e-commerce

102 . images retail . FeBrUarY 2013

By Shijo Sunny Thomas

An e-tailing business can have multiple operational models. On one end it could be a highly captive model where all areas of the business such as maintaining inventory, order management, fulfillment and logistics is handled in house by the online retail organisation. Another extent is when e-commerce players tie up with a marketplace of suppliers or manufacturers to offer their products online on the ecommerce site. In addition to the product suppliers, an online retailer could also rely on specialised service partners for e-mail marketing, shopping cart management, logistics and even customer service. These partnership- oriented models help online retailers scale up rapidly by leveraging niche expertise in multiple business areas. Cost factors also play a key role when retailers rely on product and service partners.

For instance, a customer receives an e-mail for an attractive online shopping offer on a pair of shoes. Quickly and deftly, she reaches

e-commerce

The E-tailing Partner Ecosystem– Choreography at Its Best

the diFFerentiator in an e-tailing BUsiness is oFten sUperior cUstomer service. manY online retailers are relYing less on captive inventorY and services and depending more on an ecosYstem oF sUppliers and specialised partners. it is imperative to BUild a highlY integrated operational model to retain the core valUes oF the online shopping BUsiness.

the online retail site and orders the product. She receives an order confirmation e-mail followed by the shipment tracking details. Within two to five days she receives the product, but unfortunately the size is a problem, so she calls customer service asking for a replacement which is promptly delivered in the next three days. Now imagine, if the only thing that the retailer where she shopped, had in its own stable, were the product images, an attractive offer and a reputation for impeccable delivery and customer service.

Online retailers attempt to exhibit the concept of an ‘endless aisle’ by shifting the entire fulfillment aspect towards the suppliers. This way, retailers can substantially increase the availability of the merchandise, and it is not limited by the inventory carrying capacity of the online retailer. To explain this aspect, in an online market place, retailers have established tie-ups with various suppliers across multiple product categories. Suppliers provide detailed

product listing with information on each product including images, description and specifications to the retailer. The available stock with the supplier is sent frequently, in cases daily, depending on the velocity of the product at the retail site. The retailer publishes these products on their site as available to the shoppers. An order placed by a shopper on the shopping site of the e-tailer is relayed to the supplier, who commences the shipment of the product to the customer. The supplier also provides the tracking information of the shipment to the retailer who makes it available to end customer. In retail parlance, this kind of a model is referred to as dropshipping.

Depending on the level of integration and service level agreement, a shopper might not even be aware that the product has been delivered to her by entities which are not part of the retail organisation. The packaging and invoice will have the brand and signature of the retailer and there will not be a mention of the supplier. Obviously, it is evident that the retailer has to go the extra mile to ensure service reliability and visibility at all points in the e-commerce supply network. The retailers brand image is constantly being tested by the customer from order placement to delivery. Therefore, maintaining

e-commerce

FeBrUarY 2013 . images retail . 103

ABOUT THE AUTHORShijo Sunny Thomas is the Industry Lead–Retail & CPG at Fujitsu Consulting India. He has worked extensively in advisory and operational roles with medium to large cross-channel retailers

high, reliable and consistent levels of customer service is the key to success.

There is no standard mode of operation in this e-tailing value chain. Some retailers will opt to have the shipments delivered to their distribution centre and then ship it to the customer themselves. In some cases, the retailer will have their logistics partners pick up the shipments from designated supplier locations and reorganise to be delivered to customer addresses. The model implemented by the retailer ultimately depends on the supply chain complexity and competency. Each operational model has a high degree of service level agreements involving shipping terms, order accuracy, packaging specifications, product personalisation etc.

Irrespective of the intricacies of the mode of e-tailing operations, it is evident that retailers need to weave together a layer of technology to induce control and visibility into their business. The focal point of technology in this business segment is the integration with the supplier base. Unfortunately, despite dropshipping commanding a significant share of the etailing business, integration standards are missing. This results in retailers employing proprietary methods to integrate with their supplier network. The integration methods are dictated often by the size and scale of the retailer operations. Retailers define the structure and specifications related to the data that is required from the suppliers. Retailers such as Amazon publish detailed specifications related to each area of the integration touch points. These can be accessed by the supplier network to build their side of the integration points.

The integration points refer to all touch points of interaction between a retailer and a supplier. Product data feeds are used by suppliers to provide detailed product information. This information finally resides in a retailer’s merchandising system. Available stock positions are sent by suppliers as daily feeds. Customer orders are reverse feeds which are sent from a retailer’s systems to the suppliers. Suppliers in turn send the

shipment feeds containing tracking information which resides in the retailer’s order management system. There are other feeds related to price and quantity updates; payment reconciliations; returns and refunds management among others.

Traditionally many retailers have attempted and invested to define their own integration standards. These are made available to suppliers who in turn make their own investments to subscribe to these integration services made available to them by

the retailers. This approach has turned out to be not only a costly proposition but also complex. Often retailers and suppliers end up duplicating information from the feeds so that they can be consumed by their internal systems. Smaller suppliers often only invest in ensuring that the retailer gets the information in the prescribed manner and not concentrate on integrating the information from the retailer into their internal enterprise systems. This might seem a step up from using paper, fax, phone or EDI, but when a retailer has thousands of dropship suppliers, a less than optimal integration methods can prove disastrous to the retail brand. Do consider scenarios where one retail order has to be split into multiple supplier orders.

A new mode of operating the dropship retail business is through the use of supplier integration hubs. In its simplest explanation, an integration hub is akin to multi-socket extension board that we use at home. One end of the integration hub is the main cable which connects to a retailer’s enterprise applications. On the other end are standard sockets to which multiple suppliers can connect to. The hub orchestrates the bi-directional flow of information and has built in adapters for major ERP vendors which can be used by the retailers to connect to their ERP applications. On the other end, the hub exposes all integration touch points which can be consumed by a supplier. Some integration hubs also offer a full-fledged interface to the suppliers in such a manner that they do not need an enterprise system at their end. This caters to the smaller suppliers who do not have the requisite technology infrastructure available immediately. These integration hubs also provide multiple integration methods to suit the needs of the large supplier base. The hubs also have built in reports, e-mail integration, workflows and alerts to ensure effortless and reliable communications throughout the e-tailing supply chain.

In a market such as India, where e-tailing is growing at such a rapid pace, retailers can look at scaling up through dynamic partnerships. Combined with an integrated technology layer, the dropship model can prove to be a double edged sword. Retailers can develop the capability to offer constant availability of a wide variety of merchandise and at the same time have a firm grip on shipment delivery and customer service. It is indeed the right time to turn the tables on dropship complexities and move on to drop-dead efficiency.

THE fOcAl pOinT Of TEcHnOlOgy in THis BUsinEss sEgmEnT is THE inTEgRATiOn wiTH THE sUppliER BAsE. RETAilERs dEfinE THE sTRUcTURE And spEcificATiOns.