Monthly Archives: March 2015

Dimensional Weight pricing to bog down online retailers

Shrikar Khare Posted On - March 20, 2015

VN:F [1.9.22_1171]
Rating: 0.0/5 (0 votes cast)

In the current fiscal year, online retailers would face the brunt of higher shipping costs.

Late December 2014, the new shipping fares had already penetrated the scenario as logistics firm UPS started imposing dimensional weight pricing on all shipments. Following suite, FedEx implied the same since early January.

The policy and the effect

Often referred to as DIM pricing, dimensional weight pricing fixes shipping rates on the basis of external dimensions of a package rather than its weight. According to industry experts, these major changes in both the logistic firms would affect as much as 30% of the packages ferried by them. They claim that the average rate hike would be as higher as around 30% and more after being combined with other annual rate hikes and surcharges.

The goods and the bads of DIM

According to Jack Mitchell, former executive with FedEx and the current president and CEO of shipping consulting firm, Parcel Appraisal and Negotiations Consulting Group; this is the solo largest impact on shipping since the 1980s when fuel prices hike had resulted in double-digit fuel surcharges imposed by shipping carriers.

Principal owner of Navigo Consulting Group, which advises companies on logistic operations, Tim Sailor said that it would act as a game-changer for lightweight shippers.

Retailers, wholesalers in fix

The new rules have set retailers and wholesalers brainstorming on how these changes would affect shipping fares, profit margins and sales and what they need to do to reduce the impact. Probable options include renegotiation of shipping rules and using better shipping practices. They also intend to drop certain products out of the shipping arena that would prove too expensive to be ferried.

The president and chief operating officer at eBags, Robert Cassidy said that they are doing everything within their capabilities. He claimed that around 20% of the web-only merchant of handbags, backpacks, luggage and accessories’; has been affected by the changes in the shipping policy.

Till date, DIM pricing used to be implied only to packages of three cubic feet or more for ground shipping and those ferried by air. But the new policies at FedEx and UPS, have extended these to virtually all packages shipped via their basic ground services. This also includes many goods shipped by online retailers.

Retailers seek logistic alternatives

To minimize the impact on their shipping services and overall financial outputs, retailers are on the lookout for making their warehouse operations more efficient. They are also in the process of swapping in new package materials and have changed their shipping offers for customers. Most importantly, they are seeking alternatives to UPS and FedEx.

This drastic shift in policies has come around at a time when there have already been other multifold hikes in shipping fares. The president and founder of shipping advisory firm, LJM Consultants, Ken Wood, explains that extension of the DIM pricing policy falls in sync with the annual base rate hike by both the logistics firms. The base fares at both FedEx and UPS zoomed by an overall average of 4.9% in the previous fiscal year which is the same that the carriers have been imposing since years, although the actual average hike in base fares for many shippers is comparatively higher, Wood said.

VN:F [1.9.22_1171]
Rating: 0 (from 0 votes)

How e-retailers negotiate with customers

Shrikar Khare Posted On - March 19, 2015

VN:F [1.9.22_1171]
Rating: 0.0/5 (0 votes cast)

Of late, online shopping has become has become more or less like the to-and-fro negotiation process that does its rounds in the Turkish Bazaars, where consumers have the liberties to negotiate at a few particular sites.

Amazon’s Make-an-Offer

For example, top U.S. marketplace- Amazon, launched the ‘Make-an-Offer’ button which allows customers to negotiate the prices  for uncommon merchandises, such as sports souvenirs, rare coins and fine art materials.

The e-negotiation process

For instance, when a shopper wants to buy an Edmonton Oilers Jersey autographed by Wayne Gretzky, he has two options-either add to his cart instantly at the seller’s stated price of $99,000 or ask for a lower price. The consumer can also utilize the option to negotiate by suggesting a price which he can do by clicking upon  the Make-an-Offer button, located at the right hand side of the product page. Hence after, the seller either accepts or rejects the customer’s offer or may be even come up with a counteroffer. The process continues till both the buyer and the seller reach a concurrent point of price for the product.

Smaller hands in the line

Even better fact in the scenario is that smaller retailers are too, joining the band wagon. With the aide of technology vendors of the likes of  PriceWaiter and FreshPlum, they are getting into this negotiation game too, gradually.

The Beyond Stores started using the PriceWaiter’s technology way back in 2013, in order to negotiate with consumers. Mark Ginsberg, the managing director at the retailer said that allowing buyers to negotiate prices for the products they buy, attracts more and more consumers and makes them indulge in a research process for the purchase. Ginsberg further added that the nicest thing regarding PriceWaiter is this technology allows retailers to create an impactful in-store contact with shoppers and aide them negotiate with buyers in any normal bricks-and-mortar retailer way.

How consumers negotiate

The consumer has the provision to click the Make an Offer button to offer a different price than the advertised price. This button is located just beneath the advertised price on the product page. Hence after an e-mail is sent to those five employees of Beyond Stores who manage the PriceWaiter platform part-time.  The employees at Beyond Stores might accept the price or may even suggest a counteroffer. The average time taken from the submission of consumer’s price to the sale is at least five hours.

PriceWaiter is featured on most products of Beyond Stores. The exceptions arise only in when the retail store offers the cheapest prices possible on certain items, as per the monitoring of prices that Beyond Stores does internally. Certain brands, too, are not included owing to contractual reasons.

E-negotiation boosting revenue generation of retailers

This strategy has been noted to be working effectively. Around 44% of the accepted prices offered convert into sales, and also as much as 26% of the counteroffers generate into sales. While shoppers are said to be requesting an average discount of around 16%, Beyond Stores provides an average of 12% discount. During the initial three-months of using the PriceWaiter technology, Beyond Stores had an upsurge in sales by as much as 25.4% and a conversion increase by 22.8%.

Beyond Stores is reported to have sold a whopping $7.6 million online in the fiscal year of 2013, which is a remarkable 375% increase- from a mere record of $1.6 million in the year 2012.

The freemium model- Most used e-negotiation platform

PriceWaiter works on the model called ‘freemium’. A few merchants, including Beyond Stores have been using the basic version of the technology that comes around with no costs. Customers have the provisions for adding up features at a certain cost, ranging 1.4%-2.9% of the value on transaction basing on the volume of the retailer. The highest-volume customers need to pay a lower percentage whereas the lower-volume customers are required to pay a higher percentage.

VN:F [1.9.22_1171]
Rating: 0 (from 0 votes)

Amazon amazes to 2015

Shrikar Khare Posted On - March 11, 2015

VN:F [1.9.22_1171]
Rating: 5.0/5 (1 vote cast)

One of the latest online programs from the largest U.S. marketplace, Amazon, displays how this unbeaten North American marketplace is enriching upon its strengths in the process of winning a cent per cent loyalty from the largest number of customers- in the context of parents requiring diapers and baby wipes.

According to a popular retail journal in the U.S., this January, a new label of private label products, Amazon Elements is available to only those 40 million U.S. households that are part of the $99-a-year Prime two-day shipping program, as estimated by the Bernstein Research.

The ‘Elements’ of ‘Prime’

Elements, the first product line of Amazon made exclusive to Prime, joins Prime sweeteners such as free streamed music, TV shows and films, photo storage as well as the ability to rent Kindle e-books. The Amazon Elements product pages feature a well-displayed bunch of information on every individual item. For example, a map that displays the forest from which the pulp of certain diapers are derived as well as intricate details of sodium polyacrylate and several other tongue-twisting ingredients.  There is a significant highlight on customer reviews which are expected to increase gradually, according to Experian Marketing services.

The good ‘Mom’ experience

It is a very familiar trend for Amazon, based on the data and shopping insights it earned from earlier experiences from its Amazon Mom program launched in the year 2010. Amazon Mom members were offered deeper discounts on products that had ongoing subscriptions with them, than the other non-Mom members. Yet last November, the U.S.-based marketplace snapped off its discounts for the regular subscribers on Mom products to sync them with the non-subscribers too, two weeks prior to launching it Elements program.

Aiming for the private-label

The launch of Amazon Elements is a fine reminder of the private-label push from Amazon, adding that it sells Amazon Basic electronic accessories, along with Pinzon home furnishings, yet indicates the top U.S. marketplace’s determination towards utilizing consumer data available at its disposal and its intention to step in to the shoes of powerful allies. It in turn includes popular brand manufacturers such as Procter and Gamble that set Amazon rivals on fire by allowing this marketplace to set up a shop at a P & G ware house in Pennsylvania in 2013 to directly fulfill orders for several P & G products sold at Amazon.

Scott Jacobson, MD at venture capital firm Madrona and the former senior manager for product management at Amazon during the tenure of 2003-2007; states that the launch of the Elements program also indicates that this marketplace has larger goals for Prime. According to Jacobson, the new program Elements has vivid and interesting implication such as creating a Costco-like membership at Prime where one has an easy access to a large list of products which would otherwise not have been accessible at a time at any other place.

According to industry observers at a popular retail journal, there are a whole new set of initiatives that Amazon would be rolling out in the current fiscal year.

VN:F [1.9.22_1171]
Rating: +1 (from 1 vote)

Holiday Web Sales up for more than 15% in 2014

Shrikar Khare Posted On - March 5, 2015

VN:F [1.9.22_1171]
Rating: 4.0/5 (1 vote cast)

Web sales during the final full week of the holiday season have been increasing, by around 18.2% year by year, to $5.817 billion in desktop sales from $4.920 billion for the corresponding period last year; says web measurement firm com Score in one of its e-commerce spending estimate last December.

In the last holiday season, that began as early as November 1, according to comScore, online shoppers splurged in shopping worth $48.269 billion via desktop computers, high by 15% from $41.971 billion in 2013.

15% growth rate in desktop commerce

Chairman emeritus at comScore, Gian Fulgoni, stated that the final week of online holiday shopping was quite strong leading to a strong high note finish-off and also virtually guaranteeing the fact that e-commerce spending would outperform experts’ pre-season forecast. He further informed that e-commerce industry had run at a rate of 15% growth rate in desktop e-commerce for the recently concluded holiday season. He expressed his delight at the fact how this figures display the healthy economic status of the American consumers as well as the entire e-commerce channel.

Late December 2014, a week prior Christmas, shoppers spent around $1.07 billion on its Monday, $1.16 billion on Tuesday and $926 million the following Thursday- the day of the promotional Free Shipping Day, when numerous retailers offered free deliveries. The weekend concluded with shoppers spending around $972 million, an increase of 36.1% from previous year’s $714 million; according to comScore.

VN:F [1.9.22_1171]
Rating: 0 (from 0 votes)