How to use e-commerce in SMEs

How to use e-commerce in SMEs Industry Development Augmentation Division of III. ... Founder of Alibaba Group, Jack Ma, believes that, "10 years later...

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How to use e-commerce in SMEs Industry Development Augmentation Division of III. Carrie Lai / Director 2016/08/06 [email protected]

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Index • Why do SMEs need to use e-commerce? • What is the most challenging aspect of SMEs using e-commerce? • Things that need to be considered before using e-commerce • How to choose the appropriate method of opening a store? • Successful cases of SMEs using e-commerce • Conclusion

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Why do SMEs need to use e-commerce?

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All transactions will be performed online in the future! Physical retail stores will eventually turn into a showroom! According to Forrester's report, 20% of adults in the United State use their mobile phone in stores to compare prices online, and 33% of these adults will purchase the product they enquired either online or from other stores.

Consumer behavior is changing! 1. Consumers use their mobile phones wherever and whenever, rendering the channel they visit more fragmented. 2. The online world is becoming more realistic, thanks to SNS such as Facebook and Line.

All enterprises will be e-commerce enterprises in the future! Founder of Alibaba Group, Jack Ma, believes that, "10 years later, China will have no e-commerce because e-commerce will be entirely infused into the blood of all enterprises, becoming an integral portion of their daily operations.

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Online shopping penetration in Taiwan is high. • In Taiwan, 86.1% of Internet users shop online, of which 85.2% shop online using a PC and 63.3% have mobile shopping experience. • Almost 50% of Internet users (48.5%) have both PC and mobile online shopping experiences (cross-monitor shopping). Have online shopping experience

No online shopping experience

86.1%

13.9%

M: 63.3% Only PC online shopping experience 36.7%

Have both PC and mobile online shopping experience 48.5%

PC: 85.2%

Only mobile online shopping experience Note: N=1,114 Source: MIC, 2016 Jan

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Mobile phones increase the chances of product browsing and purchasing. • Internet users in Taiwan typically shop online with their mobile phones in their bedrooms (42.6%), lounge (40.7%), and office or school (28.5%), indicating that mobile shoppers primarily shop online in living spaces. • In addition to living spaces and office or school, approximately 20% Internet users shop online with their mobile devices in sites with greater mobility (e.g., queuing or public transports). This phenomenon was absent before the prevalence of mobile shopping, suggesting that mobile devices enable Internet users to shop wherever they desire.

42.6 %

40.7 %

Bedroom Lounge

28.5 %

Office/ school

24.0 %

Waiting Sites

19.9 %

Public trans port

11.9%

Restaurant/ coffee shops

10.9%

Within store

9.8%

4.7%

Private vehicle Restroom

Source: III, MIC 6

Reduced online store platform threshold and more options! Social networking websites Group-buying websites O2O Bidding websites C2C Shopping street B2B2C Shopping street B2B2C Brand websites B2C/APP

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What is the most challenging aspect of SMEs using e-commerce?

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Challenges

Sell what? How to find products?

How to transact? Cash?

How to increase exposure?

How much to invest? How long until return on investment?

How to deliver? How to handle product returns? 9

Over 80% of online stores manage their business on an online platform • The current survey showed that most of the online stores choose using online store platform as their sales channel, and this ratio is greater than that two years ago.

• The ratio of online stores choosing shopping websites to supply products has increased on a yearly basis; the ratio was ranked No. 2 this year. • The ratio of online stores using apps as sales channels has also increased on a yearly basis, indicating the prevalent use of apps. 2014 Ratio

2013 Rank

Online store 86.10% 1 platform Bidding websites 42.46% 3 Self-owned 38.74% 4 websites Product supply to 45.40% 2 shopping websites Product supply to group-buying 16.63% 5 websites Mobile version 9.58% 6 websites APP 9.58% and Infrastructure 6 Source: eCommerce Cloud Innovation Plan

Ratio

2012 Rank

Ratio

Rank

81.60%

1

84.80%

1

54.10%

2

40.90%

2

41.90%

3

34.60%

3

34.70%

4

27.00%

4

16.90%

5





10.70%

6

3.30%

5

4.80%

7

2.00%

6

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Clothing, shoes, and bags remain the primary products sold • Clothing, shoes, bags, and accessories remain the products primarily sold by online stores, with their ratio increasing from 20.5% to 30.9%. • Ratio of food specialties remained roughly the same as last year, ranking No. 3 this year. 2014 Rank

Category

2013 Ratio

Rank

Category

Ratio

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Clothing and accessories

30.9%

1

Clothing and accessories

20.5%

2

3C and electronic appliances

20.9%

2

Food specialty

20.0%

3

Food specialty

19.0%

3

Beauty and cosmetics

17.8%

4

Beauty and cosmetics

16.2%

4

Computers and peripherals

14.9%

5

Daily necessities

13.5%

5

Miscellaneous furniture

14.1%

6

Health care

11.1%

6

Daily consumables

12.6%

7

Furniture decorations

10.0%

7

Mothers and children

11.4%

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* Ranked No. 2, 3C products and electronic appliances, which include computers, peripheral computers, communication products, and household electronic appliances, registered a ratio increase to 20.9% this year. Source: eCommerce Cloud Innovation and Infrastructure Plan

Over 60% of online stores achieved break-even • Compared with last year, in 2014, the annual revenue increased as stores with zero revenue dropped below10%for the first time and stores with revenue of over NT$500,000 dollars increased. • In 2014, the ratio of stores that achieved break-even or better exceed 60%for the first time, and profits also increased. 今年還無營收

50萬元(含)以下

50-100萬元(含)

100-500萬元(含)

500-1000萬元(含)

超過1000萬元

2014

8.6%

2013

11.4%

2012

11.5%

2011

12.8% 0%

42.5%

未達損益兩平

剛好損益兩平

已開始獲利

2014

37.9%

25.9%

36.2%

18.0% 4.8% 10.0%

2013

40.3%

10.2% 15.2% 5.5%7.0%

2012

11.0%

44.4% 50.7%

21.1%

11.4%

52.1% 20%

40%

8.0% 8.8%

12.4% 13.0% 4.1%5.7% 60%

80%

45.7%

2011

Source: eCommerce Cloud Innovation and Infrastructure Plan

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19.4%

48.3% 0%

100%

24.4%

20%

19.8% 40%

60%

35.3% 34.9% 31.8% 80%

100%

Considerations of online stores to choose online store platform • According to 70% of store owners, platform customer-attraction capability is the priority consideration, whereas cost is the third factor of consideration, indicating that business owners attach greater importance to profitability. Platform has high customer attraction capability 平台集客能力高

357

Platform can provide comprehensive cash flow service 平台能提供完整的金流服務

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Platform cost is low 平台各項收費成本低 Platform plans promotion activities 平台有規劃促銷活動的能力 Platform provides a diversity of management and marketing tools 平台有提供多樣化的管理及行銷工具 Platform can provide comprehensive logistics service 平台能提供完整的物流服務 Platform has low technology threshold 平台技術門檻低 Platform has cross-border capability or provides cross-border sales assistance 平台有跨境能力或提供跨境銷售的協助 Platform provides mobile tools to induce purchases and strengthen marketing effect 平台有提供行動工具導購強化行銷 Platform provides online training courses 平台會提供上線教育訓練課程

Source: eCommerce Cloud Innovation and Infrastructure Plan

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294

261 230 172 89 93 89 52

加權

次數

The chief source of pressure is price competition. • In an open market where online information is transparent, online store owners are still under the pressure of price competition. How to increase visibility among so many competitors is also another biggest challenge. Intense market competition, price competition influences 市場競爭激烈,削價競爭影響營收 revenue

425

網站或網店知名度拓展不易 Difficult to increase website and online store visibility

331

七天猶豫期衍生之消費者惡意行為 Seven-day return policy causes consumer malicious conduct

260

缺乏電子商務人才 Shortage of e-commerce experts

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網路交易安全問題多 Numerous online transaction safety problems

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法令對網路販賣限制太多 Excessive legal limitations on selling products online

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對於法令規章不了解 Unknowledgeable about legal regulations

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缺乏物流管理配送機制 Lack of logistics management and distribution mechanism

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缺乏金流工具交易機制 Lack of cash flow tool and transaction mechanism

53 0

50

Source: eCommerce Cloud Innovation and Infrastructure Plan

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100

150

200

250

300

350

400

450

Summary: Opening a store is not difficult.

Opening a store is not difficult

Challenges in opening a store

Existing platforms are typically used to open a store because platform technologies have a low threshold, are able to attract customers, provide comprehensive range of cash flow and logistic services, are low in cost, and offer marketing tools and training courses.

• Intense market competition, price competition • Difficult to increase online store visibility • Consumer malicious conduct (e.g., return a product on purpose) • Shortage of e-commerce experts

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Things that need to be considered before using ecommerce...

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Things that need to be considered in ecommerce management... What do you want to sell?

Market positioning

How is your product different from others' products?

Product features

Where are your customers?

Target users

How do you setup an online store?

Online store assessment/tools

How to attract customers? Who are your competitors?

Flow volume/ competition analysis

Which marketing methods are the most effective?

Marketing + sales

How to run a business?

Model and business focus 17

The most important things to do before ecommerce management Market positioning

Product features

Target users

• Brand e-commerce? Community ecommerce? – Transaction based – Content based – Service based • Are there this type of website in the market? • How do they manage it? – Pricing/sales channel/brand positioning/profiting model

• Product appeal? – Product value – Producers' story – Price and product packaging • How do consumers find products – SEO – Keywords – Search engines – Group word of mouth

• Who are the target users • How to find the target users • Consumer needs – Are consumers willing to pay more to buy your products? – Consumers' acceptable price range – None or unknown

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How to choose the appropriate method of opening a store?

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Way of setting up an online store?

Line

Facebook

Online Store Platform Bidding Platform

Mobile app store

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Comparison of online store models Type

Operating model

Subjects

Level of difficulty

Social networking websites

Consumer<-> Intermediary platform

Advertising store

Pan-group buying

Consumer-> Intermediary platform-> Supplier

Popular stores in the service industry (restaurants, B&Bs, etc.)

B2C supplier

Shopping website-> Consumer

C2C Personal to personal transaction platform

Cash flow and logistics

●○○

(none) For advertising and marketing purpose

●○○

Cash flow is provided by a platform; logistics is generally transported to the destination by the platform and the group buyer distributes the product onsite

Purely supply product to a platform and the platform sells the product

●○○

Platform takes charge of cash flow; the platform and supplier share responsibility in handling logistics

Seller-> Bidding website-> Buyer

Personal auction Supplier auction Increase sales channel

●●○

Cash flow provided by the platform Logistics negotiated between seller and buyer

B2B2C SME platform

Online store-> Online store platform-> Consumer

Small suppliers open their own store

●●○

Platform provides cash flow service; platform service can be used or suppliers can choose their own way to handle logistics matters

B2C brand website or APP

Website-> Consumer

●●●

Website with product shelf management, transaction, cash flow and logistics, and marketing functions

Business with own brand

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Choose a method suitable for you •

Better to setup a store yourself? Or setup a store through other channels? Using a platform

Independently

Website

None

Independent website

Online store system

PChome Yahoo mall Rakuten Momo mall

 Online store system (Shop123, Shopline, Wei Mon, etc.)  Customized setup (information service provider)  Mobile app (91app) WIN

Cash flow

Platform already connected

 May connect yourself  Can use third-party cash flow service (allPay, Neweb, Funcashier, etc.)

Logistics

Platform already connected

Flow volume

May participate in platform activities and pay advertising fee to attract flow WIN

Must rely on keyword advertising, FB advertising, or management to attract flow

Member

Does not provide member information

Can management own members and brand loyalty

Setup cost

Lower and can be duplicated faster

WIN

WIN

WIN

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WIN

 May connect yourself (President Transnet, Pelican, FamiPort)

Higher at the initial stage

WIN

Stages and steps to online store operations Planning stage

Introduction

Operation

Target users

Confirm store model

Marketing scheme

Product positioning

Product shelf/webpage design

Sales channel establishment

Market survey

Link cash flow and logistics

Flow conversion rate

Competitors

Supply Chain Management

Report analysis

Pricing strategy/ business model

Business management

Customer experience/repu rchase rate

Website Products /services

Marketing

Market position ing

Brands

Supply Chain

Team

Source: Organized by CDRI and III.

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Introduction to online store setup tool (1/2)  Taiwan has 22,500 online store platforms, with 72,630,000 products and 13,000,000 members and ranked No. 38 in flow volume.  Provides online store platform and cash flow service; owners can decide for themselves product shelf items, quantity, price, marketing model, logistics, customer services before and after product sale.  Introduces various convenient sales and management systems and tools to help owners more easily sell their products online and to collectively create sales performance.

No. 1 online store choice

Next-day delivery service Store owners are free to choose

Number of products/number of stores rank No. 1 in Taiwan

First cross-store shopping cart Convenient check-out procedure

Multiple payment methods

Provides diversified marketing tool such as EDM/discount vouchers

Support mobile devices and other shopping interface Make purchases anywhere and anytime

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Self-developed system is easy to operate

Introduction to online store setup tool (2/2) One of the earlier online store platforms established in Taiwan; the number of owners using this platform to setup a store exceeded 20000 Possess multilingual front and back stage with powerful functions Has branch offices in the United State, Japan, China, Malaysia, Vietnam, and African countries Has links to cash flow or logistics of different countries; suitable for cross-border e-commerce operators Provides e-commerce college and has links to Family Mart, Hi-Life, OK, and other kiosk systems

 The first platform to offer online store app system platform; currently has approximately 3000 online stores  Provides cross-device online store system so that store owners can setup mobile shopping websites and apps all in one go  Provides responsive web design, pinterest interface design, push notifications, branch information and GPS navigation, location-based service for customer attraction, real-time coupon O2O integration, community management synchronization, and other functions.  Easier to manage own brand and branch store, uses mobile characteristics to increase member loyalty From Hong Kong, provides brand e-commerce and multifunctional online store platform Website provides simple, easy-to-understand instructions and offers a number of information on online store setup Front and backstage supports bilingual interface and overseas cash flow; suitable for cross-border e-commerce sellers Cash flow options can support overseas credit cards and Alipay service to facilitate purchase transactions between buyers and sellers Integrates Google Analytics and SEO optimization functions to help sellers analyze and optimize their flow volume; with Facebook store function, sellers who manage online community can therefore maximize their exposure

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What is the most challenging aspect Successful Cases

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Successful Cases Funding

透過群眾募資的鮮乳坊

Contents

會說故事的直接跟農夫買

https://ilovemilk.com.tw/

https://www.buydirectlyfromfarmers.tw

Online 分享購買經驗的486先生 community http://www.486word.com/

Logistics

自建物流的東稻家居 www.hdlife.com.tw/ 27

Milk House as a bridge to connect small farmers and consumers The exposure of a series of food safety incidents in 2014 has induced consumer panic and severely affected innocent dairy farmers. Nonetheless, dairy farmers are not at fault, the fault falls on large manufacturers.

Large manufacturer problems To produce consistent flavor in milk, large manufacturers unanimously adjusted the nutrient content and therefore lost the natural flavor of fresh milk, which made consumers question the safety of such milk products.

Producer problems Raw milk purchase price in Taiwan is defined by large manufacturers. To retain dairy farmers, manufacturers prolong the contract period, causing monopolization. Raw milk purchase price in winter is so low it cannot even cover the cost.

Consumer problems Japan has numerous brands competing with each other, giving consumers different choices. By contrast, Taiwan has only a few options of dairy products and these products are not clearly labelled.

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Crowd-funding to gain consumer support  Position: Consumers place orders online, and products are delivered to members at a regular interval in fixed quantity; dairy farmers can therefore take care of their cow and produce safe, high-quality milk products  Appeal: Have vets standby on-site to care for the cows; no content adjustment to ensure product naturalness; product is made of 100% local dairy resource to support the sustainable development of dairy farming  Contribution: Skip intermediary to profit the place of origin; single dairy source, farm brand, and small farmers can co-exist and prosper together; contribute earnings to cultivate and develop vet students

 Raised the highest amount of funding through the FlyingV fund-raising project, shipping over 27,000 milk products every month; established a company in March 2015, earning an annual revenue of approximately NT$40,000,000, which is expected to reach NT$120,000,000 by 2016 and the products will be sold in 3000 stores across Taiwan.  A second fund-raising event was held in May 2016, inviting consumers to adopt new farmlands; within a month after the event went online, over 60000 preorders were received, increasing to almost 120000 at the end of June; such a substantial order stabilized the first two months of income for new farmlands.

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Increase sales through group buying and event sponsorship • Refine single product line (audio and video+story+social enterprise) • Strengthen logistics distribution method (cold chain logistics and special low-temperature bags) • Promote group buying to save on logistics cost (welfare committee, office, product supply to beverage stores) • Sponsor events by providing small-packaged products to increase visibility (New Taipei City WanJin-Shi Marathon, Mini Socar...) • Develop peripheral products and new farms that produce single dairy product to increase product line (Chiaming fresh milk) • Cooperate with enterprises that hold the same business philosophy (Milk House X Morning Shop, Milk House X OKOGreen, etc.)

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From place of origin to the dining table: Buy directly from farmers Business philosophy: Revolution of 2300 people! Support 100 farmers and village restructuring plan!

• The community organization initiated in 2010 successfully transformed into a social enterprise in 2014, building a BuyDirectlyFromFarmers platform. • Cooperate with 100 farmers, use each product page to delineate the story of farmers and their land, and provide online transaction functions to help farmers gain access to an ideal way of living and teach them how to farm and market their products at the same time. • Internet channel: Independently setup official website and manage fan groups (number of fans: 126,017 individuals) • Operating model: Marketing→packaging→pricing→cash flow→sales model • Profitability: Revenue exceeded NT$15,000,000 and achieved break-even within a year • Benefit and impact: The income of 70% of farmers increased by more than 20%, and the income of a fifth of farmers increased by more than 50%. Buying directly from farmers and cooperating with over 60 farmers for one year resulted in a one-fold increase in the revenue of the past two quarters compared with the revenue last year. 31

Capitalize on story marketing: Deliver true feelings Pinterest-style webpage to increase probability of searches

Use large photographs and let pictures tell stories • Farmers' seasonal crops: Provide seasonal fruits or ingredients; get to know the person who planted them for you; and feel the actual weight of the products. • Farmers' signature products: The authentic taste of sauces, vinegar drinks, dried fruits, etc. • On sale: This area is designated to help farmers resolve urgent sales problems and discounted prices are offered to sell products that are about to expire and thereby prevent food wastage • Mix-and-match: Products under this category can be mixed and matched; transport fees are included • Pre-orders: Using contract method to pre-order farm products consumers desire to help farmers achieve stability and sustainability

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Sharing his shopping experience: Mr. 486, a group-buying expert

• •







A popular blogger who loves to share his stories and has written over 400 articles on product recommendations In 2006, Mr. 486 purchased the world's first iRobot Roomba and shared his experience in using it. His blog motivated a large number of Internet users to group-buy the product. To date, over 60,000 machines have been sold, making a total of NT$900,000,000 in sales. The blogger, John Chen first buys a product and then writes an article to recommend it, the manufacturer sees the article and negotiates on a group-buy price, and a purchase hyperlink is provided in the article. The profit earned from selling the product is divided. Currently, a monthly average of 100 manufacturers seek to cooperate with John. John selects his product carefully, tells the truth, excludes paying advertisements in his article, and focuses on services. For this reason, his blog attracted 18,310,000 readers and over 20,000 views per day; he has 380,000 fans on FB. He earned a revenue of NT$190,000,000 in 2014 and NT$460,000,000 in 2015, a growth rate close to 200% and attracted 76% repurchase rate. 33

Carefully select product and word of mouth: Building customer trust 486 Group Buying

Multifunctional charger for mobile phones and tablet computers







Recommends only a few products, primarily focusing on household appliances and daily necessities. Mr. 486 typically buys a product first and then describes his usage experience in an article to help consumers find products with the highest price/performance ratio before they purchase them. Thus, marketing expenditure and inventory cost can be reduced.



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R2D2 Humidifier

Introduces products that are popular in Japan, South Korea, United Kingdom, Spain, United States, and Germany. Introduces products to attract readers and explores products consumers are interested in before trying out the product, recommending it, and encouraging group buying.

Home & Deco (H&D) creates Taiwan's largest fashion furniture platform • • • •



Established in 2003 and began online operations in 2006 Has 70 employees and four physical stores; operating revenue is estimated at NT$400,000,000 in 2015 Won the Top 100 Power Seller by Business Next as well as Yahoo Auction Golden Award in 2014 Pays attention to website analysis figures and adopts various marketing means to achieve physical and virtual integration Then, cooperated with other e-commerce experts in creating the OBIS brand and achieved break-even and started profiting within as short as four months. This year, H&D sets its annual revenue goal to NT$300,000,000.

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H&D core competencies Quality evaluation/warehouse team (product power)  Use export quality and quantity-based pricing to create a fast fashion lifestyle  Change packaging to enhance customer trust

Product power

Service power

Marketin g power

Studio/professional photography (marketing power)  Each product is a home-based project  Display material property, dimension, and product context

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Professional attitude/customer service team (service power)  Use service to strengthen customer loyalty  Provide 24/7 service to resolve customer enquiries and logistic-related problems Increase scale/logistics team (service power)  Establish logistic service to raise threshold for peer industries  Wrap advertising is also a form of marketing

Use SEO tools to surpass IKEA • Use existing SEO tools and understand current status from five dimensions: ease of use of search engines, search experience, content quality, and content message delivery capability, to make adjustments • Leverage your understanding on SEO to achieve top 10 ranking • Through tool testing, adjust website META, h1, keywords, and other textual content; meanwhile, work with the company's R&D department to revise SEO-related deficiencies that would increase website score from 49 to 94 points

IKEA's SEO Condition

H&D's SEO Condition After Improvement

H&D's score increase d from 49 to 94 points

Source: http://product.awoobros.com/archives/174/seo-tool-success-case 37

Conclusion • SMEs have limited resources. Internet and e-commerce are cheaper than are physical store costs and are easily accessible to customers • Introducing e-commerce applications is easy; numerous online store platform schemes are available. You can first test those that are simple, inexpensive, or require monthly subscription to find ones that meet your needs • Setting up an online store requires a long-term plan, continual refinement, and maintenance; therefore, enhancing relevant knowledge or recruiting professional talents is necessary • Online store is not only a virtual channel, but also yields more accurate data and effectively predicts and determines an enterprise's next step in product development as well as its business decisions, or customer satisfaction • Similar to buying a fund, setting up an online store does not guarantee flow volume, orders, or profits, but you will never the know the benefit of it if you do not establish one 38

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