E-Commerce Round-Up: October 2015
E-Commerce Round-Up covers major recent events and news from the past month in the e-commerce world, and provides a brief analysis of what they mean. This month’s Round-Up covers SingPost’s ambitions to become a cross-border e-commerce leader, IKEA’s e-commerce catch-up plans, and the growing problem of e-commerce package delivery for multi tenant-building owners and employees.
SingPost’s cross-border e-commerce ambitions
It may have a population of just 5.4 million people, but Singapore – or more accurately, SingPost, that city state’s national postal service – has been quietly positioning itself to become a pivotal player in cross-border e-commerce.
SingPost has created a separate e-commerce subsidiary (appropriately called SPeCommerce) whose strategy is focused on helping brands launch and grow in the Asia Pacific region. SPeCommerce offers a wide broad range of e-commerce-related services, from marketing to warehousing to payments to logistics, and has local presence in twelve countries in Asia.
More recently this month, SingPost has announced investments in U.S.-based e-commerce companies, indicating that it is not just looking to help companies enter Asia, but also to do the reverse, and help Asian companies enter North America:
- Jagged Peak, provides ecommerce software and supply chain services, with a focus on retailers, branded product manufacturers, consumer packaged goods, and services providers. The company, headquartered in Tampa, Florida, has warehouse services in over 20 locations in the US.
- TradeGlobal offers end-to-end Saas-based commerce and supply chain management, including Demandware platform development, and focuses on fashion, beauty, and lifestyle brands. Based in Cincinnati, Ohio, TradeGlobal is the more recent brand name for what was formerly known as Netrada North America, which private equity firm Bregal Sagemount purchased in late 2013.
SingPost is forming a much-needed bridge between Asia and North America ecommerce, the continents that represent some of the largest and fastest growing commerce markets. However, SingPost will also face the challenge of knitting together these new acquisitions into its existing SPecommerce business. In addition, these acquisition announcements tout the new companies’ ability to provide end-to-end services. This is not necessarily an automatic plus for companies in the North American market, where e-commerce has been evolving since the nineties, and where a single company may have different generations and brands of software, as well as some established supply-chain partners, and thus not be interested in an entirely new solution.
IKEA announces e-commerce expansion . . . slowly
IKEA’s CEO recently appeared on CNBC and discussed the Swedish furniture giant’s e-commerce investment plans and late entry to the market. The company has been criticized for being overly slow in developing its online presence while other online furniture retailers – both pure-play like Wayfair and bricks-and-mortar like Pottery Barn – have seen huge gains in the last few years.
A privately-owned company, IKEA has been taking a more cautious approach: while it has 315 stores in 27 countries, only 13 of those countries offer online buying. Of the $22.4 billion of the company’s current revenue, less than 10% comes from e-commerce. However, the company’s growth regions are in emerging markets, including East Europe, Russia, China, and more recently India. Furthermore, the economic downturn in Europe – which accounts for a majority of IKEA’s revenues -has actually been to the company’s advantage as European customers look for more value for money.
Being a late bloomer in e-commerce may have cost IKEA some sales in the short term, but it also has advantages. The IKEA model created a very particular physical world experience for customers: drive to the store in an industrial area, wander its many staged rooms, eat meatballs, buy a bunch of furniture plus a lot of other miscellaneous household items you never knew you needed but must have, load up from the warehouse and assemble the goods yourself.
Recreating or transferring that experience to the digital realm has to be done properly or else there is a risk to the brand’s image of being informal, well-designed, and low-cost. This means not just great content on the front end, but also superior logistics on the back-end; the latter is the piece that IKEA historically purposefully left to the customer in order to keep costs low. Rather than rush to make e-commerce available in as many countries and for as many products as possible, IKEA may be better served by using a few stores in a few markets for e-commerce trials and experiments, and get those right first.
E-commerce growth creates headaches for mailrooms and multitenant building managers
Two articles in two different publications from the last few weeks hint at one of the unforeseen downsides of the e-commerce boom: the headaches increased package deliveries cause to those who manage multi tenant buildings.
A Business Insider article described how the mailroom at the University of Connecticut, designed for receiving letters rather than packages, could no longer cope with the volume it is receiving due to online orders for its 31,000 students. UConn is now considering creating a central warehouse for packages, which other universities such as University of Vermont and SUNY Binghamton have done. The article notes that Amazon Prime is available to college students for free for the first six months, and for $49 – half the price of a non-student Prime subscription – after that.
Similarly, the New York Times noted recently that doormen, building supervisors, and other employees for apartment buildings are finding that they are in a quandary: they no longer have enough employees to ensure that packages get delivered promptly to tenants’ hands. This is a service the tenants’ expect, from the pre-Prime days, but would need to pay for in increased maintenance fees should the buildings decide to hire the help they need.
Both articles point to an issue that is part of the customer experience which the sellers have little or no control over: how the package into the hands of the recipient, particularly if they are one of hundreds of residents at a single address.
Brands, e-commerce companies, and real estate companies that are leaving this part of the customer experience in the hands of the building employees are missing an opportunity to help solve a problem that is sure to persist and worsen if it is not addressed. A next-day delivery that does not get to its buyer the next day is a broken promise, regardless of the reason. Those college students with overloaded mailrooms are tomorrow’s full-service Prime customers. And for those players looking to expand into e-commerce in emerging markets – in some of which, like China, the majority of the population lives in cities – this problem will repeat itself, and on a greater scale.