Recent trend: adoption of B2C
For the past three years of living in the shadow of Covid-19, there was an increasing adoption of online ordering. With the restriction of movement beyond their residences, people were purchasing necessities online.
B2C ecommerce has become the norm, especially consumers who are staying in city areas. Even with the opening up of the country borders and lifting of lockdown by the government, consumers are accustoming to the convenience of the new purchasing method of getting things online.
Additionally, consumers are now able to compare the pricing of certain items they are interested in across different online shops and platforms. No longer are the days where consumers need to depend on the shops in their vicinity for the availability of the goods. The extent of the comparison can range from within the geographical region to even beyond the physical boundaries of the countries.
Why B2B companies venture into B2C
Companies begin to realize the impact of the change in consumer habit. Traditionally, the focus has always been the conventional distribution of goods to wholesalers who in turn will distribute the items to various physical outlets for consumer to purchase.
Companies now realize that ecommerce forms a substantial part of the overall sales volume. Neglecting or ignoring the ecommerce trend will result in missing out a large aspect of the revenue. Not forgetting that ecommerce also contributes to the marketing and brand presence online.
Recognizing the importance of ecommerce is the first step of acknowledging the trend. In order to sell things online, be it the brand’s own online store or online platforms, companies need to engage another service provider to do the following:
- Create online store/ stores in the marketplace platforms
- Listing and management of inventory
- Management of the orders
- Picking, packing of the inventory
- Delivery and fulfilment of the items to the online customers
- Updating availability and level of inventory in the listings
- Customer services to handle queries from online customers
The above is just an example of a simple requirement for setting an online store presence.
Setting up of online presence
To setup the online store presence, companies will engage different parties. Typically, one party to setup the online digital presence and manage the orders, and another party to handle and physical volume and last mile delivery to the consumers.
|High level steps to setting up online stores||Who will do this?||Charging mechanism|
|Online store setup||Agency who has knowledge to setup online store||One time charge|
|Listing of items in store||Agency who has knowledge to setup online store||Percentage of sales to be allocated to agency|
|Management of listing |
– with price and discounts/promotions
|Agency who has knowledge to setup online store||Percentage of sales to be allocated to agency|
|Management of stocks across various marketplaces and online stores||Agency who has knowledge to setup online store||Percentage of sales to be allocated to agency|
|Management of online orders||Agency who has knowledge to setup online store||Percentage of sales to be allocated to agency|
|Online orders information to pass to warehouse operations (example API)||Agency who has knowledge to setup online store||Percentage of sales to be allocated to agency|
|Warehouse to pick and pack orders||Logistics service provider (example 3PL)||Activity basis and monthly storage of inventory|
|Last mile service providers to pick up inventory and deliver to end consumers||Last mile service provider||Per trip basis|
|Update of order status and inventory levels in systems||Agency who has knowledge to setup online store||Percentage of sales to be allocated to agency|
|Handling of queries from customers||Agency who has knowledge to setup online store||Percentage of sales to be allocated to agency|
|Management of marketing for online presence |
– Such as Search Engine Optimization (SEO)
|Agency who has knowledge of online marketing||One time charge|
Based on the above, companies who are interested in setting up online stores for ecommerce will need to liaise with at least 3 different parties, i.e. a party for the online digital setup and management, a party for the physical handling of items and a party for the last mile delivery fulfilment.
Advantages of hybrid model
Certain companies are exploring the feasibility of using the same pool of inventory for both b2b and B2C businesses. Additionally, it will be ideal if the companies can reduce the reliance of the setup from 3 parties to just a single point of contact. This means one service provider to setup the online presence, managing of online store, physical stock and finally last mile delivery to end consumer.
With this integration, companies can reduce the inventory on hand, and lessen the complexity in management of different service providers. There will be more avenues for sales, visibility of data and reduction of obsolete items.
Disadvantage of hybrid model
Over reliance on a single service provider. Assuming if the service provider is unable to perform, it may be detrimental to the company.
Most 3PL companies are currently not equipped with aiding companies to setup and managing online stores. These 3PL firms will need to outsource this part to another partner. Same for last mile deliveries as well.
Inventory planning becomes more critical to the supply chain. With both B2B and B2C sale channels utilizing the same inventory pool, there will be a potential risk of over ordering of certain inventories that may result in stock obsolete if their sales do not meet the forecast. On the flip side, if the sales levels are high, but the inventory ordered are low, this will result in stock out situations. There will be loss of sales, which companies do not wish to experience.
From perspective of logistics service provider
|Capabilities||Other capabilities need to be further enhanced||Level of difficulty to acquire new capabilities|
|Agency with knowledge of setting online store & management of online store|| || || |
|3PL|| || || |
|Last Mile Delivery Provider|| || || |
The consensus is that online B2C ecommerce will become a norm. It is an undisputed trend that will only become more prominent. To prepare this change, every actor in the supply chain arena will need to adapt and change. No longer will one be only focusing on an aspect of the logistics while neglecting the rest.
Forward looking service providers will explore enhancing and adding the required capabilities to the list in order to be a one stop shop for customers.