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Global Internet Sales "Finally a Viable Business Model" Says Industry Veteran
Experience of a number of 'false starts' led Asia Pacific business expert David Christensen to the conclusion three critical factors were necessary before global B2C eCommerce was viable. These are now in place and a revolution is about to begin.
In 1997, then an executive with insurance and funds management giant AXA in Australasia, he was responsible for establishing an online subsidiary to take advantage of the latest development at that time: internet distribution.
Still passionate about this concept, he argues the strategy and formula was right, and borrowed much from a number of highly acclaimed similar ventures around the world like ‘egg’ by Prudential plc in the UK which had added significant value to the Prudential share valuation.
But the business really never gained any real momentum and some years later was sold to a bank, allowing AXA to roughly break even. Few of the new entrants that had been held up as fantastic initiatives at the time, including ‘egg’, fared better and most fared worse.
Moving into a strategic consulting role based in Hong Kong, during the mid 2000’s, with this knowledge still top of mind, David was involved in several projects to investigate and possibly establish internet based businesses in China, Russia, and South East Asia. In each case, after weighing the facts, his advice to the corporate client was not to proceed, as the elements that were critical for success simply were not in place.
“It became clear to me that regardless of the theory about internet distribution, and irrespective of the industry or its location, there were three major pieces of infrastructure that were pre-conditions for success, and unless all three of these were in place and could be seen to operate smoothly, a B2C internet based business of any scale was simply a pipe dream,” says Mr Christensen.
“But the benefit of taking a strategic perspective on this issue was to also become firmly convinced that once all three of these elements were in place, there would be a very high likelihood of web-based business being viable, and once that happened it was likely this could stimulate rapid and highly dislocative change across the entire B2B and B2C commercial landscape.”
Mr Christensen summarizes these three enabling infrastructure elements succinctly. “First, there needed to be a broadly based, easy to use, reliable and secure payments system that was in the hands of the average man and woman in the street and not just an elite. Secondly the global distribution system needed to mature sufficiently to enable small parcels to be sent to most destinations quickly, reliably, and inexpensively, and finally there needed to be a change in consumer behavior from treating the internet as an information collection tool only and to become and end to end distribution channel in its own right.”
The second half of the decade saw Mr Christensen heavily involved in B2B commercial landscape in Asia Pacific with regional VP roles managing airline and hotel commercial relationships firstly with American Express and then with Carlson Wagonlit Travel, and he returned to a consumer-focused business less than 12 months ago.
“I am speechless at what has taken place in consumer marketing during those 5 years of focusing on other things,” he states “and I don’t think many senior or experienced consumer product marketers have really grasped the magnitude of change which is taking place. It’s a bit like a tsunami – for many marketers they know there has been an earthquake somewhere but it seems quite manageable – the sea is calm and has even receded somewhat. But like the pictures we have seen of Thailand/Indonesia and Japan over recent years what’s coming could completely wash away everything that people now know and currently accept.”
In his current role, Mr Christensen heads a Bangkok-based manufacturer and distributor of premium skin care and related health and beauty products, based on natural and traditional Thai ingredients and manufacturing processes.
He goes on to say “Over the past five years or so, the three major stumbling blocks to widespread and successful online retailing have by and large been solved. The rise of debit cards and services like PayPal – with more to come – have solved the payment system impediment; there are now multiple viable and inexpensive shipping solutions including both courier and a re-energized global small packet airmail system, and the dam has finally burst in terms of people transacting online with the growth rates for online shopping for many consumer products compounding at well into double digits.”
“And an entire industry has grown around the provision of support to businesses who need to reorient themselves to compete in this new and unfamiliar environment – and these services are rapidly maturing from glorified snake-oil merchants to professional B2B service providers as it becomes more and more difficult to manipulate or circumvent the ‘gatekeepers’
These factors, plus the availability of information and tools to make sense of this information have fundamentally shifted the way products will be bought and sold in the near future according to Mr Christensen, who believes the changes will be more far-reaching than most people realize.
“Today our Thai based skin care business – which has a clear point of differentiation in the market – is actively competing for sales globally, through its active online presence – in a way that would not have been possible ten, or even five years ago,” he believes. “Because our potential reach for online communications is so massive, we can concentrate on some very specific market segments which would be insignificant if we were limited to the tools and technologies 1-2 decades ago, as although the percentage of people who may purchase online from is small, when we calculate a small percentage by the massive numbers of people in our target markets globally, it becomes very exciting. And when you replicate these same parameters across multiple markets and many competitors both large and small, it seems clear to me that traditional B2C channels are going to quickly be eroded” he points out.
As a result, he believes it may be only a matter of time before the point is reached that some companies can’t or won’t survive, and once this starts occurring it is often the harbinger of more rapid, systemic change owing to the compounding nature of some of these major trends in society and business.
He concludes with a quote from Charles Dickens from the preface of “A Tale of Two Cities”, which goes “It was the best of times, it was the worst of times” and according to Mr Christensen exemplifies the business world we are entering. “Times of upheaval and dislocative change such as what we will see over the next few years will provide opportunities that some companies will grasp and show dramatic growth, while for others – Kodak being an excellent example – it will signal their demise.”
“However my interpretation of history is that in the majority of situations it is the new business entrants who experience the best of times, while large companies often can’t change as quickly as they need to. The result is they are the ones who will be saying that the second decade of the 21st Century was the worst of times for ‘legacy’ consumer marketing organizations, many of whom will have become largely irrelevant to consumers by the time they are able to implement sufficient change, and find their place at the VIP table has been taken over by companies that no-one had ever heard of just 5 years ago, with bizarre names like Facebook, Google, Instagram, Vimeo, and Pinterest while at the same time the door closes or sun sets household names like Kodak.