Summary:

• We have firmly entered the age of the “now economy” when immediacy and responsiveness to unexpected consumer demands can make or break a supply chain strategy. Elastic logistics is crucial to finding supply chain solutions in 2021.
• Millennials live in the regime – klick & receive with an immediate effect. eCommerce should smoothly function in the regime – LOGISTICS IS EXTENSION OF INTERNET.
• The Green trend is on the way to revolutionize consumption culture, for example, a demand for green holistic experiences, which opens up new strategic perspectives for eCommerce & Logistics development.

Everyone is entitled to have a dream. Even a pandemic cannot compel to stop dreaming. Human nature is the ultimate force. So, what does a typical business leader dream about despite uncertainties of our time? An ordinary answer goes like this: sustainable growth, breakthrough technologies, new heights of profitability, etc. Timeless wisdom (business scholars including) abundantly proves the case that not just tangible gains, but the blissful sense of victory is the real prize for a restless soul. Victory makes one‘s life fulfilling, and, at the same time, provides with a renewed potential to aspire to new heights with even more uplifted sense of self-fulfillment.

This state of enduring victory is called strategic victory. A victory beyond any doubt, beyond any enemy’s reach. It is a decisive destruction of the enemy without any possibility of resurgence or revanche. Invincible! In the vein, strategic victory necessitates strategic advantage.

It just these – rather military – notions are not popular in business. Strategic advantage is something which is exceedingly difficult to sustain in the ever-changing market. Instead, we tend to use the concept of competitive advantage. Because it is more real: we compete and struggle daily, and … never win decisively.

Still, we cannot resist the exigencies of human nature to never dream and strive for strategic advantage. Up in arms! Let us attempt to look at a plausibility of strategic advantage in business from the perspective of our time. Take the Big Four. Could we say that Alphabet (the parent company of Google), Amazon, Facebook, and Apple have succeeded in creating a strategic advantage?

In respect to Amazon, has the dominant market leader in eCommerce with 50% of all online sales going through the platform secured strategic advantage? Recent developments in eCommerce doubtlessly tend to endorse a firm ‘yes’. The survey “COVID-19 and E-commerce” by UNCTAD (United Nations Conference on Trade and Development) and NetComm Suisse eCommerce Association Experience of the COVID-19 pandemic has shown how changed online shopping behaviors. According to the survey of about 3,700 consumers in nine emerging and developed economies, online purchases have increased by 6 to 10 percentage points across most product categories. Companies that put eCommerce at the heart of their business strategies are prepared for the post-COVID-19 era. According to Carlo Terreni, President, NetComm Suisse eCommerce Association, “In the post-COVID-19 world, the unparalleled growth of e-commerce will disrupt national and international retail frameworks.”

Amazon growth for 2020 proves the case. Amazon’s market capitalization by the end of Q2 of 2020 gained $570 billion, with $5.2 billion in quarterly profit in Q2, and was the largest ever in its 26-year history. It broke that record again in Q3 with $6.3 billion in quarterly profit, up 200% year-over-year. At that time (2020 August) the company was worth more than $1.7 trillion, making it the second-most valuable company in the U.S., trailing only Apple. The company is now worth $1.49 trillion. That makes Amazon one of the largest companies in the world, trailing only Microsoft (worth $1.54 trillion), and Apple – worth $1.61 trillion (Source: Forbes / VentureBeat / CNBC).

Well, does it mean that Amazon has finally fulfilled the dream – THE strategic advantage? Is Jeff Bezos a king among other kings (a sort of primus inter pares) who has surpassed the first trillion of company’s net worth? The truth is that any businesses, despite its size in the rapidly changing and dynamic world, cannot rely on a static competitive advantage anymore. There are some other dragons out there in eCommerce. To name just couple of them: Alibaba with the market capitalisation of $720.36 billion, Jingdong Mall with $155.51 billion and raising (Source: companiesmarketcap.com, January 2021), etc.

Well, the numbers are tempting to conclude that Amazon is still far ahead of the Chinese dragons. However, behind the numbers there are reality factors ambushing a Big Fat Cat. The factors might be angry and daring. Remember, in the real-world black swans tend to slay dragons. The true question is this: what are dynamism and force of disruptive factors in eCommerce? Let us list some of them.

Economy NOW & Elastic logistics. It seems that comfortable days of fixed supply and demand are behind us. We have firmly entered the age of the “now economy” when immediacy and responsiveness to unexpected consumer demands can make or break a supply chain strategy. According to Harvard Business Review (September–October 2020), an absence of supply chain flexibility would be the most vulnerable to damage from sudden supply and demand re-configurations. In post-pandemic 2021 and beyond, supply chains need to be ready to expand or shrink capacity depending on an ever-changing demand of industry variables. This practice is called Elastic logistics, and it is crucial to finding supply chain solutions in 2021.

Urgency of delivery. According to World Economic Forum, 60% of the earth’s population will live in cities by 2030, 70% – by 2050. The recent pandemic has taught us one great lesson. It is SPEED. In the urban consumer’s mind, delivery speed must reciprocate speed of ordering, which, in turn, incites urgency of longing for a good already paid. Millennials live in the regime – klick & receive with an immediate effect. In the consumer’s mind, there is less and less difference between receiving information and getting service done. To put it simply, eCommerce is already functioning in consonance with the formula: LOGISTICS IS EXTENSION OF INTERNET. Therefore, to make a delivery as speedy as possible, the supply chain should become increasingly responsive and flexible.

Green packages. Green awareness, sustainable thinking have long become beacons of progressive humanity in our times. Covid experience has added safety awareness to the current factors, which currently revolutionize consumer behaviour. Consumer is becoming increasingly specific what brands constitute his welfare. He wants to be confident that acquired goods are safe & sane in all aspects. In turn, this constitutes a holistic approach to consuming, a kind of green packaging. With the climate change issue, Green Tech progressively goes global, at the same time, inciting scale changes in consumption culture. No doubt, the challenges will impact supply chains at all levels of distribution in recent future.

So, the urgent question is this: how should eCommerce companies respond to the factors?

It is clear that:

• eCommerce should cognise (use AI) & facilitate its clients (practice Elastic logistics)
• eCommerce should integrate supply chains and make them responsive & flexible
• eCommerce should respond to the changing consumer culture by proposing green holistic experiences via smart packaging of its product & services

Green trend & Localisation. To facilitate its clients, eCommerce should not only become AI-equipped, but also become close to producers with which clients are confident. In the perspective of the Green trend, food producers are likely to be the principal target in projecting green packages by eCommerce companies. Furthermore, the companies will go beyond the food industry to enlarge green holistic experiences. It is a matter of strategic development for the Green trend to incorporate other local brands into green packages.

I perfectly aware that this kind of ‘localisation’ trend is now not pressingly obvious. However, given the progressive enlargement of farmers‘ production spots in supermarkets and other signs of the green revolution, this trend could explode in a nearby future.

How is Amazon going to respond to this looming localisation trend and, thus, sustain its competitive advantage from the being BIG vantage point?

It is a one-million-dollar question, already creating a new strategic perspective for new LOCAL players in eCommerce and Logistics.

Mindaugas Kubilius

Next: Strategic challenges in XXI century (2): Amazon case

Summary:

• An urgency for answers leads to the urgent search for a reliable making of strategy in the dynamic  times.
• How to make a value creation process reliable in the constant changing circumstances?

Times are difficult and unpredictable. It cries out for new solutions – difficult and unpredictable ones, which means – highly insightful. I do not say „creative” on purpose. This popular „creative” might mistakenly mean good per se. However, it does not necessarily lead to „effective” and „real”. So, let us leave the „creative” aside. For now we need to get real. Or die in the uneven battle against the Forces: complex systems & dynamically changing environment.

We are getting increasingly accustomed to daily disruptions, deconstructions, onslaught of unseen factors. More to that, normally a well-established ordnung of business world is being shattered by a somehow unfamiliar symbiosis between progressive technologies & political agenda, looming collapse of global trading network as the geopolitical forces such as China, USA sequentially become political enemies, while liberal societies themselves are undergoing transformation.

Living according the rhythm of pandemic fluctuations, otherwise fixed habits of relaxed consumer societies fall prey to new social demands. Well, it is a different case in authoritarian states with disciplined societies and politically subdued „free market” economies. China is priding itself as doing just fine in all respects. It excels itself as the pattern of an exemplary state for the dynamic times. What is even more scary, technologies become tools to tighten controls in either world – free as well as authoritarian.

Let us put it expressively: the Capitolium of Free World Order is being attacked ferociously NOW.

Nowadays it is becoming increasingly difficult to understand what is „free“, „beneficial“, „true“, „ethical“, even „global“. This situation in business literature has long become known as VUCA: Volatility, Uncertainty, Complexity, Ambiguity. But never to such an extent!

An urgency for answers leads to the urgent search for a reliable making of strategy in the dynamic times. So, the question for leaders is this: how to make a value creation process reliable in the constant changing circumstances?

It has long become evident that the traditional strategy making, facing the complex and dynamic environment, has reached its limits. Nevertheless, many managers are still following the old approach, which, worthwhile for decades of stable environment, has become redundant. The problem is that it has become difficult to revolutionize ones’ entrenched habits of already deficient strategic thinking. However, the old good ways of strategy making does not hold against the pressure of the new complex realities.

To wrap up, complexity and dynamism of our times are constituted of multifaceted & multi-layer amalgam of new factors: from new disruptive technologies to unprecedented geopolitical transformations.

Now the question is: what constitutes a strategic advantage in the new world.

Next: Strategic challenges in XXI century (1): eCommerce & Logistics

Mindaugas Kubilius