It would be great to see more businesses in India that are built around the power of online communities. A lot of people feel that online communities may not be a good fit for the Indian culture, but I strongly feel that the communities can be very successful if the right incentives are offered to them.  I am posting the slides that I used for my topic at the conference – “the future of eCommerce”. eCommerce is definitely an area

which can benefit a lot from community participation. I will put up a link to the Podcast if I am able to get hold of it – alternatively, you can also check at http://www.webinnovation.in which is the official site for the conference.

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The organization and maturity in the retail sector is inevitable in India. As the retail sector gets more organized, there will be more and more consistency in the assortment as well as the user experience across various stores. However, the retailers must demonstrate one aspect to be really successful – transparency of information. Gone are the days when retailers could charge any amount, without worrying about what another store in another part of the city was charging. Gone are the days when retailers could get away with no regard for customer service or the overall purchase experience. In today’s world where information is only a few clicks away, the retailers must demonstrate leadership in accepting what they don’t do well.  If the retailers don’t listen to their customers, customers will find other channels (e.g. Discussion Forums, Blogs) to voice their opinions as well as research what others are saying about the retailer. We should not undermine the power of these community based channels – take for example the incident where one of the installation engineer from a large cable company (Comcast) was caught on tape, sleeping in a customer’s house. The video was posted on YouTube, resulting in about 1 million views. Comcast had to issue a formal apology to the customer.

The online channel offers a great vehicle for retailers to demonstrate this leadership and they must capitalize on that. For example, a number of retailers still have reservations about posting negative customer reviews for the products on their web site. At first, this may sound logical. However, I would argue that by showcasing negative reviews on the site, the retailer is actually demonstrating a position of leadership and authority that actually results in a higher trust with their customers, thereby increasing loyalty and sales. Now if there is a product on the website that has consistently received only negative reviews, it is likely that the customers will not buy that product. However, instead, this will steer the customers towards a more satisfying product in the category. This also helps the retailer make better assortment decisions so that thy can constantly prune the assortment for the better products. Overall, it is a win-win situation for retailers and the customers.

Let’s take another example – the transparency in pricing. Costco – a discount warehouse retailer in US excels at this. Shoppers are handed out saving booklets for an entire season, where they can see what items will be available at additional savings on which days during that season. Although some would argue that this is against the fundamentals of promotional pricing, where there is a risk of customers “gaming” the system by only purchasing items during the promotional periods, thereby eroding the margins. However, in today’s world where price comparison services are available at the click of a button, customers have a lot of options to begin with. If they know that their trusted retailer will have a certain item on sale few weeks later, they may be willing to defer the purchase decision instead of buying the item from a competitor.

The web channel can also be used to listen to the customers and help improve their perception about the retailer. Some companies have actually appointed web community managers whose job is to actively participate in discussion groups and immediately resolve customer issues that are posted on those discussion groups. Take for example, Starwood Hotels. They have a Customer Service coordinator who is constantly seeking feedback and responding to customer issues posted on the discussion boards. This flyertalk post is an awesome example of how Starwood Hotels (A leading hotel chain) leverages internet to openly seek feedback on issues and complaints and immediately addresses them by engaging the senior management. You will see so many customer complaints in this forum, however, at the end of the day, almost every customer is won over by the passion and empathy demonstrated by Starwood to resolve customer issues.

When customers ask for help, report a problem, protest or offer feedback, it is within retailers’ control to seize the opportunity to build loyalty and turn unhappy consumers into raving fans. Perhaps it’s time to think of the call center not as a cost center, but as a valuable touch point and marketing vehicle that can be used to build long lasting relationship with the customers.

In the Indian context, the web is still not as mature and the information about customer reviews and purchase experience is not easily available. Customers still use word of mouth as the primary vehicle to research products and to make purchase decision. However, it is only a matter of time when the web becomes the primary channel for customer research in India – as the retail sector gets more organized, the customer segment will also get more organized and utilize the online channel to share and research purchase experiences. Retailers who build their foundation around transparency and customer centricity will enjoy a sustainable competitive advantage over others.

Imagine an online retail store that is run by its own communities. Communities decide what products to sell, communities setup the online content for the products, communities rate the products as well as the vendors, communities set the prices for products, and last but not the least, communities write the software to power the online store! At this point you are probably thinking that this is a crazy idea. How will a retailer make money if the communities set their own prices for products! Welcome to Web 3.0 – the future of online retailing. In this article, I will demonstrate how online communities will be at the center stage of eCommerce and how will they change the dynamics of web based merchandising and selling, as we know it.

If we look at various aspects of traditional eCommerce, majority of the functions are performed by the category managers, sourcing managers, merchants, technology and the operations teams. The technology team creates the software platform, category managers and sourcing managers determine the product assortment, and then work with the vendors to actually determine the cost for the products and finalize contracts. The category managers or the vendors upload product content such as descriptions, attributes, images, product copy etc. Although majority of the work in this case is performed by an internal team, the input for most of the decisions is typically based upon explicit or implicit customer research.

The power of internet is that it can be used to capture insights about customer’s needs on a real time basis, and decisions can be taken based upon that insight. It is this power that will fuel the growth of “Self adjusting” applications which can evolve based upon real time customer needs. Let us look at various eCommerce functions mentioned above and see how the power of communities could alter the game –

1. Category Management: Although today this function is based upon offline customer research – technology is now available that can allow the communities to vote for the merchandise that is popular. For example, the website could offer Polls and other voting functions where customers specify the products they are interested in purchasing. In addition, the real time sales information could help in estimating relative ranking and predicting future demand of the products. In this context, the role of category manager can be replaced by business rules within the application that determine the online assortment based upon real time customer information and sales information

 

 

2. Sourcing: For this discussion, let’s look at the drop ship model where the vendors ship merchandise directly to the customer. Once the demand for the products has been determined based upon real time customer feedback and sales history, the vendor community can be invited to engage in a “reverse auction” where they bid on supplying the merchandise at the lowest price, within the SLA boundaries The negotiations that are currently done between the sourcing team and the vendors can now be done using a rule based, open market auction model.

1. Product Content Setup – Kaboodle.com already offers this capability. Communities can setup their own product content, add description as well as images that others can search for and rate. In traditional eCommerce, this is one of most painful tasks that the category managers or vendors are responsible for. The collective power of communities will not only help in setting up product content quickly but will also ensure excellent quality of the content. Take, for example, a Digital Camera. In traditional eCommerce, the category managers or vendors will setup a product page that describes the camera and provides details on the specifications. In future, communities will be able to add content that describe the key benefits of that digital camera and offer their independent perspectives around the pros and cons based upon their real life usage. This is much more compelling and will help other customers make more informed purchase decisions.

1. Pricing – This is where things get even more interesting. Communities will be able to specify their own Willingness to Pay (WTP) for various products via polls or other online mechanisms. This will help generate a real time demand curve for the products, and the pricing rules engine will adjust the product price based upon the demand curve, and in the end, offer the product at a price which maximizes the overall profit margins at category or aggregate levels. The beauty of this approach is that the pricing engine would be able to adjust on a real time basis based upon instant feedback from the communities and the overall sales history.

1. Customer Service – A number of online retailers have now established discussion groups around various topics related to various product categories. Taking this one step further, discussion groups could be setup around resolving customer issues. Product experts within the communities will be able to help new product owners in resolving their issues or answering their questions. This model will not only help reduce customer service costs, but will also build “stickiness” and a sense of belongingness across its communities that would result in additional conversion from the online stores

1. Software Development – The power of this concept is that the entire software development for such an application can be done in an Open Source environment where communities actually collaborate and write the software together. Open source communities have already built some best in class applications and frameworks – even more feature rich and superior than their commercial counter parts in many cases.  

Web 2.0 introduced to us the notion of online communities and demonstrated how powerful these communities can be in building social networks that do not see any geographical boundaries. The future of internet belongs to these communities and the successful organizations will be the ones that can see this potential and build their operations as well as offerings with communities in the center stage of their business.