Digital Commerce Lecture for Advanced Digital & Social Media Strategy at UCLAx (MGMTX 466.05)
ValtersLauzums
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May 28, 2024
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About This Presentation
Modern e-commerce is characterized by a dynamic blend of opportunities and significant challenges. Supply chain disruptions and inventory shortages are critical issues, leading to increased shipping delays and rising costs, which impact timely delivery and squeeze profit margins. Efficient logistics...
Slide Content
Digital
Commerce
Advanced Digital Strategy MGMT X 466.05 UCLA
Commerce
Advanced Digital Strategy MGMT X 466.05 UCLA
Lecturer: Valters Lauzums 2024
Overview & Concepts
E-commerce is an economic powerhouse that has transformed industries and will
continue to expand and grow as technology advances.
Overview & Concepts
E-commerce is an economic powerhouse that has transformed industries and will
continue to expand and grow as technology advances.
Digital
transactions
Any digital channel that allows people to buy and sell physical
goods, services, and digital products over the internet rather than
at a brick-and-mortar location is e-commerce. Frequently, brick
and mortar stores are also tied to digital.
transactions
Any digital channel that allows people to buy and sell physical
goods, services, and digital products over the internet rather than
at a brick-and-mortar location is e-commerce. Frequently, brick
and mortar stores are also tied to digital.
Digital Retail
History
The low barrier to entry in e-commerce means that businesses face
intense competition. Making it work requires continuous innovation,
effective marketing, and excellent customer service.
Boom & Bust Cycles
The late 1990s and early 2000s saw a surge in
internet-based companies, leading to the dot-com
boom. Many startups emerged, promising to
revolutionize commerce. The dot-com bust led to
many companies failing due to unsustainable
business models and the reluctance of consumers to
make major shifts in their shopping behavior.
The launch of platforms like Amazon (1994) and eBay (1995)
marked the beginning of a new era in retail.
History
The low barrier to entry in e-commerce means that businesses face
intense competition. Making it work requires continuous innovation,
effective marketing, and excellent customer service.
Boom & Bust Cycles
The late 1990s and early 2000s saw a surge in
internet-based companies, leading to the dot-com
boom. Many startups emerged, promising to
revolutionize commerce. The dot-com bust led to
many companies failing due to unsustainable
business models and the reluctance of consumers to
make major shifts in their shopping behavior.
The launch of platforms like Amazon (1994) and eBay (1995)
marked the beginning of a new era in retail.
Current Status
E-commerce continues sustained growth, and surged in
2020 due to covid. China is the leading market and reflects
the direction of current market evolution.
Consumer Benefits:
Lower Prices: Online stores have lower operational costs compared to
physical stores, allowing them to offer lower prices to consumers.
Accessibility and Convenience: E-commerce websites are accessible 24/7,
enabling consumers to shop at any time from anywhere.
Wider Choice: Online shopping provides consumers with a vast selection of
products and brands not limited by geographic location.
Business Advantages:
Higher Margins: Reduced operational costs, such as rent and utilities, lead
to higher profit margins for online businesses.
Scalability: E-commerce allows businesses to reach a global market
without the physical limitations of a brick-and-mortar store.
Consumer Insight: E-commerce platforms collect extensive customer
data, enabling businesses to analyze and optimize shopping.
E-commerce continues sustained growth, and surged in
2020 due to covid. China is the leading market and reflects
the direction of current market evolution.
Consumer Benefits:
Lower Prices: Online stores have lower operational costs compared to
physical stores, allowing them to offer lower prices to consumers.
Accessibility and Convenience: E-commerce websites are accessible 24/7,
enabling consumers to shop at any time from anywhere.
Wider Choice: Online shopping provides consumers with a vast selection of
products and brands not limited by geographic location.
Business Advantages:
Higher Margins: Reduced operational costs, such as rent and utilities, lead
to higher profit margins for online businesses.
Scalability: E-commerce allows businesses to reach a global market
without the physical limitations of a brick-and-mortar store.
Consumer Insight: E-commerce platforms collect extensive customer
data, enabling businesses to analyze and optimize shopping.
Types of E-Commerce
Facilitates transactions between individuals, often through a
third-party platform like eBay or Craigslist. Trust and user ratings
play a significant role in this model. The success of C2C platforms
relies on the community and peer-to-peer interactions.
Consumer-to-Consumer (C2C)
A less common model where individuals sell products or services
to businesses, such as the platform Upwork. This model highlights
the unique skills and flexibility of the individual seller and
democratizes business services for individuals.
Consumer-to-Business (C2B)
The most common form, where businesses sell directly to
consumers. Examples include online retailers like Amazon and
fashion brands like Zara. This model emphasizes mass marketing
and personalized shopping experiences.
Business-to-Consumer (B2C)
Involves transactions between businesses, such as wholesalers
and manufacturers. Platforms like Alibaba cater to this segment.
This business model focuses on long-term relationships with other
businesses and bulk purchasing.
Business-to-Business (B2B)
Facilitates transactions between individuals, often through a
third-party platform like eBay or Craigslist. Trust and user ratings
play a significant role in this model. The success of C2C platforms
relies on the community and peer-to-peer interactions.
Consumer-to-Consumer (C2C)
A less common model where individuals sell products or services
to businesses, such as the platform Upwork. This model highlights
the unique skills and flexibility of the individual seller and
democratizes business services for individuals.
Consumer-to-Business (C2B)
The most common form, where businesses sell directly to
consumers. Examples include online retailers like Amazon and
fashion brands like Zara. This model emphasizes mass marketing
and personalized shopping experiences.
Business-to-Consumer (B2C)
Involves transactions between businesses, such as wholesalers
and manufacturers. Platforms like Alibaba cater to this segment.
This business model focuses on long-term relationships with other
businesses and bulk purchasing.
Business-to-Business (B2B)
Gartner projects that by 2026, 30% of B2B sales cycles will
be managed through digital sales rooms, which will be
integral in managing customer life cycles. Furthermore, by
2025, 80% of B2B sales interactions between suppliers and
buyers are expected to occur through digital channels.
Companies that offer a unified commerce experience,
enabling seamless customer journeys, are anticipated to
see at least a 20% uplift in total revenue by 2025.
Unified Commerce
Macro-Environmental Perspective: Highlights the interaction of
technology, people, organizations, policy, and standards.
Transacting Partners: Classifies e-commerce based on the parties
involved, such as B2B, B2C, C2C, and G2B.
Degree of Digitization: Analyzes the digitization of products,
processes, and delivery agents.
be managed through digital sales rooms, which will be
integral in managing customer life cycles. Furthermore, by
2025, 80% of B2B sales interactions between suppliers and
buyers are expected to occur through digital channels.
Companies that offer a unified commerce experience,
enabling seamless customer journeys, are anticipated to
see at least a 20% uplift in total revenue by 2025.
Unified Commerce
Macro-Environmental Perspective: Highlights the interaction of
technology, people, organizations, policy, and standards.
Transacting Partners: Classifies e-commerce based on the parties
involved, such as B2B, B2C, C2C, and G2B.
Degree of Digitization: Analyzes the digitization of products,
processes, and delivery agents.
Customer data is crucial for e-commerce businesses to
enhance growth, optimize strategies, and improve
customer satisfaction. Data can deliver personalized
experiences, targeted marketing, and boost customer
retention through loyalty programs and personalized
discounts. Customer data also aids in product
development, predictive analytics, better customer
support, fraud prevention, and other purposes.
E-Commerce and
Customer Data
79% of consumers say loyalty programs make them more likely to
continue doing business with brands (Bond)
enhance growth, optimize strategies, and improve
customer satisfaction. Data can deliver personalized
experiences, targeted marketing, and boost customer
retention through loyalty programs and personalized
discounts. Customer data also aids in product
development, predictive analytics, better customer
support, fraud prevention, and other purposes.
E-Commerce and
Customer Data
79% of consumers say loyalty programs make them more likely to
continue doing business with brands (Bond)
E-Commerce
Marketplaces
Marketplaces provide a platform for third-party
sellers to reach customers, often handling logistics,
payment processing, and customer service.
Sellers can scale their business without the need to
manage their own e-commerce infrastructure, but
the low barrier-to-entry has led to congested seller
categories and less opportunities.
Marketplaces
Marketplaces provide a platform for third-party
sellers to reach customers, often handling logistics,
payment processing, and customer service.
Sellers can scale their business without the need to
manage their own e-commerce infrastructure, but
the low barrier-to-entry has led to congested seller
categories and less opportunities.
Marketplace Platforms
E-Commerce Channels
Amazon
Amazon is the world’s largest
marketplace and 50% of US purchases
start here. Amazon has millions of third
party sellers who benefit from their
extensive logistics network. However,
high competition and fees can be
challenging and are increasing.
eBay
eBay is a pioneering platform known
for its auction-style listings and
fixed-price sales. Sellers must navigate
fees and competitive pricing but
benefit from eBay’s global reach and
unique auction format, which can drive
up final sale prices.
Upwork
Upwork connects businesses with
skilled professionals for short-term
tasks or long-term projects. The
platform’s feedback and rating system
helps ensure quality and reliability,
though competition can be high for
freelancers seeking projects.
Alibaba
Alibaba connects manufacturers and
wholesalers with businesses. It
facilitates B2B transactions but buyers
must navigate import regulations and
ensure quality control. The platform
offers significant cost saving
opportunities for importers.
E-Commerce Channels
Amazon
Amazon is the world’s largest
marketplace and 50% of US purchases
start here. Amazon has millions of third
party sellers who benefit from their
extensive logistics network. However,
high competition and fees can be
challenging and are increasing.
eBay
eBay is a pioneering platform known
for its auction-style listings and
fixed-price sales. Sellers must navigate
fees and competitive pricing but
benefit from eBay’s global reach and
unique auction format, which can drive
up final sale prices.
Upwork
Upwork connects businesses with
skilled professionals for short-term
tasks or long-term projects. The
platform’s feedback and rating system
helps ensure quality and reliability,
though competition can be high for
freelancers seeking projects.
Alibaba
Alibaba connects manufacturers and
wholesalers with businesses. It
facilitates B2B transactions but buyers
must navigate import regulations and
ensure quality control. The platform
offers significant cost saving
opportunities for importers.
E-commerce requires logistics, payment processing, and
fulfillment, requiring an operational infrastructure to ensure
a system of delivery and process for transactions.
Streamlined fulfillment is essential to running a scalable
e-commerce business.
E-Commerce is
Becoming Difficult
Global B2C e-commerce revenue is projected to grow to $5.5
trillion by 2027, continuing its upward trajectory.
Low barriers to entry and competition means that most
businesses struggle to earn customers and profitability.
fulfillment, requiring an operational infrastructure to ensure
a system of delivery and process for transactions.
Streamlined fulfillment is essential to running a scalable
e-commerce business.
E-Commerce is
Becoming Difficult
Global B2C e-commerce revenue is projected to grow to $5.5
trillion by 2027, continuing its upward trajectory.
Low barriers to entry and competition means that most
businesses struggle to earn customers and profitability.
Ecommerce fulfillment is a specialized skill which requires
investment and labor. This. includes receiving goods,
warehousing, inventory management, picking and packing
orders, shipping, and managing returns. Outsourcing fulfillment
to a 3PL can be an effective solution.
Order Fulfillment
Receiving Goods: Ensures products are quickly logged into inventory
Warehousing: Organized storage with labeled shelves for efficient picking
Inventory Management: Keeps stock levels optimal and reduces storage costs
Picking and Packing: Generates pick lists, packs orders, and prepares shipping
Shipping: Uses multiple carriers for timely delivery
Returns Management: Processes returns, often through the 3PL
Outsourcing: Reduces time investment, to allow focus on core business
Kitting: Groups products into a single package to streamline order fulfillment
investment and labor. This. includes receiving goods,
warehousing, inventory management, picking and packing
orders, shipping, and managing returns. Outsourcing fulfillment
to a 3PL can be an effective solution.
Order Fulfillment
Receiving Goods: Ensures products are quickly logged into inventory
Warehousing: Organized storage with labeled shelves for efficient picking
Inventory Management: Keeps stock levels optimal and reduces storage costs
Picking and Packing: Generates pick lists, packs orders, and prepares shipping
Shipping: Uses multiple carriers for timely delivery
Returns Management: Processes returns, often through the 3PL
Outsourcing: Reduces time investment, to allow focus on core business
Kitting: Groups products into a single package to streamline order fulfillment
Traditional Order Fulfillment
The retailer buys products in bulk from wholesalers
and manages the inventory. This model can offer
lower costs of goods sold (COGS) and better brand
control, allowing for personalized experiences.
Outsourced Fulfillment
A third-party service manages storage, packaging,
and shipping. This model combines elements of
dropshipping and traditional fulfillment, providing
flexibility and scalability for growing businesses.
Dropshipping
The retailer does not hold inventory. Instead, orders
are sent directly to the manufacturer, who ships the
products to customers. This model reduces inventory
risk and operational costs, ideal for startups.
Fulfillment Models
E-Commerce Operations & Logistics
The retailer buys products in bulk from wholesalers
and manages the inventory. This model can offer
lower costs of goods sold (COGS) and better brand
control, allowing for personalized experiences.
Outsourced Fulfillment
A third-party service manages storage, packaging,
and shipping. This model combines elements of
dropshipping and traditional fulfillment, providing
flexibility and scalability for growing businesses.
Dropshipping
The retailer does not hold inventory. Instead, orders
are sent directly to the manufacturer, who ships the
products to customers. This model reduces inventory
risk and operational costs, ideal for startups.
Fulfillment Models
E-Commerce Operations & Logistics
E-Commerce for
DTC Brands
In 2024, e-commerce faces a myriad of difficulties
stemming from supply chain issues, inventory
shortages, increased shipping delays, rising costs
for logistics, coupled with inflation, have all
squeezed profit margins.
Additionally, consumers now demand faster
delivery times and are changing shopping
behaviors for different reasons.
DTC Brands
In 2024, e-commerce faces a myriad of difficulties
stemming from supply chain issues, inventory
shortages, increased shipping delays, rising costs
for logistics, coupled with inflation, have all
squeezed profit margins.
Additionally, consumers now demand faster
delivery times and are changing shopping
behaviors for different reasons.
B2C Challenges
The DTC market has become saturated,
with more brands vying for the same
audience. For instance, the number of DTC
brands in the U.S. increased from 400 in 2015
to over 1,100 in 2020. This heightened
competition drives up the cost of
advertising. As more brands enter the
market, the bidding for digital ad space
intensifies, leading to higher prices on
platforms like Facebook and Google.
Competition
Social media platforms regularly update
their algorithms, making it harder for brands
to reach their target audience organically.
Paid ads have become a necessity, and
their prices are continually rising. Facebook's
ad prices increased by 89% in 2021.
Additionally, the decline in organic reach
forces brands to invest more in content
creation and influencer partnerships to
maintain visibility.
Advertising
New privacy laws and regulations have
made data collection more challenging.
These regulations limit the ability of brands
to track and target consumers effectively,
necessitating higher spending on broader
advertising strategies. As a result, DTC
brands must invest in first-party data
collection methods and advanced analytics
to maintain targeted marketing, further
increasing operational costs.
Data Privacy
The DTC market has become saturated,
with more brands vying for the same
audience. For instance, the number of DTC
brands in the U.S. increased from 400 in 2015
to over 1,100 in 2020. This heightened
competition drives up the cost of
advertising. As more brands enter the
market, the bidding for digital ad space
intensifies, leading to higher prices on
platforms like Facebook and Google.
Competition
Social media platforms regularly update
their algorithms, making it harder for brands
to reach their target audience organically.
Paid ads have become a necessity, and
their prices are continually rising. Facebook's
ad prices increased by 89% in 2021.
Additionally, the decline in organic reach
forces brands to invest more in content
creation and influencer partnerships to
maintain visibility.
Advertising
New privacy laws and regulations have
made data collection more challenging.
These regulations limit the ability of brands
to track and target consumers effectively,
necessitating higher spending on broader
advertising strategies. As a result, DTC
brands must invest in first-party data
collection methods and advanced analytics
to maintain targeted marketing, further
increasing operational costs.
Data Privacy
Product
Innovation
Product innovation and strong branding are crucial for success in e-commerce, as they
differentiate a business in a crowded market and attract customers. Innovative products
capture consumer interest when they otherwise have better alternatives from other brands.
Strong brand identity keeps those customers loyal to your brand.,
Innovation
Product innovation and strong branding are crucial for success in e-commerce, as they
differentiate a business in a crowded market and attract customers. Innovative products
capture consumer interest when they otherwise have better alternatives from other brands.
Strong brand identity keeps those customers loyal to your brand.,
Brand Building
DTC brands prioritize creating strong brand identities and loyal customer
bases. This requires substantial investment in marketing, content
creation, and customer engagement without expecting immediate
returns. These brands often leverage social media and influencer
partnerships to enhance their reach and connect emotionally with their
audience. Consistent brand messaging and high-quality products help.
Customer Lifetime Value
By focusing on long-term customer relationships rather than one-time
transactions, DTC brands aim to maximize customer lifetime value (CLV).
This approach often involves offering superior customer service, loyalty
programs, and personalized shopping experiences. Implementing
data-driven strategies allows these brands to understand and
anticipate customer needs, leading to more effective retention efforts.
DTC brands prioritize creating strong brand identities and loyal customer
bases. This requires substantial investment in marketing, content
creation, and customer engagement without expecting immediate
returns. These brands often leverage social media and influencer
partnerships to enhance their reach and connect emotionally with their
audience. Consistent brand messaging and high-quality products help.
Customer Lifetime Value
By focusing on long-term customer relationships rather than one-time
transactions, DTC brands aim to maximize customer lifetime value (CLV).
This approach often involves offering superior customer service, loyalty
programs, and personalized shopping experiences. Implementing
data-driven strategies allows these brands to understand and
anticipate customer needs, leading to more effective retention efforts.
Homepage
Make Product Value Instantly Apparent:
Clearly convey the value of products through
concise copy and compelling images that highlight
how the products solve problems.
Give Products Names That Make Sense:
Use product names that indicate their utility or
value from the shopper's perspective, avoiding
internal jargon or overly creative titles.
Highlight Deals and Promotions:
Make deals and promotions stand out with bright
colors and bold text to attract attention without
overshadowing the primary value proposition.
DTC Optimization Examples
E-Commerce Websites
Product Pages
Feature Multiple Images per Product
Provide 3 to 5 images to give users a
comprehensive view of the product.
Include Product Videos:
Use videos to showcase features and benefits,
especially for complex or popular products.
Clarify Return Policies:
Present clear and concise return information to
boost user confidence.
For a deeper dive into these best practices and access to the complete set of guidelines, consider exploring Baymard or other UX
research groups, which offers extensive libraries of data, UX case studies, and benchmarking tools.
Make Product Value Instantly Apparent:
Clearly convey the value of products through
concise copy and compelling images that highlight
how the products solve problems.
Give Products Names That Make Sense:
Use product names that indicate their utility or
value from the shopper's perspective, avoiding
internal jargon or overly creative titles.
Highlight Deals and Promotions:
Make deals and promotions stand out with bright
colors and bold text to attract attention without
overshadowing the primary value proposition.
DTC Optimization Examples
E-Commerce Websites
Product Pages
Feature Multiple Images per Product
Provide 3 to 5 images to give users a
comprehensive view of the product.
Include Product Videos:
Use videos to showcase features and benefits,
especially for complex or popular products.
Clarify Return Policies:
Present clear and concise return information to
boost user confidence.
For a deeper dive into these best practices and access to the complete set of guidelines, consider exploring Baymard or other UX
research groups, which offers extensive libraries of data, UX case studies, and benchmarking tools.
Social Commerce
Social media commerce leverages social media platforms
like Instagram, Facebook, TikTok, and Pinterest to integrate
seamless shopping features, such as in-app purchases,
shoppable posts, and live stream shopping events, brands
can reach and engage customers where they already
spend a significant amount of their time.
Social commerce sales are expected to grow at a compound
annual growth rate (CAGR) of 31.4% from 2021 to 2028 .
Instagram is the leading platform for social commerce, with 130
million users tapping on shopping posts each month .
Gen Z and Millennials are the primary demographics driving social
commerce, with 60% of Gen Z purchasing via social
Social media commerce leverages social media platforms
like Instagram, Facebook, TikTok, and Pinterest to integrate
seamless shopping features, such as in-app purchases,
shoppable posts, and live stream shopping events, brands
can reach and engage customers where they already
spend a significant amount of their time.
Social commerce sales are expected to grow at a compound
annual growth rate (CAGR) of 31.4% from 2021 to 2028 .
Instagram is the leading platform for social commerce, with 130
million users tapping on shopping posts each month .
Gen Z and Millennials are the primary demographics driving social
commerce, with 60% of Gen Z purchasing via social
The landscape of digital commerce is rapidly evolving with
innovative formats such as live shopping, which combines real-time
engagement with the convenience of online purchasing. Live
shopping events, where influencers or brand representatives
showcase products through live video streams, allow consumers to
ask questions and make purchases instantly. This format not only
replicates the interactive experience of in-store shopping but also
leverages social proof and influencer marketing to drive sales.
New Formats
The integration of augmented reality (AR) and virtual reality (VR)
further enhances these experiences, enabling customers to virtually
try on products or visualize them in their homes.
innovative formats such as live shopping, which combines real-time
engagement with the convenience of online purchasing. Live
shopping events, where influencers or brand representatives
showcase products through live video streams, allow consumers to
ask questions and make purchases instantly. This format not only
replicates the interactive experience of in-store shopping but also
leverages social proof and influencer marketing to drive sales.
New Formats
The integration of augmented reality (AR) and virtual reality (VR)
further enhances these experiences, enabling customers to virtually
try on products or visualize them in their homes.
Winning in
E-Commerce
Businesses should focus on creating a personalized customer experience by
leveraging customer data and optimizing their platform presence with best
practices from competitive and category research. Building long-term brand equity
to create customer loyalty is an important success factor.
E-Commerce
Businesses should focus on creating a personalized customer experience by
leveraging customer data and optimizing their platform presence with best
practices from competitive and category research. Building long-term brand equity
to create customer loyalty is an important success factor.
Thank you
Advanced Digital Strategy MGMT X 466.05 2024
Advanced Digital Strategy MGMT X 466.05 2024
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