Business strategy | Alan Hung

Transitions toward B2C E-commerce: Part II

Sat, 08 Jun 2019 00:00:00 +0000

Table of Contents

Abstract

This document presents a competitor analysis and a strategy and timeline for transitioning our business into B2C e-commerce.

To begin, we create a competitor profile that identifies social media and e-commerce as promising entry points. After investigating our competitors’ social media strategies, we have discovered that posting tutorial videos about bag making on Facebook is the most effective way to reach potential customers.

Next, we conduct a SWOT analysis to determine how we can utilize our strengths in fabric design and workflow automation to overcome weaknesses and threats from external competitors. We also note that our long-term goal is to create unique products as a differentiating factor.

Finally, we set up a logical and chronological timeline based on the aforementioned analysis, prioritizing the necessary actions.

1. Introduction

Competitor analysis (CA) is a cornerstone of market studies, providing meaningful insights and guiding actions. Firms that have a system to monitor their competitors also tend to show better profitability ( Citation: Subramanian & IsHak, 1998 Subramanian, R. & IsHak, S. (1998). Competitor analysis practices of US companies: An empirical investigation. MIR: Management International Review. 7–23. ) . This is particularly important for us, as our objective is to venture into a new business, as mentioned in the business transition plan.

A competitor analysis for a business may involve the following steps:

Identify the business’s competitors and analyze their products, pricing, and sales.
Identify the competitors’ marketing strategies.
Use the findings to create benchmarks.
Estimate market share and potential growth.

Thanks to the internet era, businesses can provide information about their products on the web or promote them via social media. This makes competitive analysis much easier since most of the necessary information can be found online. However, tasks such as retrieving information for all products from an online shop can be repetitive and time-consuming. To handle such tasks efficiently, we build a website crawler as described in the appendix.

2. Competitor Analysis

2.1. Profile and Benchmark

To gain an understanding of the market, we can begin by creating a profile of our competitors. Based on the results from the search engine and estimations, we have created a table as shown in Table. 1.(Due to confidentiality, some content in the table has been replaced by green and gray symbols.)

Observation

All of our competitors have both direct selling and e-commerce stores.
Competitors in Taiwan mainly focus on product design and retail operations.
The companies, except for competitor D, have a weak social media presence, indicating that they have not utilized social media as a marketing tool for promotion.
Competitor A has the highest annual turnover and a diverse range of businesses.
Competitor D has the highest popularity on social media.

Action

To enter the B2C business, the first step should be to promote our product on social media and e-commerce platforms. These areas have a low barrier of entry, and our competitors have not yet focused on them.
We need to analyze the social media strategies of competitor D.
For our long-term goals, we should leverage our advantage in fabric design and combine it with our knowledge of customer preferences gathered during E-commerce store operations. This will allow us to incorporate this information into our product design and create unique products.

2.2. Post on Facebook

To study competitor D more thoroughly, we can use a website crawler to retrieve all of their posts on Facebook.

Observation

The competitor D began promoting on Facebook in 2014, with an average of 40 posts per month. The average number of reactions per post gradually increased to 1000, as shown in Fig. 1(a).
According to Fig. 1(b), ninety-eight percent of the content is made up of text and image posts. However, they use YouTube links instead of in-line videos within their posts.

Action

To compete with our competitors, we should consider generating at least one post per day to match their performance of 40 posts per month.
We can utilize video posts, which can generate 1200% more shares than text and image content combined. This has the potential to reach more people than our competitors’ posts.

2.3. Video on YouTube

As competitor D redirected their audience to YouTube in their Facebook post, we can analyze the content on their channel. Just as a Facebook post can be extracted, a website crawler is also useful for retrieving video information on YouTube.

Observation

The competitor’s channel has three main categories: sewing techniques, product promotion, and bag tutorials (see Fig. 2(a)(b)). Bag tutorials have the highest number of videos and contribute to around 62% of the total views.
The video length is around 20 minutes, as shown in Fig. 2(c).

Action

We might consider using a bag tutorial as a promotional tool due to its high popularity.
We may consider reducing the video length to 20 minutes.

2.4. Product, Pricing, and Sales

Since this information is not publicly available, it is inappropriate to disclose details on how to retrieve it or any results obtained. However, we can share our general approach. We gather information on product and pricing from our competitors’ sales pages. We compare daily or monthly sales results to obtain sales data, which we then use to estimate market share and potential growth.

3. Strategy

Based on the findings from competitive analysis, we can plan our strategy by conducting a SWOT analysis first and then prioritizing actions accordingly.

3.1. SWOT Analysis

Strength:
- We have plenty of experience in fabric design, which is beneficial for designing unique products in the long run. This is because we have fewer restrictions on fabric selection and usage.
- We are capable of automating our workflow with algorithms and machine learning (ML) techniques. This can lead to lower operating costs and a reduced workforce, making us more resilient when confronting difficult situations.
Weakness:
- Currently, we lack experience in the consumer market. This can be overcome by utilizing data analytics, such as analyzing purchase history and social media activity.
- Designing a great product requires hard work and dedication. Collaborating with other designers and gaining experience along the way can help us get started on the right path.
Opportunities:
- Short term: Our competitors have not yet focused on social media for product promotion, but this is only a short-term advantage. Eventually, they will also join the competition.
- Long term: Utilize our experience in fabric design and the customer preference information gathered from the e-commerce store to create a unique product that stands out from the competition.
Threats:
- Short term: Selling a similar product on an e-commerce store may result in price competition. Larger corporations may use this as a weapon to eliminate other competitors because they have more resources to withstand short-term losses. With our strength in workflow automation and lower operational costs, we are better equipped to survive in this competition.
- Long term: Due to the lack of copyright protection in fabric and product design, competitors may replicate our designs. To address this issue, we can leverage our strength in workflow automation to accelerate design and release new products more frequently.

3.2. Milestones

Based on the results of the SWOT analysis, we can create a timeline for the necessary actions.

I. Break into Market:
We will leverage social media opportunities and set up an e-commerce store. We will use competitive pricing to break into the market with the purpose of collecting enough feedback and sales data to understand the market.
II. Task Automation:
We have divided the efficiency improvement program into three steps. The first step is to automate daily routine work using algorithms. Specifically, we will focus on fabric feature extraction and retrieving similar fabrics, which are the preliminary steps for building an in-house library. This is also the most time-consuming task in daily work.
III. Data Analytic:
Once we have collected enough data from the e-commerce store, we will use machine learning techniques such as cluster analysis and regression to understand our customers’ preferences.
IV. In-house library:
By combining the results from task automation and data analytics, we will build a library that serves as a data storage system. This will enable team members to access and retrieve required data more efficiently.
V. Workflow Optimization:
We will integrate our in-house library with our original workflow and empasize on collaboration to further improving the efficiency.
VI. Advertisement:
Targeting potential customers with advertisements effectively requires customer profiles. Therefore, we have placed this action in the later phase of the timeline. Sufficient data from the e-commerce store is needed to create a customer profile. In addition, we should establish our internal advertising flow to avoid unclear and opaque processes offered by advertisers.
VII. Creative work:
After gaining enough experience through collaboration with other designers, we should focus on co-designing products and fabrics to create a differentiated product that will set us apart from our competitors.

4. Conclusion

This document outlines a strategy for transitioning our business model into B2C e-commerce.

First, we conduct a competitor analysis by creating a competitor profile. This reveals that social media and e-commerce are good entry points to the market. We then analyze our competitors’ social media promotion strategies and find that creating video tutorials about making bags is the best way to reach potential customers. Due to confidentiality, we can only briefly describe how we estimate our competitors’ sales.

Next, we perform a SWOT analysis. Our strengths lie in our experience in fabric design and our ability to automate workflows. This not only enables us to overcome short-term threats from price competition but also creates long-term opportunities to differentiate our products. To overcome our weakness in being unfamiliar with the consumer market, we plan to utilize short-term opportunities on social media. Regarding our weakness in product design, collaborating with other designers initially is a good way to gain experience.

Based on the aforementioned analysis, we have established a timeline. To break into the market, we will set up an e-commerce store and utilize competitive pricing and social media promotion. We will also use machine learning techniques to understand customer preferences.

For our efficiency improvement program, we’ve divided it into three parts. First, we’ll implement algorithms that focus on fabric feature extraction and retrieving similar fabrics. Next, we’ll build an in-house library to store data about fabrics, products, and sales, with a user interface that allows team members to access and retrieve required data more efficiently. Third, we’ll integrate our workflow with the in-house library, emphasizing collaboration.

Finally, we will increase our market share through advertising, which will be based on the customer profiles we build and our internal advertising flow.

Our long-term goal is to focus on fabric and product design to create unique products as a differentiating factor from our competitors.

5. Appendix: Website Crawlers

5.1. Program

A website crawler can be implemented using Selenium in Python, which involves four major steps:

Target: Users can provide a list of URLs as targets.

Login: Users may be required to log in with credentials. For example, a user needs to enter their email and password to log in to Facebook and view its content.

Retrieve: Users can retrieve HTML elements by selector. The following code provides an example that uses Firefox as a browser and retrieves all elements with the tag name “article” in a given URL.

# Open browser
driver = selenium.webdriver.Firefox(options=options)
# Visit url
driver.get(url)
# Retrieve all element with tag name "article"
articles = driver.find_elements("tag name", "article")

Extract: Users can extract information from HTML elements. For example, for each article retrieved from the previous step, it is possible to extract the post’s ID from its attribute and take a screenshot of each element.

for article in articles:
    data_ft = article.get_attribute("data-ft")
    post_id = data_ft["post_id"]
    article.screenshot(post_id + ".png")
    ...

For detailed implementation, please refer to the GitHub repository.

5.2. Performance

The website crawler can be used on any website composed of HTML elements. To demonstrate its performance, we use Facebook as an example and measure the number of posts retrieved over time, as shown in Fig. 4. Unlike the Meta Graph API, which has a limit of 600 posts per year, the crawler can retrieve more posts and organize them chronologically.

Reference

Subramanian & IsHak (1998): Subramanian, R. & IsHak, S. (1998). Competitor analysis practices of US companies: An empirical investigation. MIR: Management International Review. 7–23.

Transitions toward B2C E-commerce: Part I

Mon, 01 Jan 0001 00:00:00 +0000

Table of Contents

Abstract

The document discusses a proposed transition from a B2B fabric design business model to a B2C e-commerce model for a Taiwan-based company named “Haori Taiwan”. The advantages and disadvantages of the original model are listed, and a proposed solution is presented. The document then analyzes the requirements of the transition in both system and business aspects, and presents the achievements of each milestone. The impact of the transition is quantified using measures of productivity, popularity, and sales, and the conclusion notes that the transition has improved total sales in Taiwan by 378% compared to March 2017.

1. Introduction

Our company, “Haori Taiwan”, is based in Taiwan and specializes in fabric design. The company’s business model is illustrated in Fig. 1(a). Designers send their designs to manufacturers, who produce the fabric that we then sell to product design houses and distributors. The advantages and disadvantages of this model are listed below:

Pros:
- The business is straightforward
  Our main tasks are designing fabric and communicating with manufacturers, distributors, and product design houses.
- Low operational costs
  Since the company primarily consists of designers, there is no need to have a large working area such as a factory or multiple stores. As a result, the operational costs are much lower than those of manufacturers and retailers.
Cons:
- Long sales cycle
  Starting from the delivery design, it takes months to manufacture, ship abroad, and receive payment from clients. This process is risky and presents a challenge for cash flow management.
- Lack of direct awareness of market trends
  Without direct feedback from customers, it’s possible that the design may fall out of fashion. We can only react once our client reports a decline in sales.

To address these disadvantages, we propose transitioning to a B2C business model, depicted in Fig. 1(b). This approach is similar to that taken by the Finnish fabric design house, Marimekko. It involves adding product design capabilities and establishing an e-commerce store to directly sell fabric and products to customers. The objective of this transition is to overcome the drawbacks while maintaining the benefits of the original business model.

2. Analysis of the Transition

To achieve our goals for this business transition, we need to solve two main problems:

System-wise:
- We need to add three departments to our company: product design, marketing, and inventory. However, simply hiring more employees to implement this transition could turn the previously mentioned benefits into drawbacks.
Business-wise:
- What is the most effective way to reach potential customers? In other words, what is our plan to enter the market?

2.1. System-wise

Our goal is to maintain the advantages of the original model while simplifying the workflow and minimizing operational costs. To achieve this, we will take the following approach:

Break down the requirements of the business transition.
Analyze the tasks involved in each part.
Reduce repetitive and tedious work.

In essence, our objective is to improve work efficiency and accomplish more tasks without the need to hire additional employees. This approach is also beneficial in the long-term since it reduces the time spent on human resource management, lowers operational costs, and makes the company more resilient and flexible during times of transition.

We start by considering the requirements, as shown in Fig. 2. Compared to the original business model, there are three additional parts: design, inventory, and marketing. Although their functionalities appear to be completely different, their workflows intersect with each other. For example, the designer may need information about customer preferences while searching for fabric, and the inventory planner may need to organize fabric based on sales or customer preference so that the designer can easily find the required fabric. Therefore, building an in-house library containing information required by different departments can significantly improve efficiency.

2.2. Business-wise

We conduct competitor analysis and SWOT analysis. The strategy and milestones are established as depicted in the Fig. 3, which are elaborated in detail in “Transitions towards B2C E-commerce: Part II - Competitor Analysis and Strategy Formation”.

3. Result

3.1. Data

To measure the impact of the business model transition, we selected four metrics as shown in Fig. 4:

Number of Facebook posts per month
Average reactions per post on Facebook per month
Printed fabric sales in Taiwan
Total sales in Taiwan

The number of posts and average reactions reflect productivity and popularity, respectively. Sales data is normalized to the sales in February 2017, and a four-quarter moving average is applied. The data for “Benchmark” is from Competitor D in the previous competitor analysis.

3.2. Milestones

To provide more context about our development process, we have divided the timeline from February 2017 to August 2021 into three phases, which are described separately.

Phase I:
- We entered the market by using competitive pricing and selling a similar product (printed fabric), and promoting it on social media. This was the strategy identified in our competitor analysis. Despite achieving significant sales improvements, we were still lagging behind our competitors on social media.
- Result on Sales:
  Sales growth of 289% for fabric and 73% in total (from 2017/3 to 2018/3).
Phase II:
- We improved work efficiency by building an in-house library, automating workflows, and optimizing processes. This has had a positive impact on our social media presence, with the number of posts increasing by 5.35 times compared to January 2018, and post reactions increasing by 6.88 times compared to January 2018. Additionally, we have surpassed our competitor in terms of the number of posts.
- Cluster analysis was also performed to identify customers’ preferences, which helps reduce purchase processing time and relocate budgets more effectively.
- The COVID-19 pandemic has impacted the logistics and import procedures of fabric, limiting the growth of fabric sales. However, due to our increasing popularity on social media, sales of other products have also increased.
- Result on Sales:
  Sales growth of 289% for fabric and 67% in total (from 2018/3 to 2019/3).
  Sales growth of -7% for fabric and 28% in total (from 2019/3 to 2020/3).
Phase III:
- As mentioned in the SWOT analysis, short-term opportunities on social media are decreasing, which is impacting sales. As a result, we have focused on increasing our market share through advertising and creating unique products.
- At the end of Phase II, we observed a diminishing marginal effect on Facebook posts. This means that the number of posts is no longer proportional to popularity. As a result, we decided to shift our focus from productivity to creativity. This change helped us surpass our competitors in popularity for the first time.
- Result on Sales:
  Sales growth of +13% for fabric and +3% in total (from 2020/3 to 2021/3).

To sum up, this business transition has improved total sales by 378% compared to March 2017.

Phase	Milestones	Actions / Results
I	Break into Market	Creating daily video tutorials is the most effective way to reach customers. We use competitive pricing and sell similar products as a means to enter the market. More details: ＊Transitions towards B2C E-commerce: Part II - Competitor Analysis and Strategy Formation
II	Tasks Automation	We have implemented algorithms to automatically extract fabric features and find similar fabrics. This achieved processing speeds 12 to 63 times faster than human processing, with 98% accuracy. More details: ＊Color Theme Extraction Based on the Bucket Sort Algorithm ＊Repeated Pattern Detection of Printed Fabric ＊Investigation of Algorithms for Retrieving Similar Images
II	Data Analytic	We performed cluster analysis on our fabric sales data, resulting in two improvements: First, we reduced processing time for each purchase by 50%. Second, we allocated our budget more effectively, resulting in up to a 4x improvement in sales. More details: ＊Improving fabric sales through cluster analysis
II	In-house library	The library is implemented using the Django framework and deployed on the Google Cloud Platform. More details: ＊Design and Implementation of an in-House Fabric Library
II	Workflow Optimization	The revised workflow led to a 4.4x increase in the number of posts and a 3.2x increase in the number of reactions per post, all while maintaining the same operational budget as the original workflow. More details: ＊Workflow Optimization for Social Media Promotion
III	Advertisement	We use the RFM model and customers’ reactions on messenger apps to create profiles. These profiles are then used as the target audience for advertising. However, this workflow is still under development.
III	Creative Work	We reached 748k people with a single post and had a monthly reach of 1.2M on our Facebook page. More details: ＊Design Portfolio ＊Product Videography ＊Product Photography

Note: In addition to advertising workflow, a tool for inventory planning is also still under development.

4. Conclusion

We first point out the disadvantages in the original B2B business model, and propose a transition to a B2C e-commerce model. Next, we analyze the requirements of this transition in both system and business aspects. In terms of the system, we break down the problem by examining the functionalities of each department and their intersections. We point out that building an in-house library can not only improve efficiency but also retain our advantages in the original business model. As for the business aspect, we perform competitor and SWOT analysis to establish a strategy and milestones.

To quantify the impact, we select the number of posts and reactions on each post as measures of productivity and popularity. Additionally, total sales and fabric sales are also selected.

We present the achievements of each milestone and briefly describe the context in three different phases. Although we have observed that the short-term opportunity on social media is fading in 2021, this business transition has improved total sales in Taiwan by 278% compared to March 2017.

Business strategy | Alan Hung

Transitions toward B2C E-commerce: Part II

Abstract

1. Introduction

2. Competitor Analysis

2.1. Profile and Benchmark

Observation

Action

Profile of our top four competitors in the market. (Due to confidentiality, some content in the table has been replaced by green and gray symbols.)

2.2. Post on Facebook

Observation

Action

Information regarding the Facebook posts of competitor D from Table 1, including: (a) The number of posts per month and the average number of reactions per post; (b) The proportion of image, text, and video posts.

(a)show hide

(b)show hide

2.3. Video on YouTube

Observation

Action

Content on the YouTube channel of competitor D from Table 1, including (a) the proportion of videos in each category, (b) the proportion of view counts for each category, and (c) distribution of video length.

(a)show hide

(b)show hide

(c)show hide

2.4. Product, Pricing, and Sales

3. Strategy

3.1. SWOT Analysis

3.2. Milestones

4. Conclusion

5. Appendix: Website Crawlers

5.1. Program

Four major steps of the website crawler: target, login, search, and extract.

5.2. Performance

Number of posts retrieved from Facebook pages.

Reference

Transitions toward B2C E-commerce: Part I

Abstract

1. Introduction

The (a) original and (b) proposed business models of the company.

(a) Original modelshow hide

(b) Proposed modelshow hide

2. Analysis of the Transition

2.1. System-wise

Analysis of requirements for business model transition.

2.2. Business-wise

Milestones of the transition plan.

3. Result

3.1. Data

(a) Comparison of our performance with that of our competitor in two metrics: the number of posts and the average number of reactions per post. (b) Four-quarter moving average of fabric and total sales in Taiwan.

(a) Posts on Facebookshow hide

(b) Four-Quarter Moving Average of Sales in Taiwanshow hide

3.2. Milestones

The actions and results of each milestone are summarized in the following table

4. Conclusion