This post is by Chris Sewell, Business Director at TrinityP3. Chris has a wide ranging knowledge of all areas of the advertising and procurement world and specializes in helping companies understand the environmental impact of their marketing spend.
Today the retail supply chain is undergoing a game changing transition that will remove a number of established businesses that sit in the middle of any purchase. The raise of on-line trading will leave these businesses with eroded brand values or worse, be road-kill on the side of the technology highway.
The origins of today’s modern marketplace can be traced back thousands of years. The opening up of distant trade routes led to multiple money making opportunities and a proliferation of middle men and women along the way.
The commercialization of the Internet in the 1990’s was a major game changer for the traditional retail model. Up until then the purchase of that ‘little black dress’ involved the gainful employment of numerous pairs of hands from farmers to shop assistants. While remote areas were serviced by catalogue shopping via direct mail the majority of goods followed the tried and tested route.
New financial vehicles have been deployed up and down the supply chain to help grease the wheels of business. Improvements to shipping, legal frameworks, marketing, local transport providers, warehouses, merchandisers as well as the removal of trade barriers have all had a hand to play in the endless pursuit of that perfect little black dress.
But nothing fundamentally challenged this well trodden business model like the arrival of the Internet.
Avoiding a mauling in the Mall
So what’s changing to cause this extinction of the merchant; the whole-hearted acceptance of purchasing on-line?
Gone is the fear of buying without trying first, now that the returns process has been simplified.
With one of the key purchasing demographic groups glued to their iPhones the need to visit the shop is fast losing its fascination.
The on-line shopping experience is today at least comparable with a visit to the Mall. This has been driven by better merchant facilities plus secure and dynamic websites. Fast and cost efficient inventory and shopping cart software like Magento and the maturing of complex shipping aggregation engines like Temando have all vastly improved the buyer’s experience.
Now we have the means to supply most goods straight to the door with a casual swipe of a finger. So what is going to become of that long list of traditional handlers in the middle?
Let’s take that LBD once more.
The Net-a-Porter model clearly demonstrates the changes taking place causing the elimination of the middle merchants. Previously an Australian purchase could be manufactured in Asia, shipped to the UK, then final delivery back to Sydney. Now with the opening of their Hong Kong hub the need for the UK warehouse and pick and pack facilities, the shipping of around an extra 20,000 km is not required. Today you can sit in the comfort of your lounge room on a Sunday night and order that must have LBD and be trying it on in the comfort of your own Sydney home by lunch time on Monday.
The rise of the Merchant of Suzhou
Ask yourself do we really need multiple warehouses and movements before that LBD finds its rightful place in the wardrobe. By removing the layers of warehouses and the physical shop costs the shutters will come down on a lot of businesses. Also, a contraction of unnecessary movements will also reduce the carbon footprint of these necessary commercial ventures. Re-zoning of empty shopping centres will clear the way for high density housing in all capital cities. But this is just one future scenario.
Naturally there will be major resistance by anyone within this middle layer of enterprise. ‘Adding value’, ‘ease of supply chains’ and ‘tried and tested business models’ will be rolled off the silver tongues to help shore up the interest of the vested.
The speed of understanding, deployment of new technology and the reconfiguration of existing logistics businesses, will dictate the timing of this streamlined delivery chain.
One of the major business risks holding back this transition of maker to door would have been the ability to ensure that the quality controls are in place to replicate the existing service levels.
Quality control requires special attention but in the garment industry this already occurs in the manufacturing industry therefore these learnings are already available at a local level.
Again with technology solutions it is now easier for the manufacture to deliver the goods directly to the customer. Companies like Temando take care of the processes, carrier relationships and customs paperwork to simplify the transition. Centralized distribution or drop shipping points will either be managed by tech savvy third party logistics companies at the point of manufacture or point of entry into any given market.
Streamlined inventory controls will also reduce the need to warehouse stock. Order-make-delivery to wardrobe within a matter of days will cut costs, dramatically reduce stock obsolescence and again, soften the carbon footprint on the planet.
What this means for Marketers
Marketers have moved at varying speeds to realize the opportunities that await them in this changing market place. If you are historically wedded to profit from an existing business model it is sometimes hard to convince the powers that be to alter course.
Online shops such as Net-a-Porter, ASOS and The Iconic have already captured the hearts and minds of fashion shoppers with price and service models that are superior to traditional bricks and mortar ventures.
These are all online shopping centres that promote other brands within their brand. Today are these more valuable than the traditional shops of Myer, DJ’s and shopping centres like Westfield?
The challenge for marketers is to understand and communicate internally the value of the brand and then position it in a highly dynamic digital marketplace. The ability to be able to reach out to customers who are now comfortable with not having to touch and feel the goods before they buy is now a truly one on one relationship. The world of social media means you will be praised and gossiped about so partner with businesses that truly understand the brave new world not just pay lip service to it.
While the marketplace changes goes through radical change the selection of your marketing partners also needs to change as well. It is not about a creative award winning graphically rich website. What a retailer needs is the equivalent of online merchandisers or window dressers. They need to understand the needs of the customer and make the sales process simple and fast.
Disclosure: Chris Sewell is the CEO of The Gaia Partnership whose marketing communications CO2counter has been deployed in the Temando offset to measure carbon in transport and supply carbon offsets.