Published by DHL

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BUY
E-Commerce & Collaboration
InsightOn:
by OneVoice

3. 03
If everyone is moving forward together,
then success takes care of itself.
HENRY FORD

4. 04

5. 05InsightOn: Editorial – Bill Meahl
Dear Reader,
With the growth of e-commerce, the way people consume is changing rapid-
ly, with strong impact on the way many companies do business and on their
supply chains and logistics.
There’s no doubt that e-commerce empowers consumers through ease of use
and broadening product choice. Plus, for logistics providers, it opens up a
whole new area of potential, because, of course, products ordered online need
to be delivered to doorsteps. Those doorsteps might be in the next town; but
they might also be on the other side of the world. For every opportunity, there’s
a challenge. How can good delivery performance be achieved cost-effectively
in an era of higher fuel prices and higher volumes, for example?
Collaboration may be one part of the solution. Collaboration is frequently
discussed in business, yet not always fully understood in its entire scope and
potential.
Most commonly, companies think of collaboration as what happens at a con-
solidation center, when manufacturers and retailers work to share warehouses,
transport infrastructure and information. Some people call this ‘horizontal
collaboration’, and it is indeed an option that many companies are pursuing as
higher e-commerce volumes change the equation on the market.
Then there’s ‘vertical collaboration’ in which suppliers in a single industry, such
as the semiconductor industry, consolidate goods and share transport, since
they are often retracing each other’s steps and sharing the same customers
from a logistics point of view.
True collaboration is hard to achieve, of course, as you’ll read in the second
half of this report. Luckily, it’s also a topic that inspires a great deal of ‘thought
leadership’, some of which is highlighted in the following pages.
I invite you to enjoy our take on e-commerce and collaboration and to find out
more about what experts from around the world have to say about both.
Best regards,
Bill Meahl
Chief Commercial Officer at DHL

6. 06

7. 07InsightOn: Contents
Contents
Editorial – Bill Meahl Page 05
Contents Page 07
Editorial – Ken Allen Page 09
Facts & Figures Page 10
The Game Changer Page 13
Life – Plugged In Page 14
Consumption 3.0 Page 20
The Expert View – Johan Paludan Page 25
Reaching Customers – Globally and Locally Page 26
Perfection:What Customers Expect with Online Shopping Page 34
The Ripple Effect of Online Purchases Page 38
Global E-Facts Page 42
E-Commerce:The Growing Pains Page 44
The Expert View – Christoph Wenk-Fischer Page 50
E-Commerce and Collaboration Page 53
An Evolution of Collaboration Page 55
Collaboration – The Human Factor Page 58
Collaboration:A Foundation for Supply Chain Innovation Page 65
The Expert View – John Gattorna Page 70
Orchestration:The New Form of Collaboration Page 74
The Foundation of Future Business Page 76
DHL Case Studies Page 78
Background and Bibliography Page 90
InsightOn: Contents

8. 08

9. 09InsightOn: Editorial – Ken Allen
E-commerce revenues worldwide are expected to reach 1 trillion US dollars
this year. By 2015, the world will have 3.7 billion internet users. Already, the
number of internet users in Asia is double that of Europe, even though pen-
etration rates in Asia are still low.
The numbers are staggering. And, as e-commerce flourishes, they are only set
to rise. For retailers with an online offer, then, the international opportunities
are both hugely exciting and there for the taking. The phenomenon of online
shopping (and it is a phenomenon, touching everyone wherever they are in
the world) allows enterprise the chance to break into new markets – particu-
larly lucrative developing ones. It also allows them to build a prosperous and
truly global customer base.
There is, of course, a ‘however’ – and it’s this. Successful product shipment is
going to become more critical than ever for retailers who want a slice of the
e-commerce pie. You might have developed a truly groundbreaking product,
but if you can’t transfer it easily from your website into the hands of your
customers, your business will never succeed.
Studies have shown that effective logistics – particularly in the retail e-com-
merce sector – are a competitive differentiator for merchants. If you can offer
the items that people want or need and ship them more efficiently than your
competitors, you offer something of real value. Your business is duly marked
as a cut above the rest.
For those who recognize this, online is a real growth opportunity, a point
made in the first half of this InsightOn: report which explores the trends,
prospects and challenges of e-commerce. The second half of the report looks
at collaboration as a means to tackle some of the more taxing problems and
complexities of e-retail.
Collaboration is a word we know well at DHL. We believe in close collabor­ation
with businesses in order to drive sustainability initiatives, reduce costs and
implement the best, most efficient integrated solutions for their individual needs.
Of course, we are well known for providing critical services that enable the
vast flow of goods around the world, and for our ability to move high volumes
from one corner of the world to another on time and within budget. But we
also do far more to support our customers who run businesses online. For
example, we provide software products that make it easy for merchants to ship
and track their packages and manage their returns – a facet of e-commerce
highlighted in this report.
Whatever viewpoint you are reading from, e-commerce isn’t a subject any of us can
choose to ignore. Online retail, with all its multi-faceted challenges, is here to stay.
With that, I’ll leave you to explore our latest InsightOn:. Enjoy your read.
Best regards,
Ken Allen
CEO, DHL Express

10. 10
More than 1000 16
101 to 1000 7
11 to 100 9
Under 10 18
– number of top 50 online retailers
that featured more than 1,000
videos on their site in Q1 2011.
SS AALL EE
68%of American retailers polled expected 2011 online
­holiday sales to increase by at least 15% from 2010
26%projected annual growth of e-commerce
in countries such as Spain, Brazil, China, Russia
and Mexico through 2015

11. 11InsightOn: Facts & Figures
‘mobile commerce’ grew
between 2010 and 2011,
as measured in the e-tailing
group’s 14th Annual Mystery
Shopping Study
2015 – the year that global e-commerce, including travel and auto purchases
as well as online retail sales, will reach an estimated
$ 1 400 000 000 000
of monthly retail
budget that U.K. shoppers
spend online
48%48%
224 000 000– number of ebay’s unique visitors per month
– average
number of
hours internet
users in Europe
spent online
in March, 2011
26
2/3– fraction of
smartphone users
who shopped
by phone in
September 2011
75%

12. 12

13. 13InsightOn: The Game Changer
The Game Changer
E-commerce is a truly ground-breaking inter­
national phenomenon — a consumer in Madrid,
say, can order goods from a seller in Missouri.
Yet, from a logistics perspective, this involves a
long supply chain that crosses borders, curren-
cies and customs regimes and requires a cost-
effective and consistent solution. The consumer’s
repeat business depends on it.
Returns is another conundrum. How does a
faulty or unwanted product go back through the
supply chain in a way that serves and satisfies the
customer, but doesn’t squeeze the margins of the
e-retailer or the logistics provider? It’s a question
that the logistics industry is still grappling with.
There’s no doubt, however, that e-commerce is
a game changer for the retail industry. It’s also
growing exponentially. Online companies who
want growth – and what ones don’t? – know
they need to set up their businesses and sup-
ply chains to take advantage of a new shopping
reality. The ones who don’t won’t be around to
tell the tale about how they tried to turn back
the e-commerce tide. So, in the first part of this
edition of InsightOn:, we look at the continually
evolving e-commerce landscape and investigate
its trends, opportunities and challenges from the
viewpoints of the consumer, enterprise and the
logistics operator.
If retailers are going to thrive in the age of e-com-
merce, then collaboration could offer a way to
implement greater competencies in logistics
planning and execution. At its simplest level,
collaboration is about the sharing of equipment,
vehicles and carriers; but it’s also about sharing
critical data on the movement of goods as they
travel to the end user. There are human factors
to consider, too: Collaboration between internal
team members and their managers, for example,
and cross-collaboration between their opposite
numbers in external (and sometimes competing)
organizations. For this to be successful, a com-
mon focus and open communication is needed;
plus an understanding of the end goal by staff at
many different levels within a business.
So how do companies collaborate successfully?
What challenges and barriers must they over-
come to do it effectively, what is its true cost and
how can it be encouraged? In the second half
of this report, leading international academ-
ics and logistics experts (including author and
consultant John Gattorna, and Richard Wilding,
a professor of supply chain strategy at Cranfield
School of Management) offer the latest thinking
and strategies on collaboration.
Could it be a turning point for e-commerce?
E-commerce once described how companies operating in the B2B sector conducted business by
sharing information electronically. Nowadays, it has a completely different meaning: e-commerce
is ‘online shopping’ and all that comes with it, such as social shopping, multimedia entertainment,
immediacy and, of course, ease.

14. 14
Futurists predict that our electronic connect-
edness will continue to impact daily lives in
profound ways, including the way we consume.
It may seem far-fetched now, but some futur-
ists can see the day when you might not have to
shop for yourself because your fridge will do it
for you. It will be intelligent and, knowing when
it is getting empty, able to initiate an order from
an online shop – thus taking you, the consumer,
out of the equation.
Your bathroom mirror, meanwhile, could have
a dual role as a message centre, reminding you
about your schedule as you get ready for the
day, and/or summarizing your home’s energy
consumption and production. By tapping your
mirror you post these results on a social net-
working site, where you are challenging friends
to earn the most points to exchange for games
and prizes to be collected online.
If all this sounds outlandish, scroll back to the
world today and notice that what was considered
science fiction two decades ago is not only part
of the new reality – it is driving expectations
The changes are well documented. ­Anthropologists
have shown how text messaging – expected to top
9.4 trillion messages by 2016 (Informa ­Telecoms
and Media, May 2012) – has transformed language;
how instant messaging has shortened attention
spans, and how consumers are collaborating and
sharing in new-found communities that are no
longer restricted by physical boundaries.
These communities often pursue a greater good,
such as reducing their carbon footprint or help-
ing others with practical information on things
as diverse as home health remedies, fashion
trends and where to spot a shopping bargain.
From a consumer perspective, computer technol-
ogy has had the greatest impact of all by revolu-
tionizing the way people shop. Now everything
from groceries and home furnishings to cars and
holidays can be bought over the internet. More
than this, however, consumers can collaborate
and share information, write reviews and impart
tips in new-found online communities. Shoppers
are no longer restricted by physical boundaries.
Technology has empowered them.
Life – Plugged In
The digital world – with its always-on, 24-hour cycle of information, communication and media –
­permeates lifestyles, shaping the way people interact, consume and make sense of the world we live in.

15. 15InsightOn: Life – Plugged In
Delivering Tomorrow: Customer Needs in
2020 and Beyond. A Global Delphi Study (see
p. 113 for details)
PROBABILITY
Unlikely:
25 %
Definitely not:
13 %
Definitely:
12 %
Probably:
31 %
Possibly:
19 %
DELPHI THESIS 46
IN FUTURE …
… the internet connects
100% of the world’s
population, based on a
new infrastructure (e.g.
glass fiber, satellite, mobile
devices).
for consumers. For instance, between meetings
at work, the busy consumer can now place an
online order for a dinner to be delivered to their
home at a time of their choosing. All they need
to make this happen is two minutes’ access to
a PC, laptop, mobile or tablet – and a reliable
delivery service, of course
“With reliable delivery
and plenty of choice,
­consumers have discovered
that click-and-ship is in
many ways more gratify-
ing than traditional
­shopping.”
Multiple means of communication – or hyper-
connectivity – is the new normal. According to
Robert Greenhill, the chief business officer of
the World Economic Forum, hyperconnectivity
is redefining relationships between individuals,
between consumers and enterprises and between
citizens and state. He has said, “We are begin-
ning to see fundamental transformations in all
areas of the economy and society.”
Most experts believe that e-commerce is not
the driving force, but rather e-connectedness.
Once connected, people then transfer their
experience of instant information gratification
and empowerment to the realm of e-commerce.
In other words, e-connectedness means con-
sumers want their products fast, easy and on
their own terms.
It’s no wonder then that retail e-commerce is
booming. For several years now, it has been
steadily taking market share away from tradi-
tional bricks-and-mortar retailers. In the US, for
example, e-commerce reached 8 percent of over-
all retail sales in 2011, compared with roughly 4
percent in 2004.
With reliable delivery and plenty of choice,
consumers have discovered that click-and-ship
is in many ways more gratifying than traditional
shopping. People find that it fits into their lives
much more easily than a trip to the store, where
selection may be limited and comparing prices is
done the old-fashioned way: Manually.
And that’s not to mention the benefits for life-
logistics: No more vying for a parking spot at a
shopping area, waiting in line to try on clothes,
waiting in line again to pay and then fighting
traffic or crowds on the subway on the way
home.
Governments, too, are keenly aware of the
advantages that come with e-commerce, and
they’re keen to boost computer and internet
usage to keep their economies and workforces
competitive.
As part of its Digital Agenda for Europe, the
European Commission has set a target of en­
abling 75 percent of the population to be regular
internet users by 2015, with the proportion of
the population that has never used the inter-
net decreasing to 15 percent. Within the same
period, 50 percent of the population should be
buying online and 20 percent of the population
should buy cross-border online.
For businesses and consumers alike, this trend
opens up whole new worlds of opportunity.

16. 16
SoLoMo
We are perpetually in motion.Thanks to online
technology, we can now all have a home and office
on the move.With our mobile phones and tablets,
we can field business queries, monitor our Facebook
pages, send a Tweet, add to a blog and book a table
for dinner while we’re, say, sitting on a train or re-
laxing at a café table.
Internet trend watchers have come up with a new
acronym that could describe this behavior as well
as one of the main trends on the world wide web:
SoLoMo, short for social-local-mobile.
The term conjures up a world dominated by social
networks (So), in which local (Lo) commerce and
communities thrive while people interact and
transact from their mobile (Mo) devices.
“The Social, Local, Mobile (SoLoMo) revolution is
here,” says Daniel Laury, the CEO of LSF Network, a
US-headquartered global digital marketing company
offering digital advertising and performance marketing.
“With rapid rates of smartphone and tablet adoption,
consumers are on the move, looking for information
quickly and expecting relevant results on the go.”
Already in 2007, social networking surpassed email
in terms of time spent online. By 2011, users in
­Israel,Argentina,Turkey and Chile all spent more
than 10 hours a month on social networking sites.
They were most likely sharing and commenting on
photos of friends and family, swapping recipes or
comparing their opinions on films, books and cur-
rent events.
Many people use social networks to research pur-
chases and learn about products. For example,
Mumsnet in the UK, a place where mothers compare
notes and collaborate, has built up such a following
that is considered crucial for influencing product
choices – and even elections. In India, India Con-
sumer Forum is an online platform giving consumers
the chance to share information about goods and
services, post grievances and give helpful consumer-
related tips and advice.Then there is US site Pinter-
est, which invites visitors to share their favorite
things on ‘pinboards’ and follow collections created
by others, and has over 12 million users a month.
Plus, many retail sites have developed a sellers and
buyers community forum – discussion pages where
potential consumers can read comments and re-
views by posters who have already bought a partic-
ular product. US retail giant Amazon, for example,
launched its customer discussion board in 2007.
Christoph Schwarzl, a Kurt Salmon partner and the
author of the book New Online Retailing, said,
“Many shoppers now consult their peers online be-
fore they make major purchases. For them, other
consumers are considered more reliable and trust-
worthy than advertisers.”
Going Local
Next comes business, with a definitive local twist,
driven by social media users on mobile devices.
While business may be global in many ways, com-
panies like Groupon and LivingSocial help generate
demand for products and services locally.And
check-in services like shopkick drive foot traffic
into retail outlets.
E-commercetrends

17. 17InsightOn: Life – Plugged In
Delivering Tomorrow: Customer Needs in
2020 and Beyond. A Global Delphi Study (see
p. 115 for details)
PROBABILITY
Definitely not:
2 %
Definitely:
12 %
Probably:
40 %
Possibly:
27 %
Unlikely:
19 %
DELPHI THESIS 48
IN FUTURE …
… all across the world,
communication costs
decrease extremely –
information and telecom-
munications are available
to everyone at any time
and almost for free.
Indeed, a survey by comScore in 2011 showed that
local listings are among the most relevant and trust-
ed search results for consumers. Some 61 percent of
online searchers consider local search results to be
more relevant, and 58 percent consider local search
results to be most trustworthy than others, it said.
Relevancy typically means that users recognize the
name or address of a business that has the products or
services they want in a specific location. For business-
es, it translates to a more targeted readership for ads.
“For a local company looking for local customers or
a national company steering customers to local
storefronts, local search provides targeted messages
to the consumer searching for a product or service in
a particular area,” Laury said.The “Mo” trend in
SoLoMo is also moving forward at full speed.
Almost shockingly, more people on this planet
could access a mobile phone network than electric-
ity, if cost were no factor.According to the GSM As-
sociation and the United Nations, commercial wire-
less networks can reach 85 percent of the world’s
population while the electrical grid can reach only
80 percent of the world population.
With wireless access widely available and mobile
handsets far cheaper than desktop PCs, it’s clear
that users of the mobile internet will far outnumber
their fixed-line brethren.At the time of writing,
PCs are still the preferred way of connecting to the
internet; but a new study by NPD DisplaySearch
predicts that tablets will overtake PCs by 2016.
Indeed, experts say that most of the mass market
consumer world will never have a PC, but only a
smart-phone or tablet.The device will be the cen-
tral nervous system of their lives and the place
where they conduct their affairs, relying on the
opinions of people in their social networks and ser-
vices provided locally.
In South Africa, for instance, internet use grew
25 percent in 2011, mostly due to access via mo-
bile phones.And India may be raising a “mobile-
only” generation, according to one study. It found
that 49 percent of people who are using the mobile
internet either never or infrequently use it from a
desktop.
Essentially, the SoLoMo trend is another example
of how electronic connectedness and new consumer
technologies have eliminated information asym-
metries from the consumer‘s shopping experience –
and put power into the consumer’s hands.

18. 18
exponentially: 2011 saw 25 percent growth in Indian
internet users over just 12 months.
The future of the internet in India looks set to be
driven by mobile devices. Figures from wearesocial.
net highlight that 59 percent of all Indians only
­access the internet via mobile technology.With an
increase in 3G and 2G services, and an Indian
­Government roll-out of low-cost tablet devices
across schools nationwide, internet use is going to
get much higher, very soon.
With more and more citizens online, e-commerce in
India is on the rise. In 2011, it was estimated that
the value of online business in India had reached
US$10 billion. Popular sites in India include
20North.com, offering electronics, books, music
and movies; the fashion site 99labels.com; and
Dealsandyou.com, which features deals and dis-
counts on a variety of products.
The same story is being repeated in parts of Africa,
where undersea cables have opened up high-speed
online access and dramatically increased business
opportunities. Mobile is big news here: By 2015,
mobile phone subscribers are expected to reach
850 million — of which 250 million will have mobile
broadband subscriptions. In Nigeria, according to
statistics from the ITU (International Telecommuni-
cations Unions), 35 million new internet users
came online during 2007 and 2010. Mobile use is
high in the country, with over 95 million mobile sub-
scribers (Nigerian Communications Commission).
In South Africa, smartphone users also represent
the future potential of internet growth.At the end
of 2010, 6.8 million South Africans were using the
internet; but by the end of 2011, that figure had in-
creased to 8.5 million; and by the end of 2012 it is
estimated to topple the 10-million mark.
The Internet and the Developing World
The internet may have its roots in Silicon Valley, but
statistics show that its future will be decidedly in-
ternational.
Already, the strongest growth in number of users –
and the sheer largest number of users overall – is
in developing countries. Europe and North America
now have the highest proportion of internet users
among their entire populations, but the overall
number of users is dwarfed by countries in the de-
veloping world.
China, for instance, added more internet users in
three years than all the internet users combined
that exist in the US, according to Mary Meeker, an
analyst at venture capital firm Kleiner Perkins Cau-
field & Byers and a recognized expert on internet
trends and business.
China had a population penetration of internet us-
ers of only 34 percent in 2010, but that rate was
growing at 20 percent per year, according to the In-
ternational Telecommunications Union and the
United Nations.What’s more, the total number of
internet users in China in 2010 – some 459 million
– was already nearly double that of the US, where
244 million people were accessing the internet.
Popular sites in China include the marketplaces
Tao­bao and 360buy.com, which had more than
40 million registered users in early 2012 and pro-
cessed 400,000 orders a month.
In 2011 in India, 121 million people were estimated
to be internet users. If that sounds like a lot, then it’s
nothing compared to the overall Indian population,
which stands at 1.2 billion. In such a big country, then,
121 million is a low figure; and, if internet growth was
standing still, it would be unremarkable. But internet
growth in India isn’t standing still.According to re-
search aggregated by wearesocial.net, it is growing

19. 19InsightOn: Life – Plugged In
are used by far more non-Americans than Americans.
For instance, more than half of Google’s traffic
comes from outside the US.And the market valua-
tion of Chinese and Russian internet companies
has been rising quickly, according to Meeker.As of
late 2011, Chinese companies like the search-engine
giant Baidu and the online service provider Tencent
were valued at more than US companies such as
priceline.com and Yahoo!
These rising figures have real implications for com-
panies’ logistics operations. If businesses are not
already shipping to developing markets, then they
had better prepare to seize the opportunity in the
coming years.A rising, internet-savvy middle class
in the developing world is busy writing the next
chapter of the e-commerce story.
Sale, Sale, Cyber Sale
Black Friday, the day after the Thanksgiving celebra-
tion in the US, consumers typically begin their Christ-
mas shopping. It has become a discount shopping
day when millions of US shoppers hope for massive
savings.The term Black ­Friday illustrates the point
at which stores start to make a profit, or go "into the
black." The holiday shopping season is important
for the economy because 19 percent of retail sales
occur between Black Friday and Christmas. For
some retailers, such as jewelers, the period may
bring in nearly 40 percent of their annual revenue.
Often, stores stay open until midnight to attract as
many shoppers as possible.
In recent years, however, Cyber Monday, the first
Monday afterThanksgiving, has become almost as
important to retailers. It’s the day online shopping is
gauged to predict how strong the holiday shopping
season will be for retailers overall.With full stores and
rising gas prices, online shopping is gaining ground as
people simply do the job from their desktops or hand-
helds. During the 2011 post-Thanksgiving weekend,
Cyber Monday sales alone hit US$1.2 billion, making it
the heaviest US online spending day in history.
E-commerce in South Africa is growing accordingly, as
noted in an Internet Economic Impact Study survey by
independent technology research and strategy organi­
zation,World Wide Worx, published in May 2012.
“The study… indicates that e-commerce is growing
at a rate of around 30 percent a year, and is showing
no signs of slowing down,” said Managing Director of
World Wide Worx,Arthur Goldstuck.“In fact, taking
into account the fact that a number of major consumer
brands and chains have not yet devised comprehensive
online retail strategies, the scope for future growth is
even greater.”The result, says Goldstuck, is that an
internet economy worth R59 billion in 2011 and making
up 2 percent of the SA economy could grow to as much
as 2.5 percent of the economy by 2016.
Other points in case: the world’s largest internet
properties may be American companies, but they

20. 20
Delivering Tomorrow: Customer Needs in
2020 and Beyond. A Global Delphi Study (see
p. 123 for details)
PROBABILITY
Definitely not:
2 % :yletinfieD
13 %
Probably:
41 %
Possibly:
36 %
Unlikely: 8 %
DELPHI THESIS 56
IN FUTURE …
… Web-connected inter-
faces make private homes
intelligent environments,
where temperature, aroma,
personalized broadcasts,
and information are
automatically adjusted to
the preferences of the
inhabitants, at all times.
draw large groups of people; typically, they work
through social networks and rely on social
­media to spread the word about deals at shops.
“Digital natives don’t
want to waste their time.
They will only go shopping
for one reason: To have fun.”
The Psychology of Shopping
Over the course of time, shopping has always
been about more than just meeting the daily
needs of life. The acquisition of certain goods re-
mains a central way for people to distinguish
themselves socially and economically from oth-
ers. And marketplaces have historically offered
an important space for social interaction, the ex-
change of information and spectacle.
According to Paludan, the future of “live” shop-
ping may hinge on its ability to continue to meet
these key needs as it adapts to changes in the
way we peruse and pursue goods.
For hundreds of years, people visited ancient ba-
zaars, seaport commercial districts and general
stores to select the things they needed. Then
came downtown department stores and sub­
urban shopping malls.
But all this was before e-commerce was a force
to be reckoned with, with its 470 billion US dol-
lars in sales that are expected to exceed 1 trillion
US dollars worldwide by 2012.
Take the phenomenon of pop-up retail. In
New York, Paris and Berlin, shops can appear
quickly – and be gone a few days later.
The idea is to create a buzz online that trans-
fers back to the physical world, enticing people
to partake in short-term, limited offerings at
frequently changing locations in city centers –
i.e. pop-up locales.
Over the past few years, Toys ‘R Us has
opened hundreds of holiday pop-up retail
shops using otherwise vacant retail space,
Vogue magazine has rolled out temporary
stores for teens that don’t sell any items but
offer makeovers and model castings, and
US retailer Target offered New Yorkers two
weeks to buy regular store items onboard
a 220-foot long glass-topped boat that it
­motored into Chelsea harbor.
Johan Paludan, a futurist who has worked at
the Copenhagen Institute for Future Studies
since 1976, says the pop-up retail trend is part
of a wider ongoing transformation of retail
space to event space.
“Bricks-and-mortar shops are quickly finding
out that they must offer something special to
compete with the benefits of buying online. It
won’t be long before people head to shopping
areas not to buy things – but to seek entertain-
ment,” Paludan said.
“Digital natives don’t want to waste their time.
They will only go shopping for one reason: To
have fun.”
Those retailers who are successful in pop-up
selling often use the techniques employed by the
flash mob performance art movement to quickly
Consumption 3.0
Once, the mantra for successful retailing was “location, location, location.” Now, e-commerce is re-
defining the concept of place, allowing companies to create a virtual identity that can be marketed
just like a physical one and enabling people to travel between both worlds.

21. 21InsightOn: Consumption 3.0
CBRE Group, Inc, it was reported that e-commerce
had seen its share of core retail sales captured rise
from 3 to 6 percent during the past six years; while
the majority of bricks-and-mortar retailers’ shares
declined during the same period. Jeffrey B Edelman,
Director of the assurance, tax and consulting firm
McGladrey & Pullen, LLP, believes that “2012 will
be another year of lethargic growth, store closings
and increased focus on everyday low prices by
­several major retailers, all of which will have a
­significant impact on the entire retail landscape.”
He adds that multichannel is key to survival for
many; and that online retailing also threatens
­existing store economics, measurement systems
and incentives.
According to a UK-government backed report by
Mary Portas, a retail marketing expert, TV person-
ality and fashion designer known as The Queen of
Shops, town center vacancy rates have doubled
over the past two years, and 50 percent of consumer
spending takes place off the high streets. Portas
­advocates turning the country’s town centers into
cultural and social meccas. She says, “I fundamentally
Despite its tremendous size, the experience of
­e-commerce is not even fully evolved yet, says
Paludan. Right now, popular shopping sites in-
clude large marketplaces that aggregate the goods
of thousands of sellers, such as Amazon.com and
Alibaba.com, or giant retailers with a large web
footprint such as Walmart.com.
In the future, we may shop in 3D virtual malls that
are architectural masterpieces and, at some point,
we may even be able to have sensory and tactile
experiences while shopping online. “Merchants
may be able to pipe the smell of bread into your
own home, or you may be able to print out sample
fabrics to explore their feel,” said Paludan.
With the fast uptake of e-commerce, and such fan-
ciful developments on the horizon, some experts
are already predicting the death of the shopping
mall. They say that e-commerce could leave shop-
ping malls in a bind, just as those very malls and
hypermarkets have played a part in high vacancy
rates in downtown shopping districts. In the US, in
a May 2012 report from real estate services firm
BUY

22. 22
expect to find there. It’s a bridge between event
shopping and old shopping – as consumers go back
and forth between the worlds,” said Paludan. This is
omni-channel retail – the ideal aim for many e-re-
tailers and the ultimate evolution of ‘multi-channel’
and cross-channel retail. The idea of omni-channel
retail is that consumers will be able to access the
retailer from whatever platform is available to them
in whatever part of the retail process they are, and
enjoy a co-ordinated and cohesive experience.
“The idea of omni-channel
retail is that consumers are
able to access the retailer
from whatever platform
is available to them in
whatever part of the retail
process they are.”
To this end, one company has even reproduced
the image of a grocery store on a poster – just
like a Potemkin village – and is giving people the
chance to buy items in what appears to be a typi-
cal store. Hung in subways by a Korean division of
the UK grocer Tesco, users approach the posters
believe that once we invest in and create social
capital in the heart of our communities, the eco-
nomic capital will follow.
Others don’t see e-commerce as such a threat.
Paludan, for instance, believes it and real-world
shopping can co-exist and be mutually beneficial.
He says the most successful real-life shopping
venues will actually be a blend of both – offering
interaction between the virtual and real worlds and
striking the right mix of entertainment and shopping.
Already, people and merchants connect the two
worlds. Users do so when they redeem electronic
coupons for real-world goods in stores or follow
the recommendation given on their handset to
walk into a particular store and interact with
products. There’s also the trend of sharing your
location with friends by checking into physical
spaces – like a Starbucks – using a smartphone
and services such as foursquare or Facebook’s
location-sharing feature. Often companies will
reward users with discounts for checking in.
Companies, too, are transcending cyberspace.
The auction site eBay did so by setting up a
pop-up shop in central London for wares avail-
able only online. And the carmaker Renault has
plugged the virtual into the physical world by
erecting an information kiosk at a car show in
Holland and enabling visitors to “like” particular
models on their Facebook pages.
“I see companies combining real-world locations
with digital messages of what the consumer can

23. 23InsightOn: Consumption 3.0
Delivering Tomorrow: Customer Needs in
2020 and Beyond. A Global Delphi Study (see
p. 124 for details)
PROBABILITY
Definitely:
5 %
Definitely not:
8 %
Unlikely:
45 %
Probably:
16 %
Possibly:
26 %
DELPHI THESIS 57
IN FUTURE …
… purchasing decisions
are based on peer-to-peer
advice (e.g. via the internet);
classical advertising is dead.
and place orders for home delivery with their
smartphones while they’re waiting for their train.
Though some companies like Tesco seem to be
embracing these types of new marketing op-
portunities and creative ways to position their
brands, others still see altered buying behavior
as a threat, says Paludan.
“In the end, shopping will
become much more
individual, as merchants
collect intricate data
about our preferences.”
At present, many retailers are working through
their policy for dealing with shoppers who
compare prices online for items they see while
standing in a store. Some retailers may conclude
that it’s best to forbid the use of virtual shopping
assistant applications, while others have already
accepted the writing on the wall and are actually
facilitating customers as they make purchases via
the web or phone – while visiting an actual store.
The way consumers shop may be shifting, but it’s
a slow metamorphosis. Yet some things never
change: Currently, whether consumers purchase
in store or online, goods need to reach them as
quickly and as effectively as possible – other-
wise their custom will go elsewhere. Retailers
are ­currently facing the twin-pronged reality of
bricks and mortar and e-commerce and realiz­
ing the key role that logistics has to play in both.
They are understanding the importance of a
smoothly operating supply chain. Poor delivery
service in either area may have a long-term
negative impact on their entire brand, after all.
Collaborative Design
In the end, shopping will become much more
individual, as merchants collect intricate data
about our preferences, Paludan says. That data is
already being used for target marketing cam-
paigns i.e., a strategy whereby retailers focus on a
group of potential customers in specific locations
or demographic groups; or even shoppers with
similar attitudes, tastes and lifestyles. Sellers are
working to make target marketing enhance the
shopping experience. The profiles generated from
collected data also help companies interact with
consumers, offering them more chances to be a
part of the design and production process. A UK
furniture company, for instance, offers “democrat-
ic” designs by asking its customers to vote online
about which pieces it should manufacture, and
wearers of Nike shoes can now design their own
styles and colors, complete with their own initials.
Other campaigns are even more ambitious in their
size and scope and don’t even involve the product
itself. In 2011, Johnnie Walker, the blended Scotch
whisky, launched its Keep Walking campaign to
galvanize support for three innovative initiatives
in the fields of the arts, technology and business
in a number of markets, for example Brazil and
Thailand. The Johnnie Walker consumers in each
market were urged to debate, over Facebook,
which initiative they thought had the most poten-
tial to shape the future in their country.
This offered consumers “a collective sense of
participation and achievement and (will) hope-
fully spark new thinking about what can be
achieved by working together,” said Gavin Pike,
Global Brand Director for Johnnie Walker. “By
using our communications to encourage like-
minded consumers to connect, collaborate and
champion causes that inspire them we will deliv-
er a deeper engagement with our brand as well
as showcasing some of the pioneering thinking
that could lead us towards a better future.”
“Whether online or in a store, we’re seeing grow-
ing interaction between the consumer and the
producer,” said Paludan. “Call it collaborative
consumption if you will.”

24. 24
Try This on For Size –
Shape-Fitting Technologies
Walk into some stores these days and the sales
clerk may call your attention to the screen on the
back wall instead of the coat on the rack.
There you can position yourself to play a game of
shopping in a Wii-like way.The program will react
when you raise your arms and move your body to
signal which items you like and dislike.
You may motion to remove an item you’re viewing
that has been fitted to your personal avatar, or you
may swipe wide and twist to have it returned to
center-screen for your inspection.
What you’re doing is interacting with a computer-
ized personal shopping assistant. Such technolo-
gies are no longer the realm of futuristic films but
actually available to shoppers around the physical
and digital worlds.
In the UK, shoppers at Selfridges and New Look
can have their bodies mapped by BodyMetrics, and
online shoppers can do the same with home-based
camera technology.After the profile is made, it be-
comes a tool for trying on garments across multiple
stores on the web. Shoppers will try on clothes via
a personal avatar that is an interpretation of their
shape.
If body measuring technology became the basis for
online shopping, it could do even more by helping
retailers improve their manufacturing, warehous-
ing and stocking processes because of the ability
to predict demand more precisely for particularly-
sized items.
Now that’s a good fit for retailers.

25. 25InsightOn: The Expert View – Johan Paludan
Many people shop online in marketplaces (like
eBay), but the experience doesn’t feel like that of
­visiting a mall. Why not?
Johan Paludan: Online shopping is fundamen-
tally different from traditional shops. A traditional
shop has a general display, where the shopper has
to find what she wants. Online shopping will in-
creasingly be based on the supplier knowing more
and more about the individual shopper. Online
shopping is therefore much more based on the in-
dividual displaying what she or he is known to like.
What online shopping misses is the social dimen-
sion. Man being a social animal, I expect we will
continue to go to traditional shops to experience
other people.
That brings up privacy concerns.
Johan Paludan: The basic situation is that sup-
pliers will know more and more about the individ-
ual consumer. The talk is about “big data” and
about how to exploit it. People know that the ad-
vantage is that they will only get information they
find interesting and spam becomes truly a sin. The
other side of the coin is that this development will
indeed negatively affect privacy. As somebody said,
“Privacy is gone – get over it.” It does, however, only
take a couple of scandals of somebody misusing
the data before we have a new situation. It is basi-
cally a matter of trust, and trust takes a long time to
build and a short time to demolish.
Which products will disappear from the traditional
retail trade as consumers shift to online buying?
Johan Paludan: The current situation gives the
answer: Those products where it is not impor-
tant to feel, taste and smell were among the first
to be popular online, such as books and music.
Ultimately, all products could disappear from
the traditional retail trade once the digitalization
of taste and smell has been accomplished. Right
now, that process is still in the lab. Traditional
retail will have to survive on the social needs of
people and location-based marketing. When you
walk in the city you – or rather your smartphone
– will be bombarded with messages about what
you could get just round the corner. Instant grat-
ification is always tempting.
What is the role of logistics in this picture?
Johan Paludan: In traditional retail, the con-
sumer takes care of the last leg of transport from
shop to home. In online shopping the retailer has
to take care of the last leg, hence this becomes an
important element in the competition with ­others.
People are often away and can't receive their goods.
My vision is that every home will have an installa-
tion like the trap door some people have for letting
their cat go in and out. For goods, it would have to
be a one-way mechanism with built-in cooling/
freezing facilities.
Johan Peter Paludan serves
as the Director Emeritus at
the Copenhagen Institute for
Futures Studies (CIFS). He
is widely known as a crea-
tive thinker on social trends,
education, business and
the popular imagination. A
privately funded, non-profit
think tank, CIFS provides in-
terdisciplinary statistics-based
and subjective research on a
variety of topics.
Paludan earned a master’s
degree in political science from
Aarhus University and worked
as a high school teacher before
joining CIFS in 1976. His pub-
lications include ‘The Nordic
Welfare State’ as well as ‘The
Strategy of Corporations: The
most Likely Future and the
Wilder Alternatives.’ He also
contributed to the production
of ‘The Dream Society – From
Information to Imagination.’
The Expert View –
Johan Paludan

26. 26
Reaching Customers –
Globally and Locally
For the merchant behind the website, the shop-
per’s physical location is far from irrelevant.
­Logistically speaking, where the customer is can
have a major impact on how quickly – or even if
– they can be served. Shipping goods overseas
means dealing with issues surrounding different
currencies and customs regimes and longer
transport times. Overheads – such a factoring in
the costs of returns from abroad – may put a
squeeze on profit margins. Suddenly, from the
­e-retailer’s perspective, delivering the goods from
A to B is fraught with difficulty, especially if A is
on one side of the world and B is on the other.
Yet a retailer’s ability to serve customers abroad
may make or break a business, especially during
tough economic times. In the UK, for example,
merchants are clearly responding to growing
competition from domestic websites and cutbacks
in household spending due to the financial crisis:
A recent survey showed that 64 percent of online
retailers there plan to expand internationally in
2012. Good logistics will therefore play a central
role in future competition among e-retailers.
“The real growth opportunity is international,”
says Andrew McClelland, the Chief Operations
When surfing and shopping the Web, national frontiers are hard to spot. One click leads to another,
and the product is suddenly in your shopping basket. For the consumer, it is of little concern that the
website is based outside their country of residence.

27. 27InsightOn: Reaching Customers – Globally and Locally
Delivering Tomorrow: Customer Needs in
2020 and Beyond. A Global Delphi Study (see
p. 119 for details)
PROBABILITY
Definitely not:
1 %
Definitely:
10 %
Unlikely:
25 %
Possibly:
37 %
Probably:
27 %
DELPHI THESIS 52
IN FUTURE …
… more than 3 billion
people in the world run their
businesses completely and
more effectively than ever
via the internet, making
use of the World Wide
Web’s marketing power;
50% of B2C transactions
are carried out online.
& Policy Officer of the Interactive Media in Re-
tail Group (IMRG), a UK e-retail trade group.
“Overseas e-commerce markets offer a com-
pletely fresh customer base and one that is in-
creasing exponentially.” By the end of this year,
there will be 2.5 billion internet users worldwide.
By 2015, this number will rise to 3.7 billion.
For merchants, going global is easier said than
done. And it’s just one of the many challenges to
tackle as the e-commerce market matures and
customer demands rise for the best service and
the best prices.
“A retailer’s ability to serve
customers abroad may
make or break a business,
especially during tough
economic times.”
Beginning in the early 1990s as a curious new
form of distance selling, e-commerce has be-
come an overwhelming force to reckon with –
for both small and medium enterprises (SMEs)
and the world’s largest retailers. While early en-
trants like Amazon.com and eBay continue to
drive expectations with their giant marketplaces,
experts say much unclaimed territory is still
available to those online sellers that get multi-
channel retailing right and learn to cross borders
effectively.
Opportunities – A Click Away
According to recent industry surveys, even the big-
gest names in retail e-commerce are taking a slow,
measured approach to expanding abroad, given the
risks of failure, which would be costly and damag-
ing to hard-won brand confidence. For example, in
May 2012, US retailer Macy’s announced its inten-
tion to dip a toe into the Chinese market by selling
an assortment of its private brand merchandise di-
rectly to consumers in China through a Macy’s sec-
tion on omei.com, a newly established China-based
online retailer of in-season luxury and fashion
brands operated by VIPStore Co., Ltd.
“Our relationship with VIPStore will allow us to
gain additional experience in the fast-growing
Chinese market, and to better understand how
consumers across China interact with Macy’s and
the products we sell,” said Terry J. Lundgren, chair-
man, president and chief executive officer of Ma-
cy’s, Inc. “We know that Macy’s is very well known
and regarded in China through international tour-
ism, globally broadcast events such as the Macy’s
Thanksgiving Day Parade, and movies such as Mir-
acle on 34th Street. But we still have a great deal to
learn about the shopping patterns and merchandise
preferences of consumers in China’s very diverse
and rapidly emerging consumer marketplace.
“We continue to believe there is significant long-
term opportunity internationally for both Macy’s
and Bloomingdale’s. But we need to be certain
that our future decisions in this regard are based
on fact and experience.”
Macy’s are not alone in being cautious in entering
new territories. Only a small proportion of the
sites the IMRG has surveyed offer currency con-
verters or customer support in a local language.
One hurdle they face is missing infrastructure
for cross-border transactions. Search engines,
which know no geographical borders, may drive
traffic to a retailer’s site, but sales are lost without
the requisite checkout, customs and delivery ser-
vices for international clientele, as well as a host
of other adaptations.
These include site-specific ways to handle lan-
guage and cultural barriers as well as the chal-
lenges of cross-border fulfillment and returns. For
example, not all merchandise can be shipped
across international lines without incurring taxes
or duties, and returns from a different country are
more complex and costly than domestic ones.
European Cross-Border E-Commerce
Cross-border e-retailing within the European
Union would seem easy enough since internet
use and online buying from domestic websites is
on the rise across member countries, led by
adoption in Norway, the UK and Sweden. The
percentage of individuals who made purchases
over the internet has, on average, more than
doubled from 20 percent to 43 percent between
2004 and 2011, Eurostat says. In addition, the
European Union’s 27 member countries have a
common legal basis for trading and 17 countries
share the common currency.
Yet significant barriers to cross-border e-com-
merce still exist in Europe. In 2010, some

28. 28
Delivering Tomorrow: Customer Needs in
2020 and Beyond. A Global Delphi Study (see
p. 121 for details)
PROBABILITY
Definitely:
16 %
Definitely not:
2 %
Unlikely:
9 %
Probably:
44 %
Possibly:
29 %
DELPHI THESIS 54
IN FUTURE …
… people are “always on”
the internet, surrounded
by easy-to-use appliances
and virtual “smart agents”
automatically assisting the
users in their daily activities,
filtering information and
serving as personal coaches.
74 ­percent of EU online retailers did not sell to
other EU countries.
A report released in 2011 by the European Par-
liament found a lack of consumer confidence in
cross-border online commerce. Apparently, cus-
tomers hesitate before making purchases outside
their home countries because of differing rules
on sales taxes (VAT), returns and the inability to
compare prices in different languages. This fear
of the e-commerce unknown seems to be easily
overcome, however. A 2011 report, published
by the European Consumer Centres Network,
found that 61 percent of the consumers who
have already shopped across borders are equally
confident in cross-border and domestic online
shopping, compared to only 33 percent of the
general population.
Europe needs more multilingual price compari-
son sites, says Pablo Arias Echeverría, the rap-
porteur for a European Parliament Working
Group on e-commerce. “There are still a signifi-
cant number of consumers who are not yet
aware of the offers and competitive prices that
are available from cross-border retailers. Despite
the 300 price comparison websites that exist,
only a handful provide cross-border price re-
views,” he has said.
Consumer uncertainty and language barriers
have made themselves visible in the numbers as
well: From 2008 to 2010, cross-border e-shop-
ping in Europe only grew from 6 percent to 9
percent while domestic online purchases rose
twofold.
Many companies simply underestimate the cul-
tural divide present when expanding to interna-
tional markets. Experts believe they do so be-
cause of the lingering myth that technology
eradicates borders in our lives.
“There are still a significant
number of consumers who
are not yet aware of the
offers and competitive ­prices
that are available from
cross-border retailers.”
Yet, by neglecting to adapt to local conditions,
some retailers could be cutting themselves off
from growth: During recent years, e-commerce
sales have been the main growth engine of the
retail sector. According to the European Com-
mission, e-commerce is the dominant distance
sales channel and accounts for around 4 percent
of the total retail sector.
Getting Cross-Border E-Selling Right
Amazon.com has successfully expanded to inter-
national markets. Yet the world’s largest online
retailer, with 48.08 billion US dollars in net sales
in 2011, acknowledged in its latest annual report

29. 29InsightOn: Reaching Customers – Globally and Locally
Delivering Tomorrow: Customer Needs in
2020 and Beyond. A Global Delphi Study (see
p. 120 for details)
that international operations present risks such
as a relative lack of operating experience in a
particular country, legal and regulatory uncer-
tainty and established local brand-name compa-
nies as competitors.
Still, a “significant” portion of the company’s to-
tal revenues come from outside the US, and it is
clearly a leader off of its home turf. Some ana-
lysts believe the Seattle-based company may be
entering a new international expansion phase af-
ter slowing the pace following its 2004 debut on
the Chinese market. Amazon has retail websites
in the US as well as in Canada, the UK, Germa-
ny, France, Italy, Japan and China. It launched in
Spain in 2011, and reports say the giant is now
eyeing new markets.
Even as market leaders like Amazon.com or Ali­
baba.com forge ahead outside their home markets,
significant opportunity still exists. But what works
in Michigan won’t necessarily work in Mumbai.
So how must businesses and supply chains adapt
when going abroad? Researching customers and
markets is critical, naturally, because each market-
place is different. Apart from getting a handle on
culture, language and etiquette, retailers will need
to understand what product – and packaging –
will work best in the locations they are targeting.
Experts agree that “local” is the lingua franca.
They say companies should start exactly there by
making shopping carts, websites and customer
service available in the local language and pro-
viding call centers. That’s because some consum-
ers only feel comfortable making a purchase
­after finding out that the company is ‘real’ by
­actually speaking to someone.
US retailer Walmart operates a website in China
that is highly tailored to the local market. Where-
as its global site is designed for consumers who
want to purchase online, its Chinese site is made
to have an “official” look and feel appropriate for a
retailer with the size and clout of Walmart.
According to an analysis of the site by a group of
professors from universities in the US, Hong
Kong and Taiwan, Walmart’s site rightly focuses
on what’s important in the Chinese market –
­introducing the company, cooperation with the
government, social responsibility, the latest
news, supplier services and food security.
Scott Price, the Asia CEO of Walmart, said the
company is “very keen” on the online market in
China. Walmart operates about 370 bricks-and-
mortar stores across China and has a minority
position in Yihaodian, a company that has
carved a niche in same-day or next-day deliver-
ies in five cities. Walmart is applying to take a
majority position in the company. “We’re com-
mitted to the Chinese market,” Price said.
The Localization Industry
For retailers large and small, the cross-border
­opportunity is too attractive to ignore, and an
­industry of boutique companies has cropped up
PROBABILITY
Definitely not:
4 %
Unlikely:
24 %
Possibly:
36 %
Probably:
31 %
Definitely:
5 %
DELPHI THESIS 53
IN FUTURE …
… rapidly expanding
mobile infrastructures and
free access to information
let emerging economies
catch up with Western
societies.

30. 30
to help others properly design localized, multi­
lingual websites. According to some estimates, the
decade-old industry is already worth more than
10 billion US dollars.
These consultants are prepared with software
and solutions that will help companies run
­flexible websites that can scale up and down
­almost by the minute – as demand dictates.
“The future will be to figure
out how to encourage the
online customer to come to
the stores, and encourage
the customer in the store to
shop online.”
They also help retailers consider critical questions
when reaching out to new markets: Is your prod-
uct selection adapted to local tastes and are prices
competitive? Does your advertising comply with
applicable law and does the approach resonate
with locals? And are your fulfillment process and
logistics effective and cost-efficient?
Macy’s is addressing all these questions and
more as it expands abroad with its Macys.com
website. The company’s flagship store in Man-
hattan is a popular destination among foreign
shoppers, and Macy’s has tried to cultivate that
customer segment for years.
In 2011, the company began offering shipping
outside the US. According to a news report, its
website is being reconfigured to detect a shop-
per’s location worldwide and display a welcome
screen in the appropriate language. Shopping
will then continue in English, but at checkout,
the consumer is notified of the price and ship-
ping costs in the local currency.
Overall, Macy’s online sales are booming. CEO
Terry Lundgren said in a TV interview that he
expects them to exceed 2 billion US dollars in
2012. “We’re one of the most advanced com­
panies when it comes to the online business. And
we’ve been investing there. A lot of the capital
investments I’ve made for the company over the
last three years have gone into technology. It’s
­really paying off.”
Shopping Channels A La Carte –
In Store, By Phone, Online
Macy’s international push online is part of its
overall strategy to meet the demands of sophisti-
cated shoppers who want access to Macy’s prod-
ucts and services in a multi-faceted way.
“Today, the most important customer and the
most important trend is what we call the ‘omni-
channel consumer,’” Lundgren told a reporter.
“This is the consumer who is shopping on his or
her phone, shopping at their desktop and going
into our stores. The future will be for us to figure
out how to encourage the online customer to
come to our stores, and encourage the customer
in our store to shop online.”
As a result, the retailer is now testing or imple-
menting capabilities such as digital receipts, free
Wi-Fi in stores and tablet computers for sales
clerks that will help improve customer service by
giving easier access to online information. And
Macy’s already has the technology at its cash reg-
isters to allow sales clerks to search for an item
online that may not be available in the store and
complete an online purchase for the customer
who is standing in the store.
The UK department store House of Fraser and
others have taken the multi-channel idea one

31. 31InsightOn: Reaching Customers – Globally and Locally
step further. In a move that was unimaginable
only a few years ago, it has opened stores in cen-
tral shopping areas in Aberdeen and Liverpool
that don’t sell any products at all.
Instead of walking in to find racks of products,
shoppers enter what looks like a lounge where
they can browse – but mostly online. Packages
are delivered to the customer’s home or to the
shop for pickup the next day. If the consumer
happens to be un-initiated into the world of on-
line buying, a friendly assistant is there to help
the person navigate the clicks.
The move by the House of Fraser illustrates
­another way retailers are coming to grips with
shoppers who want to browse and buy in all
­possible ways and at their own whim. At any
given time, these channel-hopping consumers
may want to research online, view in a store,
purchase via the web or handle returns by mo-
bile phone and mail.
For many consumers, deciding if, when, where
and how to shop is a matter of “personal free-
dom,” and those vendors who don’t enable them
to move freely among the channels end up, well,
cramping the shopper’s style.
Accordingly, retailers should carefully organize
and plan cross-channel efforts for optimal exe-
cution, says Sucharita Mulpuru, vice president
and principal analyst for Forrester Research, in
the Retail TouchPoints 2010 Outlook Guide.
“This isn’t about taking baby steps – it’s about
committing to multi-channel and aligning your
incentives and your organizational structure in
such a way that you can set yourself up for suc-
cess,” she was quoted as saying.
And if retailers get it right, the bounty could be
rich for society at large. In Europe alone, the
gains to consumer welfare could be 204 billion
euros or 1.7 percent of GDP, if e-commerce
grows to be 15 percent of the retail sector, the
European Commission says.
The Economist magazine predicts winners and
losers in what it describes as the “coming retail
boom.” With shops representing a fifth of small
businesses in Europe, it says many will have to
change their strategies when they face up to
competition from their larger counterparts.
The magazine wrote: “But the winners will out-
number the losers. Some of Europe’s small shops
will give up the battle… and reinvent themselves
as stylish showcases for e-commerce. Oddly
enough, the old continent’s best chance of pre-
serving its cultural traditions lies with harness-
ing new technology, not ignoring it.”

32. 32
China’s Big Sellers:Alibaba,TMall,Taobao
Tmall, which is part of theAlibaba Group, was launched
inApril 2008 and is the most visited online retail web-
site in China, offering an extensive brand selection
of consumer electronics, home furnishings, designer
footwear and beauty products, to name a few.
Chinese consumers are certainly buying:Tmall reached
its highest single-day transaction volume during a
special promotion on November 11, 2011.That day,
sales of goods reached a volume of RMB 3.36 billion
(531.76 million US dollars), or an average of more
than RMB 38,000 (6,022.18 US dollars) per second.
Tmall’s owner, the Alibaba Group, is a family of
internet-based businesses that include online mar-
ketplaces which facilitate international and Chinese
B2B trade, retail and payment platforms, a shopping
search engine and distributed cloud computing ser-
vices. Privately held, the group reaches internet users
in more than 240 countries and regions and employs
more than 25,000 people in some 70 cities in China,
India, Japan, Korea, the UK and the US.
Alibaba also ownsAlibaba.com, a global e-commerce
platform for small businesses and theTaobao Market-
place, a popular C2C online shopping destination.
Alibaba.com provides three marketplaces:
• a global trade platform (www.alibaba.com) for
importers and exporters
• a Chinese platform (www.1688.com) for domestic
trade in China
• and a transaction-based wholesale platform on
the global site (www.aliexpress.com) geared for
smaller buyers seeking fast shipment of small
quantities of goods
Together, these marketplaces form a community of
more than 79.7 million registered users. Further-
more, the company offers Chinese traders a wide
choice of business management software, internet
infrastructure services and export-related services.
Taobao Marketplace was launched for consumers in
China.With more than 800 million product listings
and more than 370 million registered users in 2012,
it is one of the world’s top 20 most visited websites.
Clouds Parting Above the Developing World
Just as the advent of internet technology allowed
giant online marketplaces to flourish years ago,
the low-cost and scalable software and services
enabled by so-called “cloud computing” could give
a spectacular boost to e-commerce – also in the
developing world.
The cloud computing business model is designed to
provide digital storage space on a shared network
(i.e. in the cloud) along with the latest versions of soft-
ware and supporting services.This means businesses
using internet-accessible services from the cloud
can avoid costly upfront investments in servers or
software that needs to be installed on desktops.
The cloud revolution, say some commentators, is
coming – and it could be a breakthrough for many
when it does. In part, that’s because it offers com-
panies scalability, flexibility, agility and the chance
to launch new services (such as social media) with
minimum risk.
As such, its uptake is increasing. UK industry body
the Cloud Industry Forum (CIF) recently conducted a
survey across 250 UK-based organizations and found
that 61 percent are currently using cloud-based
services, with a 92 percent satisfaction level.The
research also showed that the primary reason for the
adoption of cloud is the flexible model of delivery
(71 percent), scalability (66 percent) and the low cost
of adoption (58 percent), although operational cost
savings were not the major driver.
For instance, international aid organizations often
stress how the “digital divide,” or the lack of access
to broadband networks and the internet, harms the
economic growth prospects of billions of people liv-
ing in developing countries. Now some have pinned
hopes on cloud computing as a way for countries to
catch up, once the broadband networks are available.

33. 33InsightOn: Reaching Customers – Globally and Locally
All Eyes on Amazon
The name Amazon.com is nearly synonymous with
the concept of e-retailing, and most experts credit
the company with opening the floodgates of online
commerce.When it was launched in 1995 by
Jeff ­Bezos, the company’s CEO, few would have
­imagined that the company would grow to its
­current size and scale in less than two decades.
Now the world’s largest online retailer, with 48.08
billion US dollars in net sales in 2011,Amazon.com is a
strong force in setting expectations among consumers,
with its huge selection, prices and customer service.
The story goes that Bezos boxed up the first book
sold on Amazon.com in his garage in Seattle. His
idea in the early years was to focus on cheap-to-ship
books and other media that was already catalogued
and therefore easy to be uploaded on a website.
Today,Amazon offers a product catalogue of mil-
lions of items. Many are warehoused, fulfilled and
delivered from Amazon’s logistics centers in north
America, Europe and Asia, and many more come
from the millions of merchants that also offer
goods via the company’s marketplaces. Add to that
Amazon’s so-called “Prime” services, which feature
unlimited delivery for a low, fixed price each year,
and it’s clear to see why the company is a key trend-
setter in the market.
Forrester analyst Sucharita Mulpuru credits
­Amazon.com’s marketplace model as a key driver of
profit, since Amazon earns a commission off the sale
of the wares without necessarily having to keep
them in inventory or fulfill orders. According to
­Forrester, marketplace sales represented 35 percent
of revenues and 30 percent of unit sales on Amazon’s
website in the fourth quarter of 2010. Other online
players are taking a cue from the likes of Amazon
and eBay and moving to the marketplace model,
including Flipkart.com in India, which offers a cash-
on-delivery model that makes sales possible for those
people in India who do not have bank accounts.
“Retailers that compete withAmazon have come to
dis­cover that offering marketplaces on their own sites is
critical to driving margins and remaining competitive on
the prices and the shipping fees of the items they do stock
in inventory,” Mulpuru wrote in a research note in 2011.
“Companies such as Buy.com and Walmart have in-
troduced marketplaces, and we anticipate others in
verticals such as apparel, toys, and sporting goods
will follow suit.” Mulpuru said,“This strategy will
help them to retain some of the market share they
may otherwise lose to Amazon.”
Mobile telecommunications networks have already
done a lot to bring communications and digital services
to people in remote areas, and the positive economic
impact is well-documented. InAfrica, some 65 percent
of the population uses a mobile phone.This cellular
infrastructure has allowed some developing countries
to “leapfrog” over the age of fixed-line networks and
go straight to the mobil e-commerce party.
In Kenya, for instance, users not only talk and text
with their phones, they also conduct their banking
on them.The M-PESA system, which uses cloud-
based infrastructure, is well known for having
brought payment capabilities to remote villages,
thereby helping millions of small businesses thrive.
Still, much more must be done to improve lives in
developing countries, and experts say the cloud
could play an important part. Nir Kshetri, a profes-
sor of business at the University of North Carolina
in Greensboro, pointed out that cloud services
are easier to install, maintain and update than
traditional computers with desktop software and
therefore provide a benefit of particular importance
for rural users with little IT training.
Microsoft, Google and Amazon.com are among
the large providers of cloud services worldwide
that may indeed help chip away at the structural
disadvantages that exist in health, education and
commerce in the developing world.
Kshetri wrote: “In theory, it is possible for the de-
veloping economies to catch up with the West, as
the cloud allows them to have access to the same
IT infrastructure, data centers and applications.”

34. 34
Perfection:What Customers Expect
with Online Shopping
By Andrew Starkey
The demands placed on the supply chain by e-commerce will be driven by retailers’ requirements.
But retailers’ requirements themselves are driven by consumers. Logistics providers and retailers
must examine how consumers are changing their behavior to understand how supply chains should
be adapted for e-commerce.
Recently on a Sunday afternoon, I went online
to purchase a towel rail for my bathroom. I
found a model I liked at a decent price on the
website of a UK retailer whose name I won’t
reveal. After doing some quick research, I was
ready to purchase.
However, when I got to the checkout stage,
I could not get the web site to accept my order
for delivery to my home. I called the company’s
customer service line, and a representative,
sounding a bit surprised, told me that I could
only buy the item in the store. My retort: “Well,
why is it listed on your website?”
My easy and convenient home shopping experi-
ence turned into frustration, and this retailer
is no longer in such high standing in my eyes.
Now I won’t be purchasing it from them at
all; and I may not purchase anything else ever
again.
I don’t think my reaction is particularly draco-
nian. Like other consumers, I know that I can
have a reliable and consistent online purchasing
experience elsewhere. Why should I give this
merchant more of my time?
This brings me to a point I’d like to make about
how deliveries measure up in the world of
­e-commerce: Too often, logistics and the supply
chain lag behind what the consumer actually
expects. We at the IMRG, the Interactive Media
in Retail Group, the UK’s trade association for
e-retail, have four years of data to show that
consumer satisfaction with physical logistics is
lower than that with other steps in the home-
shopping process.
The Digital World:Three Reasons Why
Consumers Demand More
Consumer behavior is being changed by the
spread of ubiquitous digital communications and
the alternatives it brings for multi-channel contact.
We know that some 70 percent of consumers who
make purchases online in the UK are influenced
by other channels, including above-the-line media,
below-the-line media, digital media and so forth.
Secondly, consumers are used to an immediate ex-
perience, and they’re looking for that in shopping
as well. The result is that they are losing patience.
Third, consumers are more mobile. We find that
consumers are very often in different locations for
different deliveries. They don’t spend all day in an
office. They don’t spend regular hours at home.
They conduct their lives from different places.
Consumers are simply less predictable.
Although they’re more unpredictable, we do know
that these individuals shop and increasingly on-
line. Sometimes they shop in a physical environ-
ment, but they may do their research in an online
environment. When this consumer walks into a
store, he may use QR codes or scan a barcode with
a mobile device to identify if a particular item can
be had cheaper online.
These options give consumers more choices, but
they also create complexity, particularly for the re-
tailer, since the consumer wants to have a consist-
ent experience – no matter what the channel.
High Expectations for Delivery
Then comes delivery. We say delivery begins
during the browsing phase. If you go onto an
Amazon website and you’re browsing for a
Andrew Starkey is the found-
er and lead consultant for
Spiral4, a postal and e-logis-
tics consulting company. He is
retained by IMRG as its Head
of e-Logistics, leading its re-
search and member support
program. Starkey has a
unique background in the
world of parcels, packets and
postal logistics, with more
than 30 years of experience
gained in the commercial sec-
tor and the regulatory envir­
onment. He held senior posts
at Royal Mail, and he has
served as an Executive
Director of Postcomm and the
Commercial Director of
Jersey Post International.
Starkey is a member of the
Chartered Institute of Logistics
and Transport and the
Institute of Direct Marketing
and is a recognized expert on
the UK postal and e-retail
home-delivery markets.

35. 35InsightOn: Perfection: What Customers Expect with Online Shopping
­product, it will describe the product and the service
you get with the product. If you’re shopping
for a camera, it will tell you how many pixels
the camera has, plus that camera’s absolute
availability and the time window when it will be
dispatched and when you can expect delivery.
This happens at the point of browsing. What
market leaders are doing is replicating the act of
walking into a physical store and seeing the item
for yourself, knowing you can walk out with it.
Many less-advanced e-retailers don’t give you
this information until you’ve made your decision
to purchase and you’re in the checkout process.
Only then do they tell you when and how you can
receive your camera, and if they don’t provide the
right options you may well abandon the purchase
– a time-consuming and costly exercise for both
parties.
We’re getting to a point now where consumers
expect to see this supply chain information
at the start of their online shopping journey.
They want to know the availability, dispatch
date, delivery time windows and delivery time
options. They want to see this at the time of
browsing, and a vast majority of retailers don’t
give you that information then. So, consumers
immediately experience a disconnect between
what they expect in the wider digital world and
the reality of many e-retailers provide, which is
often driven by supply chain restraints (or the
lack of understanding of the importance and
impact of the supply chain).
Checkout
As the shopper enters the checkout, he/she ex-
pects to know exactly what that product will cost.
Yet some e-retailers still apply delivery charges
at checkout after the purchase decision has been
made.
Other retailers provide a consistent shopping
and delivery experience each time. But what
happens if it fails? Let’s say you’re on your third
purchase with a retailer and that delivery failed.
If that happened, you had a 30 percent failure
rate. Nobody in this world would deal with a
company that has a 30 percent failure rate.
But at least 8 percent of UK deliveries fail to
meet the shoppers expectation at the first
attempt. We’ve got clear data that show that de-
livery performance is a clear retail differentiator.
In excess of 70 percent of UK consumers will
positively testify that a good delivery experience
encourages them to shop with that retailer again
(and again, and again…).
In-Transit
During the in-transit stage, consumers want to
have instant information at their fingertips as
well. However, some retailers disappear after the
checkout is complete. Some 70 to 80 percent of
retailers do send a confirmation email or SMS
to notify the customer that an item has been
dispatched. However, only 12 percent will send
a message while the goods are in transit con-
firming the delivery date is still on target. That’s
88 percent of retailers who forget to maintain
the positive experience.
Returns
The final way that e-retailers can improve
customer service and the delivery experience
is in the area of returns. I call the current status

36. 36
quo on returns a ‘black hole.’ We have data that
shows that female shoppers are more likely
to return goods than their male counterparts.
Some 42 percent of female fashion purchases
are returned as compared to 13 percent of
­fashion purchases made by men in the UK.
Clearly, ladies are more discerning, so they
buy several colors and several styles and they
choose the one that suits them best. The rest
they return.
The problem is that in most cases, the customer
has already paid for the item that is being re-
turned but has no control and lacks information
about the package during the returns process,
even though she may be bearing the cost of the
return herself. In fact, that’s a key point.
Since the consumer may have to pay for the
return, she sends it back the cheapest way – i.e.
through a postal carrier that doesn’t provide a
tracking number. At this point she is carrying all
the risk during the three or four days it may take
to return the item. During this time, she has
1) no goods 2) no money 3) and may have paid
a premium to return the items. Many e-retailers
are generally not good at letting me know that
the goods are back in their system and that I’ll
be given my refund. During this time, I’m in the
returns ‘black hole.’
When the retailer gets the goods back, the credit
may be delayed for another three to four days
while the return is being processed. All this
time, the consumer is feeling uncertain. She
may phone the customer service center, asking
questions and causing the retailer to incur cost.
I always say that an anxious consumer is a bad
consumer.
This is a customer who the retailer spent mar-
keting money to acquire; and the customer is
unlikely to shop with the retailer again if it’s a
bad experience. This is a very vulnerable time.
Yet in the UK, most return services remain
untracked. The data show that about 85 percent
of online shoppers are generally satisfied with
their outbound deliveries but only 60 percent
are satisfied with services for returns. Again,
it’s a disconnect because shoppers will see both
­delivery and returns as components of the over-
all shopping process – an excellent ‘outbound’
experience will be negated by a ‘black hole’
returns experience.

37. 37InsightOn: Perfection: What Customers Expect with Online Shopping
IDIS Gold Standard
Some UK retailers are seeking certification for the
use of delivery best practices as a way to differenti-
ate themselves from the competition.
IMRG has developed the IDIS Gold Standard, a
delivery baseline against which retailers can meas-
ure themselves and become certified. Certification
indicates to consumers that the retailer is geared
up for delivery best practice, such as allowing the
customer to specify when the delivery is made.
Once the standard is met, the retailer is invited
to display the IDIS Gold Best Practice logo on its
website to show its customers that it provides an
excellent delivery service.
Inside the Consumer’s Mind
I have presented four stages of the online shop-
ping experience as they relate to deliveries and
consumer expectations. It’s clear to see that a
first-class online experience is characterized
by communication with the customer that is
conducted via the channel pre-selected by the
shopper. The buyer is constantly kept abreast
about the status of their deliveries, beginning at
the browsing stage.
It’s also clear that consumers demand high
levels of service and experience from e-retailers
yet frequently experience a gap between their
expectations and the available service enhance-
ments in logistics. This gap represents an oppor-
tunity for retailers, software providers, technol-
ogy providers and logistics providers to respond
via the supply chain.
I would argue that the response must be guided
by a full understanding of how the consumer
is feeling and why consumers’ expectations are
as so high. Otherwise, we will never be able
to properly adapt the supply chain and design
low- or no-cost services that address consumer
expectations.
delivery Notification
12% of retailers sent
a text message alert
regarding delivery, up
from 4% last year
4%
12%
89% of retailers allowed
the customer to track
their order online, up
from 77% last year
77%
89%
Larger retailers were
more likely to send
texts: 26% did so, up
from 11% last year
11%
26%
19% of sites made the
customer log-in/register
before showing the
delivery charge
19%

38. 38
Delivering Tomorrow: Customer Needs in
2020 and Beyond. A Global Delphi Study (see
p. 116 for details)
PROBABILITY
Probably:
42%
Definitely:
15 %
Definitely not:
1 %
Unlikely:
12 %
Possibly:
30 %
DELPHI THESIS 49
IN FUTURE …
… data and program
storage are provided not
locally but on huge
internet servers, allowing
for ever smaller and lighter
devices.
The Ripple Effect of Online Purchases
Despite its image as “virtual,” the e-commerce industry depends on effective on-the-ground
services, such as fulfillment and last-mile deliveries.The boom in e-commerce is bringing new
and different challenges to supply chains.
Consumers may save time and energy by no
longer heading to the shopping mall. Instead,
they click away and the items are delivered to
their doorsteps.
But let’s say a consumer receives at least five
packages a week of foodstuffs, clothing and
housewares, because they live in a remote area.
The ability to purchase online may have simpli-
fied their life, but it still means change and
learning a new process: Not only must the card-
board carrier cartons be taken to the recycling
bin, the consumer may need to think ahead
about where they will be when the packages ar-
rive (i.e. how the delivery will be received) and,
in case the product isn’t right or is faulty, how it
will be returned.
Consumers bought 34 billion euros of goods
online for home delivery in Germany alone in
2011, according to Christoph Wenk-Fischer, the
head of the German e-commerce and Distance
Selling Trade Association (BVH).
How this boom changes daily lives is only one
part of the picture. Flip to the other side, and
you’ll see millions of additional small packages
flowing through the delivery networks of postal
and express carriers impacts businesses and
supply chains in numerous ways.
“A typical customer order triggers several B2B
and B2C logistical operations,” says N. Viswa-
nadham, a professor at the Indian Institute of
Science and an expert in logistics.
Market leaders like Apple have refined their busi-
ness to the point where a customer’s order online
can initiate the manufacturing of the product.
Others have focused on using advanced IT to au-
tomate numerous processes, such as the creation
of production or picking orders.
Still, the higher volumes mean far more people
than in the past are needed to handle freight,
­particularly in countries like China, where ­logistics
capabilities must in some cases be built from scratch.
Step-by-Step:
How E-Commerce Impacts Supply Chains
Before an order is placed online, many custom-
ers expect to see real-time information about
the product’s availability, how long it will take
for delivery and the cost of delivery. This type
of information is very useful to the customer
but not so easy for internet shops to provide,
since they are dependent on a long list of supply
chain partners to make that data available in a
compatible format and a timely manner. Across
the board, much effort is being given to make
this information available widely.
Next, shoppers place their order. Besides a pay-
ment receipt, they expect an electronic confir-
mation about when the order will be shipped.
Andrew Starkey, the head of e-logistics at the
UK’s trade association for e-retail, IMRG,
the Interactive Media in Retail Group, says,
“Most merchants and logistics companies send
confirmation emails with the IT systems they
have ramped up in the past years. Often, the IT
systems of the merchant are connected to that of
the logistics provider or a managing intermedi-
ary, or access is provided via the internet.”
After the order travels through the various
information systems (i.e. that of the online
shop, the producer, the distributor, etc.), and the
product is located in the warehouse, someone
(or, in highly automated warehouses, some-
thing, i.e. a robot), must then move it off the
shelf and place it into a staging area for packing.
Indeed, such fulfillment services have seen
their share of growth in the past few years, and
experts see them growing at 5 to 10 percent
going forward, as producers target the direct-
to-consumer market. It’s no coincidence that
big online retail names have opened up fulfill-
ment centers in emerging markets recently, such

39. 39InsightOn: The Ripple Effect of Online Purchases
as China and India, in order to help with their
logistics operations in these countries.
In some cases, small online sellers will fulfill or-
ders from their basements; others ask third-party
logistics providers to do the job. Companies with
larger online volumes often have their own fulfill-
ment facilities, or they have adapted their existing
logistics operations for the larger volumes and
particular demands of e-commerce.
Some even operate their own warehouses for their
merchant customers. After outbound packages
reach the warehouse dock door, these companies
send them with a variety of commercial logistics
providers (often express carriers) that deliver to
the consumer’s home.
For many logistics providers, doorstep deliveries can
be the most costly step in the process and represent
one of the biggest areas of change taking place in the
business, given the higher volumes of home deliveries
and rising demand by consumers to determine for
themselves when and where the package should be
dropped off. The challenge for the e-retailer – and,
by extension, the logistics provider – is how home
deliveries can be made both efficiently and profitably.
The fact is that a merchant’s customer-focused
reputation hangs on fulfillment. Fulfillment is
super-critical to the success of any e-commerce
enterprise. Unfortunately, fulfillment also gets
potentially more complex and costly as e-retailers
tap into different markets – including emerging
markets with all their promise but also with their
variable infrastructure – while offering increasing
numbers of products to their customers.
It is essential, then, for the home delivery part
of the process to be working efficiently, with the
e-retailer utilizing the right logistics networks and
solutions that, literally, deliver. Apart from being
ultra-reliable, these solutions need to be cost-ef-
fective both for the merchant and for the logistics
provider (who will be aware of repeat deliveries
eating into their profit margins) but also for the
customer. Otherwise their business will be lost.
The way forward has to be through ­collaboration.
With e-retailers and logistics providers ­working
together to provide each other with better
­information, the challenges of the constantly
evolving e-commerce market can be ­better
­understood and the supply chain solutions ­become
that more ingenious.

40. 40
Delivery Re-Runs
If the customer is not at home when the package
arrives, the logistics provider either tries again
at another time, takes the package to the near-
est post office or, if the proper infrastructure is
in place and the customer requests it, drops the
package off at a 24-hour un-manned service
point, such as DHL’s Packstation.
A decade ago, un-manned pick-up and drop off
stations were few and far between. Clearly driven
by e-commerce, their spread is a smart way to
deal with the fact that people aren’t always home
to receive a package. Some experts expect grocers
to begin to place such stations in their stores as a
way to drive sales on their own websites. Con-
sumers can go to the corner store, buy fresh milk
and collect their packages from the store’s locker.
If a second delivery attempt must be made, the
delivery company’s margins – already low – are put
under further pressure. And then there’s the matter
of parking delivery vans in dense city centers as well
as increased truck traffic in already congested areas.
Some companies have come up with innovative
solutions to make doorstep delivery more cost-
and time-efficient and to decrease the related
emissions. One way is to send customers a text
message or email informing them of the time
window for delivery and giving those customers
the option to accept the time window or select
another. Such a service is possible with existing IT,
but only a few companies are using it effectively at
the moment, according to the IMRG’s Starkey.
Typically, a carrier will make two attempts to
deliver a package and offer some form of online
tracking of that package for both the merchant
and the consumer, services made possible with
advanced IT systems. But what happens when
the delivery just can’t be made? Or the product
isn’t right and has to be returned?
Working – In Reverse
What’s obvious is that the package must make
its way back to the original sender. What’s not so
obvious is the sophistication and skill required by
carriers to make this an efficient process, even if
the package is returned through a different chan-
nel than it was bought.
Merchants rely on the returns management ser-
vices offered by third-party logistics companies
and others, and the ability of a business partner
to handle returns reflects back directly on the
merchant. It impacts their image and is associated
with customer service.
“Often called ‘reverse
­logistics,’ the process of
returning an item raises
the cost of the transaction,
but it’s a fundamental
and unavoidable part of
the business.”
In many cases, the way a company handles re-
turns can make or break the business. Customer
satisfaction is strongly linked to the returns pro-
cess, and inventory management depends on an
efficient and effective returns process. From a cus-
tomer perspective, an e-retailer’s returns process
cannot be underestimated. Get it right and you
can increase customer satisfaction. Get it wrong
and you reduce the chance of their repeat busi-
ness. Returns figure highly on online shoppers’
wish-lists. According to a survey by comScore,
63 percent of online shoppers look at a retailer’s
return policy before making a purchase.
Often called “reverse logistics,” the process of return-
ing an item raises the cost of the transaction, but it’s
a fundamental and unavoidable part of the business.
The right of consumers to return items bought from
a distance trader is enshrined in European law, for
instance. E-retailers will have to deal with customer
product returns because this is a critical part of
their customer service program. Customers may be
advised to mail goods back – or some merchants will

41. 41InsightOn: The Ripple Effect of Online Purchases
Delivering Tomorrow: Customer Needs in
2020 and Beyond. A Global Delphi Study (see
p. 118 for details)
PROBABILITY
Unlikely:
15 %
Definitely not:
4 %
Definitely:
9 %
Probably:
41 %
Possibly:
31 %
DELPHI THESIS 51
IN FUTURE …
… most business transac-
tions are totally automated
due to the connection of
business databases. Clients
and service providers
cooperate closely on the
basis of aligned integrated
IT systems.
organize pick-up from the customer. Poor instruc-
tions on how to return the goods – included with the
original items – may ultimately impact on a retailer’s
receiving staff. Returns policies among major
e-retailers are broadly similar, in order to remain
competitive and encourage the customer.
According to a 2008 study by Forrester, 81 percent
of consumers surveyed felt they would be more
loyal if an online company offers a good returns
policy. Some e-retailers are now going one step
further and offering free returns policies: A good
marketing strategy. Yet by making it easy to
return goods, more goods will be returned: Thus
the company creates a thorny problem for itself.
It may also be shaping new consumer behavior,
because why just order the one product you do
want when you can order a further four alongside
it that you may want? If it turns out you don’t want
the extra ones, they are easily returned after all.
“With every additional
trip to the post office to
­return an item bought
­online, supply chains are
once again asked to adapt.”
A reverse logistics operation will therefore need
to be as efficient and cost-effective as possible
and executed in a way that satisfies both the cus-
tomer and, importantly, the company itself. This
is because returns can have a significant impact
on business profits. In a paper entitled Reverse
Logistics with E-Commerce Strategy, produced
by IFIM Business School in Bangalore, reverse
logistics is succinctly described as a process
“done by a firm to minimize loss in the process
of capturing value without affecting the quality
available for enhanced customer satisfaction.”
In sectors such as high-end apparel, consumer
returns reach levels as high as 20 percent.
­Apparently, it’s women shoppers who initiate most
of the returns, says the IMRG’s Starkey. “Women
in the UK are more selective shoppers and far
more likely to return a product bought online
than men,” he said. Some estimates put the cost of
­online returns for UK consumers and retailers at
100 GBP per year for shipping, postage and pack-
aging. In Germany, 80 percent of clothes ordered
online are returned, according to the BVH.
Across Europe, consumers have 14 days to
refuse an item purchased online. Often, they
choose to return their purchases, which were
delivered by express carriers, in the cheapest
(and therefore the slowest) way, using services
such as those offered by postal carriers.
“For merchants, that’s a very long 14 days since
they are trying to recover some of the lost time
and expense associated with the item,” said the
BVH’s Wenk-Fischer, adding, “Sophisticated
companies handle returns as part of their inven-
tory management.”
With every additional trip to the post office to
return an item bought online, supply chains are
once again asked to adapt. Due to the higher
volumes, many postal organizations find them-
selves stretched to the limit, experts say.
Who Pays for Returns?
When considering the higher volumes and the
costs associated with reverse logistics, one must
remember that product returns are not new to
the world of distance trading. They were a fact
of life for companies and customers of catalogue
and television shopping for decades before
online shopping existed.
What’s different now is the transparency of
delivery prices. The rise of IT automation in the
global supply chains has allowed companies to
calculate more easily the cost of each step of the
shipping process at the item level (as opposed
to the pallet or container level) and share that
information electronically.
“With transparent pricing, it’s now far easier to
debate over who will pay the fee. Of course, cus-
tomers don’t want to pay anything extra for ship-
ping and handling,” said the BVH’s Wenk-Fischer.
What may not be calculated into the costs is
the business complexity unleashed by reverse
logistics and multi-channel shopping.
“Before, retailers had to worry about getting
their products to the store. Now, they must
place the same stock into multiple channels,
manage availability for peak periods, such as
Cyber Monday, and handle increased returns.
All this requires precision logistics and plan-
ning,” said Viswanadham.

42. 42
Global E-Facts
United States – The success
of US-based retailer Apple’s IPad
is driving widespread retail site
overhauls, with 73.9% of chain
­retailers, 62.3% of web-only
­merchants and 69.2% of manufac-
turers selling online reporting that
they will have tablets in mind as
they redesign their sites.
Brazil – Although online sales in Brazil will reach
US$22 billion in 2016, up 178% from 2010 figures,
import taxes remain steep. A Laptop, for
­instance, sells for US$1,400 in Brazil, compared with
US$800 in Mexico and US$500 in the United States.
Africa – Credit card pen-
etration remains low in Africa, with
only 50 million bank accounts
spread across a population of one
billion. Mobile payment systems like
‘M-PESA’ have instead helped drive
an increase in online transactions,
fueled by the continent’s growing
middle class.