The State of E-Commerce & Mexico s Potential

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1 The State of E-Commerce & Mexico s Potential Scott D. Smith Chief Commercial Officer ModusLink July 31, 2015

2 Introduction Scott D. Smith Chief Commercial Officer, ModusLink 30 years of logistics and supply chain experience. Leads ModusLink s global sales, marketing and client management organizations with a focus on growing revenue and enhancing the company s market position. Previously with Celestica, where he was Senior Vice President, Global Sales, Solutions and Marketing and was responsible for managing all aspects of sales and marketing on a global scale for both core and emerging markets. Additional prior posts include three years with Lenovo Corporation as President of the Americas and a 22 year tenure at IBM. Holds a Bachelor of Science degree from Clarkson University in New York. 2

3 3 About ModusLink ModusLink (NASDAQ: MLNK) is a global, omni-channel logistics provider. ModusLink enables innovative companies to build great products and customer experiences worldwide. Through its unique combination of supply chain and e-commerce software and services, and more than 25 physical locations around the globe, ModusLink simplifies complex supply chain issues to help customers rapidly bring products to market. ModusLink increases visibility across the entire supply and demand chain, helping customers correct problems sooner, lower costs and become more efficient.

4 About ModusLink ModusLink was recently awarded the Best International CNP Program and Best E-Commerce Platform/Gateway Customer Choice awards by Card Not Present (CNP). The company was also named a representative vendor by Gartner in its Digital Commerce Vendor Guide, 2015 in the warehousing, logistics and fulfillment service provider category. 4

5 Getting E-Commerce Right Global e-commerce sales are expected to reach $2.356 trillion by 2018, up from $1.471 trillion in Consumers are surrounded by countless buying alternatives just a click away online. They expect an easy buying process, products that arrive on time and in perfect condition and that any returns are painless. Back-end technologies and consumer-facing store pages need to be in sync with financial procedures and the product supply chain. Otherwise, consumers will go elsewhere. Because of this, it is imperative that your brand get their e-commerce operations implemented correctly from the start. Get it right and consumer loyalty deepens and return visits are secured. 5 1 Source: emarketer, Worldwide Ecommerce Sales to Increase Nearly 20% in 2014, July 24, 2014

6 Mexican E-Commerce Industry is Growing E-Commerce in Mexico is growing rapidly and will only continue to do so. Business-to-Consumer (B2C) e-commerce sales reached the amount of $8 billion in 2013, 18% of Latin America s total market share, positioning Mexico as the second biggest market in Latin America. 2 The number of digital buyers in Mexico is expected to grow 114% by 2018, a much higher growth rate than Brazil or Argentina. 3 Smartphone adoption is also encouraging online spending. 57% of Mexican consumers own a smartphone and 20% have already made a purchase with their mobile device. 2 o As seen in other global regions, mobile adoption is key to continued e- commerce growth. 2 Source: Allpago, Exploring the growing Mexican e-commerce sector, July 3, Source: Luna Vega, The Growing Mexican E-Commerce Market, July

7 but Challenges Still Remain Mexico is still largely a cash economy: o Only 13% of adults hold a credit or debit card. 4 o Many consumers don t feel comfortable giving out their information online and want to pay cash on delivery, which makes it difficult for new businesses to enter the market. o Mexican consumers are skeptical of extra fees or hidden costs tacked on at the end of a purchase. Basic logistics often present a problem: o There are complicated tax and tariff structures, necessitating a local expert s involvement with a foreign business looking to enter the market. o Shipping and delivery can still be expensive and unreliable. Without direct knowledge of the market, unpopular or inefficient choices can be offered, ultimately pushing consumers away. o An excellent online experience will immediately vanish when the shopper s preferred local payment method or currency is not available. 4 Source: Venture Village, Forget Brazil Mexico and Colombia are the new ecommerce frontiers, July 13,

8 Key Considerations Companies looking to enter the Mexican e-commerce industry need to consider: o What is my level of brand recognition in Mexico? o How much control and flexibility do I want in terms of sales channel, product selection and pricing? o How do I overcome customs challenges to ensure products can reach consumers in the promised time? o How do I provide post-sales support and ensure the right brand experience? o What is the most preferred shipping and delivery option for who I m selling to? o How do I manage payment collection? o How can I make sure that the correct taxes and tariffs are paid? 8

9 Blueprint for E-Commerce Success There are several key areas that companies rolling out an international e-commerce offering need to be attentive to in order to be successful: o Setting Up Your Online Store: This includes laying out the actual pages and supporting the back-end technology, such as hosting and maintenance. To succeed, you have to make sure that the front-end is true to your brand and promotes a positive customer experience and that the back-end is built upon technology that will integrate perfectly with the other and will scale easily, enabling future growth. o Online Business Management: This includes managing what you sell in your store, how pricing is determined and promotional campaigns. You need to make sure what you sell and how you price it reflects local preferences. To ensure your converting all possible leads, you need to set a process to optimize the traffic arriving on your store as well. o International Payment: Consumers need to be able to pay in their own local currency and any taxes or tariffs need to be factored in seamlessly. Otherwise, they won t remain your customer for long. This isn t easy for a global company expanding e-commerce to various different regions. This is why you need software that can help manage growth into other geographies. 9

10 Blueprint for E-Commerce Success o Financial Management: Companies need to invest in solid financial management systems as well, especially those that automate as much of this costly and time-consuming process as possible. By automating the entire financial activity chain of the order, including payment processing, fraud management, invoicing, refunds and reconciliation, companies can focus less on the accounting and more on making and selling excellent products. o Customer Service: Customer service is naturally very important to e-commerce success. You need to have agents that can answer any question or solve any problem from launch. It helps to give those agents full visibility of the order process so they can provide support during each phase of the sales cycle, including purchase, payment, product and returns. o Fulfillment: Customers have become accustomed to easily purchasing and returning products online, at any time they wish. Customers want access to multiple carrier options, ensuring fast and affordable shipping, with tracking and visibility throughout the entire process. This helps customers feel connected to the brand, knowing exactly how and when products will arrive and ensures the brand has the same knowledge in case of issues or disputes. 10

11 The Importance of the Supply Chain An e-commerce site is only as good as the supply chain and logistics processes behind it. o If customers are not receiving an excellent online shopping experience, they will go elsewhere. o The shopping experience is not limited to the look and feel of the website once a consumer selects a product and decide to purchase, the site architecture needs to be in sync with the supply chain. No consumer wants to think they ve purchased something, only to get an later that their item is out of stock. Customers expect accurate shipping and delivery times to be given, meaning your suppliers and factory need to immediately factor each and every order in. o Supply chain and e-commerce information sharing needs to be a two-way road; updates from one inform the other and vice versa, helping to ensure the customer experience is optimized across the board. 11

12 Tassimo: International E-Commerce Case Study Europe s leading coffee maker implemented global e- commerce system using a SaaS (software-as-a-service) platform. Enabled company to efficiently use same technology backend and front-end to launch e-commerce stores in 15 geographies. Platform integrated directly with company s delivery system, making it easy for consumers to be automatically notified of pending shipments or to easily change delivery destination as needed to re-route the package to a business address, neighbor or pick up point. The e-commerce technology used makes it quick and efficient for Tassimo to add new brands, coffee formats and regions in the future. 12

13 Why Mexico? Growing e-commerce market; number of digital consumers to increase 114% by Proliferation of mobile devices = greater number of potential consumers online. Payment, shipping and delivery options are maturing increasing consumer confidence in purchasing goods online. Today s e-commerce and supply chain technologies have been tested again and proven in other geographies, making them perfect to get brands quickly up and running in Mexico. 13

14 Thank You! Questions? Scott D. Smith Chief Commercial Officer ModusLink

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