I interviewed Arnaud Deshais who discussed Supply Chain for E-Commerce Companies.
It’s good to speak with you again, Arnaud. It’s been about a year or so since we did our last interview. Today I’m looking forward to hearing your new topic on supply chain for e-commerce companies. Before we start, can you provide a brief background of yourself?
Sure. Hi, Dustin, and thank you again for inviting me for another interview. Basically, I’ve been working in supply chain management for about 20 years. I started in Europe, where I’m from—I was born in Europe, in France. I started to work for Lexmark, a printer company, where I was managing the flow of products for export outside of Europe. Then I moved into consulting with CapGemini, Ernst, and Young for a couple years, and that’s how I went to the United States to work in the supply chain consulting practice. I did a couple jobs on the West Coast of the United States, working in industries like electronics, defense, medical devices, biotech. Then in the past four years, I’ve been focusing myself mostly on retail and e-commerce supply chain. I thought that would be an interesting topic. The Internet is not something new, but companies are still learning how to do business over the Internet.
Can you provide a general understanding and some specifics for supply chain and e-commerce within retail? Can you talk about supply chain for e-commerce retail?
Absolutely. Basically, companies—small companies and larger companies—have started to evolve and are basically opening their channels of distribution outside the brick-and-mortar store, trying to sell product to customers over the Internet. We see that across the board either thorough businesses that were brick-and-mortar and decided to open their e-commerce channel or some companies that basically started right away from an Internet standpoint.
Obviously, the benefit of using the Internet right off the bat without a retail store is that you don’t have all the inventory locations and the stores and all the fixed costs you have as compared to traditional retail. Basically, the e-commerce business works with one or multiple e-commerce Web sites, so from a B to C standpoint, customers go over that site and purchase whatever they can browse through and feel like finding. This has a lot to do with branding.
Your primary job is to get customers to get to your Web site—and usually through Google search or e-mails or any other promotional channels—unless you are a very well-known company, such as Amazon, where people get to search right away. It’s kind of interesting, I would say, that Amazon is kind of eating up a little bit into the Google search where, when customers know they want to buy something, they no longer, for the most part, go to Google and research the product; they sometimes go directly to an Amazon page. This is how the industry got transformed. From a retail standpoint, what that means is, as compared to B2B, the B2C is a lot of small transactions that are happening, sometimes over $100 and no more, but sometimes over multiple Web sites, global, as anyone can buy anything from a Web site; the only thing you have to deal with is the shipping aspect.
Usually, also from a traditional retail standpoint that’s also true with e-commerce is the seasonality standpoint, where maybe one-third of the sales are going to be made over the last few weeks of the year for the holiday-Christmas season. And also another factor is the competition. Many e-commerce companies have different Web sites, and it’s becoming harder and harder to compete from a supply chain standpoint due to the Amazon standard. Amazon has total * (5:36—unclear) the world of supply chain and delivery because you can buy on Amazon and sometimes get the product a day later, two days later, sometimes with free. We all know what happened with Amazon Prime and all the customers are in the Amazon Prime business.
Supply chain is becoming the primary aspect of an e-commerce Web site because it’s all about delivery time. Customers are looking for instant gratification. They’re clicking and from the last click, now the time’s going to tell how quickly they’re going to get their products. It’s very key and that’s why e-commerce companies are now looking into supply chain as potentially a key differentiator in terms of how much it’s going to be costing to ship product to a B2C customer, which, by the way, is expecting free shipping as it becomes more and more the norm, and how quickly it’s going to be delivered. If you’re in a supply chain or working for an e-commerce company, you basically have to find faster shipping at the cheapest cost; otherwise, a customer might not return and go to the competition. What’s interesting bout it is that e-commerce is not just marketing, but it’s getting very much looking for supply chain professionals to really help them deliver products in the most critical way.
How do you measure success for supply chain in e-commerce?
The most searched-after standard I say would be the net promoter score, what’s also known as NPS. It’s basically what you get from an e-mail after you purchase the product 20, 30 days later. You get a question that says, “How likely will you recommend this Internet company, this e-commerce company, to a friend or family?” Customers vote and give a score from 0 to 10. That is kind of the primary tool that’s been used from an e-commerce standpoint to measure success.
Now, a follow-up question would be, “How satisfied were you with the delivery time?” In other words, how fast the product got to you. From my own research, I found out that deliver time and the net promoter score are related and very highly correlated upon 7, upon 9, almost 1-to-1 relationship, because delivery time is the most critical aspect. In other words, that means that when customers go to a Web site, of course they want a good price, but they really want to make sure they’re going to get the product very fast. How fast can they get it?
NPS, where we measure the * (8:44—unclear), promoters, and * (8:48—unclear) is a way that companies are measuring the success of their product, of their delivery, and their supply chain.
And do you have any success examples?
I would share a couple things that brings companies to success when it comes to getting higher NPS scores or providing a faster delivery time. The very first one would be: Are you operating on a global or regional model? Let’s say you’re operating your Web site out of the U.S. but shipping all over the world. The biggest success is to find and to have inventory in the regions, in Europe, in the U.S., in Asia to deliver the product to the customer probably in less than a week. You bypass customs, you bypass * (9:51—unclear) freight, and you deliver product fairly immediately within a week from original network.
The success, yes, I’ve had success. The first key to success is to provide original distribution of the product. The second key to success is listening to the customer. I know that’s going to sound like something very obvious, but, really, it’s key to have user group, focus group, reading what you get through NPS comments, the qualitative data, quantitative data to understand what the customer truly wants, because in an e-commerce business, you’re not seeing the customer at the store, so you’re getting very limited feedback unless you ask. And if you ask by e-mail, that’s just one more e-mail, and we know that response rates are fairly low.
The challenge for the supply chain professional is to get to the customer and understand what their requirements are from a delivery standpoint, whether it’s delivery time—in other words, the time from the last click to the delivery—or the delivery condition, the packaging. Packaging is very, very important.
There is a trend that’s very interesting to the teenage group, and you can find that on YouTube. Teenagers are posting what we call unboxing videos. They take the product they receive from the e-commerce company, and they’re having fun displaying on video the opening of the package. They’re buying themselves a gift, even though it’s not truly a gift, and they’re showing how the packaging looks, how well the product is presented, any damage there. Packaging is becoming very, very important.
Of course, we know that from a branding standpoint because companies have a successful used packaging that’s actually reusable. For example, if you shipped a product in a bag and the customer doesn’t trash the bag, reuse the bag to go, let’s say, shopping, then it gets the brand across all over the place, and it’s extremely very positive. Again, original model and packaging would be two keys to success that I would recommend to any e-commerce company that really wants to grow.
Thanks for sharing today.
You’re welcome, thank you.
About Arnaud Deshais
VP/Head of Supply Chain and Quality Assurance at Redbubble