platform, and Taobao is the D2C platform. Why the need for segregation? Because the buyers are different, the procurement patterns are different, and trading terms are different. This also means that if a business wants to set up for B2B eCommerce, they will need to understand the needs of the market, how to position for that, how to facilitate the movement of goods and the like. And not only that, within the B2B eCommerce space, we will also need to understand the different structures. There are the marketplaces, the online store builders and the enablers. And finally, there are plugins to these three. How you operate on each of these and the pros and cons of these are crucial to your business.
In other words, if you want to supercharge your business by jumping onto the eCommerce bandwagon, then you need to learn the specifics of the business. Here are 5 things you need to take care of when adding eCommerce to your business model…
1. Understand your target market
2. Create a differentiated value proposition for your market
3. Update your business model
4. Create a supply chain to deliver on this model
5. Work your business model on different platforms
Well, not quite. And here is where we come in.
B2B eCommerce PCP
The SBF Internationalisation PCP has a specific B2B eCommerce track that will help you to implement all of these. This PCP is designed to help you treat this as a market test for your business expansion. We all know how expensive and risky business experiments can be; and without proper knowledge, expert guidance and careful planning, you might well head down the wrong path, dooming your idea before it has had the opportunity to show its value to you. Remember, a poorly thought through and executed experiment will deliver the wrong results. With the B2B eCommerce PCP, we help you mitigate these risks through a new hire. With this hire – who will then not affect the rest of your business operations – he/she will learn specifically how to create the eCommerce strategy, understand the logistics and supply chain of B2B eCommerce, understand the latest eCommerce technologies and how to choose the right solution, embark on your market positioning and value proposition to your market, launch your new eCommerce business all with the support of trainers and business coaches. And through the salary support that your company will receive in hiring these new staff – which is either 70% or 90% of the person’s monthly salary throughout the 9 months of the programme – you will have mitigated the risks of a failed attempt.
Do not believe anyone when they say getting onto eCommerce is easy. But, know that we have the experience in getting people onboard, and succeeding in this new business model. If you have never had any B2B eCommerce experience, or have been wanting to build it but didn’t know how, then this is the BEST programme for you.