Tag Archives: business strategy

Amazon.com and Walmart – Set to Face Off in the Omni-Retail Channel Space

Amazon.com and Walmart are busy reacting to challenges in their retail channels. The outcomes of their strategies are setting up these retail titans for a massive collusion in the Omni-channel retail space. “Amazon and Walmart have become the disruptive titans of today’s business world” says Jim Tompkins, CEO of Tompkins International. The rest of the retailers are playing catch up as they create benefits for their customers at a phenomenal rate.

But what are Amazon.com and Walmart now doing? Amazon.com – by far the leading online retailer is opening physical stores. Walmart – the biggest traditional (physical) retailer is frantically trying to compete with Amazon.com in the online retail channel. In short, Amazon.com is adding Bricks to their Clicks and Walmart is adding Clicks to their Bricks. However, they will both end up as Bricks and Clicks retailers.

Both Amazon.com and Walmart has entered the Omni-retail channel simultaneously to achieve the ultimate title: The World’s Biggest Retailer…

The paths that Amazon.com and Walmart took to the Omni-retail channel

Although the paths that the two retailers took leads to the Omni-Retail channel, they took different routes to reach their destination.

Amazon.com – adding Bricks to Clicks

Amazon.com, the most successful online retailer by far, is now opening physical shops of all kinds – and fast. That begs the question – why? Amazon wants to enjoy the advantages that a physical shop offers.

According to Trevis Team writing in Forbes, Amazon is opening physical stores to: 1) provide a more personal shopping experience to its consumers; 2) reduce shipping costs by providing a store pick up facility; and 3) integrate the online and offline shopping experience for its consumers in addition to creating a strong brand image. It is adding Bricks to Clicks then…

Nathan Cohen-Fournier and others from Tufts University suggest that Amazon’s ability to maintain its dominating position in e-commerce is under threat. Once competitors catch up with Prime and same-day shipping (Walmart and Ebay already have similar offerings), consumers will demand even lower prices and differentiation. In this regard, Bricks-and-Mortars have the lead, due to immediacy, trial-touch-feel, and ease-of-return. Also, essentially, Amazon is choosing growth over profits says Mac Bartine in Quora.

“Does this mean that Amazon will have to open more Brick-and-Mortar stores than just the one in Seattle?” asks Wayne Rash writing in eWeek. Perhaps, but it’s unlikely it could reach the penetration of Walmart.

The ultimate answer likely will mean more innovation from both companies—and that means consumers will benefit.

Amazon.com is masters of online retailing

Amazon.com is masters of online retailing

Walmart – adding Clicks to Bricks

Walmart has a long history of taking the best of what other companies do and incorporating it into their own business model. It is now doing its best to oust Amazon. But, in a world that has quickly gone digital, where Amazon has continually refined and improved its delivery options, Walmart has not quite come up with an answer to challenge the online leader.

Wayne Rash suggests that Walmart did not succeed to challenge Amazon with online sales. Products on Walmart’s website rarely were cheaper than Amazon’s and fast delivery only happened if the desired product was already in a store near you. Walmart’s online offerings were broader than one usually finds in their brick-and-mortar stores. However, Amazon always had more offerings to choose from.

For a long time, Walmart had an edge over Amazon simply because it had a network of stores. “However, by building up its Prime membership, which offers free two-day shipping, and increasing its shipping capacity and options, Amazon has made that edge less relevant” writes Daniel B. Kline in the Business Insider.

All Bricks-and-Mortar chains, not just Walmart, have struggled because they haven’t sufficiently adapted to the fact that retail on the web is a harsher environment compared to what they face on land.

The clash of equals in the Omni-retail channel

So, if Amazon.com and Walmart will face off in the Omni-retail channel, what will happen?

Both retailers are treading on each other’s strong points, challenging each other’s competitive advantages. For Amazon opening physical stores it means it customer’s expectation can be met regarding the shopping experience. Amazon’s customers can now enjoy shopping at their physical stores, using their senses to experience the products. They will however still enjoy the advantages that Amazon offers as a leading online retailer.

Walmart, on the other hand, has hundreds of physical retail outlets, with proficient staff that know how to please customers.  Walmart is the master of merchandising and decorating and fitting a shop to encourage customer patronage. What Walmart however realise, is the need to do business online the same or even better than Amazon. Walmart doesn’t have the skills or the organisational culture to confront Amazon successfully on its own. It is therefore unsurprising that Walmart acquired Jet.com to jump-start their online sales.

Who will be the winner of this epic battle? It will probably be the retailer that knows and satisfies the needs of their customers the best. As Jim Tompkins remarks that there are five elements that every counter-offensive must have for retailers to thrive nowadays:

  1. Omni-channel
  2. Store Fulfillment
  3. Same-Day Delivery
  4. Planning-Execution
  5. Demand-Driven Value Network

Tompkins notes that it is not about how much you sell online, but about the impact of online sales. Therefore, as a small Bricks and Clicks retailer – don’t even bother to compete directly with the Amazons or Walmarts in the Omni-Retail channel. Rather identify a niche market and develop your brand to provide the customers the best Omni-retail channel experience they could ever wished for.

Note:

Nathan Cohen-Fournier, Adolfo Gatti, Angelica Nouhi  2016.   AMAZON VS WALMART – REAL VISION CASE COMPETITION, Fletcher School of Law & Diplomacy, Tufts University

Images:

wikimedia.org and flickr.com

Retailers Biggest Challenge – Integrating Online with Offline

Retailers who are for years in business are using technology that is developed for running a physical shop (Bricks and Mortar) better and making shopping for their customers easier.  A study by Forrester Consulting found that although 90% of the UK retailers are now doing business online. However, most of them find it difficult to join their online and offline technology.

Only 26% of the retailers interviewed mentioned that their sales are influenced by the online channel.

Technology use by the customers of Bricks and Mortar retailers

Most of the customers of Bricks and Mortar retailers visit their website to get information about the inventory in the shop.  A recent study by Forrester Consulting,  found that 39% of customers are unlikely or very unlikely to visit a  store if its website does not provide physical store inventory information.

Only 32% of the shop owners that was interviewed offered a function on their websites for customers to view their in-store inventory details.

Customers want shopping convenience

The study indicated that half of all customers cited store pickup options as important or very important to them when shopping online. However, only a third of retailers today already support store-pickup programs.

Read also:  Will “Click and Collect” Solve the Delivery Headaches for Grocers?

The customers interviewed demanded the following:

  • Absolute guarantees that the product is actually available;
  • Rapid picking and notification alerts;
  • Customers want to pay at the point of pickup;
  • Customers want the option to pick their goods up at alternative locations.

In-store experience in the digital age

The customers are in power when they use their smartphones in the shop. They use their smartphones to check inventory availability before entering the store.  The customers also use their smartphones to get more information about the products  they are interested to buy.

Bricks and Clicks retailers need to be both masters of the store and of the digital domain.

eBizplan, an online consulting business, can help retailers to draft a strategic plan to integrate their offline and online business.

Reasons Why Start-Up Businesses Fail

Robin Allen from Smart Insights reported results from research recently done by Quartz why 87 bootstrapped (companies that start without venture capital) failed. Allen highlighted the fact that the results show ‘poor marketing’ positioned above pricing issues, legal challenges or burn out as a reason why start-up businesses fail.

The main reason that bootstrapped companies failed was because their business models were not viable. The matter of having a viable business model and business strategy will be discussed briefly in this post.

The result of the study by Quartz is shown in the table below.

Reasons for failing Number
Business model not viable 10
Customer development issues 8
Lacked financing/investors 8
No market need 8
Disharmony on team/investors 6
Inexperience/skill gap 6
Not enough traction 6
Technical/product issues 6
Lack of focus 5
Ran out of cash 4
Bad location 3
Ignore customers 3
Failure to pivot 2
Hiring mistakes 2
Poor marketing 2
Burnout 1
Lack of passion 1
Legal challenges 1
Pricing/cost issues 1

What is a business model?

A business model is according to Magretta (2002) similar to a story – a story that explains how your enterprises works. A good business model answers questions such as:

  • Who is the customer?
  • What does the customer value?
  • How do we make money in this business? and
  • What is the underlying economic logic that explains how we can deliver value to customers at an appropriate cost?

By having the answers to these questions a start-up business will come a long way to establish if their business idea is viable. A business model on its own will however not provide sustainable outcomes for most businesses. A business also needs a strategy…

What is a business strategy?

Whereas a business model is more concerned with the operational activities, the use of resources and the capabilities of a business, a business strategy had more to do with what the business should do in the future. A business strategy answers questions such as:

  • Where are we now?
  • Where do we want to be?
  • How will we get there?
  • How will we stay there and make some money?

A business model and business strategy usually come together in a business plan.

The integration of the business model and the business strategy

A well written business plan may serve as a vehicle to combine a business strategy with a business model. The opportunities and threats identified with the strategic SWOT analysis of the business can purposefully matched with the strengths and weaknesses that was identified with the business model.

Furthermore, if a prospect business owner draft a business plan before starting his/her business, most of the reasons way the business may fail (listed in the above table) may already have been identified and taken care of.

Also have a look why online businesses fail in South Africa

Please visit eBizplan if you want help to develop a business model, a business strategy and business plan for your start-up business.

Note

Magretta, Joan. 2002. Why business models matter. Harvard Business Review, 86-92.

Include a market analysis in your business plan

Drafting a business plan it is important to do a market analysis. You should determine against who your business is going to compete, what the size of the market is, whether the market is profitable and who your customers will be.

A market analysis of your business may seems like a daunting task,  but it is one of the most critical elements of your business plan. The following aspects as listed by Hanna Burmeister recently in the Grand Rapids Business Journal need to be analysed about the market in which you want to start your business:

Industry outlook

A prospect business owner needs to find answers to the following questions:

  • What’s happening in your industry?
    • Describe the size of your industry, expected growth, any sales, operational or management trends.
    • Is the industry seasonal? Are there expected economic fluctuations?
    • Are there government regulations?

Addressing these industry characteristics helps provide a detailed picture of the environment in which your business is operating.

  • Who is your target market?
    • Identify your slice of the industry. Who is your business targeting, and what are their characteristics?
    • What needs does your target market have?
    • How big is the potential market for your business?

This analysis should include both demographics and psycho-graphics.

Competitive analysis

It’s important to spend some time analyzing your competitors. By understanding what’s already out there, you can better determine your business’ competitive advantage. A competitive analysis should address the size of the market, competitor strengths and weaknesses, barriers to entry and market opportunities.

Projections

Do you know what market size and market share are? Knowing how much your potential customers spend will allow you to estimate how much of the market you can attract. Furthermore, you need to project your pricing structure and gross margins. These figures may help determine how profitable your business will be.

Additionally, all of the prior research you’ve conducted with your market analysis will help you with your pricing, gross margin and sales estimates.

Please visit my website eBizplan to read more about business plans and marketing plans.

The value of a business plan when you start a business

How many people that want to start their own business have a business plan in mind as one of the first things they must do before opening their doors? Not many… Recent research reported by the “Start Up Donut” showed that more than 1.5 million UK SMEs (about one third) don’t have business plans.

Every business should have a business plan, since not having it may cause a messy and costly take-off of your business. Here are reminders why having a business plan before starting your business is important:

What is a business plan?

It is a written document that describes your business objectives and strategies, your financial forecasts and the market you are targeting. It will help you set realistic and timely goals, secure external funding, measure your success. The plan also clarify operational requirements and establish reasonable financial forecasts.

Why do you need a business plan?

Your need a plan that will help you to focus on how to operate your new business and so give it the best chance for success. A well written plan with realistic financial proforma statements will improve your changes to secure funding for your start-up business.

A marketing plan may help you to market your product or services at the right place, at the right price and to the right people. The plan will identify what the needs and wants of your customers are also who your competitors are and how you should position your products or services accordingly.

Lastly, will a business plan answer questions such as where are you now? Where do you want to be? And how will you get there? The business plan should be revised regularly since the business environment of today is extremely dynamic.

Please visit my website eBizplan to read more about business- and marketing plans.

Are Your Customers Receiving Your Marketing Messages?

Retailers spend big money to convey messages about their products and their prices to their customers. However, if the customers understand the marketing messages differently as what the retailer has intended, then big money may be wasted…

Know what you want to achieve with your marketing messages

The main reasons why retailers want to communicate with consumers are to inform potential consumers about the attributes of their products. At the same time they want to persuade them to buy the product, and to remind them to continue buying it.

The marketing massage must reach consumers amidst messages of competing retailers. The message must be heard in online communities that usually champion Joe public concerns with their critics and praises about the products. Retailers should therefore have a promotion plan to enjoy an competitive advantage…

Plan your marketing messages

Without planning their marketing message, the best-conceived products, at the most attractive prices, will often gather dust on retailers’ shelves. The following steps need to be followed when doing your promotion planning:

  1. Situation analyses – also known as the SWOT analyses. Retailers need to identify their internal strengths and weaknesses to address the external threats and opportunities in the markets.
  2. Formulation the promotion objectives. Retailers should describe their target market as well as their promotional objectives.
  3. Preparing the promotional budget. How much money will the retailers need to achieve their promotional objectives?
  4. Manage promotional elements. What will the content of the message be, what medium will be used (e.g. press, TV or online), who will receive the message, and how effective will the feedback be?
  5. Coordination and integration of promotional decisions. Who is going to do what, when and where?
  6. Measurement of promotional effectiveness. Have the promotional decisions achieved their objectives?
  7. Evaluation and follow-up. Continuous feedback about the effectiveness of the promotion decisions is needed to take corrective measures.

The development and implementation of a marketing plan give structure to a retailer’s management tasks. It also brings a retailer closer to its customers and in contact with a dynamic retail market.

Visit eBizplan for more on marketing plans and business plans.

Trends that Bricks and Clicks Retailers Should Take Note of in 2016

Software AG identified ten disruptive trends that Bricks and Clicks retailers should take note of this coming year. Here is the first five trends to watch out for:

Trends that Bricks and Clicks retailers should take note of

1. Fewer stores, more stuff

Bricks and Mortar retailers will add fewer new shops as they dramatically reinvent themselves to address multi-channel issues. To be honest, I’ve read ever more about retailers closing shops never mind not adding new ones! The Bricks and Mortar retailers that are remaining will serve more as pick up and fulfillment centers. The “endless aisle” concept will extend shelf space to the brand’s full catalog of products and accessible content.

2. Focusing on the individual customer – you

Customer-centric personalization will differentiate retailers by making their CRM strategies more targeted. Retailers may deploy customer-centric technologies such as easy sign-up, and RFID-tagged loyalty cards, which can send personalized rewards over mobile phones when in-store. The technology allows retailers to tap into internal information, known preferences, and social media data to better understand and delight their customers.

3. The right price

Differentiation by price will be much more dynamic in nature in order to beat the competition as customers become more aware and more sensitive to price.  Also, real-time electronic shelf pricing will replicate customers’ online experiences, as well as optimize inventories and reduce labor costs. Real-time personalized discounts and special offers will further motivate shoppers to head to stores.

4. A master system to control cross channel activities

Today’s customers expect to get what they want—where and when and how they want it—and they achieve it by using multiple (Omni) channels for retail and marketing communication. Therefore the complexity of omni-channel processes and how these interact with multiple systems may require a kind of “mission control” center where retailers can see and control every activity across all channels.

5. Predicting your customer’s buying behavior

Predictive analytics in retail will enable stores to know, with a great deal of certainty, what customers are going to want and when. Predictive analytics tools, especially when combined with streaming analytics, offer retailers the ability to manage queues, customer expectations and inventories before there is an issue.

Finally, Bricks and Mortar retailers are battling to survive on their own.  Retailers therefore need to integrate both the physical and digital systems to prosper and grow during 2016. The next five trends that Bricks and Clicks retailers  should take note of will be discussed in a follow-up article.

Visit eBizplan for plans to integrate your physical retail shop with an online retail channel.

Adding Bricks to Clicks – How to Choose a Site for your Physical Store

Choosing the right site for your physical store is critical decision for an online retailer that wants to add bricks to clicks.

Open a physical store for your online business

The reasons why online retailers are starting to open Brick and Mortar Stores were  mentioned previously in this blog (http://bricks2clicks.co.za/?p=260). However, once an online retailer has decided to open a physical store, choosing the right site will help to ease the integration process with her online business.

Kenny Kline proposes that retailers do the following when choosing a site for their shop:

Outline the business needs

The type of retail business you have will determine the site and location you need.  If you offer a large variety of merchandise online, then a physical shop with space  can serve as a warehouse.  Other factors to consider when choosing a site are zoning requirements and whether you anticipate needing deliveries, making shipments, or attracting walk-in customers.

Know your customers

Before renting or purchasing a space, it’s critical to have an understanding of your ideal customer.  It is important for most retailers that their businesses are in proximity to potential customers. Retailers should therefore take time to evaluate prospective locations based on demographic data. Insight into the age, education levels, economic base, and other characteristics of the people living nearby are important.

Consider accessibility and safety

Retailers need to make sure that customers will find it easy to park their vehicles and safe to walk to your retail site. Delivery and courier trucks should have easy access to the warehouse with safe parking space. Employees should also have a safe place to park the vehicles. Employing security personnel should be considered in some areas.

Cultivate a brand

A retailer’s physical location serves as the first impression it will make on potential customers. People’s impressions of the building and its surroundings will influence their perception of your brand, so think carefully about what potential locations might say about your business.

Outsmart the competition

Explore the area to get a sense of nearby businesses, including their customer demographics, accessibility, and whether or not they might provide auxiliary services to clients or employees. Then decide whether their presence might hurt or facilitate the company’s prospects.

Anticipate growth

If you hope to expand retail space or hire more employees down the road, then seek out a building of an appropriate size. At the same time, keep in mind that there’s no sense in taking on more space than the business can reasonably fill. More space typically comes with a larger cost. Weigh future goals with present realities when making any decisions on size.

Visit eBizplan for assistance with business plans and marketing plans

Image: Forbes

Some Reasons Why Retailers Battle To Move Online In Africa

Despite being the continent with the highest growth potential and a growing middle class population, retailers  find it difficult to move online in Africa.

BiztechAfrica has identified 5 reasons why  retailers find it difficult to move online in Africa.

1 The right resources

Africa’s retailers need to have the following resources/processes in place:

  • The sourcing of products – finding the right products for your target markets at the right price may prove a challenge;
  • The retailers must hire or build a warehouse to receive, pack and dispatch the products for their online customers;
  • An online marketing strategy to target and interact with customers;
  • A well designed e-commerce website;
  • A third-party logistic service provider to get the products delivered on the doorstep of the retailer’s customers.

If one or more of these resources or processes are not in place, the retailer’s online business will fail.

2 Strategy gaps

Once the resources and processes are in place, they should be aligned with the retailer’s business strategy.  Many of the challenges for retailers getting their business online had to do with strategies that are not implemented or wrongly implemented.

3 Customers that abandon the website

The abandoning of a retailer’s website is just one click away for the visitor or customer.  The main reason why online customers leave a retailer’s website is because the website is not meeting their expectations.

4 Inability to monitor and use data

Many online retailers do not how to monitor and interpret the data available on their website that track the behaviour of their customers. The retailers therefore lose the opportunity to match their products or services with that of the customers visiting their websites.

5 Lack of competition

Retailers in Africa are sometimes not bothered to venture their business online because they experience little or no competition with their physical business.  Africa’s infrastructure, income and broadband/mobile connectivity are however improving, which may change the situation.

Visit eBizplan’s website for more on business solutions for your physical as well as online businesses.

Getting a Loan for Your Business

 

Getting a loan for your business can be a huge challenge. It takes money to make money; however, most start-up business does not have enough money to start doing business.  Here are some potential sources to get the start-up money for your business:

Getting a loan for your business from a bank

Banks require business owners to show repayment ability and have acceptable collateral to back up the loan. At the same time, they must have good business and personal credit and a reasonable owner investment in the project.

The business owner needs to show that her business idea has merit.  Therefore, a well written and research business plan may help to convince a bank to loan money to start your business.

Angel equity

If you must sell an ownership stake to get your company off the ground, start by finding a respected industry executive who is willing to invest a reasonable amount and give your venture credibility with other investors.  It is also an opportunity to work with a mentor and expand your business network.

Ordinary (equity) shares

Once your business has started and growing, you might want to raise more cash by issuing ordinary shares. The shares may be issued to existing shareholders or investors from outside of the company.  Moreover, ordinary shareholders are entitled to receive dividends if any are available after dividends on preferred shares are paid.

Friends and family

If you’re lucky, friends and family members might be the most lenient investors. They don’t tend to make you pledge your house, and they might even agree to sell their interest in your company back to you for a nominal return.

The need for a business plan for getting a loan for your business

Lastly, a well written business plan will give investors and banks an idea of how viable your business idea or expansion plan is. Visit www.ebizplan.co.za  for help in writing your business plan.