So you've got this far. Starting an Online Store is a lot easier when you've got the right info and this is the place where you can find it. It takes a lot of drive do get through Part 1 and Part 2 of this guide, so good for you!
During this part of the guide, you'll get a better understanding of what fulfillment means and how to build a company that can effectively manage orders and ship the right products to the customer.
Good, good fulfillment. Yeah! But wait …
Good question! Although the term fulfillment is used quite a lot, not everyone has a clear grasp on the whole idea. I mean – why fulfillment? Well, it's actually a pretty simple concept. Order fulfillment is anything that has to do with fulfilling your promise to the customer. That promise is you're going to ship the products they've purchased, those products are going to be in good condition and they will arrive as soon as possible.
Fulfillment also covers the reverse process (also called reverse logistics). That means getting merchandise back from the customer. That type of operations happen:
So basically when your ecommerce business is fulfilling an order, it is actually making good on its promise to deliver merchandise in the best way possible. Although the concept is not that really hard to grasp, making it happen is a little bit harder.
In order to make sure your fulfillment operations you'll have to look for the answer to four very important questions:
Fulfillment is probably the most complex and tedious part of ecommerce. It is also the one thing that is the least talked about in terms of ecommerce. It's not flashy and it's not cool. It's complex, involves a lot of tweaking and a lot of work to getting it right. While most ecommerce guides will point out to the importance of picking the right shade of orange for the "Buy now" button, few will speak of how important fulfillment is.
Just to get a glimpse of how important fulfillment is - think of your car. While having the right color and the right type of leather is important, the car won't start without an engine. Fulfillment is the engine that keeps ecommerce going.
There are just five basic steps in fulfilling ecommerce orders. Four of them are mandatory and one is optional. Hopefully you will cover this last step as few times as possible. These five very important steps are:
Overview of the Fulfillment Process (including returns)
Customers will place the orders through one of your sales channels. It may be your online store, on the phone or through a mobile application or a pop-up store.
There is a great variety of order management software out there and later on on this guide will get through some of them. It matters less what you will be choosing later on. What matters from a fulfillment standpoint is what the order info should contain. Here is the minimal information you will be needing:
Most of the time, you will be receiving more info from your order management tool but these are the essential blocks of information to keep in mind.
Before moving on to the actual order fulfillment bullet points I have to make a point. You don't HAVE to fulfill the orders yourself. Some companies outsource their fulfillment to other companies. My advice is you should keep most of your fulfillment operations within your company. You won't be able to ship products across the globe but you can pick, pack and carefully wrap orders for your customers.
When medium and large online stores are fighting each other over consumer mind share, we only see the marketing and superficial aspect of this battles. But the fact is, underneath all this visible struggles, the real battles are won in the warehouse. Your real chance for success stands in picking, packing and shipping the right products, within the timeframe you've promised.
It may seem hard to handle fulfillment operations and it sure is. But because it is hard, you have to master it before the competition does. Walmart and Amazon, two of the largest retailers in the world, are also two of the best supply chains in the world. It's not that these companies have developed spectacular fulfillment operations because of their huge sales but the other way around.
Glad we've got that out of the way. Now – what's the best way you can receive products in your inventory?
It all starts with an order to your supplier. It is usually called a "Purchase Order" as you are placing an order to purchase products. We will assume that you have already set up an agreement with your suppliers and they will ship the products. You will probably pay as you place your order, when the order arrives or at a given time after the order has arrived, if you have agreed as such with your supplier.
Once the products have arrived at your warehouse you will need to:
( Basic check list when receiving products from the supplier )
Placing the products in the inventory is a very important part in receiving the products. The better you keep track of where the products are, the less time and effort you will need when picking and packing the products.
When placing the products in storage you need to keep in mind some very important aspects:
Hopefully at this point you have managed to get the products in your inventory, they are correctly marked and stored and you are ready to pick said products for the orders you are going to be shipping.
Once you have the products in the inventory and orders are coming in, it's time to process these orders.
Order processing is split between four main areas:
Picking is probably the most time consuming part of order processing. It also gets a lot more complicated as your business grows and it may be prone to errors. Having more products in your inventory will increase the complexity of picking the right products in the fastest way possible.
If you've managed to place the products in the right spots (as stated in the step above – receiving products) your chances of correctly processing orders increase big time. The reason is it will be easier for picking staff to move fast through the aisles and pick the right products.
To have a streamlined picking process that works just as well with 10 orders per day or 1000 orders per day you have to decrease the chances for errors. To do so, your picking staff will cycle through these steps:
( A basic example for a picking list )
Packing is the next step in the fulfillment operation. Once the products have been picked from the corresponding aisle, shelf or bin, they are sent to the packing station where they will be split into orders and prepared for shipping.
The packing operation is usually split into these further steps:
Once the products are placed in the right package, a quality control station will check for any errors that may happen.
Quality control personnel will usually check for one of the following errors that may appear:
Once the products have been picked, packed and quality control made sure there were no errors in the order management process, the package is ready for shipping.
Online stores usually partner with one or more shipping companies to deliver the goods. The shipping station will check the package weight and direct it to the right shipping partner.
Most shipping companies will provide you with a general framework on how to handle packing and preparing for shipping. Here are the most popular ones:
When these companies (and others) will charge you for their shipping services they will take into account some (or all) of the following variables:
Once the orders are picked by the shipping company, the order status is constantly updated so customers and the online store knows where the packages are at the moment.
When the products are delivered the status is updated and the order is confirmed. After this point the product is in the customer's ownership and any reverse process wil be treated as a return.
Oh, returns – can't live with them, can't live without them. Just kidding. A clear and friendly return policy is what sets the likes of Zappos.com apart from the competition. They will let you return the products you've purchased within 365 days, free of charge and as their return centers will check the products you will be credited within 7 days with the money you've spent.
Ecommerce customers love a great return policy and you need to be ready to handle one. The logistics involved in such a return process are usually dubbed reverse logistics. This means you will reverse the steps mentioned above.
Basically you will unship the products, unpack, unpick and un-order everything.
If you offer free shipping, you will have to handle the shipping costs from the customer to your return center (for small and medium companies, the return centers are the same as the fulfillment facilities).
Now, the big problem when getting information on handling returns is that most of the resources out there are either
What will follow will hopefully be a bit more relevant and a bit less boring. The big idea you have to keep in mind is returns are the reverse process of everything you have read so far.
You will have to tailor the following concepts to your specific company structure, accounting, IT systems and processes.
That being said there are three main areas you need to focus:
There are usually three main options to do this:
Once the products are back at the fulfillment center you will have to get them back into inventory. The process is similar to what you would do if you were to receive goods from your supplier. The main differences are:
Once the products have been checked and returned to the inventory, you will need to issue a refund to the customer and inform said customer of these changes.
And … that's it.
It may seem complicated right now but keep in mind that thousands of online store owners are doing all these things. Now that you've got the basics, you will be able to deal with most of the operation challenges you will face. If there is anything else you need to know – just ask in the comments sections bellow.
This concludes this part of this guide. This is probably the hardest and the most important part of making your store run smooth. It involves many operations, usually lots of people and it needs to be built in such a way that it will easily scale when your company is growing at double digits.
Next week we will focus on branding, designing and choosing an ecommerce platform for your online store. See you soon!
In Delivering Happiness we get a glimpse of how a promising startup becomes a multi-billion company and the life events that shaped its leaders. Tony Hsieh, author of Delivering Happiness, is CEO of Zappos.com, one of the largest online retailers in the US. The company he built, alongside other co-founders, was acquired by Amazon in 2009, in a deal valued at over $1.2 billion.
If you’re planing on buying the book you’re definitely not wasting money. It is a great insight in the mind and life of the man that drove Zappos from a great idea to a company worth billions. But Tony Hsieh is an entrepreneur, a story teller and probably a great leader for his company. There’s plenty to learn from him. But he’s no writer. At least not yet.
From a literary perspective – don’t expect too much. „Delivering Happiness” is fun and easy to read, it’s packed with practical advice and real-life stories to get the point across. But Tony is no Hemingway. The writing sometimes rushes through some really important events and sometimes lags behind boring details. For example there is a bit more info on how Tony decided he should build a worm farm when he was nine years old than there is on how actually did Amazon decide on acquiring Zappos.
Literary style aside, Tony Hsieh’s life story and Zappos growth is nothing less than amazing. The book cycles through three very important areas on building a business, overlayed on top of Tony’s life story: Profits, Passion and Purpose.
It seems as if the book is less about Zappos and more about Tony’s search for purpose. From an individual point of view I believe anyone can relate to striving for purpose. Just as the title hints, Tony Hsieh’s purpose was ultimately delivering happiness to the people around him: employees, vendors, customers.
You’ll get a feeling of just how entrepreneurial Tony is from the first chapter, Profits. He shares funny stories that show his drive for profits. Be it an worm farm, a newspaper delivery operation or the pizza delivery business he created in college, we see a clear drive for profits that ultimately leads Tony to cofound LinkExchange, a media business ultimately sold to Microsoft for $265 million.
But it wasn’t all great. Building LinkExchange, Tony felt the initial energy and culture in the company ultimately faded away. In the days leading to the company being acquired by Microsoft, many employees became unexpectedly greedy, trying to squeeze as much as possible from the transaction. This fact left a bitter taste with Tony. However, the patient took the bitter medicine and applied the lesson to Zappos.
One of the most important aspects to Zappos is clearly the focus on customer service, something impossible to build without a spotless company culture. It was the bitter taste Tony felt in the days leading to closing the LinkExchange transaction that set the tone for Zappos „fun and a bit weird” culture, one of the assets that helped the company reach more than 1 billion in sales in less than 10 years.
It was the culture that helped the company evolve, kept its employees with the company when the going got tough and it was the culture that drew attention of Amazon CEO Jeff Bezos.
It was the culture that showed Tony and other executives that they have to steer away the company from previous investors, which wanted more profits and less customer focus. This ultimately lead to what Tony calls a „marriage” between Zappos and Amazon – the transaction that tied the knot on two of the largest online retailers, two companies that take pride on being customer centric.
„Delivering Happiness” is a great book for any entrepreneur. It outlines the struggles and hard times that are usually invisible in the media. It shows how painful and energy draining it is to build an world class company. It also shows how important passion and purpose are when trying to scale beyond the startup phase.
Delivering Happiness shows Tony Hsieh’s struggle to go beyond being an one-shot entrepreneur. It shows the struggle to go beyond profits and build an organisation that brings together passionate people that ultimately share a common purpose. It is the story of how this purpose came to improve the lives of those inside and outside the company.
How do you describe China? How could one understand a land with historic roots that spawn for almost 4000 years? No easy task, that’s for sure.
Henry Kissinger, the statesman credited for opening the US ties to Communist China in 1971, tries to do just that in its book “On China”.
The book is a framework for anyone willing to dive in the complex culture that China has carried throughout the ages. It is a vast exposition on what makes China so enduring and so different from the type of empire we have come to know in the west.
The reason “On China” is reviewed here, a blog on the future of retail, goes beyond the obvious (manufacturing). By reading Kissinger’s masterpiece, we will get a glimpse into the future, through the lens of the past. We can see China is not a rising power. It is a returning power. It is a land that fostered the strongest economy in the world through 18 out of the previous 20 centuries.
China predated the Roman Empire. It survived it and lived on to be reached by the British Empire. It survived this one as well and now it survives another one. The fact that its economy keeps rising and rising, its retailers take the world by storm and the country has moved beyond its Mao Zedong legacy shows the quiet force this country packs.
Henry Kissinger proposes the Wei-Qi game as a start point to understanding China. As opposed to the oldest western strategy game, Chess, Wei Qi has some key differences.
First of all – there are a lot more pieces that have to be used in the game. The pieces are all equally valued. As opposed to chess, the Wei Qi pieces are all just as valuable. There are no knights, no bishops, no king and no queen. All pieces are equally important and equally effective.
The point is not to find the pivotal action to winning the game. The point is to avoid being surrounded. Throughout China’s troubled history, generals have discovered how costly defeats are, when the enemy surrounds the troops. The war strategy has shifted from direct engagement to battles that are won before they are even fought, through good preparation, as the mythical Sun Tzu general would have noted.
These simple yet powerful differences and others such, have shaped China’s destiny throughout the centuries. Western history barely mentions the Chinese Empire, yet the court viewed itself as ruler of all that is “Under the Heavens”. The Chinese Empire rarely fought outside its borders (viewing such act as a crime). It nevertheless encountered its fare share of troubles with barbarians outside its borders, constantly being attacked. Unlike its western counterparts, it used diplomacy, rather than force to subdue weaker civilizations. The court was well taught by centuries of rich history on how to negotiate alliances, resisting attacks, integrating barbarians or even using politics to break alliances between its closest enemies. Sometimes using the enemies farther away to control those closest to the empire.
Throughout the centuries diplomacy and politic skill has been enough to keep the “barbarians” at bay. Eventually, even the Celestial Empire had to run out of luck. In the beginning of the 18th century, Western colonial powers, as well as Russia, were knocking on the gates of the Empire, trying to develop a commerce relationship. Russia, being closer and in a position to threaten China, was the first country, Kissinger notes, to be allowed to have a de facto embassy. The embassy was in fact an orthodox mission but it was a lot more than the British Empire had.
The British, as well as other colonial powers, were barely allowed a presence within the empire. Commerce was carefully regulated and restricted. In time, as diplomacy failed to get results, the British decided to use force. As China previously refused to get western military technology, it was quickly overwhelmed by better trained soldiers, using more advanced weaponry. The “Barbarians” forced their way towards the capitol, eventually being stopped by Russia’s diplomats who negotiated a temporarily redraw. But this help from the friendly Russians was costly. China agreed to a humiliating act that would offer vast territories to Russia, in exchange for its help.
This humiliating treaties, rising internal instability, and the enemies at the gates eventually lead the empire to crumble. In 1912, the last Emperor abdicated, and China became a republic.
It wasn’t for the better, as China was virtually ungoverned. Henry Kissinger lists intervention by the United States to help the forming republic, supporting the existing nationalist government. But it was not this government that eventually won the power. It was a new leader, a communist leader: Mao Zedong.
Kissinger lists Mao’s rise with a reverence that may seem unnatural at times. After all – Mao is seen less like an enlightened leader in the western world, and more like a power hungry criminal that lead its country, as well as the party close to imminent self destruction. Whether it is diplomatic courtesy (you have to expect reverence from a high level US statesman) or genuine interest, if not admiration – Kissinger is clearly inclined to describe Mao as a Chinese savior. Whether it is the fact that he reunited China, or that China survived the Soviet Union’s threat, Henry Kissinger sees Mao as an important geopolitical player.
Mao defied and somehow survived both the US and the Soviet Union. Unlike the weakened European countries, Mao repeatedly declared his country was not afraid of the Nuclear Threat. No one will know if he was just bluffing to resist on the world stage, or he was actually not caring if 300 million Chinese would die in a Nuclear war. The “Great Leap Forward” and the “Cultural Revolution” would later point into the second direction.
Although Mao listed Confucianism and “the old ways” as obsolete and not to be used, he did resort to one of these tactics when the Soviet Union deployed 1 million soldiers at the Chinese-Soviet border. The soldiers were not much of a problem, but the nukes were. China and USSR were no longer comrades, and the Soviet Union was likely planning a preemptive nuclear attack. Mao decided to apply the old strategy of using the enemies from afar against those closer.
In 1971 Henry Kissinger lists its meeting with both Mao Zedong and Zhou Enlai. At the time, Zhou Enlai was the prime minister for over 22 years and he left a deep impression on the US statesman: “In 60 years of public life, I have never met a person more fascinating than Zhou Enlai“. This meeting extended in the next year with a visit from Richard Nixon and it was the the start in a long relationship between the two states. It was also the visit that probably stopped a nuclear attack on China.
Mr. Enlai was eventually replaced and Mao left its position, leading the way for a new leadership. It was this new leader, Deng Xiaoping, that turned China from a starving, barely educated country, bathing in Mao’s shadow, to a growing economic power.
His work was later continued by Jiang Zemin, that encouraged education, technology developments and eventually helped China join the WTO in 2001.
Since 2001, just 13 years ago, China became a leading manufacturer, the sourcing choice for retailers worldwide, to a dominant power that now exports not only products, but rather leading businesses.
Henry Kissinger ends the book by reminding the reader of the Crowe Memorandum, an analysis of pre-WWI Germany and the causes that lead to war. Though he envisions a future where the Pacific Powers (US and China) can collaborate in peace, he does pose the question of whether such a future is possible. The last paragraph cites Zhou Enlai, at the first meeting in 1971, when the Chinese PM mentioned their meeting will “shake the world”. The big question, for this new century, mr Kissinger asks, is could China and the US build the world, rather than shake it?
In 1932, Ben Graham asked a tough question: “Is American Business Worth More Dead than Alive?”. At the time US and the World were struggling through the depths of the Great Depression. The 1929 and 1930 stock market crashes left anyone with a sense of reality discouraged with stock exchange.
But Ben Graham, then a small investor with a brilliant mind, noticed something interesting. The stock market crashes left companies deeply undervalued. The companies were worth more taken apart than sold as a whole. They struggled with banks that not loaning them money and investors far too prudent.
30% of all listed companies had a larger value disassembled than sold as a whole. Their net quick assets (cash, marketable securities, and accounts receivable minus current liabilities) were worth more than the value investors were willing to pay for. Mr. Graham basically said: it’s now safe to invest again.
It’s 2014 and now we wonder how technology companies are evaluated. We strive to understand how something so seemingly small and useless as messaging app, a social network and an electronic market can be so highly valued. If Ben Graham would look at Amazon, would he decide to buy? Well I don’t know about the messaging app or the social network but if it were for the electronic markets, I bet mr. Graham would say: it’s now safe to invest again. Below you’ll find out why.
Ben Graham lived until 1976. Although definitely not a poor man, he didn’t die a very wealthy one either. He had no problem ensuring his wealth increased steadily but he was more fond of reading Proust in French and Plato in Latin than gathering fortunes.
It was one of his disciples that reminded the world about Mr. Graham. It was this disciple, the worlds richest man for a very long time, that made Ben Graham famous, repeating his mentor’s name every chance he got.
Warren Buffet made his first investment when he was just nine. He ran his own business by the age of 14. He was a millionaire by the age of 32. He tried to get Ben Graham to hire him for years until the mentor finally accepted he was ready to join his company.
He than evolved continuously. Using Graham’s method he increased his fortune by the year. There were of course setbacks but he managed his money and his partners’ like no other.
But there was something Warren was not fond of: technology. He refused to be one of the early investors in Intel because he just didn’t understand technology. He was more focused on long term companies that he understood. Amid the Dot Com Bubble, when everyone was rushing in to buy tech stocks he said:
“Technology is just something we don’t understand, so we don’t invest in it.”
They laughed and they lost. The Oracle of Omaha, as mr. Buffet is often called in media, was right again. He left the bubble unwounded. An than he bought tech stocks.
Warren Buffet invested in IBM and Intel. These companies fit his principles. They were strong companies, that he could expect to own indefinitely. They survived the hype and escaped stronger.
Fairness is a concept that sometimes eludes our understanding. At least most of us. Warren Buffet is not like most of us. He was able to see beyond the hype when tech stocks were overvalued and he was able to see beyond the public opinion when important matters were disputed.
He and his wife were one of the few anti – segregation militants in Omaha, back when rasial differences were the norm. He fought strongly anti – semitism in his hometown. He pledged $31 billion to charity and now he is one of the strongest advocates of increased taxation on the rich.
“So let’s forget about the rich and ultra rich going on strike and stuffing their ample funds under their mattresses if — gasp — capital gains rates and ordinary income rates are increased,” he said. “The ultra rich, including me, will forever pursue investment opportunities.” Warren Buffet
Warren Buffet was never an elitist. He believed everyone should have equal opportunities at pursuing his interests and he stands even today as the living proof fair opportunities make up for very successful people.
But for the recorded human history, wealth has been unequally spread. From the dawn of man kind, through the Roman Empire, the Middle Ages, the Industrial Revolution, one thing was constant: wealth is not distributed equally. For a very long period of time also wealth (especially inherited) also mean life opportunities.
Here’s how we perceive wealth disparity right now:
The long story short:
Wealth disparity may indeed be a problem. If it meant the poor stay poor and the rich stay rich forever.
But it’s not really that way. At least not anymore.
In the past 20 years the top 1 percent increased their share of total net worth from 33.8% to 35.4%, with a peak of 38.5% in 1995. The next 19 percent increased their share of total wealth from 47.5% to 53.5% and all of these at the expense of the bottom 80%, who lost a 7.6% share of total net worth.
The rich 1% didn’t get much richer. The rich 20% got richer on the expense of the poor. It’s not the rich that take away from the poor. Nor is the middle class disappearing . The middle class is getting a lot richer.
Think about it for a second. Are these categories fixed? Are people in the bottom 80% destined to remain there? Are the top 1% staying there forever?
The previous two examples, Warren Buffet and Ben Graham, although not dirt poor, did not come from rich families. Sure, they were not starving (well except Ben Graham, at an earlier point in his life), but they were definitely not rich.
Yes, Warren Buffet’s father was congressmen for 4 terms, but he did struggle at length in his youth to keep the family finances afloat. Through extensive work he managed to provide a decent lifestyle for him and his family, and thus young Warren was provided an opportunity to put his outstanding mind at work.
So did Ben Graham. His mother inherited a decent fortune from his father but lost it all in 1907, when he was just 11 years old. What he did receive was a brilliant mind and before 25 he already had a $500 000 small fortune.
It’s not inherited wealth. Graham and Buffet improved their financial status with as a result from their innate intelligence and hard work. They did not receive a fortune. They received a fair chance at earning their fortune.
They’re not the only ones. Forbes top 10 richest people are similar cases:
And they’re not the only ones. Have a look at Forbes top 400 richest people and you’ll notice the self made billionaire is not the exception. Out of 400 richest people, 386 were self made. That’s an astonishing number. 96.5% of the richest 400 are self made.
So it is not inheritance that builds fortune. It’s sometimes the opposite. As numbers would have it wealth is a result of fair opportunities, a brilliant mind, drive and hard work.
Well … at least if you’re lucky enough to be born in the US.
In the past, before the airplane, the radio, the telephone and eventually the internet chances looked pretty grim for those born outside rich countries. Capital was scarce, life was hard but most of all education was a real problem.
Starting with the industrial revolution, unless you were born in the Western Europe or the Western Offshoots (United States, Canada, Australia and New Zealand) your chances of getting a decent lifestyle were slim to none. Getting an education – even worse.
So if you are reading this from a computer in the western world and you are complaining about the 1% stealing your wealth know this: 96.5% of Forbes 400 are self made. You have an equal opportunity at getting rich.
Those born outside don’t have this opportunity. Or do they?
As the world moved from the pre-industrial to post-industrial era some won and some lost. Income grew and grew, helped by the magical vector of technology. Human workforce was replaced by exponentially growing human ingenuity.
The working hand was replaced by the steam-powered machine. Carriages were replaced by cars, trains and railways. Houses were replaced by steel and concrete behemoths. In the western world people were no longer working the fields but rather in factories and offices. Capitalism fought and (relatively) quickly replaced all other economic ideologies.
Marketing and advertising were born to help sell excess production. The stock markets were fueled and exploded. Multinational companies roamed the world to sell the products the West could make better, faster and cheaper.
Technology patents piled up until masses of workers became nothing but managers, lawyers, tradesmen, pencil-pushers. Those brilliant enough to harness the power of technology and improve their peers’ lives were rewarded with vast fortunes.
The temple of the mighty dollar discovered and pushed new concepts and new ways of doing things, growing faster and faster apart from the rest of the world. Until it built the personal computers and the Internet.
When the Internet came online it was a military application. It quickly evolved into an academic research network that spread throughout the world. There weren’t too many people willing to bet big on its economic impact yet the internet economy is now expected to reach 4.2 trillion by 2016.
Nobel Laureate Robert Lucas stated that economies that are at the forefront of economic and technological development will grow by approximately 2% per year. Those below them are usually kept below by what he called “technology frontiers”. Advances in genetics, IT, robotics and others that help labor and capital be more productive, are technology frontiers. Once technology frontiers disappear, lower economies will grow 2% + an additional growth rate determined by the income gap between itself and the richest country. So – the later the technology frontiers disappear, the bigger the income gap. The bigger the income gap, the faster the growth. The world tends to balance inequality.
Countries that are later to develop can adopt new technologies easier and the main factor that helps emerging markets evolve is technology and education.They can freely adopt and integrate these, without having to go through the research and developed the countries at the top of the food chain had to.
Internet made everything easily accessible. It quickly became the gateway for anyone willing to access the sum of all human knowledge. Western colleges now post courses online free of charge. Online academies help students become specialists in any desired field, ranging from business, to communication to computer sciences.
In a simulation of Lucas’s model (on the left) you can see how countries that are later to break through technology frontiers are also those with the fastest growth. For most countries the bulldozer that broke through the technology frontiers was the Internet.
With the widespread adoption of the Internet, global opportunities shifted quickly. Countries that were previously kept in the dark by economic conditions, lack of education and poor access to information now had a fighting chance. They were no longer tied to menial jobs and export of raw materials. Giant leaps were made in the past twenty years in terms of global access to information and decreasing the opportunity gap between the Western Countries / Western Offshoots and the World.
Jan Koum’s rags to riches story is deeply iconic on how much the field was leveled in the past years. He grew up in a village near Kiev, Ukraine. He lived through poor conditions until he put his skills to use in the US. Just as his country was being torn apart by an anti-government revolution he sold his company, WhatsApp, becoming a billionaire at just 38.
And it’s not just software, code and people. Goods are quickly moving from country to country, continent to continent. All due to the new electronic markets, enabling global access for small to medium producers and retailers.
Companies such as Amazon, Ebay, AliBaba.com are connecting the world and taking out the middle man. With less losses on the way to the end consumer, products are cheaper and competition is itself leveled. Everyone gets an equal opportunity and a decent start.
Take China for example. It was pretty late to the party in terms of economic development. When it did start to grow, it took the world by storm.
As for electronic markets, China hadn’t had to invent or discover the internet. It just adopted it. It made a great leap forward in terms of manufacturing. It made an even bigger leap forward when it comes to e-tailing and electronic markets:
If you look carefully at the China’s e-tailing market growth, the growth rate it’s pretty similar to Robert Lucas’economic growth theoretical modeling. China’s quick adoption of ecommerce as a means to get a larger retailing coverage was a breakthrough in a very important technology frontier: electronic markets.
It is estimated China’s internal ecommerce market will reach $655 billion by 2020. The figure, as astonishing as it may seem, is dwarfed by AliBaba.com’s sales figures.
AliBaba.com, China’s main ecommerce company, is focused on B2B / C2C transactions between Chinese manufacturers and the rest of the world and it reported gross sales of $170 billion in 2012. That figure has only been ever reported by two companies: Walmart and AliBaba. It was founded in 1999 by 18 people and an initial investment of 22 million dollars. Now it is the largest ecommerce company in the world and quickly becoming an unbeatable force in retail as a whole.
The company is a prime example of how a previously complicated international supply chain can turn into a click of the button. AliBaba is responsible for developments in key areas of China’s economy:
Companies such as AliBaba, Amazon , Ebay are supplying the world with something it badly needs: equal opportunities. With electronic markets easily available and growing fast, people all over the world are starting to have, for the first time in history, equal chances at attaining success.
By empowering individuals to access the same wealth of possibilities, the new tech companies are changing the way we think of human development.
Our history has been sadly occupied by mostly dynastic forms of leadership. Aristocracy, brute force ruling, totalitarian states have one thing in common – unequal opportunities for those that deserve them.
Marxism brought a fake yet inciting concept: that all man are equal. Indeed we are all created equal. We should have equal opportunities. But perfect equality is neither attainable nor fair. Even among equally gifted individuals, drive and hard work can shift the balance more than we care to admit.
Equal access to opportunities is needed and desirable. We have to make it possible that even if the future cancer – curing Nobel Laureate is born in a poor village in Africa, he has the chance to rise. Even if the physicist that will invent faster than light travel will be born in a poor family, he has the chance to reach his full potential.
Our electronic markets are so far the only way we can ensure equal opportunities to all mankind. What made Warren Buffet rich was a brief period of time when stocks were great to buy, his innate intelligence, his access to the best information he can get, a close relationship to an intelligent mentor. And hard work.
Beside innate abilities that turn out to be not so important, everything else above is now available or shortly be available to each citizen of the world.
Companies that are building electronic markets are not overvalued. They are a new breed of companies that work for the betterment of mankind. Knowingly or not. That’s why we need to look at them not from the previous brick and mortar, asset only point of view, but a new one. We need a perspective where we look at a company and choose to invest in it based on a simple question: “Does this company get us closer to an equal opportunity world?”
However – be sure equal opportunities do not mean equality. Man was not born a machine. He is a creative force of nature and as long as it will use his creativity and intellect, opportunities will be used.
Unfortunately a dark veil has been pulled over, at the dawn of our productive society. Many of us still act as if we depend on simple, repetitive jobs to make a living. Whether it is our instincts fighting the technology we hardly understand or a self perpetuating fallacy we must stop trying to act as machines.
The world is potentially free. We must leave all repetitive tasks to technology and become the creators we are able to become. Those that fail at this will be the 80% struggling tomorrow.
It’s pretty hard for anyone to admit it but it’s true: universities can’t keep up with the times. They cannot deliver qualified individuals for the growing online retail segment because there is nothing to be qualified on. Of course, there are some courses that cover some successful business models but truth be told there is no use in knowing Amazon’s business model as long as there is already one Amazon on the market.
How did it come to this? When did this pillars of economic evolution start to lose ground? Let’s have a look at some of the potential causes and some answers on how to hire and develop the right individuals for the online retail segment.
The whole concept behind higher education was that one might benefit from (1) a few extra education years, (2) access to some very experienced professors and most important although not usually talked about – (3) a network of like minded, probably successful colleagues. These three factors don’t really apply to online business in general and online retail in particular:
Unfortunately a college diploma shows only that the individual can remember some things and can obey rules. That’s great for middle management and below but what do you do when you need to hire talent? Where can you find people that can turn Brick and Mortar stores into online retailers?
No matter how big your company is – you will be always faced with recruiting issues. How to look for the right candidates, how to attract them and how to keep them are always distinctively difficult issues.
Some of the larger companies, such as Walmart, have chosen the path I believe works best: buying entrepreneurs. When I say buying – think more than cash. The large pay check is one type of incentive, but not the only one. The right kind of people need a purpose, a direction and the freedom to choose their own teams. They will be motivated by a large vision, a goal to strive to and a team that can help them achieve that goal.
Here’s how Walmart CEO Mike Duke managed to lure ex-eBay engineer Jeremy King, now CTO of Walmart. Notice how Mike Duke had already decided that although ecommerce is not really the biggest piece of the pie – it is the key to continue Walmart’s development in the future.
After years of seeing his company lag online, Duke swore that digital was now a priority for Walmart. Duke had restructured the company, placing e-commerce on equal footing with Walmart’s other, much larger divisions. He had made serious investments in high-tech talent, acquiring several startups.
Remember – what did you do when you first tried to ride a bike? Chances are that unless you were an unusually talented child or a late learner you got a few bruises out of your first try. However, due to those slightly annoying incidents, you managed to learn what to do and what not to do.
As an online retail business owner or manager you should be looking for experience. Experience doesn’t come easy. As I said earlier in the article – there is no one there to teach young professionals what to do and what not to do. So far, at least. As such you will be dealing with people that failed, struggled, tried again and again and eventually learnt a thing or two about online retail.
In time, education will adapt to this changing landscape and it will offer better suited courses. In the same time online retail will develop into a mature industry and things will start to get rusty again, just as it had happened to classic retail. Then you will be able to hire diplomas again. Until then – keep you eyes open for experience.
Some countries, including Russia, China and Iran, well known for their democratic efforts and respect for civil rights ( ), seek more control over the Internet, through the UN International Telecommunications Union (ITU).
As this year’s World Conference on International Telecommunications (WCIT-12) is preparing for its December the 3th opening several documents have leaked on http://wcitleaks.org/ . Although these documents were not actually classified they were never made public. After they leaked the public opinion could see why: countries like China, Russia, Iran, Tadjikistan and Pakistan are asking for a complete change of the Internet as we know it.
The ITU was founded in 1865 to help regulate telegraph communications. Over the years it has evolved into an organization managing international telecommunications regulations (ITRs). As its last signed protocol dates back to 1988, previously to the invention of the Internet, some of the government representatives in the UN thought of how might the Internet be controlled. As a result some preposterous proposals surfaced on wcitleaks.org. Here are some of them:
I find such proposals not only misguided but also economically dangerous and short sighted. For the last 20 years the world benefited greatly from the Internet being a somehow free media. Yes, the Internet is now manged by some US based organizations but this structure brought us a level of information we have never seen. Almost one third of the world is now connected and free to share ideas. Education, economy and general well being – they all improved with the free Internet.
I discussed the dangers of over-regulating the Internet in a previous article. At the time I had no knowledge of such disturbing news. Even more disturbing is the fact that public media is not yet taking as much interest as it should in this matter. Forget ACTA, SOPA and all the other things the Internet stood against. This conference is a turning point in human history, just like the invention of the Internet was.
Should the proposals discussed above be accepted and enforced we will see a huge set back in economic development, education and civil rights. After all – the Internet is changing the status quo in a civilization that has been so far lead by fear, ignorance and hate. In a world that faces poverty, over population, countries armed with nuclear weapons, can we really accept to bury this diamond in the dirt?
“The printing press helped education”. It’s pretty hard to argue with that. When Johannes Gutenberg invented the printing press he had a simple idea in his mind: to help more people read the Bible. Also – make some money out of it (Gutenberg was a goldsmith so we might assume he had some economic motivations).
Back then The Church held a monopoly on Bible printing and distribution. Most of the Bibles were hand written in Latin and it was frowned upon, to say the least, to translate or own one. There were few people able to read, let alone read Latin, so the Church held the absolute truth as priests were able to interpret the Bible in any way they found it appropriate.
Johannes Gutenberg changes all that in 1440 with his invention of the printing press. He is credited with having printed the world’s first movable type book, a 42 line Bible.
The context was favorable as Europe was seeing a post-medieval rise in learning, the early notions of capitalism appeared and manifested themselves through a high interest in product efficiency. In just a few decades the printing press spread throughout Europe. This is not as impressive now as we take book publishing and distribution for granted, we read our books on tablets or the Kindle but back then it was unheard of any technology to spread that fast. In under 4 centuries the book printing output rose from one million to over one billion books.
Soon people began printing more than Bibles. Authorship actually started meaning something. Back when the printing press did not exist the author was not really important. A copy of Platon’s Republic in Paris may have been entirely different from the one in London. Authors where sometimes unknown and most didn’t find any interested in writing something that brought no profit or recognition in return.
The sciences blossomed as people were able to exchange ideas in writing. The arts started blossoming as literature was finding its way to the masses. The first newspaper was printed in 1620, almost 200 years after the invention of the printing press. Illiteracy dropped as educational means were now available and the life quality increased.
We may never know how important the printing press actually was to the evolution of mankind but we can guess that were it not for the printing press we might still be living in the dark ages.
Imagine the world without internet. It’s pretty hard to do that now as you have probably spent at least an hour today sending and receiving emails, using Google, shopping online or reading the news on your favorite news portal. If you are older than 25 you might remember a time when the Internet was something closer to science-fiction than everyday utility. There was a time when you actually had to wait more then a few days to send a letter to someone across the globe.
Back in 1950 a point to point computer communication between mainframe computers and terminals was developed. A decade later this led to the development of several networks and in 1970 one of these networks, the ARPANET, a military developed network, developed the concept of internetworking, basically a network of network. 1982 saw the implementation of TCP/IP, a protocol to allow interconnection. A few years later ARPANET was decommissioned and in 1995 the internet was commercialized.
Bam! Everything exploded! Well – not actually. At that young age the internet was still mainly used for scientific purposes and information exchange.
Soon, though, people started experimenting with email systems, eCommerce, self-publishing, and others such.
A big breakthrough in research and education were the search engines. Before Google there was Altavista and Yahoo. Yahoo was actually a web directory that helped users find websites based on interests. The development of Google meant people didn’t need to browse for hours to find what they were looking for (we might remember the days when a 64kbs dial-up connection was considered a luxury).
Now we can find almost any kind of information online. The search engines crawl billions of webpages on a daily basis, everyone with an access to a computer and internet can easily publish an article and Amazon is already selling more instant-delivery eBooks everywhere in the world.
Some of the most important universities in the world now have free access to online courses. Have a look at this list to get a glimpse into how much information is available to anyone willing to spend the time to learn.
As mobile internet consumption rises new education approaches emerge. Apple launched iTunes U, a collection of higher education courses in audio or readable format. Hard to reach populations are actively taught through mobile internet connections.
Some of the most prestigious universities in the world have online courses that offer a degree with lower education costs for those in less economically stable areas.
Yes, “THE” Wikipedia is probably the greatest education feat in the human history. Human knowledge is now accessible for free to those that want to learn more, understand more. It features more than 4 million English articles and is available in 278 languages.
Wikipedia drove the paid print version of Encyclopedia Britannica to extinction as generous article contributors have made Wikipedia the go-to place for fast research.
Internet has changed many things for the better but education is the field that changed most. Never in our history has so much information been available to so many. I believe in a future where individuals are empowered, informed, educated. Internet has mad that possible as education and information became publicly available.
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