Professor Kalyanam shared his ideas about myths and controversial issues that surround e-tailing. Among them is the myth that “e-tailing is a small percentage of overall retail sales.” Actually, this is true, but the influence of online is much larger, he says. “It’s not about actual commerce online, it’s about influence. The leverage is coming from e-commerce.”

Some people say that e-tailing is not profitable and it will never be profitable. Kalyanam counters by saying that online retailing is a highly leverageable and profitable business, if 1) customer acquisition costs are managed, 2) your pick/pack costs are small relative to the total value of the order, and 3) technology costs are managed.

Pure dot-com retailers can and will survive by partnering, he says. Some people believe that consumers make their online decisions based simply on price. Not necessarily, says Kalyanam. “Brand, assortment, and customer service are very real, tangible guidelines to consumers. And they will produce a premium. However, retailers have to quantify the advantages that they have and communicate them in a transparent manner to consumers.”

Kalyanam also shared research that he’s been conducting at Santa Clara with colleague Shelby McIntyre, which actually demonstrates the return for brand and return for merchandising in an online environment.

Doing research on E-bay, and analyzing E-bay’s customer feedback system, the researchers have found that “there’s a very clean 15 percent return to reputation online. A fellow with a lower reputation will get about 15 percent lower than a fellow with a higher reputation.”

First RCME Speaker