Reverse Commerce 2.0

Another important aspect to commerce and the consumer shopping demands is the customer returns, or reverse logistics, handling.  No discussion on commerce can be complete without inclusion of reverse logistics.  This was the critical aspect required for the consumer to first engage with eCommerce retailers.  The requirement is the ability of the consumer to return any purchase within a time period for any reason and be provided credit for the purchase.  

This provides additional complications for the retailer to handling the returned product in a manner that recovers the most cost as possible.  The requirements for product handling change dramatically for each product type and each of these requirements must be incorporated in the merchants process flow.  For example, apparel can be easily examined and reconditioned for resale, where electronics can be costly to examine and recondition and even then electronics must be sold at a discount as ‘open box’.  These are all obviously processes and procedures that can be clearly defined and implemented.

The challenge in this though is incorporating these processes and procedures in your collaborative supply chain network to support these requirements.  Handling customer returns is much easier when the retailer provides all services and sales support to the consumer.  However it becomes a little more difficult when you bring additional partners into the equation.  This support will most probably start with a single point of support from the retailer and then as the collaborative partnerships grow the opportunity to push the support of the processes and procedures may be appropriate to shift to one or more partners.  

There are two factors you must take into account with your collaborative supply chain:

1. The support of the consumer especially as it relates to satisfaction.
2. The cost of handling the returned product.

The most critical aspect of these factors is the satisfaction of the consumer.  The merchants and their collaborative supply chains are responsible for containing and recovering the cost of these returns.  The merchant must realize that they will never recover the full cost of the product, services and original shipping and delivery to the consumer.  

The reason why this is so important is because of the impact it has on the consumer retention and long term satisfaction of the consumer.  As I have been saying for a long time now the key to success is the long term satisfaction of the consumer which itself leads to the long term retention of the consumer.  Retailers understand this and have included these processes and procedures as a cost of doing business.  This cost view however sometimes colors the interaction with the consumer.  Retailers must be careful to train and provide electronic services that simplify and even encourage the return of unwanted products.  Too many times this view of a cost is projected to the consumer in their interaction through many questions and complicated procedures to return.

And now for the audience participation portion of the show…

ECommerce will have wide ranging impacts on both the retail and manufacturing sectors.  How can you focus these abilities to improve the consumers’ experience?  Improving the consumers experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes.  In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas.  How can you support these continuously changing requirements?

Supplying Commerce 2.0

The supply chain supporting retailers’ Commerce 2.0 framework must also be a collaborative and flexible framework in order to support the changing demands of the consumer.  Retailers cannot overlook the requirements to support the demands of consumers’ shopping for both selection and purchase and delivery options.  Just as retailers must revise their sales channels to meet the changing shopping demands, the extended supply chain must also change and increase flexibility to support the changing delivery and demand cycle of the consumers.  

Retailers have tried to meet the consumer purchasing demands through a variety of strategies from earlier purchasing to meet the demand to purchasing after the consumers have ordered to meet the demand of the orders.  As with most strategic decisions the optimum strategy is somewhere in the middle. A collaborative supply chain network provides the framework and the collaborative partners in the supply chain provide the means to meet the changing consumer demands.  The key to the success of the retailers in meeting the demands of the consumer is a collaborative supply chain strategy and the key to the success of this strategy is the partners in the collaborative supply chain network.

This strategy allows the retailer to focus on the consumer shopping demands and utilize the collaborative supply chain to support the purchase delivery.  The consumer shopping demands require the retailer to extend the support of the consumer purchase delivery across the extended supply chain network.  This extension and strengthening of the collaborative network increases the flexibility of the retailers’ commerce network providing the flexibility necessary to support the changing demands of consumers.  This strategic collaborative network extends from the raw material and manufacture of products all the way to the consumers’ door.  

In order to remain successful in this collaborative marketplace, the retailer must support both the shopping and delivery demands of the consumer.  These demands are changing at a much faster rate due to the capabilities and improvements delivered through mobile technology.  This rate of change can only be successfully met through an extended collaborative supply chain.  This strategy allows the retailer to focus their efforts on supporting the consumer shopping demands and then collaborate with the extended supply chain to support the purchase delivery, whether through the brick and mortar store or the the direct delivery to the consumers’ door.

This network supports the consumer demands in two directions; from the purchase to the consumer’s door and then from the consumer to intake back into the extended supply chain.  It is important to remember that the retailer must support the consumer demands in two directions in order to retain the sales.  The consumer returns, or reverse logistics, back into the extended supply chain are a critical aspect to the the customer relationship.

Embracing Commerce 2.0

By all appearances and actions consumers are embracing Commerce 2.0, or the collaborative marketplace, and this is leaving many retailers chasing the market and the sales.  In order to maintain success the merchants must also embrace this new practice and framework.  Consumers are not simply sitting back and waiting for the next product that a major retailer has decided should be accepted and purchased by the consumer, they are actively searching out, and also recommending products through their social networks and the specialized services such as Groupon.  The successful merchants will embrace the collaborative marketplace and focus on the shopping rather than the purchase.

Consumers not only want to get value, they also want to give value.  We are now seeing where consumers will engage in many types of services to provide feedback to improve the service or even the product.  The entertainment and restaurant market is probably the best example of this engagement.  Yelp provides a platform for consumers to engage and network with other consumers to rate service from both merchants, restaurants and entertainment venues.  There are many others providing this same type of service and this is the type of services that the large retailers should embrace.  We already see small local retailers engaging the consumer through social networks, the ‘shop local’ practice is strong and successful not because its a catchy phrase, its successful because the local merchants engage consumers through social networks.  

The initial focus of retailers on social networking was and in many cases still is as a marketing channel and a consumer complaint channel.  This was a good beginning however consumers have progressed dramatically in their capabilities and as their capabilities increase they are also pushing their desires and methods for interacting.  Large retailers must recognize these additional demands and support them in order to maintain their success.  

The greatest challenge for large retailers is to understand and embrace the concept that the consumer has wrested control of their shopping and purchasing from the retailer.  I think the large retailers have been expending a great deal of effort in fighting these trends because first it is hard to recognize the shift and second because it is difficult to give up control.  How will these merchants select products to offer?  This is where the merchants must begin to focus on engaging the consumer and bringing them into the process.  Embracing this method will provide two values to merchants, first it will provide the merchant with the types of products and features the consumer desires, second the engagement will retain the customer.

 

And now for the audience participation portion of the show…

ECommerce will have wide ranging impacts on both the retail and manufacturing sectors.  How can you focus these abilities to improve the consumers’ experience?  Improving the consumers experience will require a re-evaluation of the sales channels, the manufacturing channels and practices and the supply chain channels and practices from the raw materials to the consumers’ homes.  In order to ensure and maintain success in this new reality you must harness the tools and capabilities in many new areas.  How can you support these continuously changing requirements?