Keywords

E-commerce, Retailing, Strategy, Marketing, Logistics

Case Body

Once again, Luis was trying to purchase in the online store of Carlos III, hosted in tuenvio.cu platform, after waiting more than ten days for its reopening. Days before, the e-commerce had closed to make "readjustments in its logistic process." However, this time, after putting the few products available in the shopping cart, he was ready to make the payment, when suddenly the website "fell" for several hours. The next morning, when the site "woke up" and checked his shopping cart, most of the selected products were no longer available. Luis closed his browser and was ready to resume his work online. After all, he felt lucky that the error had not occurred in the payment confirmation, as if it had, he would have to claim the reimbursement to the store, and he did not know how long the response would take. One thing he was sure of, and that was that tuenvio.cu platform needed improvement¹.

E-commerce in Cuba

Cuba is a Caribbean country, with a geographical extension of 109,884.01 km², divided into 16 provinces, with a total population of 112,21060 inhabitants. Its capital, Havana, is home to 2,195,53 million people (República de Cuba, 2019). Cuba has had a centralized socialist economy since the 1960s, and since the 1990s has had a partially dollarized economy, with two currencies for retail operations: the Cuban peso (CUP) and the convertible peso (CUC) with a relative parity to the U.S. Dollar.

In parallel to these two currencies, there are two types of retailers: those that operate in CUP and those in CUC. In 2019, several retailers were authorized to operate in both currencies. However, the year 2019 added additional complexity: several stores that only operate in international currencies such as the U.S. dollar or the euro were opened. In those stores, clients can only pay with international credit or debit cards, or debit cards from Cuban banks with funds in those currencies.

In terms of telecommunications, in 2006, Cuba had a mobile telephone penetration rate of 1.3% and Internet access of 0.1%. In 2008, Cubans were authorized to have mobile telephone services. Five years later, ETECSA, the Cuban telecommunication monopoly, created Wi-Fi hotspots in its venues, parks, and hotels. In December 2018, Cubans had access to mobile data through 2G and 3G networks, expanding 4G networks in 2019. All of these are prepaid services.

By the end of 2019, there were some 6,217,000 debit cards in the country issued by Cuban banks (Figueredo Reinaldo, 2020). Those plastics are not valid for use on international websites but Cuban shops and national banks. There were 6.1 million mobile phone lines (del Sol González, 2020a), of which 3.7 million had data plans, 1.7 million permanent accounts for internet access in Wi-Fi hotspots, and 160,000 ADSL connection services in homes (del Sol González, 2020).

E-commerce for B2C arrived in Cuba in 2007 through virtual stores on websites hosted abroad, so that family and friends can purchase products and services for their loved ones on the island. Among these stores are compra-dtodo.ca and bazar-virtual.ca (Figueredo Reinaldo, 2020b). From these experiences, other retailers gradually joined, such as the 40 stores in envioscuba.ca platform. These operate in a similar business model, but the difference is that the latter are physical stores that add up an e-commerce channel.

Until shortly before the arrival of COVID-19, none of those e-commerces had the Cubans on the island as their target, because most of them did not have international credit or debit cards to make online payments.

COVID-19 times

"The Computerization of the Cuban Society Strategy" visualized e-commerce in Cuba before the arrival of COVID-19, of which the opening of tuenvio.cu, and xetid.cu platforms gave account. However, when social distancing measures were settled, online stores were boosted to nationals. At that moment, retailing experienced a product's scarcity and large queues of crows, which could spread the virus.

The precarious situation of retailing in Cuba had several reasons:

1. The U.S. embargo and the inclusion of national retail chains in the list of companies sanctioned by the Trump administration for belonging to the Revolutionary Armed Forces, limited the access to many international suppliers and external sources of financing.

2. The Cuban economy depended on imports of consumer goods because of the low productivity of the national industry.

3. There were no wholesale stores in Cuba that guarantee a steady supply of inputs in the required amount and reasonable prices, as required by entrepreneurs. That made those entrepreneurs relies mostly on retailers.

4. There was a liquidity shortage for international currencies since national retailers operate in CUC and CUP, which cannot always be exchanged for the import activity.

That was the scenario where e-commerce is born for Cubans.

E-commerce tuenvio.cu

In November 2019, Corporación CIMEX S.A. launched the e-commerce platform tuenvio.cu developed by the company Datacimex, and designed to manage, in a centralized way, the e-commerce of different physical stores of the Corporation. Tuenvio.cu started its operations in Havana and incorporated stores from the rest of the provinces during 2020 (ACN, 2020). Carlos III was the first physical store joining tuenvio.cu. The department store already had experience with its online store carlostercero.ca, aimed at international customers.

Carlos III e-commerce commercialized the product lines: grocery, beverage, baby, beauty and personal care, electronics, home appliances, and house cleaning products. Available products were visible for the customer, whether being authenticated or not. But not only for Cubans on the island, but for anyone from wherever in the world. When creating a new user, the website only requested a name, a password to confirm twice, an email, and complete a captcha code. The client was verified by email, and the new user is set.

The e-commerce operated in both CUC and CUP. It had a wish list, a shopping cart, a section of useful links for order tracking, warranty services, help and contact, and information regarding transportation and delivery, terms and conditions and, return policies. The website's home showed the contact phone, email, and the geographical location of the store.

The customer's purchase process went through authentication, selection of products from different menus, order display in the shopping cart, and payment. The latter took place in six-steps, where the customer must:

1. register his data as the sender of the order -after the first time it is saved and self-complete-,

2. select a beneficiary, modify it or register a new one, allowing the option of naming up to a second recipient of the delivery,

3. choose the delivery method -in-store pickup or home delivery-,

4. accept the terms and conditions of the store,

5. check the data, order's amount and send the order, and

6. Pay.

Each step is done independently and consecutively to the previous one, by clicking on the Next button.

The e-commerce started its operations only with the in-store pickup method, but soon added home delivery. Time for in-store pickup was three days, and for home delivery, seven days (Peña López, 2020). The e-commerce did not accept payments directly with debit cards on its website. Therefore, in step (6), customers must had Trasnfermóvil, a mobile app jointly developed by ETECSA, and the banks BPA, BANDEC and BANMET. Transfermóvil keeps the bank details associated with the customer's debit cards from one of these banks and is linked to a code card the customer must obtain from his bank.

Transfermóvil was an app for online payments and banking operations in the eyes of the customer. The app worked based on sending and receiving SMS free of charge, which did not require internet access (Transfermóvil, 2020). The application intermediated transactions between different Cuban service companies, customers, and the banking system. At the moment of payment in tuenvio.cu (step six), the customer could manually enter the order's data or scan a QR code. Once the order was identified and confirmed, Transfermóvil instructed the bank to deduct the amount from the customer's debit card. Finally, the bank notified the payment to the store as well as the client by an SMS.

In the wake of the COVID-19 crisis, operations in the physical stores were reorganized on April 9, focusing on the sale of essential goods such as grocery, and personal and household hygiene. Public transport, both state and private, which was used by most of the Cuban population, was also suspended. At the same time, CIMEX began to run another e-commerce stores in tuenvio.cu, planning to have seven new stores in Havana, in addition to the 13 stores running in the rest of the country Beatón & Ferrán, (2020). On the other hand, it encouraged its use by offering customers a 10% discount on the total value of the shopping.

These measures caused a shift in demand towards e-commerce, which was not correctly estimated, as stated by Héctor Oroza Busutil, president of CIMEX: "... we were not prepared. We were not able to foresee the growth in demand that would result from the measures proposed and approved on April 9 to confront Covid-19" (Figueredo Reinaldo, 2020b). Rosario Ferrer, commercial vice president of CIMEX, commented that Carlos III's previous experience in e-commerce was limited to a 60 m2 space, operated by five workers, with no more than 100 orders per day (Televisión Cubana, 2020, mayo 7). Figure 1 shows the order's increase received on the tuenvio.cu.

This avalanche of orders for which the company was not ready caused a series of problems such as the low availability of products, because demand exceeded supply (Figueredo Reinaldo, 2020a). In that sense, a customer of the store commented on a press website: "...most of the time - the store - is out of stock of products of first necessity...". (Aliette, 2020).

CIMEX recognized the increase in demand, mainly in food, hygiene, and toiletries (Redacción digital, 2020). This increase impacted tuenvio.cu platform, generating problems as the managers acknowledge: "...serious difficulties are being encountered to access the platform...", where "...the page has maintained a very unstable operation...". (del Sol González & Rodríguez Milan, 2020).

Ramsés Díaz pointed out that tuenvio.cu platform was created under a centralized operation architecture, which performed the execution of the online purchases, the confirmation of the orders, and the payment process, from the same database and website, for the thirteen stores at the same time. Gilberto Díaz, general manager of DATACIMEX commented that the platform was functional in its origin when it received an average of 5000 daily visits and less than 100 users accessing simultaneously, with an available bandwidth of 40 Mbps of which only 12 Mbps were used. With the change of scenario, it went to 25 thousand visits per day and concurrence of up to 8000 users, which made the platform inoperable (Televisión Cubana, 2020, mayo 7).

Another client commented on his experience: "...I've been trying to get into tuenvio.cu all day, and there's no way to get inside. I don't know if it is congestion or what it is, but it is impossible to enter this website..." (Arh, 2020).

CIMEX authorities pointed out that the malfunctioning of the website caused difficulties in the rest of the system. One of the manifestations of these problems was the non-completion of the purchases (Figueredo Reinaldo, 2020a), as one customer stated: "I just made an invoice (twice) on that website and at the end, there is an error that must be dealt with by the network administrator" (Papaho, 2020). Another customer pointed out:

...2 hours of the home internet trying to buy and nothing. When you're in the famous "six" steps to make the purchase the website falls, when you think you're going to finish, they send you back to the shopping cart page with the announcement that the product you want and already selected is sold out. (Mamrda, 2020)

Another problem associated with the system's instability was that there were difficulties with the connection to the bank, which caused some customers to have their bank account debited even when the order was not placed in the e-commerce (Figueredo Reinaldo, 2020a). A customer told her experience:

I'm really worried about a purchase I made. The money was deducted from my debit card, but I never received the payment receipt email. And when I go to the website to see my order, it comes out that I don't have any purchase made. I write to the email they give, and I don't get any answer. I call the phone and it is always busy. What can I do? (UnaPreocupadaMas, 2020).

Nevertheless, tuenvio.cu dealt with payment issues from the very beginnings, associated with the two currencies, causing that some clients were charged to an exchange rate different from the official (del Sol González & Rodríguez Milan, 2020). That was the experience of one customer who commented: "If you pay for a product in CUC and it does not exist, the money is returned at a rate of 1 for 24 and not 1 for 25 as you were charged" (Talia, 2020).

On the other hand, perhaps the most stressing problems were linked to the incorporation of e-commerce to the brick-and-mortar store, with both forms coexisting in the same physical stores. That led to internal organizational and logistical problems in some of the venues that provide those services (Figueredo Reinaldo, 2020a).

In some stores, physical and virtual sales were made from the store's sales-floor, reducing the inventory only for the in-store sale and not the online sale (Ojeda Bello, 2020). There was also a lack of match between the exhibited offer in tuenvio.cu and the real inventory in the warehouse, which caused that when the client received the delivery or went to the store to pick up his products, the package was not complete (Figueredo Reinaldo, 2020a). About this, Gilberto Díaz commented that the inventory management system worked in such a way that, once the day's work in the store was over, all those orders were invoiced manually. When the inventory system synchronized with the accounting system again, it produced an inventory already sold, which led to a large group of orders for non-existent products (Televisión Cubana, 2020, mayo 7). In this regard, one client commented his experience:

It happened to me that I made a purchase (they say the delivery is from five to seven working days). After six working days, I asked them through an email, and they told me that they were on time. After nine working days, they gave me my money back because there was no availability of the product; however, on the platform, after eight days, the product was still on sale. (Jalev, 2020)

As a consequence, customers experienced delays in dispatch and delivery of more than ten days (Ojeda Bello, 2020), but not only in home delivery, but also at in-store pickup, which generated queues in the sidewalk of the store: an undesirable effect at the time of COVID-19 (Figueredo Reinaldo, 2020a). About this, another customer told his story:

The fourth time I went, I decided to wait. In all cases, the queue to pick up the order was almost three times longer than to enter the store. This last time there were fewer people, but it tooks me one hour and a half until the clerk picked up my I.D. card, then we went upstairs and had to wait for another 30 minutes up there so they could call me at the delivery office. (Blindado, 2020)

In these situations, an increase in customer complaints and interactions with the company was expected. In this regard, CIMEX acknowledged that there was a lack of attention to the main channels of customer service (Peña López, 2020), whether by telephone or email. A customer recounted his experience:

... I have tried to contact them through all the supposed channels of customer service to tell them about the limited quantities in all the products and other problems in the online store, and so far, nothing... They don't answer my emails, they don't answer me by phone, they don't answer my comments on Facebook... (PowerSlave, 2020).

Finally, another of the problems presented, and which might become one of the causes of the previous ones, was not having the required amount of personnel prepared to operate the e-commerce (Peña López, 2020). In this respect, the experience of this client, although in a different e-commerce from another state-owned store chain, at the same time, was very revealing:

Those in charge of the 5ta y 42 website have no idea how this really works; they don't even have a training in I.T. matters, so when they are given a problem they are left empty mind and don't know what to tell you. One of them even told me when I went to complain that that's why he was putting the website down. What he doesn't know is that, if several people are making a payment at that moment, and he puts the website in maintenance mode without any warning, he discounts the client's money without completing the order because the process could not finish. I think this regard takes seriousness and training." (Jessy, 2020).

Perhaps this comment from a client summarized much of what, in terms of customer satisfaction, these problems represent:

The service doesn't work in Havana nor anywhere else. In Camagüey, for example, you spend more time in line to pick up the products than if you were in ques on the street for buying with cash. Not to mention the bad service of the workers and that when you arrive in you are almost always missing something of what you have already paid for, and I still don't understand how they can sell without having availability or an inventory to support that sale. Ah, and the return of the money takes more than a week to arrive... Sadly, I have had to live all this (Mary, 2020).

As a result of all these problems, on June 9, CIMEX issued a news release informing the gradual closure of the online stores hosted in tuenvio.cu for their reordering. The company reported: "Despite the different measures adopted to assist the customers' orders, we recognize that we have not reached the expected result, and instead of decreasing, the demand dissatisfaction has grown" (Redacción digital, 2020).

Upon reading the news, Luis confirmed the need for CIMEX to implement improvements in the entire system associated with tuenvio.cu and resolved to present a consulting project to the Corporation's management.

Instructors' Notes

Position in the Course

The case is designed for the course: "Business Models for e-commerce" for the Master Program in e-commerce. It should be applied later to the topic “Strategic planning for an e-commerce”, after completing the topic “Strategic analysis for B2C business models”.

Learning Objectives

1. To raise awareness about the need of strategic planning for a B2C e-commerce.

2. To evaluate the different business models when launching a B2C e-commerce.

3. To assess the demand for an e-commerce and its market viability.

4. To generate a consulting project for the success of a B2C e-commerce.

Suggested Reading

Laudon, K.C., & Traver, C.G. (2017). E-commerce 2017: business, technology, society (Thirteen edition). Boston, Pearson Education.

Questions for the Students

1. Based on the information presented in the case, assess tuenvio.cu e-commerce business model.

2. What elements should have been taken into consideration for the launching of tuenvio.cu e-commerce.

3. Make a consulting proposal for “fixing” and guarantying the success of tuenvio.cu e-commerce.

Recommendations for Teaching Approaches

1. The professor should make the case study available for students in advance for reading, analyzing, and answering the questions.

2. The professor can begin the class by voting on whether or not to build success from a failure in e-commerce. From the vote, students should discuss what a failure represents for issues such as customer satisfaction and loyalty.

3. Next, the professor will facilitate a discussion on the planning and implementation phases of the tuenvio.cu e-commerce business model, its failures, and possibilities for improvement. This discussion will include aspects such as calculation of market demand; objective conditions for the e-commerce development: the situation of retailing, stability of supply, telecommunications and banking in the country; usefulness of previous experiences in e-commerce and how they could have exploited; functionality of the web site and friendliness of the purchase process (emphasis on the payment process); delivery methods; payment methods; connectivity with banks through Transfermóvil; coexistence of the physical store with the virtual store (organization and logistics); invoicing and inventory management; delivery time; delivery process; customer service; and staff training.

4. Finally, the professor will organize work teams to validate the consultancy proposals, which will be unified and presented in a plenary session.

5. The session will culminate with the request to generate the take-aways of the case study.

End Notes

1.This case deals with a real situation and was built on secondary information obtained from public sources. The authors construct a fictitious initial and final situation to put the student in the context of the development of a consulting project. The case recreates a situation with the only purpose of serving as a class discussion material. This case study does not intend to illustrate or judge good or bad administrative practices of the companies, institutions, and persons herein aforementioned.

References

1. ACN. (2020). Habilitada nueva plataforma de comercio electrónico. Agencia Cubana de Noticias. Recuperado el 19 de junio de 2020, de http://www.acn.cu/cuba/60414-habilitada-nueva-plataforma-de-comercio-electronico
2. Aliette (2020). Re: CIMEX anuncia mejoras a tiendas virtuales congestionadas [Newspaper comment]. Retrived from http://www.cubadebate.cu/noticias/2020/04/10/cimex-anuncia-mejoras-a-tiendas-virtuales-congestionadas/comentarios/pagina-3/
3. Arh. (2020). Re: CIMEX anuncia mejoras a tiendas virtuales congestionadas [Newspaper comment]. Retrived from http://www.cubadebate.cu/noticias/2020/04/10/cimex-anuncia-mejoras-a-tiendas-virtuales-congestionadas/
4. Beatón, B., & Ferrán, B. (2020). Nuevas medidas frente a la COVID-19. Trabajadores. Recuperado el 19 de junio de 2020, de http://www.trabajadores.cu/20200409/mesa-redonda-sobre-cuba-frente-a-la-covid-19-cobertura-especial/
5. Blindado (2020). Re: CIMEX anuncia mejoras a tiendas virtuales congestionadas [Newspaper comment]. Retrived from http://www.cubadebate.cu/noticias/2020/04/12/cimex-adopta-medidas-para-viabilizar-compras-y-evitar-aglomeraciones/comentarios/pagina-3/
6. del Sol González, Y. (2020). Ampliar el acceso a internet es una prioridad para Etecsa. Granma. Obtenido de http://www.granma.cu/cuba/2020-05-29/ampliar-el-acceso-a-internet-es-una-prioridad-para-etecsa-29-05-2020-00-05-47
7. del Sol González, Y. (2020a). Etecsa continuará ampliando sus servicios y conectividad. Granma. Recuperado el 19 de junio de 2020, de http://www.granma.cu/cuba/2020-05-29/etecsa-continuara-ampliando-sus-servicios-y-conectividad-29-05-2020-00-05-38
8. del Sol González, Y., & Rodríguez Milán, Y. (2020). 20 datos importantes para entender qué pasa con las tiendas virtuales en Cuba. Granma. Recuperado el 19 de junio de 2020, de http://www.granma.cu/cuba-covid-19/2020-04-17/20-datos-importantes-para-entender-que-pasa-con-las-tiendas-virtuales-en-cuba
9. Figueredo Reinaldo, O. (2020b). De lo físico a lo virtual: Panorama de la red de tiendas en Cuba. CUBADEBATE. Recuperado el 19 de junio de 2020, de http://www.cubadebate.cu/noticias/2020/05/14/de-lo-fisico-a-lo-virtual-panorama-de-las-red-de-tiendas-en-cuba-video/
10. Figueredo Reinaldo, O (2020). A partir de agosto pago exclusivo por tarjetas magnéticas en los servicentros. CUBADEBATE. Recuperado el 19 de junio de 2020, de http://www.cubadebate.cu/noticias/2020/03/23/desde-agosto-pago-exclusivo-por-tarjetas-magneticas-en-los-servicentros/
11. Figueredo Reinaldo, O. (2020a). Comercio Interior, Cimex y Tiendas Caribe responden inquietudes de la población sobre comercio electrónico. CUBADEBATE. Recuperado el 19 de junio de 2020, de http://www.cubadebate.cu/noticias/2020/04/29/comercio-interior-cimex-y-tiendas-caribe-responden-inquietudes-de-la-poblacion-sobre-comercio-electronico/
12. Figueredo Reinaldo, O., & Sifonte Díaz, Y.J. (2020). Comercio Interior en tiempos de COVID-19 en Cuba. CUBADEBATE. Recuperado el 19 de junio de 2020, de http://www.cubadebate.cu/noticias/2020/05/07/comercio-interior-en-tiempos-de-covid-19-en-cuba-video/
13. Jalev (2020). Re: CIMEX anuncia mejoras a tiendas virtuales congestionadas [Newspaper comment]. Retrived from http://www.cubadebate.cu/noticias/2020/04/10/cimex-anuncia-mejoras-a-tiendas-virtuales-congestionadas/
14. Jessy (2020). Re: CIMEX anuncia mejoras a tiendas virtuales congestionadas [Newspaper comment]. Retrived from http://www.cubadebate.cu/noticias/2020/04/10/cimex-anuncia-mejoras-a-tiendas-virtuales-congestionadas/comentarios/pagina-3/
15. Mamrda (2020). Re: CIMEX anuncia mejoras a tiendas virtuales congestionadas [Newspaper comment]. Retrived from http://www.cubadebate.cu/noticias/2020/04/10/cimex-anuncia-mejoras-a-tiendas-virtuales-congestionadas/comentarios/pagina-5/
16. Mary (2020). Re: CIMEX anuncia mejoras a tiendas virtuales congestionadas [Newspaper comment]. Retrived from http://www.cubadebate.cu/noticias/2020/04/10/cimex-anuncia-mejoras-a-tiendas-virtuales-congestionadas/
17. Ojeda Bello, I. (2020). CIMEX anuncia mejoras a tiendas virtuales congestionadas. Granma. Recuperado el 19 de junio de 2020, de http://www.cubadebate.cu/noticias/2020/04/10/cimex-anuncia-mejoras-a-tiendas-virtuales-congestionadas/
18. Papaho (2020). Re: CIMEX anuncia mejoras a tiendas virtuales congestionadas [Newspaper comment]. Retrived from http://www.cubadebate.cu/noticias/2020/04/10/cimex-anuncia-mejoras-a-tiendas-virtuales-congestionadas/comentarios/pagina-4/
19. Peña López, M.E. (2020). Ministerio de Comercio Interior aclara dudas sobre comercio electrónico en el país. Vanguardia. Recuperado el 19 de junio de 2020, de http://www.vanguardia.cu/de-cuba/17188-ministerio-de-comercio-interior-aclara-dudas-sobre-comercio-electronico-en-el-pais
20. PowerSlave (2020). Re: CIMEX anuncia mejoras a tiendas virtuales congestionadas [Newspaper comment]. Retrived from http://www.cubadebate.cu/noticias/2020/04/10/cimex-anuncia-mejoras-a-tiendas-virtuales-congestionadas/comentarios/pagina-4/
21. Redacción digital. (9 de junio de 2020). Informan cierre gradual de tiendas virtuales para su reordenamiento. Granma. Recuperado el 19 de junio de 2020, de http://www.granma.cu/cuba-covid-19/2020-06-09/cimex-reconoce-dificultades-en-tiendas-virtuales-cubanas-e-informa-su-cierre-temporal-para-ajustar-metodos-de-trabajo-y-ofertas-09-06-2020-18-06-11
22. República de Cuba. (2019). Recuperado el 19 de junio de 2020, de EcuRed: https://www.ecured.cu/República_de_Cuba
23. Talia (2020). Re: CIMEX anuncia mejoras a tiendas virtuales congestionadas [Newspaper comment]. Retrived from http://www.cubadebate.cu/noticias/2020/04/10/cimex-anuncia-mejoras-a-tiendas-virtuales-congestionadas/
24. Televisión Cubana. (Productor). (2020). Cuba mesa redonda especial informativa. [Archivo de video]. Recuperado de https://www.youtube.com/watch?v=k4oE9n7EOHI
25. Transfermóvil. (19 de junio de 2020). Obtenido de ETECSA: http://www.etecsa.cu/telefonia_movil/transfermovil/
26. UnaPreocupadaMas. (2020). Re: CIMEX anuncia mejoras a tiendas virtuales congestionadas [Newspaper comment]. Retrived from http://www.cubadebate.cu/noticias/2020/04/10/cimex-anuncia-mejoras-a-tiendas-virtuales-congestionadas/comentarios/pagina-7/