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virtual value chain

Are Retailers creating virtual value ecosystem?

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“Are retailers in the middle east region, creating a virtual value ecosystem?” was the question asked to me recently in one of the retail forums wherein I was co-presenting.

At first, I complimented the questioner for asking such a great question and opened the question to the audience.

The question got the audience engaged and there were many responses from the audience which satisfied the questioner.

I went home with the question in mind, “What is the virtual value ecosystem?; I had earlier studied Porter’s value chain formats but was not sure about the virtual value ecosystem.

This article summarizes my learnings from various online research articles and reading case studies from the Harvard business review.

 

What is the Virtual value chain?

Every business today comprises of two worlds- a physical world of resources that managers can see and touch and digital/virtual world which is made of information and data.

The later gives birth to eCommerce

It is the amalgamation of “Marketplace” and “Marketspace” to create a virtual value chain or ecosystem.

F&B retailers mainly those of quick-service restaurants (QSRs) take customer orders both from physical stores as well as from online customers coming through zomato, food panda, talabat, etc.

 

Value Ecosystem/ Chain Model

The value chain is a model that describes a series of value-adding activities connecting a company’s supply side (raw materials, inbound logistics and production processes) with its demand side (outbound logistics, marketing, and sales).

virtual value ecosystem

Retail Demand planner or Merchandising manager often uses information from their retail point of sales system i.e. inventory – store wise and warehouse wise, inventory in order or in transit to control stock replenishments in their stores.

However, they rarely use information itself to create new value for their customers.

That’s what the paradigm change is brought by the Virtual value chain ecosystem.

Let me explain using an example

FedEx or DHL (now copied by almost all logistics companies) allow their customers to track their order on their website.

Now the customer could locate their parcel, orders and also get an alert as soon as the courier is delivered and the name of the recipient is also shared.

This service comes as value addition or as free of cost, thus FedEx has created added value in their delivery process and thus loyalty of their customers.

Learn as to how luxury brands are disrupting accounting practices, read here.

The Big data

Retail companies invest in ERP systems for their managers to plan, execute, control and evaluate results with greater precision and speed.

Technology helps in creating a virtual value chain offering for its customers.

Have you ever seen a merchandiser of the FMCG brand working in a hypermarket?

Ever wondered as to why the salesman/merchandiser of an FMCG brand carries a computing device (nowadays a tablet) while visiting one hypermarket to another.

They collect information on the sales of the products, inventory levels, store by store and feed it electronically.

They also capture their competitor’s activities about sales and promotions, new product launches, etc in select locations.

By combining field data with information from each stage of the value chain, brands can now better determine levels of inbound supplies of raw materials for their production facilities, plan for their truck coverage in an optimal fashion for efficient coverage, plan for sales offers to combat their competition in a more efficient manner.

How retail companies could use the virtual value Ecosystem?

The virtual value chain redefines the economies of scale.

Retailers today can optimize their inventories, shipping lead times, margins and promotions (markdowns of slow-moving inventories) much in advance.

Retailers who use omnichannel (i.e. both physical retail and eCommerce) can provide the access to their customers to track their online purchases or even the purchases made through the online but pick up from the designated store ( Buy online Pick up at store option).

As a result, Customer not only gets visibility of their order but also get their complete purchase history.

 

Do you know the biggest problem with millennials?

Converting the gigabytes of data into useful information is the biggest challenge in today’s time.

Retailers who can de-code this gap would emerge as winners.

Do you want to implement a virtual value chain ecosystem for your retail business? Feel free to reach out to me on riteshmohan@yahoo.com

References: HBR strategies for growth, retail gazette, Inc.

 

About the author:

Ritesh Mohan is a passionate retail professional with over 20 years in the Retail sector, handling some of the biggest brands in beauty, fashion and fragrances retail & FMCG sector. He has been instrumental in the growth of some of the regional brands as well in the Middle East region. Ritesh specializes in Retail management, Product development, and Brand Management, Retail Operations, Sales Management, and Franchising Management. He strongly believes in empowering business owners with his wisdom & experience of around two decades in the industry.

last-mile logistics

What is the Last-Mile Logistics & Why Ecommerce retailers are looking at this logistics function?

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Stage set up for the Last-Mile logistics

Recently, there was a news headline in one of the business dailies in UAE under “Last-mile Logistics headline” about one of the region’s leading e-commerce platform to initiate grocery deliveries to its customers.

The headline got my attention and prompted me to deep dive more about “last-mile logistics” and why it has suddenly become the “blue-eyed” function for major e-commerce players in the region.

I am sure my article and its insights would help my readers and blog followers in understanding the importance of logistics function and how Omni-channel retailers are using it to their advantage.

last mile

What is the “last-mile logistics”?

Last-mile logistics refers to the final step of the delivery process from a distribution center or facility to the end-user. Although the name implies, it is the final mile delivery, actual last-mile delivery can range from a few blocks to 50 or 100 miles.

Most often, last-mile logistics involves the use of courier or small package carriers to deliver products to consumers.

Why is it crucial for e-tailers or e-commerce players?

It’s pertinent to understand the logistics process in any e-commerce company.

The Logistics Cycle in e-commerce can be broken down into 5 major components, first-mile delivery, fulfillment, processing/sorting, line haul, and last-mile delivery. (For some lean start-ups, it involves 3-4 components only)

 

  • First-mile delivery: This involves picking up goods from the sellers and transporting it to the e-commerce retailer’s fulfillment center or directly to the mother warehouse.
  • Fulfillment: Post first mile logistics, the next phase that follows is fulfillment, which involves picking and packaging of products once an order is placed on the website and then moving it to the mother warehouse.
  • Sorting: After fulfillment, the products are sorted on the basis of the final delivery location.
  • Line-haul: This stage involves connecting the main supply center with the main demand center, via land or air.
  • Last-mile delivery: This is the last however the most important phase of the logistics cycle.                It involves the dispatch and shipping of products from the mother hub and to the delivery hubs, from where they are delivered to the end-customers.

 

The reason why “Last-mile delivery” becomes critical is due to the fact that the majority of customer complaints in any e-commerce company are pertaining “Late deliveries” which are mainly due to lack of processes in workforce management, no real-time coordination between fulfillment teams and last-mile delivery teams.

Customer returns and the ability of a retailer to quickly process the returns to enrich customer experience is another major challenge faced by e-commerce retailers.

learn about the business model of food delivery apps, click here.

The emergence of new entrants in “last mile logistics”

Companies such as Amazon have already jumped into the fray with its Amazon Prime Air service that it hopes will soon use small drones to deliver packages in 30 minutes or less. Drones, droids, and parcel copters are here to stay.

Future for Last-mile logistics companies:

Companies like Uber eats, Deliveroo has mastered the model of Airbnb but for transportation/logistics.

Technology has allowed these companies to leverage their advantage and offer jobs to anyone with a car or bike. They are able to analyze data and figure out how to do the job for less. They can fill capacity in vehicles that weren’t previously open to them.

I feel the future for Last-mile logistics providers is very promising provided they adapt to technology advancements at the earliest & ride the disruption wave.

Case study: Carrefour Valet trolley (home delivery services) available in Dubai.

Hypermarket giants like Carrefour have been fast enough to realize the importance & advantages of last-mile logistics for enhancing their customer experience and also leading to customer retention strategy.

Today in Dubai, Carrefour offers a Valet trolley facility to its customers. Leave your trolley at their store and have your items delivered to your doorstep at your convenience.

The benefit to customers:

  1. Convenient shopping experience without going through hassles of pulling overloaded trolleys to parking lots etc.

 

My article would definitely help budding entrepreneurs and start-ups who are either venturing into e-commerce or are already an established player. I would be more than glad to share my knowledge and wisdom on “Last-mile logistics” with budding entrepreneurs in case they need any of my assistance to build up their e-commerce model. My connections can reach me on riteshmohan@yahoo.com if they wish to know more about this exciting tool.

 

About the author:

Ritesh Mohan is a passionate retail professional with over 20 years in the Retail sector, handling some of the biggest brands in beauty, fashion, and fragrances retail & FMCG sector. Ritesh has been instrumental in the growth of some of the regional brands as well in the Middle East region. He specializes in Retail management, Product development, and Brand Management, Retail Operations, Sales Management and Franchising & Business Management. He strongly believes in empowering business owners with his wisdom & experience of around two decades in the industry.