E-commerce is not the solution

I am fortunate to be able to work on a day-to-day basis with several clients from a variety of industries and sectors, some of which are startups, but others are multinational companies, among the top ones in the world. I am often contacted on the topic of e-commerce, but quickly the approach evolves into something different, digital strategy.

Change is a reality that cannot be ignored. No matter how good an e-commerce store that a company creates, if it does not have real differentiation from its competitors, it will never sell enough.

Geographic differentiation, used by so many companies in the past, is not enough online. In the past, those who had more geographic coverage got, in most cases, better results. That’s why we have big supermarket chains all over the place. Why? Because if the supermarket was not close to my home, I wouldn’t go across town to buy the products. I would buy the ones that were offered near my home or in the places I pass by on my way to the office, at the price offered by that establishment (within reasonable differences).

Many companies have survived and grown in the last century by applying this strategy. However, when we go online, this advantage is no longer real. The difference between a store and a competitor’s store is no longer to one click and a few seconds.

At the same time, economies are globalized. We still have an oxygen balloon for a while longer based on import tariffs and work visas, but I don’t believe that it is sustainable. After all, we can already hire professionals remotely, anywhere in the world, and without added costs. In terms of products, Alibaba’s AliExpress, for example, already delivers Chinese products directly from the producer to the consumer, with very low prices.

Bad news for those who have their business model based on importing these products only by putting a margin on top. The time of “fat cows” and very high margins in certain sectors is ending.

Some companies and industries try to use the legal system to compete. However, the laws do not keep up with the evolution of technology. And those who use this strategy will not get anywhere. Has the music industry gained much by fighting online piracy? No! Who won was Apple innovating. The cabs, despite all the scandals they try to provoke against Uber, are doing nothing to innovate and are on a fast path to extinction (no matter how much they try to deny it). The Portuguese justice system has tried several times to shut down Uber, but without success. If the cabs were more concerned with improving the service and were focused on the customers, they could even copy many things from Uber, and probably would have better results.

When seeing these new threats, the normal reaction is, “we have to do something digital,” and e-commerce is usually one of the first alternatives chosen. It may be an excellent option, but setting up an online store doesn’t guarantee sales by itself if the brand and products are not competitive. Just setting up a site online, no matter how good it is, doesn’t make you sell a product that is more expensive, less attractive, and of lower quality than the competition.

What to do? What was done before, find differentiation strategies. Creating a strong brand

an option, just as it happens with fashion. Ralph Lauren, for example, doesn’t have to worry so much about the sales of a “Chinese” company, without a brand. Why? Because they sell something intangible, they sell status and an identification of the individual with the brand, difficult to copy. Consumers want to create relationships with brands that care about them and with whom they develop a personalized relationship (Nike for example).

Another hypothesis is through personalization. Know your customers and stop segmenting to begin to customize the experience and services, which is achieved with technology and data. Creating communities and developing platforms (think Uber, Airbnb, etc.) is another way.

So, answering the question from some readers. Is e-commerce for all sectors? Apart from the usual exceptions, YES, e-commerce is a fundamental tool for most sectors. But just launching e-commerce is not enough. As in the “more traditional” economy (for lack of a better expression), e-commerce alone is not a sufficient source of differentiation. Clinging to the margins and strategies of the past will not work. You must understand today’s world and create strategies that are differentiated in this reality.

David Bernardo
David Bernardo
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