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 health insurance through these State-run exchanges. Again, it makes the prices easy to compare and contrast. It’s going to keep pressure on the prices. The healthcare providers are looking around at other industries to combat these online marketplaces. They tend to get to the same place of, “I’ve got to be very good at managing this experience with my customer and also giving them other products that they could conceivably buy that may come with a little more margin.” Instead of selling one product to a customer, selling two or three can leverage the cost of that experience.

The same thing would hold true for the auto industry. There’s now plenty of price comparison sites out there for core automobile products but once again, you’re going to be very concerned with how much you are paying for your core liability policy. Maybe you’re not going to be quite as selective when it comes to looking for road-side assistance product to the extent that you can sell those and package those along with those core products. They come with a margin usually much higher than the core product. All of a sudden, I’ve got a much better value that I’m delivering to the consumer. I’m also delivering higher margins to myself.

All of those use cases are the same thing. If a distributor’s prices are getting exposed and transparent, they can send us information and we’re finding, either through them or other ways, a set of potential products that have better margins that we can cross-sell and append to the core product. Our role then is to sit in the middle and make that recommendation.

This segment is part 3 in the series : Thought Leaders in E-Commerce: Bob Dufour, President of Fusion
1 2 3 4 5 6 7