Direct Selling E-Commerce Platforms

Direct selling e-commerce platforms — a new digital business model

Nowadays, an increased number of companies rely on e-commerce strategies for selling and reaching out to their customers. The decision which many companies must confront is whether to host the online shop or to go for a retailer marketplace like Amazon. Both options yield advantages and disadvantages. While hosting includes big efforts in managing the supply chain activities like shipping, payment, and warehouse management, retail marketplaces may limit the customization of the online presence or put pressure on the sales margin. Well, there is also a third option — e-commerce platforms allow companies to manage their online shop and all its supply chain activities. This third option more and more gains focus on the customer relationship through the emergence of changing customer behaviors in a digital era.

E-Commerce Pattern

Gassmann et al. (Link) already looked at e-commerce as a traditional business model pattern that allows companies to deliver products and services electronically over the internet. Online channels eliminate the need to physically run a shop. This pattern brings together companies that offer products and different segments of customers who potentially buy these. On the one hand, customers benefit from higher accessibility, and, on the other hand, companies benefit from a cheap and easy to maintain sales channel.
Retail marketplaces provide companies with access to a broad customer segment. Amazon’s online store, for example, combines several brands into one marketplace where customers are offered a variety of different products. Throughout the last decade, Amazon became the largest internet retailer which many companies choose as their main sales channel. The lack of differentiation for customer segments and the co-occurrence of competition may be highlighted before describing the characteristics of a changing digital society.

Business Transformation and Customer Relationship

The discussion about digital transformation strongly includes digital natives, a group of people being born and raised in the age of technology. One aspect of this customer segment is more important than ever — digital adaption. Digital natives are familiar with changing technologies and constant change as they have always been confronted with it. They are attracted by everything that is new and innovative. Hence, companies must understand this characteristic of adaption and must be able to keep up with changing customer perceptions.

A direct selling strategy may help here to keep up with customer perception and to address the customer needs better. This digital business model pattern refers to the scenario where the products are not sold through a managed retail marketplace but are directly available from an online shop. With this, companies can establish a custom experience and improve customer relationships. Additionally, direct selling removes the charges that are associated with the retailer marketplace and can offer an increased revenue stream.

Direct Selling E-Commerce Platforms Pattern

The main characteristics of the Direct Selling E-Commerce Platforms pattern are the following components:

  1. Channel: The pattern provides a new channel on how to offer products and services to customers. At a certain point, the pattern may also complement an already existing channel, e. g. a physical shop, or make an existing channel obsolete, e. g. an unlucrative retail marketplace presence.
  2. Customer Relationship: With tailoring the online shop according to the customer perceptions the customer relationship will improve by creating a soft lock-in which makes it hard for the customer to leave. Customer segments can be targeted with a customized online presence and are not generalized anymore.
  3. Key Partners: The platform provider must be considered as a new key partner that is contributing to the online representation but also the supply chain activities like shipping, payment, and warehouse management.
  4. Revenue Stream: The revenue model includes direct sales that follow a custom sales model. As there is no intermediary in place, this strategy has as much flexibility as possible and does not rely on a retailer’s control.

The influence of the pattern is best explained by mapping the characteristics into the business model canvas (BMC) according to Osterwalder and Pigneur (Link) to show where they take actions.

Direct selling e-commerce platforms pattern in the BMC

Shopify and the Future of B2C Retail

There are a number of different providers of e-commerce platforms to run an online shop. An incomplete list includes Magento, BigCommerce, Volusion, WooCommerce, and Shopify. While each of them has advantages and disadvantages, Shopify was chosen exemplarily to give more insights into the pattern as the provider seems to offer mature functionalities and provides high flexibility. Shopify’s vision is to make e-commerce as easy as possible for all companies, from startups to large enterprises by providing all the features required in retail.

Shopify is providing e-commerce platforms as a Software-as-a-Service solution. Barriers like infrastructure setup and operation can be bypassed through an all in one box solution. Using Shopify makes the creation of an online shop easy because it is intuitive, handy, and lets you pick pre-defined functionality and features from an app store providing store management, marketing, product management, web hosting, and support. Shopify’s platforms are hosted cloud-based and therefore differ from other platform providers, e. g. Magento, which tend to be on-premise solutions. With the integrated web hosting, Shopify makes it easy to let you focus on the brand representation rather than supply chain activities. The platform takes care of scalability to sustain spikes in views, reliability to retain availability of the shop, and deployment to update functionality. Offering several levels of subscription plans Shopify is perfectly targeting small and medium-sized companies. However, Shopify is also offering a Plus edition which is an enterprise-ready platform that targets e-commerce for large corporations. This edition includes higher-volume options and additional functionality to ensure scalability and analytics. The business model of Shopify intends to price a low monthly subscription fee and to make money by offering payment processing, warehouse optimization, and shipping. This strategy has a low barrier for starting an online store and lets Shopify have its share in the success of the store for each sale.

Example: Staples’ Online Shop

Some more thoughts and details shall be given by mentioning the case study about Staple’s online representation (Link). Staples is an office supply provider with different operations worldwide originating in the US. In the past they came up with a custom e-commerce platform providing an online store, taking care of delivery, payments, and warehouse management. The platform served its purpose but did not offer enough flexibility to meet a growing market because it required infrastructure for web hosting and supply chain activities. The big challenge for re-platforming the e-commerce platform was to integrate Staple’s resource planning system their core of everything. Choosing to migrate to Shopify Plus enabled Staples to re-platform the online presence in 12 months and at admirable cost using pre-defined e-commerce functionalities. Staples changed its bulky and complex online shop into a handy and easy to manage e-commerce platform. Characteristics of the new e-commerce platform are the flexibility to react instantly with new promotions, the stability to meet peaks in customer views, and the managed infrastructure to reduce the high cost of supply chain activities.

How can you find out if a store was created with Shopify? Add /admin to the base URL of the online shop and see if you are redirected to the Shopify login page for managing the shop. Visit the Canadian online shop of Staples (Link) to test it yourself.

Best Practices

There are a couple of best practices that can leverage applying the Direct Selling E-Commerce Platforms pattern:

  • Hyper-personalization: Having different online shops for different customer segments improves the customer experience. For example, create a modern, funky online shop for a younger audience and maintain a classy one for a business audience which gives a totally different perception.
  • Headless e-commerce: Platforms offer the option to integrate your own frontend and to use their supply chain functionality via standardized APIs. This option gives all flexibility to customize the look and feel of the online shop.
  • Dropshipping: A big effort for online shops is to maintain warehouses where products are stored before they can be ordered. Modern e-commerce platforms offer to store the products as a service and reduce the need for warehouses and complex delivery models.
  • Point of sale: The sale of products in physical stores has not been considered so far. If there is a need to offer products this way, the back office can be integrated into the e-commerce platform as well and equipped with retail hardware.

Related Patterns

Patterns are best used in combination with other patterns to use possible advantages and to reduce significant downsides. The Experience Selling pattern (Link) is directly related to the Direct Selling E-Commerce Platforms pattern because digital natives desire an improved customer experience. The effects of complying with this are higher demand and flexibility in pricing. Customer experience does not only include extreme examples like Starbucks but preferably a seamless shop representation grants a unique customer experience. An idea of enriching the customer experience for online shops is to integrate more substance to the online representation. This could be a magazine-style approach whereby the online shop provides a lifestyle experience or a brand awareness approach giving insights into the company’s past and its noble intentions. The Dollar Shave Club is one example of following a lifestyle experience approach targeting bearded men and allowing them to identify themselves with original content. It did not require rocket science, a modern web representation with good-looking illustration, fitting descriptions, and trendy topics published as blog posts.

Conclusion and Final Thoughts

Many companies choose to sell their products and service online. While there are many ways to do so, e. g. using managed retail marketplaces, e-commerce platforms offer easiness and flexibility. With the digital transformation, the customer experience is becoming more and more important to keep up with fast-changing customer perceptions. A way of directly selling products to the targeted customer segment allows companies to tighten the customer relationship by providing custom content. Shopify is an e-commerce platform provider that enables companies to create direct selling online shops including supply chain activities like payment, shipping, and warehouse management. Furthermore, the example of Staples showed how beneficial Shopify is to modernize a company’s aging e-commerce strategy.

Further Readings

The following readings will help you to sort out the above-mentioned topics better.

Business Models of a Digital Era (Link)
Do not miss this article about how digital transformation and digital natives are changing the business. With the adoption of emerging technologies and customer behaviors, companies show a variety of new business models patterns face the characteristics of a digital era.

Digital Business and E-Commerce Management (Link)
Digital Business and E-Commerce Management are bringing together all important aspects of digital transformation and e-commerce including digital communication and content marketing. Giving a structured approach to plan and implement a digital e-commerce strategy helps to understand the speed of change companies are challenged with.

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