Thought Leaders in E-Commerce: Bob Dufour, President of Fusion (Part 4)

Sramana Mitra: Very interesting. The insight that is interesting here is the core versus non-core products and optimizing margins selling non-core products while people are shopping on the core.

Bob Dufour: One of the things that I would say, as far as my overall position goes, would be if you’re getting into digital marketing and if you don’t have an ancillary strategy figured out, I think you’re screwed. You’re just going to watch your margins get eroded and you don’t have anything to move them back up. People who are really good at this are going to make more money. If I’m selling a Sony television and I know that Best Buy and Amazon are out there, I know that I can only get away with offering that product at a certain price. What if I’m really good at selling warranties or financing? Both of those bring in additional profits to me. There are a couple of things I can do with that. One is, I can just take it in as profit. I’ll really look good at Wall Street for a while. The other thing I can do is, I can discount my price even more. Now, I look even better. I’m cutting the price but I’m still going to be as profitable as the other one. It gives me a lot of flexibility when I’m in a digital selling mode by having these profits that come from being really good at selling these ancillary or supplemental products. >>>

Thought Leaders in E-Commerce: Bob Dufour, President of Fusion (Part 3)

Bob Dufour: The outcome for the digital distributor is that because of the transparency, their margins are getting compressed severely. A lot of times, people use the analogy of the grocery store. You may be very aware of what you’re paying for certain big-ticket items but when you come to the checkout counter, no one really checks the cost of the magazine, gum, or soda because they’re impulse buys. The margins on those are usually very high. These ancillary products that we focus on have very high margins. Even though the purchase rate may not be as high as the core product, their margins more than make up for that. It’s a way in which, as the margins on the core product get compressed, sellers can improve their margins through being very good at selling these ancillary products.

The same thing would hold true for healthcare. Because of the Affordable Care Act in the US, the margins on core healthcare policies are shrinking. You also have the advent of the exchanges that came about as a result of the Affordable Care Act. You have a lot of people buying >>>

Thought Leaders in E-Commerce: Bob Dufour, President of Fusion (Part 2)

Sramana Mitra: Let’s take maybe a couple of your customers from different sectors and walk us through the use cases of how they use your product.

Bob Dufour: One of the things that’s common to all of our customers is that as they go online and as their business becomes more digital, price transparency increases for consumers. It’s accelerated by the presence of aggregator or comparison websites. It pushes their core margin down. Then they all have a very strong need for ancillary products. If we think of the airline industry, it would be a seat on an airplane. If you think of the healthcare industry, it would be the core health insurance product. If you think about auto insurance, it would be the core auto insurance product.

Let me take those three industries. Our role, again, is to take information that somebody has left behind—their digital footprint. That could be a referring site or information that they left on a form. It could be CRM information. We take that information on a real-time basis. If you take the >>>

Thought Leaders in E-Commerce: Bob Dufour, President of Fusion (Part 1)

This interview delves into a somewhat obscure aspect of e-commerce: margin optimization through non-core product recommendations. Quite an interesting subject in its own right.

Sramana Mitra: Let’s start with some context about yourself as well as the company.

Bob Dufour: My background is in a couple of different disciplines—statistics and analytics, direct marketing, and psychology. That’s my background and that’s how I put these all together in a company like Fusion, which was started in 2007. Our go-to market strategy is in digital optimization. What do I mean by that? We were formed in 2007 and had our launch with our first client in November of 2007. What we did at that point was we were this intermediary company that sat in between companies that had products to sell through a digital media and distributors that had customers interacting through a digital media. We sat in the middle and did real-time recommendations and real-time optimization. That was how we got started. >>>

Thought Leaders in E-Commerce: Brian Dhatt, CTO of Borderfree (Part 7)

Sramana Mitra: It’s still a whole lot of cans right now because the delivery rates are going down. The spam volumes are going up. The inbox is becoming a total nightmare.

Brian Dhatt: It depends on your approach. I think there are emails that consumers value and still want to look at every single day. I think it depends a lot on if you’re pushing personalized and relevant content to the consumer. If so, they’re going to open up your email. I do agree with you. There are many folks out there that still take the approach of sending daily emails. It’s got this generic marketing message or generic merchandising. As a consumer, if you think you’re going to see things that are pertinent to you, you’re going to open that mail everyday.

Sramana Mitra: Honestly, it’s really not viable for people to keep on top of emails anymore given the level of spam. I just look at my inbox and the number of people who are adding me to their mailing list and I have to sit there and unsubscribe from the mailing list all the time. That is an uncontrollable volume of trash that comes over. This is true about everybody these days. That is really taking away from the effectiveness of email marketing.
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Thought Leaders in E-Commerce: Brian Dhatt, CTO of Borderfree (Part 6)

Sramana Mitra: Is there any other point that you want to make? Are there any open problems that you are seeing, trying to solve, or want to see entrepreneurs solve?

Brian Dhatt: The other big one that is worth discussing might be mobile, which I know you’re probably hearing a lot about. The funny thing is, outside of the United States, you see a completely different world of mobile. We’re seeing folks transacting inside of chatting applications like WeChat. This is something that hasn’t come to the United States yet. We typically are going direct to merchant websites. You’re not transacting outside those experiences. Moving towards a community-based, content-driven model for commerce is happening aggressively outside the United States. >>>

Thought Leaders in E-Commerce: Brian Dhatt, CTO of Borderfree (Part 5)

Sramana Mitra: So you calculate duties based on data that you have. You collect that duty when you deliver the goods and pay the duty after the fact.

Brian Dhatt: We show it to them right during checkout. If you’re checking out on J.Crew, you’ll see the duties that would be assessed and pay for them right then. Anything above and beyond that, we actually get billed by the government or by the carriers. We will pay no matter what that duty comes in as.

Sramana Mitra: If you have under-assessed the duty, then you’re going to be taking responsibility for that?

Brian Dhatt: Exactly.

Sramana Mitra: How often does that happen?
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Thought Leaders in E-Commerce: Brian Dhatt, CTO of Borderfree (Part 4)

Sramana Mitra: It sounds like there are three or four different aspects that are issues. One is the payment and the whole currency management aspect. The other is shipping and who is considered as a trusted source for shipping.

Brian Dhatt: On the shipping and the compliance side, that’s a big deal to folks. The typical experience was you would either receive a notice from a customs body that says they’re holding your package until you pay more, or you would actually receive the item and then some weeks later, receive a bill from the government. That’s a horrible experience especially when you don’t know in advance what that bill is going to look like. We moved to a model where we moved that pricing right up front. You see it as part of the transaction. The item shows up on your doorstep just like it should without any additional problems. It’s the same for restricted items. >>>