Supply Chain is Important Capability for E-Commerce Companies

Supply Chain is Important Capability for e-Commerce Companies

In E-Commerce businesses, it’s common if the total supply chain costs as much as 20-30% of the turnover. With this high-level view on cost levels, the role of supply chain in the e-Commerce business is clear. The profitability of any e-Commerce operation is exclusively dependent on the efficiency of the supply chain operation.

In the highly-competitive electronics, fashion and books segment of the Internet, the purchase prices of the various online parties differ only marginally. In these types of market segments, the role of supply chain becomes ultimately decisive in regard to margins. While electronics, books and fashion are still the biggest segments online (next to “digital” products such as travel and insurance), many other segments are still growing very rapidly.

With this high-level view on cost levels, the role of supply chain in the eCommerce business becomes clear. The efficiency of the supply chain operation is the major driver behind the profitability of virtually any eCommerce operation. This, of course, next to the Merchandising piece, how cheap can you buy stocks?

In the long tail segment (where competition is much lower and you have “unique” products without too much competition on the Internet) this is less important. But in the highly-competitive electronics, fashion and books segment on the Internet, you can imagine that the purchase prices of the various online parties differ only marginally.

In these types of market segments the role of supply chain becomes ultimately decisive regarding margins. It’s not for nothing that the strongest online supply chains (Amazon, bol.com, Zalando, Apple etc.) are originating from these segments. It was pure necessity for them to get the supply chain at a high level (1) to support growth levels and (2) to maintain or improve margins.