posted on: 11.06.2020
Jaka Marinšek

Author:

Jaka Marinšek

Project Manager

Modern E-Commerce Challenges in Industry and Trade

In the context of increasing digitization, the companies in industry and trade are faced with a multitude of challenges, but also many opportunities. It’s up to the company how it will deal with this – and every company does it in its own way.

While it’s sufficient for some of them to answer customer inquiries by email, other companies go far beyond that. They digitize almost all business processes and successfully establish their own e-commerce business on the market. It’s often necessary to adapt to the pricing strategy or use new pricing models.

For sales, that are in direct customer contact, relocating and adapting business processes to such a large extent is not easy, since the active customer processes also need to be adapted to the new conditions and that doesn’t work on the side. But lasting success can only be seen if it’s possible to integrate the possibilities of digitization into the existing business model or to build new business models.

As companies often experience, pure webshops don’t meet the expectations – either in B2B or in the B2C area. With that said, the development of a modern online sales strategy and integration of the digital sales channel into a multichannel solution (to which the company processes are also adapted), is of fundamental importance.

But, the question is – how to leverage the full growth and earnings potential, while minimizing the risks?

Today’s companies already know that doing business offline won’t be sufficient in the future. The risks for existing business models, communication strategies, product ranges, and sales channels must be reassessed. The key questions, however, are when and to what extent a changeover should take place. Which online or offline strategy is the right one? Is it their own webshop, what they want to operate, or does it make sense to go through portals and large marketplaces?

In this early phase, customer relationships are also in the focus, because an individual online strategy can only be defined when it has been clarified, which customer is going to be served, with which offer, and via which channels. The offer can either be aimed at existing customers or include new customer segments. But again, the goals must be clearly defined beforehand.

The important questions are: is it better to offer the complete range or only a subrange? Who are the customers and what are their expectations? Is it possible to win the new customer segments? What about the conditions? Can the same offline prices, discounts, and conditions apply online, or is there a cannibalization risk?

Very few companies have complete price control over all products and throughout the whole way until it gets to the end customer. There are many more suppliers who market the products themselves. Then again, the competitors offer comparable products. The individual articles can be found on special platforms or are offered on the large marketplaces. Even if this doesn’t usually apply to the actual products, such as machines, systems, or own brands, it does apply to purchased parts, standard parts, spare parts, etc. This means that not only the internal cannibalization risk must be taken into the account, but also the external one.

The right pricing includes measures to increase the willingness of customers, who previously only ordered offline to buy online and, if necessary, to offer incentives to place an online order.

Right from the beginning, it’s necessary to decide which payment conditions apply online. Besides, the right approach should be able to determine whether the strategy is going to be used independently or in the form of the selective online pricing. Above all, the work must create a win-win situation for the seller and his customers. And last but not least, it’s important to comply with the legal framework, concerning price management.

In the case of the channel-independent prices and conditions, the price level is based on stationary sales, with the offline price level acting as a price anchor. Because prices are identical, there’s no cannibalization risk between the channels, as there are no differences in profitability. The possibility of acquiring new customers must be assessed on a case-by-case basis for channel-independent prices and conditions. With selective pricing, selected segments are offered cheaper online. This means that, among other things, differentiated pricing enables competitive products and ranges to get offered cheaper and thus sold better. This form of online pricing offers greater flexibility compared to stationary sales. However, due to the high price transparency, the cannibalization risk in the area of ​​stationary sales, as well as the increased price pressure, must be taken into account.

 

Conclusion

There isn’t a standard recipe for developing and designing the perfect online strategy. But the development of multichannel solutions and adapted company processes paves the way to a successful e-commerce business. Even if online sales are currently low or even negligible in some areas and industries, it’s only a matter of time before online business increases significantly, while offline business decreases as a result. An intensive focus on the customer, market orientation, and active customer-oriented sales, as well as the professionalization of processes, are of decisive importance for online trading.

The stable upward trend in online trade is proof that the optimized interlinking of business processes, in combination with the right online strategy, gives companies in industry and trade equally great advantages. The sales markets’ expansion offers high growth potential and improved customer relationships, while it’s easier to exploit cross-selling and upselling potentials. Processes and operating procedures can be upgraded and more efficient. And, finally, all this will allow companies to develop significant growth and earnings potential in e-commerce.