By Benjamin Wall
Online retail is constantly accused of destroying downtown communities due to running stores out of business. In fact, e-commerce builds communities in a viable manner, suitable to the modern world, by making them sustainable. Online retailers can secure a successful future by becoming the nerve center of virtual communities united in sustainable value creation.
Community And Retail Have Always Gone Together
Retailers always have been important to a community. For centuries, brick and mortar retailers shaped the landscape of towns and cities and formed the hubs where the locals crossed paths. This community context has been a significant aspect of value from retailers: part of what they offered has been a physical meeting point and the “sidewalk experience” in a conglomeration. Stores have been key to the personality of towns and cities.
Digital commerce companies today are still building communities. It is just that in today’s globalized and internet-focused world, the communities are virtual. People in and around the value chain of an online retailer are formed into new kinds of communities. These communities are more robust because they are rooted in sustainable value creation and not simply in shared location. Benefits are being created for people and planet and not just profit. Value is being generated in new ways, representing the wave of the future. Rather than ruining downtowns, e-commerce companies are in fact creating communities more suited to today’s world. Online retail is in this sense still keeping to the community-building tradition of retail. Going further with this point, part of the value offered by digital commerce companies, and an important ingredient in their recipe for success, is to build communities around sustainable value. Viable virtual communities are increasingly the basis for online retail success around the world, as the examples below will show.
Sustainable Community Value At New E-Commerce Fashion Retailers
Young e-commerce companies in fashion are building sustainable value in virtual communities in reaction to the traditional non-sustainability in the industry. One just has to think of sweatshops, animal furs and groundwater contaminated by both the chemical dyes in the clothes as well as the pesticides to grow cotton. Three companies spread throughout the globe illustrate how virtual communities can be built around sustainable value, chosen from Europe – TWOTHIRDS in Spain (twothirds.com) – and from Asia – LivingWear in Hong Kong (livingwear.com) - and from the Americas – Outerknown in California (outerknown.com).
All three companies build communities where, as in any community, all members are expected to pull their weight in generating value. First, the community of customers is exhorted to close the loop of the circular economy by washing clothes less often and wearing them longer as well as by repairing, reusing or recycling the clothes. The appeal to customers to do their part as practiced by TWOTHIRDS is noteworthy for going a step further. To eliminate waste production the company produces only to order, waiting for a minimum volume of pre-orders to accumulate before producing a batch. The consequence is that the customer may have to accept waiting for up to three months before a purchased garment arrives. This delay stands in stark contrast to the efforts of many online retailers to be fast, faster and yet fastest in their deliveries. And it hasn’t seemed to have held back the growth of TWOTHIRDS.
Second, online retailers form supplier communities with their producers by working together closely on a shared journey. The retailers manage the journey to ever more sustainability by continually updating the sustainability requirements. The requirements become more extensive and demanding as more and more is learned. What’s more, the e-commerce companies exploit the information potential of the internet to report extensively about the supplier community. In this way, the customers are drawn in as observers, and thus indirect participants, to become part of the virtual community. Striking in this regard is the insistence of LivingWear to make shared values a key criterion in selecting suppliers. The supplier community is built around the same approach to business as a whole.
Third, and following up on the previous point about the total approach to business, all three online retailers are fully aware that they are moving toward a new way of doing business. And transforming business will ineluctably transform society. They assume an activist stance in making over business and changing society. Outerknown specifically acknowledges that it is “thinking far beyond clothing.” The company “aspires to work with businesses, governments, and throughout our community to create deep and lasting changes in labor and environmental practices all over the world”. It points out “this isn’t normal. This is an uprising.”
Building The Future For The Company And The World Via Community Value
Communities are being built where the motivation to join is to be engaged as a customer, supplier, stakeholder – or employee, not discussed above - in a transformational relationship with the digital commerce retailer. Direct value is created by being a member of one of the communities which transforms “normal” business relations. Indirect value is created for community members when they see the other kinds of forward-looking community value created by the company with which they “do business.”
These online retailers use their websites to inform about the different kinds of value generated in the various virtual communities. Ecommerce companies make each of these communities come alive on the internet so that all involved persons gain value from them, directly or indirectly. The interlocking communities sustained by the online retailers are a more solid groundwork than simply locale for the company to grow on. At the same time, these companies strive to build a new sustainable future for the world.
Systematic Sustainable Community Value From E-Commerce Leaders
Young digital commerce companies in the fashion industry, “born sustainable”, are not alone in their endeavors. The large digital commerce companies have the resources and organizations to build sustainable virtual communities systematically, offering more opportunities than smaller companies. Examples from three large American e-commerce companies – Amazon, Target, and Walmart – show they generate value for a wider range of communities with a broader impact.
Amazon has built a community of investors, analysts and other members of the capital market around a convincing long-term “equity story.” The virtual community members apparently obtain value from their vision of gaining exposure to a company that is sustainably viable. In their view, Amazon shapes the future of retail and sparks disruption in other branches. A community of investors is totally lacking at the smaller e-commerce companies.
Target builds a sustainable community amongst its personnel around the opportunities for training, education, cross-functional fertilization on the job, career development, diversity and so on. The smaller companies lack the resources for this kind of systematic sustainability in the long-term work perspectives.
Like the smaller companies, Walmart builds a sustainable community of suppliers by together working on processes, materials, packaging, employment conditions, organizational development, etc. It’s just that Walmart can methodically offer volumes, resources, and expertise far beyond that of a smaller company. Furthermore, a supplier who adjusts to the working relationship with Walmart is systematically made shipshape to be sustainably successful with other retailers.
Finally, all of the large digital commerce companies have built communities with other large companies to agree on sustainable standards for doing business. The smaller companies see themselves as pioneers in the fashion industry, but to date, they have lacked the clout to systematically establish industrial associations.
A leading online retailer straddling both camps is Ikea. Like the smaller companies, Ikea places sustainability at the center of the value created for communities: “The IKEA sustainability strategy – People & Planet Positive – was launched in 2012 with ambitious goals to transform the IKEA business, the industries in the IKEA value chain and life at home for people all across the world.” And like the leading companies, Ikea can systematically create sustainable value in a wide range of virtual communities with a greater impact on the business world and society.
Transparency Underlies Sustainable Communities For The Future
Digital commerce has been criticized – indeed, at times vilified – for supposedly destroying the communities which stores form in the city and town centers. Here it has been shown that such online retailers are in fact heavily engaged in community-building which generates value for the future of business and society. It remains to be seen whether the more revolutionary objectives of the younger companies will, in the end, overcome the more evolutionary goals of the older companies.
However moderate or radical the case for change at these companies may be, what they all have in common is that the basis for virtual community-building is transparency. The websites of each of these retailers are chock full of information, offering links for interdependent facts and drill-down navigation for greater detail. This mass of information, available at the fingertips of the site visitors, would be much more difficult to present in brick and mortar stores. It is exactly the secure presence of this extensive information which creates stable fundament for the virtual community, with reliability much greater than a storefront. The potential of the internet to make available huge volumes of interlinked information is being realized to the full via the transparency offered by online retailers, large and small.
Building And Managing Virtual Community Value
There are three steps to create sustainable value in virtual communities:
- Review the AS IS existing communities and value generation: Identify the most important communities in and around the value chain and define the value being generated thereby. What kinds of sustainable value does the e-commerce company generate for the community? In turn, what sustainable value does the community generate for the e-commerce company?
- Design the TO BE communities and value generation: What kinds of sustainable value would the online retailer like to receive from the community? What kinds of sustainable value should it offer to the community in exchange in order to receive the value it wants? And should any new communities be addressed?
- Define and implement the plan: Define initiatives to build the community relations as desired in the TO BE design. Plan a timeline to implement the initiatives. Derive milestones and KPIs to manage the implementation and measure success in building the communities as targeted.
Generating sustainable value for virtual communities need not be disruptive or transformational. It makes plain good business sense for e-commerce companies to treat groups in and around their value chain as interlocking communities. Creating long term value in these communities is a more stable basis for doing business; and thus more sustainable. Online retail does not destroy communities, but on the contrary builds them in a robust manner. Doing business in a sustainable manner for the good of communities also can possibly generate PR benefits as icing on the cake.
About The Author
Benjamin Wall studied economics and sociology at Yale and the London School of Economics. In the past 30 years, he has been located in the Zurich area, active as a management consultant, professor on business programs, and author of numerous articles and books. His most recent book is titled Amazon: Managing Extraordinary Success in 5-D Value.