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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 (and this was before the time of, 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.