another guy like you who thinks retail is an arcane science.
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Friday, Mar. 9, 2001 1:01 pm PT
IS Survival Guide |Bob Lewis
Business-to-business can benefit from the miscues of b-to-c vets
MANAGEMENTSPEAK: We strive to be the industry leader.
TRANSLATION: We strive to copy our competitors, but on the cheap.
-- This week's anonymous contributor is now an industry phrase leader.
B-TO-b-to-b-to-b-to-b-to-b-to-b-to-b-to-b. Sounds like Porky Pig, doesn't it? And just as Porky's stuttering means nothing until the actual words come along, it doesn't matter how many b-to-bs you have -- none of them create any value at all until a b-to-c happens. All business-to-business transactions are in the middle of a value chain; the end is always business-to-consumer -- customers consume the goods and provide the money that powers the rest of it.
The term b-to-c created a huge potential for "ignorant expertise." The newness of the term gave some pundits the misguided impression that there's something new about b-to-c itself, which in turn meant their general-purpose New Economy theories gave them something useful to say about the subject.
The only thing new about b-to-c, though, is the term. There's nothing at all new about b-to-c transactions. Until about two years ago it was called "retailing." Experts in the field still call it that.
No matter how hard your business is, retailing is harder. Bank on it.
If you think your manufacturing company has an elaborate bill of materials, visit a big-box retailer and think about its inventory management. For soft lines (clothing and the like), every SKU (Stock Keeping Unit) comes in multiple sizes and colors. A knit shirt may come in six sizes and eight colors. That one shirt represents 48 separate items to track. How many different shirts can you find in Target or Wal-Mart?
In b-to-b you sell through creation of tangible value. In retail? It's fashion, status, convenience, the customer's mood, price, and of course, store design and merchandising.
"E-tailing" was going to transform the whole business of selling to consumers through the magic of Internet b-to-c. Too bad so many e-tailing experts knew nothing about retailing. If they did, they'd have known there's no such thing as online retailing.
When you sell online, as a retailer friend of mine pointed out more than a year ago, the shopper's psychology has nothing to do with entering a store and everything to do with buying from a catalog. Catalog shoppers care more about convenience, less about physical interaction with merchandise, and not at all about the immediate gratification of coming home with the goods -- the exact opposite of in-store shoppers, who see, touch, and often try on merchandise and can wear it or hang it on the walls as soon as they get home.
That's why market estimates for online retailing are completely wrong and always have been. E-tailing is bounded by the number of catalog shoppers -- a far smaller segment than retailing. Although the boundary isn't fixed, it isn't all that elastic either.
An e-tailer's business processes are those of a cataloger. Whereas a retailer's warehouse is designed for logistics -- as an intermediate distribution point, shipping crates and pallets to stores -- a cataloger's warehouse is designed for fulfillment: pick, pack, and ship. It's a very different discipline. Having a warehouse doesn't make you ready to offer customers online shopping carts.
And then there's the little matter of returns, or "reverse logistics" for the fully buzzword-compliant. Awhile back I suggested that Amazon.com's success would depend on it opening physical stores. Returns are just one reason, but an important one. Mailing books back to Amazon.com for a refund is a pain in the neck for all involved. If you bought it at Barnesandnoble.com, you'd drive to their nearest store, where you'd probably leave with more books than you returned.
You work for a b-to-b company. What does this have to do with you? B-to-b companies have plenty to learn from retail. A good place to start is Paco Underhill's book, Why We Buy. As you read it, I expect you'll find lots of notions you can use in your own business.
Among those notions will be many examples of how limited a role IT has to play when a business meets its customers.That's a subject we'll explore next week. Until then, go shopping. The economy needs you.
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Have a similar experience? Send Bob an email at ISSurvivor@cs.com. Bob Lewis is a Minneapolis-based consultant with Perot Systems.
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