Near Field Commerce – Another Rising Trend for e-Commerce After O2O

June 11, 2018 i-Neighbour Smart Community 1 Comments




Near Field Commerce – Another Rising Trend for e-Commerce After O2O



The history of e-commerce can be dated back as early as 40 years ago when an innovative English entrepreneur, Michael Aldrich, connected a television set to a transaction processing computer with a telephone line in 1979, and created what we called “teleshopping”, thus started the concept of shopping at a distance. 


Internet accelerated the growth of e-Commerce in the 1990s, sprouted millions of B2B, B2C online storefronts and platforms. And Amazon, the largest e-Commerce store established so far on Earth, started as an online bookstore in 1994, now becomes the everything store; offering limitless selection and seductive convenience at disruptive low prices, registering a revenue of USD178 billion in 2017. 


With the boom and ubiquitous presence of smartphones, it sparked another round of e-commerce revolution, and online-to-offline commerce, or simply O2O, boosted by the mobile technology and beginning to take shape nowadays which stressed on the interactive element between the online and offline business operations. Group purchase platform: Groupon; ride-hailing service providers: Uber, Grab and Lyft; bike-sharing services: Mobike and ofo; order online and pick-up at storefront: Walmart to Go are all best quoted examples of O2O business models, which integrate the online and offline business operation to create a seamless and better customer experience. 





Near Field Commerce, NFC  



Near Field Commerce is a term I coined, adopting the well-known acronym, NFC, which refers to near field communication, a communication protocol that take effects within 4cm, often used between two electronic devices, one of which usually is the smartphone, and to be commonly used for mobile payment and mobile access. I removed the word 
"Communication" and replaced it with the word "Commerce"; with the clear concept to adopt smart technology to connect buyers and sellers to complete any business transactions in close proximity.   

Contrary to the e-Commerce of promoting the borderless marketing regardless of distance, the B2C or C2C Near Field Commerce champions a short distance business activity, whereby the shorter the better. 


One might ask, the concept is quite like O2O, so why not just stick with O2O, rather than creating a new term that could create confusion?



The difference between O2O and NFC



Just like O2O, Near Field Commerce represents a certain mix of online and offline operations to connect buyers and sellers within the same geographical concerns; but in O2O, buyers are always treated as separate and simple individuals, while in Near Field Commerce, the community is one of the key considerations. When the community comes into the scene, there is a requirement to link the e-Commerce platform and the community platform thus e-Commerce will appear to be part of the community system. The commercial functionalities can either be B2C or C2C like O2O, but the focus would be on the integration and interaction with the smart community system to achieve a better community experience, rather than an individual customer experience. 


And unlike the O2O’s normally purely business consideration nature, Near Field Commerce has a society value in mind; besides reducing time and cost, cutting waste to a minimum should be the larger environmental perspective concern in one of the NFC’s sacred goals. 


Now let us temporarily shift our attention towards the environmental aspect in relation to e-commerce.   






A boon in e-Commerce, a bane in environment 



In general, the prosperity in e-Commerce has given the logistics industry a big boost as demands for transport and delivery services soared. 


According to E-Commerce Logistics Market Report, published by Allied Market Research, the global market is expected to garner $535,895 million by 2022, registering a CAGR of 21.2% during the period 2016-2022. The transportation service type generated the largest market share in 2015 while warehousing sub-segment is expected to register the fastest growth during the forecast period 2016-2022. Asia-Pacific is expected to be the largest market over the forecast period.

The rise of e-Commerce that boosts the logistics industry, normally tags along with two environmental problems, firstly the carbon emission problem, and secondly the waste of packaging. 


For example, China faces 160 tonnes of packaging waste after Singles’ Day buying binge.  Greenpeace described the annual promotion as a "catastrophe for the environment" that not only creates waste, but also leads to a surge in carbon emissions due to manufacturing, packaging and shipping. In a report published last week, it is estimated that the total orders of last year had produced 52,400 tonnes of additional climate-warming carbon dioxide.


We all know too well that e-Commerce helps to eliminate travel time for customers but on the other hand, increases the transportation for the delivery of goods. This is not a simple offset game from one to another, because e-Commerce channel, on average, tends to produce more emissions per item for three reasons: e-Commerce requires additional packaging, customers purchase fewer items per online transaction, and multi-item orders often result in multiple deliveries. Hence, the purchase volume of a single trip to a physical store requires multiple e-purchases and deliveries. That said, one normally seldom travel far to purchase goods, but with online purchase, shopping and goods now travel around the globe. 

We also know too well that for deliveries, two of the largest sources of emissions are last-mile delivery and packaging. The e-Commerce channel can improve its average footprint per item by increasing the number of items shipped per order; but only if all the items can be packaged and shipped together. The Walmart study underscores the importance of shipping multiple items together and avoiding split shipments, which occur when some of the items being shipped are not immediately available from the same distribution center. As a result, the emissions of two items shipped separately are 35% higher than if the items are shipped together.


Walmart’s findings show that for grocery items, the average brick-and-mortar purchase is also more environmentally efficient than e-Commerce. When customers buy their groceries online, they tend to buy larger basket of goods than with other e-purchases. However, delivering groceries is carbon intensive because retailers will still need to alter routes to suit customer schedules along with using refrigerated trucks or special packaging. Standard delivery by parcel requires either insulated packaging or reusable coolers that must be picked up from the customers and returned to distribution facilities.


That is why promoting Near Field Commerce would be the solution to build a more environmental friendly community compared with online commerce or online to offline commerce in general. 





The adoption of Near Field Commerce in a smart community 



A smart community system should consider the following elements for Near Field Commerce:



1. A Compulsory in Smart Community 

Near Field Commerce is a must in a smart community system, and the system should have the ability to connect any nearby merchants or service providers to the communities, rather than to promote general e-commerce.  

2. Distance is an essence 

Since distance matters for Near Field Commerce, the merchant platform should be able to provide geographical distance or GPS coordinates information in order to allow the users to pick up from the nearest merchants in their vicinity. For example, the nearest clinic, locksmith, veterinary, plumber are essential in some circumstances. And occasionally, when customers decided to visit some places; distance is the main consideration instead of price. 

3. Merchant directory 

Just like e-commerce platform, the Near Field Commerce platform also should have a merchant directory based on categories, loaded with products, prices, promotions, contact information, customer reviews and etc.

4. Online payment not necessary

Online payment gateway might not be necessary for Near Field Commerce because, sellers and buyers can meet face to face easily, so long as both parties agree; payment method is not the crucial issue. 

5. Eliminate Third Party Logistics 

Short distance is the best distance in promoting Near Field Commerce, the shorter the better, with the objective to eliminate third party dispatch services entirely since sellers and buyers can meet up easily. Besides cutting the cost of delivery that helps reduce carbon emission, it would also reduce the waste in packaging tremendously. You don’t need a special wrapping plastic or box to carry home some groceries. Near Field Commerce promotes the concept of “Grab a book from your nearby bookstore, instead of getting it sent from thousand miles’ Amazon”. 

6. Yard sales to recycle used merchandise

To tie short distance and environmental concerns, what better Near Field Commerce concept than a Yard Sale? A smart community platform should come with a yard sale module to entice the recycling of used stuff among the neighbourhood. Even if you are providing some personal services like tuition, piano lessons, renting out of your own unit; a yard sale within the community is the best Near Field Commerce, whereby it achieves virtually zero distance; eliminate the time and cost of traveling entirely. 

7. Contact info for amenity services 

Even if a smart community system comes with or without a proper embedded Near Field Commerce platform or yard sale feature, it should have a system for the community to add the contacts of useful and best chosen service providers into its system to facilitate the near field commerce activities. For example electricians, movers, cleaners, gardeners, gas suppliers’ contact info and etc. 

8. Delivery to integrate with visitor management system  

Integration of Near Field Commerce platform with a smart community platform is essential at the visitor management system level to facilitate the delivery services from the merchants. Since pre-registering visitor is almost a default built-in feature for a smart community platform, the integration will smoothen the delivery process with a simple QR code scan at the guardhouse and to enhance the security level required by a gated and guarded smart community. Additionally, the information of the delivery such as date, time, merchant, dispatch vehicle and delivery man can be obtained effortlessly.  

9. Third party O2O system integration 

Nowadays, the system developers always adopt open architecture in designing their system as well as provide API, or Application Programming Interface for third party developers to integrate with their system. With Near Field Commerce concept in mind, smart community system providers should consider to establish deep integration of some O2O commerce platform into their system. Take Uber as an example, imagine when calling a cab, relevant information like cab driver and vehicle plate number can be pre-registered, thus speeding up the pick-up and drop-off process. Or in a permissible Airbnb service community, deep integration should be able to facilitate the issuance of temporary pass for tenants and their vehicles for accessing the community within the tenancy period.  Besides achieving better automation, all O2O activities would be traceable at the community level. 

10. Offline shopping mall to achieve Near Field Commerce

For a housing developer that builds a township to include a shopping mall nearby its residential, better engagement between the merchants and residents can be achieved with the Near Field Commerce platform. In this context, the Near Field Commerce should be the reverse of O2O, offline to online, rather than online to offline. Imagine when a physical store in a shopping mall with lesser buyers during weekdays, the merchant receives orders from the nearby residents and delivers the merchandises without hassle to boost sale and compensate their loss during slack time? Imagine an exhausted resident coming home from work, will he/she shop at the nearby shopping mall, or shop at the Near Field Commerce platform, and get their items delivered to their doorstep in the evening? 

11. To ease returned merchandise handlings

One of the significant advantages for Near Field Commerce is the handling of the returned merchandise. Retail is estimated as a $5 trillion market, with about 10% of that being e-Commerce. According to Reverse Logistics Association, the return rate on in-store purchases is about 8%, but for online shopping, the rate leaps to 25-40%, causing extra waste of packaging and carbon emission. But for Near Field Commerce platform, with the brick and mortar store nearby, the returned merchandise handling is just a walk in the park!

12. Trust-based commerce 

Several barriers still constrain further growth in long distance cross-border e-Commerce, including unreliable and lengthy transit times, complex and ambiguous return processes, customs bottlenecks, limited transparency in delivery, price opacity, limited ability to alter delivery times, and all in all, resulted in limited mutual trust. Because Near Field Commerce platform is not merely based on online communication, it also encourages offline communication between buyers and sellers, where you can look into their eyes, or easily strike a conversation; better relationship and trust can be built within two parties. 


Summary:

1.   Near Field Commerce promotes short distance commerce to preserve the environment by cutting any unnecessary waste in terms of product packaging and reduce carbon emissions by avoiding excessive transportations. 

2.   Near Field Commerce stresses on eliminating the involvement of third party logistics in business dealings between the buyers and sellers.  

3.   Near Field Commerce encourages online e-commerce platform to better connect merchants with customers as well as complete the business activities within the vicinity.

4.   The online platform can remain as a separated platform to connect into any smart community system or can be any modules developed within a smart community system.

5.   If the online e-commerce is a separate platform, Near Field Commerce stresses on the interoperability and the interactivity between the functionalities of the e-commerce platform and the smart community platform. For example if a delivery is involved, the integration of a visitor management system from the smart community platform is necessary.

6.   For township that contains a shopping mall surrounded by residential areas, the offline commerce should be embedded with online Near Field Commerce platform for the objective to enhance the customers’ engagement and improve business activities.

7.   Near Field Commerce reduces the hassles in the handling of returned merchandise.

8.   Near Field Commerce strengthens the trust and relationship between buyers and sellers.

9.   Since buyers and sellers can meet up easily, the payment methods can be of any kind; online payment is not a compulsory for Near Field Commerce platform.  

10.  Distance info is at the very core when designing a Near Field Commerce system.


References:


1. Wiegler, L 2017, Returns of Online Purchases a Key Factor in E-Commerce Boom, Transport Topics, viewed 15 July 2018, <http://www.ttnews.com/articles/returns-online-purchases-key-factor-e-commerce-boom>. 

2.  Online-to-Offline Commerce 2017?, Investopedia website, viewed on 20 July 2018, <
https://www.investopedia.com/terms/o/onlinetooffline-commerce.asp>.

3. Aaron Cheris, Casey Taylor, Jennifer Hayes and Jenny Davis-Peccoud 2017, Retailers' Challenge: How to Cut Carbon Emissions as E-Commerce Soars, Bain & Company, viewed on 22 July 2018, <http://www.bain.com/publications/articles/how-to-cut-carbon-emissions-as-ecommerce-soars.aspx>.


4. China faces 160,000 tonnes of packaging waste after Singles' Day buying binge 2017, The Strait Times, viewed on 25 July 2018, <https://www.straitstimes.com/asia/east-asia/china-faces-160000-tonnes-of-packaging-waste-after-singles-day-buying-binge>.


5. E-Commerce Logistics Market to Garner $535,895 Million, Globally, by 2022 2017?,  Allied Market Research, viewed on 30 July 2018 <
https://www.alliedmarketresearch.com/press-release/e-commerce-logistics-market.html>.

6. How e-commerce companies are changing the logistics business 2016, EDB Singapore, viewed on 28 July 2018, <https://www.edb.gov.sg/en/news-and-resources/insights/innovation/how-e-commerce-companies-are-changing-the-logistics-business.html>.



Teh Hon Seng, Group CEO of TimeTec Group of Companies. Prior to forming TimeTec, Teh led PUC Founder (MSC) Bhd to be listed on MESDAQ (ACE) market of Bursa Malaysia in 2002. Teh initiated the R&D in fingerprint technology in 2000, which later developed into a renowned global brand for commercial fingerprint product known as FingerTec. In 2008, he foresaw the trend of cloud computing and mobile technology, and over the years, he had strategically diversified and transformed its biometric-focused products into a suite of cloud solutions that aimed at workforce management and security industries including smart communities that centered around the cloud ecosystem. Teh has more than 10 patents to his name, and he is also a columnist in a local newspaper and a writer of several books.

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