Online vs Offline Commerce

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Strategising pays off as e-commerce revolution takes off

PUBLISHED : Wednesday, 09 March, 2016, 4:09pm
UPDATED : Thursday, 10 March, 2016, 9:35am

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A seismic shift is taking place in the way consumers shop and manage their personal finances, thanks to the spread of mobile technology and all it entails.

At times, the pace of change can seem bewildering. But whether their roots are in the old or the new economy, businesses everywhere accept the need for strategies and operating models to capitalise on the opportunities of e-commerce, while knowing that the “rules” are still being written and a period of trial and error lies ahead. 

Recognising this, the latest lunchtime seminar in the HKUST Business Insights Presentation Series has outlined the challenges, who is showing the way and why, and what it will take to keep up.  

Addressing the topic of “Online versus offline commerce in retailing and banking”, the two main speakers from HKUST’s Department of Information Systems, Business Statistics and Operations Management, suggest that a complementary approach, rather than one or the other, makes the best sense.

Leading off, professor Xiaojun Zhang notes that online retailing still accounts for a small slice of the global pie. It is, though, expanding fast, notably in markets like mainland China, where figures for 2015 show it represented 11 per cent of total retail sales, valued at the equivalent of US$672 billion.

For shoppers, the big advantages of the online option are lower prices, convenience and, sometimes, tie-in benefits such as cut-price shipping and delivery. As the Internet of Things (IoT) evolves, there will also be new opportunities for reordering groceries by barcode or letting a pre-programmed home appliance do it for you when supplies, such as fabric softener, are running low.

“There is a new sophistication among consumers,” Zhang says. “Even when in a bricks-and-mortar store, they use their mobiles to check prices, read product reviews, and get comments from friends.”

In some cases, after testing or trying on an item, they may then order it online, possibly getting a discount and home delivery into the bargain.

For retailers, the challenge is to effectively integrate online and offline platforms by taking an “omni-channel” approach, upgrading in-store service, and adopting features such as location-based technology.   

“They have to think about how people are now using their smartphones. They can then improve the standard shopping experience with more use of QR codes, digital coupons and big data analytics,” Zhang says. “As for e-commerce, it is not just about the system. It requires an efficient logistics network, and that can be a very expensive proposition.”

Focusing on developments in the banking sector, professor Theodore Clark notes that information technology has already had a fundamental impact on traditional financial services, but more change is on the way.

Mobile transactions, online banking and stored value cards are already firmly established. But what no one can predict with any degree of certainty is how the likes of peer-to-peer lending, crowd funding, digital currencies and NFC (near-field communication) e-payment systems may reshape the financial services landscape in the course of the next few years.  

“All these disruptive innovations have the long-term potential to replace more and more services used by big firms,” Clark says. “They may not replace the traditional vendors, but we have to look at the implications, and the established players must get better at adapting and making use of these IT-based innovations.”

He adds that such subjects are covered extensively in HKUST’s MSc in Information Systems Management. The programme is offered in both full- and part-time modes, with the emphasis on management rather than the technical aspects of technology.

“IT matters to companies, but many senior managers don’t understand it that well,” Clark says. “If you simply say ‘we should spend more’, you run a very good chance of wasting your company’s money. Therefore, the programme teaches students how to harness IT resources more effectively and to make sure projects deliver what users and customers actually want.”

With regard to the ongoing Business Insights Series, an event that marks its seventh year, professor J. T. Li, senior associate dean at HKUST’s School of Business and Management, notes that this type of interactive engagement with members of the business community provides clear mutual benefits.

“We have a lot of faculty members doing very interesting research, which they can share in a forum like this,” Li says. “But it is also about two-way knowledge transfer because we need to understand real-world challenges and not be in an academic ivory tower.”