Economic and social development is based on exchange transactions; more specifically, buying and selling transactions. Every moment of our lives, we buy or sell something. Most times such buying and selling transactions cover tangible products and services but they also cover intangible factors such as goodwill and brand equity. Many times, buy-sell transactions get known under different nomenclatures such as deposits and loans, in the context of a banking transaction, for example; but a closer look will reveal the embedded buy-sell nature of even a banking transaction. In certain other times, the presence of intermediaries and channel partners obscures one from the realities of buy-sell transactions. From the very established situation of physical buying and selling that has been in vogue till recently in an exclusive manner, electronic commerce has brought in completely varied hues to buying and selling. Two ubiquitous variables, one an outcome variable called value and the other a process variable called bargaining, influence the arithmetic of buy-sell leading to either profit or loss.
The buy-sell transactions are a key aspect of human, organizational, social and national behaviour. Like a coin has two sides, all these entities have buying and selling as the two sides of their personalities. Resources, especially natural and financial resources, being finite it is impossible to specialize and excel only in buying or selling. One needs to be adept at both simultaneously. Organizations tend to believe that buyers and sellers have characteristics that are different and differentiated; rarely one does see a head of procurement becoming a head of sales, and vice versa! There are some who believe that the underlying characteristics are the same, the differences are caused by the respective universes that the buyers and sellers operate in; the buyers operate in a limited supply pool and the sellers operate in a huge market place. In respect of a bank as an example, the buyer of a fixed deposit has only a few banks to choose from while the bank has millions of customers to sell its deposits to.
Buyers do not exhibit homogeneity. A buyer who is part of an organization tends to be methodical seeking high quality for low cost. The same person as an individual tends to be less analytical and more emotional while exercising his or her buying decisions. An organizational buyer tends to operate within a budget while an individual buyer prefers to be influenced into purchasing with elastic budgets. An organizational buyer tends to be a responsible and held-accountable buyer while the individual buyer tends to be a responsive and self-empowered buyer. The organizational buyer is motivated to save costs and increase profits for his organization as part of an integrated organizational goal system. The individual buyer is inspired to fulfill needs and increase esteem as part of a diversified social aspiration system. Industrial buying and individual buying have completely different ecosystems and behavioural triggers even if the operating person is the same.
Sellers also do not exhibit homogeneity. A seller who is part of an organization tends to be methodical seeking high price despite low cost. The same person as an individual tends to be less analytical and more emotional while exercising his or her selling decisions. An organizational seller tends to operate within a budget while an individual seller prefers to be influenced into selling with a view to deleverage, save or buy something else. An organizational seller tends to be a responsible and held-accountable seller while the individual seller tends to be a maverick and self-compelled seller. The organizational seller is motivated to offer discounts and raise volumes or prices for given volumes with a view to increase profits for his organization as part of an integrated organizational goal system. The individual seller is inspired to fulfill needs through better buys later and increase esteem as part of a diversified social aspiration system. Industrial selling and individual selling have completely different ecosystems and behavioural triggers even if the operating person is the same.
A trained organizational buyer and an experienced individual buyer have one common characteristic though. He or she invariably seeks premium at a discount. A trained organizational seller and an experienced individual seller have also one common characteristic in a similar manner. He or she invariably seeks volumes at a premium. Both premium and discount generate loyalty. Loyalty, in turn, generates volumes. The buyers and sellers have a convergence play in how premiums and discounts are structured for a given specification and quality level. The selling strategies of organizations and the buying strategies of individuals vary depending on how the premium-loyalty, discount-loyalty and loyalty-volume relationships are structured. It appears that within this convergence, a divergence is developing between physical stores and virtual stores (or brick & mortar sales and electronic sales). There are essentially two points of view; one from a premium repositioning angle and the other from a discount repositioning angle, both of which attempt to increase purchases and sales, without losing the premium tag or accruing discount scorn, respectively.
The premium repositioning hypothesis is that the higher the perceived premium in a product or service and the higher the discount obtained on such product or service the greater is the value (and the volume). Even entities and channels which wish to play on premium are therefore forced to simulate, if not exactly offer, discounts. The increasing trend of same store gift or discount certificates of premium retailers (Lifestyle, Home Centre, Shoppers Stop) or the same channel loyalty points of premium corporations (Taj Hotels, Sheraton Hotels and Lufthansa) are designed to encourage long term repetitive buying behaviour on premium products without sacrificing the short run profitability that could have come with discounts on premium pricing. The discount repositioning hypothesis is that the lower the perceived premium and the higher the discount obtained on such product or service the greater is the value (and the volume). Even channels which wish to play on discounts are therefore forced to continuously enhance the discount experience. The increasing trend of flash discounts by e-commerce channels and Uber style cab services are designed to continuously refresh the value-volume equation even with discounts.
Close touch to virtual scan
Electronic commerce, including electronic auction, has redefined the buy-sell characteristics. The foundations of close look and trial performance of physically available goods that have been the solid foundations of physical buy-sell experience have been replaced with the 360 degree compasses of universal scan and analytical evaluation of endless arrays of portal-linked goods. The physical buyer has become a more focused and circumspect consumer while the digital buyer has become a more empowered and maverick consumer. The physical seller is challenged with the task of re-establishing the relevance of brick and mortar store while the digital seller is challenged with the task of delivering to promise of digital platform. The physical buyer and seller are in a state of rediscovery for the next level of interaction with the physical sellers attempting to find other value enhancements besides look-feel (digitized shopping follow-up, for example) and the digital buyers seeking to find other credibility alternatives besides direct interface (digital price matching, for example). The digital buyer and seller are in a state of evolution with the digital sellers attempting to find other value enhancements besides discounts (same day delivery, for example) and the digital buyers seeking to find other credibility alternatives besides discounts (reseller warranties, for example).
The big corporations and the small consumers in both physical and digital buy-sell relationships are thus in a state of evolving expectations. As the chairman of Hindustan Unilever, Harish Manwani, stated recently electronic commerce cannot be wished away. The physical sellers may decide or influence their channel partners to list what can be sold through digital channels; the long term success may, however, lie in supplementing and complementing rather than in competing and substituting one for the other. This could include own e-commerce sites or contractual tie-ups with independent e-commerce sites to make available what is not physically available. As the consumers of e-commerce sites recently experienced what is most sought after digitally is rarely available freely. The digital buyers may patronize the digital portals for instantaneous buying gratification; the long term satisfaction may, however, lie in bringing in some of the discipline and practices of physical buy-sell to digital platforms. This could include more voice-verification opportunities, product reservation facilities, cancellation options and product return policies. Both flash sales in digital platforms and progressive sales in physical platforms require media advertisements, a trend likely to continue for long time – until a time point is reached when buy-sell is as embedded and as contractual phenomenon as a family, school, college, club or job relationship is. A completely integrated buy-sell ecosystem is what the future evolution is likely to be, as Apple Pay and Google Wallet may indicate.
In the extended digital age of the future, buy-sell will undergo a major transformation. A few principles of buy-sell nirvana will determine the evolution. Firstly, all buyers will be sellers, and vice versa. Buying intentions will be to buy as now but only to use temporarily and sell eventually. Selling intentions will be to sell as now but only to induce repetitive buying through a variety of means, including buyback. Secondly, all physical will be digital and all digital will be physical. Buyers will seek seamless transfer between digital and physical buying and selling. Sellers will redesign and throw open their call centres and warehouses to buyers (akin to factory outlets). Thirdly, modularity and scalability will be used to extend product lifecycles. Designers will be encouraged, or even required, to use as much portability as possible. Fourthly, value will be determined by neither premium nor discount; it will be determined by exchange feasibility. Fifthly, buyers and sellers will weave themselves into integrated ecosystems in which phones, tablets and computers with banks and telecommunication providers will connect the buyers and sellers.
These principles could lead to a new ecological logjam. The more one buys the more one will sell, and vice versa. With digitization while paper and trees are saved more plastic, metal and rare earths are potentially being generated, consumed and wasted. If this trend accelerates, as it looks to, the planet could be burdened with profligate consumption of resources and excessive hoarding of products of multiple generations. As buyers keep looking at the earliest points of sale and resale, rather than maximal points of use and extended use, and as sellers keep looking at the earliest points of purchase and repurchase, products will only multiply exponentially. Accelerated buy-sell (of a range, from physical goods to financial instruments) which is seen today (and possibly for several years, and even decades to come,) as an inevitable driver of socio-economic development will be seen as a fit case for accepting some philosophical and spiritual caveats relating to the limitations of the planet. A buy-sell nirvana could be a theme that would encourage ‘optimum development-optimum conservation’ (if not, ‘minimum development-maximum conservation’). Nations would have ombudsmen, corporations would have offices, societies would have crusaders and families would have thinkers who will reflect the principles of a responsible universal digital age that focuses on design optimization and resource conservation.
Posted by Dr CB Rao on November 2, 2014