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Tiq Issue 3 Web

Tiq Issue 3 Web

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Published by Michael Ross

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Published by: Michael Ross on Oct 07, 2012
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    M   a   r    k   e   t   p    l   a   c   e
                                                                                                                                                       P                                                                                                  r                                                                                                  o                                                                                                                                                                      d                                                                                                  u                                                                                                     c                                                                                                                        t                                                                                                                                                           i                                                                                                  o                                                                                                     n                                                                                                   o                                                                                                     n                                                                                                                                                                   d                                                                                                     e                                                                                                     m                                                                                                  a                                                                                                     n                                                                                                                                                                   d   
The unbundling o retail
The TradingIntelligenceQuarterly
April 2011Issue 3
What is a retailer? 04-11Choosing and managing 12-16
 competencies or online growth
When brands become retailers 17-18Is Amazon a retailer? 19-22
                                                                                                                                                       D                                                                                                  r                                                                                                  o                                                                                                      p                                                                                                                                                  s                                                                                                                                                                       h                                                                                                                                                        i                                                                                                   p                                                                                                                                                v                                                                                                     e                                                                                                     n                                                                                                                                                                   d                                                                                                     o                                                                                                     r
eCommera is a specialist
retail-focused ecommerce
product and servicesbusiness.
We deliver robust and
exible technology toenable you to trade online,combined with insight tohelp you ocus on proftableaction. It’s our blueprintor your success.
We call it trading intelligence.
For urther inormationEmail trader@ecommera.com
Call us on +44(0)20 7291 5800
Or visit www.ecommera.com
Welcome to the third edition
o The Trading IntelligenceQuarterly
The Internet has had a undamentaland irreversible impact on retailing.It has changed the very defnition o what it means to be a ‘retailer’.
In this issue we take a look at the modern retailer.The Internet and the increasing adoption o ecommerce by consumers have created myriad
opportunities for retailers. With enthusiasm
or new channels, new technologies and newways to interact with customers, many retailershave ailed to appreciate the extent to whichecommerce has disrupted traditional retailing –requiring a undamental rethinking o retailingmodels, skill sets and relationships.To understand new retailing models, we takeyou on a tour o the past starting with the frstretailers – individual cratsmen and artisans –examining the progression o retailing economicsover time.
We also present the ndings of independent
research into what ecommerce directors perceiveto be the core competencies o a modern retailer.It oers a ascinating insight into which skillsretailers are outsourcing and which they are
developing in-house. We also take a look at the
dierences between French and UK retailers indeveloping core skills.
Our regular spotlight on Amazon examines
its business model: how it makes money, andhow retailers can best align themselves with thisonline giant.
We hope that you nd this issue thought-provoking.We would welcome the opportunity to discuss how
eCommera can help you position, plan and developyour ecommerce business.
Andrew McGregor
CEO and co-founder, eCommera
What is a retailer?
Michael Ross
– co-founder and director, eCommera
The traditional heart o shopkeeping is the symbioticrelationship between retailersand suppliers: retailers buy romsuppliers and sell to consumers.The Internet has disrupted thisrelatively happy equilibrium. Inits place is emerging a complexspectrum o relationships thatundamentally alter the ways inwhich retailers operate.
Responding to a radically dierent retail modelcan appear a minefeld o complexity, laden withthreats and challenges. But or those who cangrasp what is happening and work out how to playin this new arena, there are abundant opportunitiesor growth on a previously unimaginable scale.This article helps to unravel the new economic
reality of retailer-supplier relationships to help you:
Understand the unbundling o retail
Navigate the new landscape
Identiy what is needed to execute successullyThe unbundling o retailThe starting point to understanding the new retailmodels is a clear recognition o how retailing hastraditionally worked, and what the undamentalchanges are. These can be distilled into two criticalaspects: the relationship between retailers and
suppliers, and the economics of start-up, trading
and growth.
The way it was… interdependent retailersand suppliers
Britain has a worldwide reputation as a nationo shopkeepers, with the earliest retailers beingindividual cratsmen who sold what they made.The industrial revolution had a dramatic impact
on retail. In every category (with few exceptions),
technology transormed the manuacturing,distribution and promotion o products.
Economies of scale and scope fuelled the roll-out
o chains, and the expansion o department stores.In turn, this catalysed consumer demand – peoplenow worked in industry, had disposable incomeand were exposed to, and inuenced by, trends.
Retailers innovated, and the early 1800s saw the
invention o retail norms now taken or granted,
including xed prices, self-service and returns.
Products became standardised and branded.Crucial to the retailing evolution has been the corerelationship between the two ‘lead actors’ in theindustry – suppliers and retailers.
The supplier
(whether brand owner ormanufacturer) typically took a combination
o product development, manuacturing,supply chain and marketing risk.
The retailer
took property, stock andoperational risk.Geography provided the backdrop and stimulateda symbiotic relationship – suppliers neededretailers to reach critical mass and gain access tocustomers. Retailers needed suppliers to give themsomething to sell and to dierentiate themselvesrom the competition. Moreover, geographyprovided riction that allowed competing retail
propositions to co-exist.
Some players, such as Singer sewing machines,were brave enough to do both roles but mostplayers tended to specialise. Facilitating this corerelationship was a whole ecosystem o supportingactors, including malls, concessions, ranchises,wholesalers, agents and importers.
The way it was… store economics
The retailer-supplier relationship also shaped
retail economics – the retailer’s P&L and cashcycle. Each category’s economics were inuencedby myriad actors, including: its supply chain;its product commoditisation and liespan; andthe relative retailer/supplier power. Every retailerhas developed and adapted its margin structures,payment days, and supply chain – category bycategory – to make these economics work.These decisions have driven the working capitaland proftability o each store. The predictabilityo retail growth has allowed a retailer’s cashrequirements to be managed as their business
scales (see gure 1.)
The Trading Intelligence Quarterly.The unbundling o retail
45 days working capital 
Day 0Day 45Day 90Product receivedSupplier paidProduct sol4x stock turnAdapted rom Amazon’s presentation at the Credit Suisse Convergence Conerence,June 10, 2009.
Figure 1: Typical retailer cash cycle

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