[Square] The Two Wheels of Distribution Innovation: Standardization and Data

As the competitive leadership in the distribution industry rapidly shifts towards online distribution due to the impact of COVID-19, and with continued consumer recession, companies are struggling to devise survival strategies both online and offline.

Offline distribution companies are considering changes that strengthen their online capabilities while also preserving the unique advantages and values of offline channels. Meanwhile, online distribution companies are sparing no large-scale investments to improve ‘speed’ and ‘convenience’ in order to increase their market share even slightly.

Active ‘convergence’ beyond the traditional distribution domain is taking place with manufacturing, logistics, IT, and social networking services (SNS), and there is also a proactive push towards ‘digital transformation’ through the adoption of new distribution technologies such as big data, AI, metaverse (extended virtual worlds), and easy payment systems.

Amazon and Alibaba utilize big data and AI to plan and propose personalized marketing tailored to each customer’s preferred products. Based on digital data, they provide fulfillment services that cover all processes from product stocking to customer orders, storage, and delivery. The foundation of such distribution innovation strategies is ‘standardization’ and ‘data.’

First, it is important to use internationally accepted standard identification codes for each product. Whether it is barcode, QR code, or data matrix, the numbers themselves must use international standard codes. If a product has no code at all or uses non-standardized codes, inventory and logistics management for that product will be inefficient, and it will be impossible to track the history of distribution and sales processes or utilize various data.

Product information registration must also be standardized. Even for the same product, if distribution companies or channels express product names, specifications, ingredients, or materials differently, product information must be registered multiple times, and it becomes impossible to compare and analyze sales and purchase data. In open markets, product information is often incomplete, erroneous, or expressed in non-standardized ways. Open market operators must actively engage in registering standardized product information with a sense of mission that goes beyond simple sales brokerage to advancing distribution order and ensuring consumer safety.

The capability to accumulate, analyze, and utilize distribution big data is also crucial. Big data analysis is essential to efficiently manage inventory and logistics and provide personalized services to consumers. The development of new business models by startups and policy design by governments and public institutions must be based on data and statistics rather than intuition. It is necessary to actively consider establishing and operating platforms where distribution big data and the analyzed and processed results of that big data can be freely traded and exchanged.

The Ministry of Trade, Industry and Energy announced the ‘Digital Distribution Competitiveness Enhancement Plan’ last year and signed a ‘Digital Distribution Win-Win Agreement’ with 12 related organizations and online distribution companies at the end of the year. We hope that these steady steps by the government and industry towards change and innovation in the distribution industry will bear fruit, enabling our distribution industry to leap forward as an advanced convergence industry and innovation platform industry, and to thrive as a global leader on the world stage.

/Seodeokho, Director of Distribution and Logistics Promotion at the Korea Chamber of Commerce and Industry

This content was produced with the assistance of AI translation services.