by Byron Connolly

E-commerce: ‘I’ve never heard so much bullshit talked about a business model,’ says Razorfish boss

Aug 23, 20135 mins
Retail Industry

Razorfish boss Doug Chapman has taken aim at e-commerce in Australia, telling attendees at the CIO Summit that he had “never heard so much bullshit talked about a business model since the dot com days of the new millennium.”

“Electronic commerce is not a religion so why is the world full of evangelists?” said Chapman during a presentation at the CIO Summit in Brisbane on the role of the CIO in digital marketing.

Chapman – who leads digital agency, Razorfish Australia – said that social deal sites and ‘click frenzy’ marketing campaigns are “not sustainable business models and never will be.”

“I suspect that Kerry Packer would have sacked his son when he saw the money that they paid for Catch of the,” he said.

“I hope I am wrong but the events of the last few days around there where the original owners are coming back into the business to restructure, reorganise and buy back some of the shares probably tells that story more than we realise.”

Chapman then turned his attention to fashion retailer, The Iconic, “supposedly the most successful online fashion retailer in the world.” He claimed that it will fail here in Australia if it sticks to its current business model.

“No fashion retailer, no serious businessperson in Australia would continue to throw the sort of money that that business has at any fashion business in Australia – whether it was clicks, bricks or whatever,” he said.

“There’s nothing wrong with their product, there’s nothing wrong with their site, there’s nothing wrong with what they do in delivery – it’s the absolutely distorted perception of scale in Australia that will be their downfall ultimately.”

The Iconic seems to be in trouble. In mid-July, Crikey reported that the retailer had lost $45 million in 17 months of operation.

Chapman believes that “Gerry Harvey may be right” or at worst, he’s probably closer to the truth than any other business people when he questions the real value of e-commerce to his business.

“As he rightly points out, currently the turnover on his site is less than the average bricks and mortar store but the operating costs are many times more than the average bricks and mortar store. Where’s the value?

“The truth is that where is the value in spending all this money to get very little return? Don’t get me wrong, I am not for a single moment suggesting that there is no future in online retailing, not at all, I am very committed to that.

“I just don’t think we have got the right business models in this country yet across the board and I don’t think that evangelists are letting the congregation speak.

“While the agenda is being set by software vendors, social evangelists and wet behind the ear’ dot com celebrities, we’re going to continue to burn through money and people and businesses and set back true e-commerce for years.”

He said that the CIOs of Australia have a vital role to play if their businesses are struggling with the challenges of e-commerce.

“You are the ones that need to be the catalyst for getting the alignment between your marcoms team, your finance and your IT for a successful business plan.

“I’ve sat in too many meetings where the CIO says the first time he knew about e-commerce in the business [was when] the digital agency first asked him for access to the ERP system. And that may seem bizarre but I can give you numerous examples of that.”

He spoke of a recent meeting he had with a large Australian wine company for the development of its e-commerce site.

“They had the chief marketing officer and the CEO in the room. I asked ‘where was the CIO?’ he says. “The CEO’s response was ‘for god’s sake, do not involve them, they haven’t even got email on my phone yet.’”

“That’s a sad lament on the way some people see the role of IT and the CIO in the business.”

I’ve sat in too many meetings where the CIO says the first time he knew about e-commerce in the business [was when] the digital agency first asked him for access to the ERP system.

He said CIOs need to ask why ad agencies, printers, accountants, software vendors, or anyone who can stick ‘digital’ after their name, “be allowed to drive the digital strategies of the business that you are involved in.”

“I don’t know the answer to that,” he said. “If I were you, it would keep me awake at night.”

Blending marketing and technology

Finally, Chapman told attendees that it is imperative that marketing and technology departments both “embrace the fact that the internet puts the customer front and centre in every single organisation today.”

“And it’s only when you smash creativity and technology together and they are working as one can you build that sustainable competitive advantage.

“All those examples of those businesses that have transformed and made a huge impact on people’s lives and their business’ performance – the Zappos, the Amazons and others – it’s a beautiful blending of creativity and technology smarts has made them what they are today,” he said.