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A New Ecommerce Business Model

Google vs. Amazon in the battle for the end user

At A Glance

• The battle between Google &
  Amazon shows how user retention mechanisms & ecommerce
  business models are entering a new dimension.
• Ecommerce ecosystems are starting to
  integrate stated user delivery preferences before and after their purchasing
  decisions.
• All the processes involved in the delivery of goods and services are
  becoming connected. The address is being supplemented by electronic and mobile
  identities.
• Retail stores and physical outlets are
  being forced to follow this development, decoupling from their physical
  infrastructure and enabling users to digitally determine delivery preferences.
• This leads to fundamental changes in the business model behind stores and
  outlets, and fundamental changes to the nature of distribution networks. 

Google
is increasingly losing customers to Amazon; Amazon has repositioned itself as the
leading mediator platform for sales of goods and services. In the battle for
last mile delivery, user profiles and preferences are shifting to the core of
future ecommerce business models.

Google’s
acquisition of the Canadian start-up BufferBox™ brought excitement to the
analogue community of parcel distribution services.

Few believed that a digital
multinational such as Google would be interested in a start-up
calling itself a “parcel pick-up kiosk operator”.

Ecommerce business
model makes takeover strategy clear

It is clear that Google recognises
Amazon as a potentially fierce competitor.

Amazon has understood how to enhance
and develop its position as a mediator. Google’s own data shows that a
decreasing number of users are using its own platform to search for goods and
services; instead they search directly at Amazon.

Google is losing out in its area of core
competence – optimized search. Meanwhile Amazon is expanding its own ecommerce business model to include the search for goods and services available on its own sites.

• Consumer data remains with Amazon

Consumers search Amazon directly for
goods and services which they then buy from Amazon. The consumer data this
search generates now stays with Amazon.

Amazon has little or no interest in
selling its user data – a core asset – to third parties for marketing purposes.

On the contrary; Amazon uses this
data – in most cases with the explicit knowledge and consent of the user – to
target them with new offers.

Amazon’s ability to predict interests and
preferences relating to the goods and services it offers is a growing part of
its ecommerce business model – placing
it in direct competition with Google.

Google’s strategy behind the
purchase of Buffer-Box™ now becomes clear: it is a means of retaining access to
the profiles of end customers whose stated delivery preference (on platforms
including Amazon) is their local Buffer-Box™ station.

Other factors are also gaining importance.

Amazon’s ecommerce business model includes pricing
according to preferences & customer profiles,  end-user delivery preferences, last mile,
national, regional and international (including different tariffs for delivery,
landed costs – such as tax and customs fees) delivery costs, and payment
options (paypal, Credit Cards and (remittance-like) escrow services.

It is interesting to see how
Amazon’s own product and services portfolio has become a minor share of all the
products and services offered via Amazon’s platforms/ecosystems.

In other words, with its ecommerce business model Amazon has
understood how to position itself as the new mediator for products and services
in a 24/7, global digital environment.

This ecommerce business model can easily
be extended to other sectors currently still dominated by “old fashioned” analogue
retail structures.

Unified ecosystems

As users of platforms/ecosystems
start to purchase goods and services via Google, Amazon or third parties, the focus on customer retention increasingly shifts to physical delivery
systems.

In addition to turnover and the fees
earned through facilitating goods, services and payment, selling delivery and supplemental
services (e.g. cash-on-delivery, alternative delivery methods or locations) is becoming an increasingly important source of additional revenue and methods of
generating customer loyalty in the ecommerce business model.

• Mediator role is key

Companies such as Google and Amazon
are aware of their role as mediators between supply and demand in an
increasingly consumer-driven environment.

This development is being accelerated
by the unprecedented growth in the digital economy.

The traditional outlet-based
model, driven by suppliers, will be replaced by a demand-driven model, where
the user/customer takes well-informed decisions.

Success in this field depends upon integrating
all the necessary processes into a single ecosystem.

The better one succeeds in binding the
user to a platform/ecosystem (with their full knowledge and agreement) right
through from the initial search for goods and services to final delivery according
to the user’s preferences, the higher the value of the platform and thus the greater
and more sustainable the profit it generates per user.

Ecommerce business model: recipient-driven

A key part of the purchasing
decision is quick and timely delivery according to the user’s own preferences.

Therefore
it is increasingly important that any ecommerce business model allow the platform user to determine the
method and timing of delivery.

Fig. 1: Many parcel operators deposit items at locations not chosen by addressees / recipients (Source: InternetPost AG)

Failed delivery attempts (such as
Austria’s “yellow notifications”) create additional effort and cost for the
recipient who must collect the parcel in person from a postal outlet or a
delivery service depot. This is reflected in customer purchasing behaviour.

In continental Europe the physical delivery
location (post box, etc.) is the property of the recipient.

The recipient is
entitled to determine the delivery location by issuing formal delivery
instructions, e.g. PO box; alternative delivery address, deposit,
re-direction, authorisation to receive mail.

This information forms part of the
postal infrastructure and must be shared with all postal service providers on
an equal cost and access basis.

Fig. 2: Model for delivery based on recipient instructions (Source: InternetPost AG)

Delivery address becoming delivery identity

The delivery address itself is
increasingly becoming a delivery identity, one that can be displayed digitally,
is maintained by the user and applied according to their individual and mobile
needs.  As a result, delivery increasingly
reflects the interests of the users. 

It is clear that there will soon be
offers from user interest organisations to protect the interests of digital
users.

Continued integration, growth of the digital economy and the arrival of
more ecosystems for distributing, selling and acquiring goods and services –
especially the forward integration of sales channels traditionally serviced by
physical sales outlets onto online platforms – all lead to a fundamental
redesign of the delivery infrastructure.

The recipient, not the sender, determines last mile delivery

A delivery infrastructure driven by
the recipient, one which supports both traditional parcel delivery and
alternative delivery instructions, would be open to all parcel services on an
equal cost basis.

In the digital economy, this offers
a further means of integrating the entire delivery process according to the
preferences of the user of the platform / ecosystem.

Increasing mobility and
individual preferences are increasingly important factors in retaining
consumers.

Fig. 3: A delivery model following recipients’ stated preferences encourages new business models (InternetPost AG)

Supplementing outlet infrastructure with digital, customer care-supporting deposit systems

When an online platform / ecosystem can
support the full purchase process – from initial search for goods and services
through to recorded delivery & including returns – then additional customer
service functions can also be directly integrated.

These include customer
information and advisory functionalities.

They also include identity and age
checks, or the inclusion of samples for marketing purposes (reflecting the user’s
preferences and in accordance with data protection legislation).

Ecommerce business models with delivery & collection systems help sustainably develop economically underdeveloped regions

Integrated platforms /ecosystems
help connect anyone who is structurally and regionally disadvantaged in the
physical / analogue world.

Existing platforms and ecosystems such
as Amazon and eBay, etc. can automate the process of directing delivery
instructions, notifying receipt and dispatch, and integrating networks of pick-up
and drop-off stations.

As a result, they make it possible to integrate
economically and structurally underdeveloped regions with no additional effort
and on an equal basis, providing universal coverage and meeting the specific demands
of users everywhere.

Fig. 4: Stakeholders in a sustainable, user interest-focused, ecommerce-based service culture
(Source: InternetPost AG)

All deliveries within the postal infrastructure must comply with sector-specific data protection regulations

Confidentiality,
protection and the security of personal data are the cornerstones of the postal
service provision. They focus on the postal user.

They clearly and specifically declare that a
postal service user’s personal data may be employed only for the
purposes for which it was gathered, i.e. for delivering a mail piece.

Any list privileges, list brokerage, or the
reselling of address data which enables third parties to directly or indirectly
identify postal services users is, by definition, prohibited. This is referred
to as “purpose limitation”.

Retail outlet network providers face a fundamental change to their business model

Retail
networks maintaining large locations, and particularly those outlets and stores
in assumed “ecommerce distant” areas, are facing a dramatic, disruptive change to
their business model.

Wal-Mart, and its UK-based subsidiary ASDA, demonstrate
the necessary response: their core business is food and non-food items in daily
demand.

Their ecommerce business model, involving online
platforms/ecosystems (including social media platforms) will enable users to
decide how goods and services are delivered.

Integrated customer information
and interactive care services, based on individual preferences and supporting
electronic identities, will quickly gain in importance.

The physical address
will be connected to the user’s electronic identity, seamlessly unifying the
digital and physical environments as demanded in a mobile and ICT-supported
society.

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