Consumers are evolving
rapidly with their adoption of smart devices that influence their purchasing
behavior. Millennials who are the young generation have transformed themselves
into superlative figures that make lot of purchases through online and are
influential in buying decision by their families, friends and social circles. A
survey conducted by DDB Worldwide on US web users’ attitudes toward ecommerce
during January 2013 reveals that Millennials are likely to engage in nearly
every online shopping activity as well as shows that a considerable chunk
of more than 30% from both males and females contemplating buying everything
online[1].
Also, the annual market spend by Millennials are an astounding $600 billion
which is expected to reach $1,400 billion by 2020 occupying 30% of sales of U.S. retail products[2]. To cater to this significant demographic,
many retailers are trying different online tactics to keep them engaged through
mobile applications, online stores, in-store digital interaction, social media
and gamification. Though there has been mixed reports on which segment namely
online or store based sales cater to highest sales, the impact of digital
transformation is profound and the future is now and not after five years
considering the nimble dynamics.
Now, we know that the
Millennials are tech-savvy and contribute significantly to the sales of the
retail and consumer goods. The companies will have to evolve in this ever
changing albeit fast-paced market environment to understand digital customer
preferences and their purchasing behavior. Likely, there was this automobile
company General Motors which recently announced that they are planning to sell
their products to Millennials through online channel. The company has in fact
started online sales through ‘Shopclickdrive.com' that allows user to select whatever
model they would like, add accessories of their choice, multiple financial
options for payment and registered dealers acting as distributors. Probably,
Tesla is one of the first companies to start an online sales channel offering
many of its models to be purchased online for U.S. customers with various
customization options in terms of color, roof, wheels and plenty of interior
technology and battery options[3].
Are other industries apart from retail, consumer goods and banking that are
gradually making efforts to enter into digital-consumer frontier?
Imagine the process of car
purchasing through online taking cue from global ecommerce giants such as
Amazon and eBay and other technology advancements. Now, Alan wants to buy a car
from one of the leading car manufacturers. He visits an online marketplace or a
comparison site that allows him to compare features, offers, pricing and
reviews which already exist through many third-party sites. He made his
decision to buy a model and clicks on a link that directs him to the car
manufacturer’s online store. The online store allows Alan to use
modular-pick-and-choose tool to pick features of his choice for his lovely car.
Alan decides to use 2000 CC Fiat Diesel Variant among various engine options; picks
right color for his car with options to choose graphics that enhance the look;
chooses appropriate customizable features in terms of stereo systems from Bose,
Blaupunkt and Kenwood, leather seat covers, spoilers, sliding roof, headlights,
wheels, internal digital systems such as GPS, Touch Screen, Voice Interface
etc. As Alan keeps adding features, a digital car mannequin changes automatically
to adjust to the added features and Alan can zoom in or out, see inside out and
rotate to get a visual appeal of the car. Once features have been picked and
finalized, payment options pop up that allows plenty of financing options. As
the banks and other financial institutions are part of this whole digital
transformation, they do a background check and quickly authorize the credit
request. Then the message pops up saying that you have successfully completed
the purchase of the car which will be delivered to you at the mentioned
addresses by three days along with “Thank You” post in the car manufacturers
Facebook page. Alan can share this post and his buying experience to his
friends circle in Facebook or other social networking sites. He can refer his
friends for the car purchase and keep accumulating goodwill and points on the
car manufacturers’ lifetime card. This reward points can be redeemed for any
service Alan wants at the service centers for his car.
As soon as this request
comes to the warehouse team, the analytics program in the system runs through
the specifications requested by Alan and attempts to find a match from any of
the nearest dealers who are on the close proximity to Alan’s location. Within
few moments, the program throws a message that the “Match is not found” to the
authorized person while in the background splits and sends this request to all
the suppliers and inventory team for action. The inventory team looks at the
specification and looks at the modules which are ready to assemble and at the
parts which may require to be made anew. The inventory management program
automatically does this analysis and sends the order receipt to concerned
suppliers and manufacturing team. The assembly team by then would have been
alerted with the new order and starts to assemble the product while all the
required modules will be received at the assembly end at the specified time
from specified supplier team. Once the assembly is completed as per the
required specification of Alan with all interiors, exteriors and combustion
engine all intact, the product is tested before being dispatched from
manufacturing unit. As the product is being tested, the warehousing and
logistics team are alerted on the product to be dispatched where the business
intelligence program in the background aggregates all the orders based on
warehouses and destination to be picked up by truck. Alan can track his order
at various stages through the online application. By the time car has arrived
at warehouses and ready to be dispatched, Alan receives a message from
warehouse which is again confirmed by the application. Alan waits for his car
and receives it at the specified time. As soon as Alan receives the car, the
confirmation message is sent to the warehouse team. Now, Alan enjoys his ride
on the new car and updates his story to his friends. When the car is due for
service, the system automatically triggers an alert to Alan based on the
readings from car which is automatically transmitted to the car manufacturer
with the inbuilt system through Wi-Fi or through the smartphone application
which is connected to the in-built system and appropriately fixes up an
appointment after confirming from Alan through online at the nearest service
center. As Alan is busy he requests for pickup at home for servicing and
immediately receives a message from service center with the details of the
person such as name, photograph and employee code; also receives an
authorization code which will be shared by the individual from service center
for confirmation of authenticity and the time of pickup. At the scheduled time,
the service person arrives at the door and Alan authenticates the person from
the personal details and the six digit unique authorization code received on
his mobile. As the vehicle is serviced, Alan receives a confirmation message on
service details, payment and time of delivery.
Now, many of the automated
aspects and trigger mechanism is already in place at leading automobile manufacturers
that have deployed ERP package and quality measures. The question is on the
integration of these online stores with retail-like shopping experience and the
back end systems of the manufacturers. One of the profound challenges for this
disruptive model by auto manufacturers will be to deal with the large dealer
network. How to convince the dealers to be part of this new model and support
the innovation? The dealers could also assist the customers with personal
contact, test drive and servicing. The entire dealer network should be
integrated with warehousing, manufacturers, supplier and online store for
successful deployment at the national level and cross country level and provide
seamless access to information and processes by all stakeholders. The lagging
industries could take cue from successful consumer product companies that use
its own network as well as dealers and telecom operators such as Apple, Google
Smart Devices and Samsung for selling and promoting their products. While
implementing the integrated online channel, the cost lever should be addressed
with predictive analytics that identifies the best way to serve a particular
customer by analyzing the back end systems for availability, timeframe to
procure products and customer information.
Forward-thinking leaders
should leverage this online channel and provide targeted options laying choices
in the hands of consumer. It is only a matter of time before the digital
transformation hits across all the industries taking the rhythm from retail and
consumer goods sector. The Emergence of “Direct-to-Consumer” model is being
adopted by B2B companies such as pharmaceuticals. Pfizer is one of
the largest pharma companies that have resorted to direct sales to consumer
through online for some of its products. Companies that don’t foresee this
emerging marketplace and don’t embrace digital transformation are destined to
become obsolete as we have witnessed in number of cases such as slow demise of movie
rentals, book stores and newspapers. We have heard that “Change is New Normal”
but with changing dynamics, innovation, technology advancements and swift consumerism,
“Disruption will be our New Normal” and companies will need to adjust to the
new normal periodically and adopt tactics to reinvent themselves while the long
term strategy is in place.
I am just extending this idea
on digital transformation and see if it can lead to “Build-to-Order” strategy
for companies as we have seen in the erstwhile famous PC maker, Dell. With the
online stores in place and orders coming directly from consumers, the car
manufacturers can effectively capture customer information better and equip his
back end systems to react to the demand of consumers rather than build-and-store
model. The consumer information can be effectively used for demand planning
apart from demand data from dealers and effectively build a centralized team
that oversees the demand pattern and appropriately arrange their distribution,
warehousing and dealership networks. For instance, in cities we could probably
have online fulfillment center while for tier-II towns we could effectively use
a dealership for personal interaction and sales management. After couple of
years of operation, online sales channel will have captured essentials such as
who is actually buying it by analyzing the consumer information and
demographics, which region is seeing spike in demand, what payment channels are
preferred and eventually target your communication, promotion, offers and
discounts to individuals directly rather than an umbrella approach. As we know
“The Future is Now” and companies may need to relook at the disruption that is
happening at the consumer level, cross industry level and within their peers to
play the game and formulate the winning strategy than to decide on the
participation itself. Looking forward to see the companies evolving in this
digitally transformative world!
Nissan is starting to sell cars online.
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