Expert Column: Cloud-based Shopping Doesn’t Mean the Sky is Falling
ecommerce in the consumer goods industry will certainly grow at exponential rates. However, it will not supplant traditional supermarkets, despite the significant amount of media-induced fear suggesting supermarkets will become modern-day buggy whips. It reminds me when VCRs were becoming popular and entertainment pundits believed taped movies would render movie theaters obsolete. Or that TV would kill radio. But don’t get me wrong, there is a certain amount of danger surrounding eCommerce –- and if not addressed, it could be devastating for manufacturers and retailers. That danger is failure to engage.
Other industries, like travel, books/music and print media have taught us that the lack of engagement can cause irreparable damage. But engagement does not mean you have developed a comprehensive, integrated digital strategy. It simply means you’re in the game.
For most manufacturers, their entry point into ecommerce begins by comparing and contrasting the digital channel with traditional formats. While many executives may believe that ecommerce is vastly different, and to a degree it is, there are number of similarities. For example, shoppers have been remarkably consistent in defining their needs and expectations, most of which transcend channel boundaries. Price is still important (perhaps even more so due to transparency), as is value, convenience and assortment. While the path-to-purchase may be different, the human condition still applies. Therefore, regardless of approach, manufacturers must continue addressing these consumer dynamics.
Merchandising and promotion remain critical elements in the path-to-purchase, but here too are a number of similarities. Influencing consumers at the point of purchase is still an effective way to drive volume. Only now search engine optimization (driven by dynamic web content) and geo-fencing are used in place of traditional marketing vehicles. Even displays are similar. Instead of building a primary display with secondary, or flanking SKUs, we have a “You might also like” option.
Streamlining the digital path-to-purchase
A company’s approach to digital integration will vary by a number of key factors, including competitive stance, investment levels (new and/or through redirected capital), and agility, which is critical for trial and rapid course correction. The level of organizational commitment, which is defined at the top, should be directly proportional to the company’s digital aspirations. Another key element is the company’s ability to manage disruption. Even an agile organization with empowered decision makers needs to determine how much disruption it can effectively manage, without diluting the flow of product to its brick-and-mortar trading partners.
The path to ecommerce begins with data and insight. Companies should already be assembling the needed systems and processes required for managing big data. This is essential for determining product performance in the online marketplace, as well as understanding shopper behaviors along each segment of the path-to-purchase. This will give manufacturers the much need visibility into sales, volume and profit for all ecommerce categories and subcategories.
Once measurement is made possible, companies can begin establishing cross-category benchmarks. This is important as some categories will be impacted minimally through digitalization, while others may see 25-30 percent of their volume coming from online sales within the next two years. This will also help manufacturers understand their brands’ contributions across the expanded platform. Additionally, these large data sets will deliver insight into how consumers are shopping the various pickup and delivery programs, while determining the key price points and effective assortment ranges that result in greater demand. In the bigger picture, companies will use advanced analytics to determine the true economics of their ecommerce initiatives.
Collaboration is the key that unlocks the click-and-mortar experience
A comprehensive, integrated digital strategy will include operational components, such as R&D, production, sales and marketing, and supply chain. However, the initial purpose of the plan should be to make the shopping experience as seamless as possible. This will require manufacturers and retailers to collaborate like never before. Manufacturers must become students of emerging and evolving models that address the “last mile” in the shopping cycle. They must fully understand the retailer’s fulfillment methods, and the costs associated with each approach, whether it's warehouse picking, store-level picking, dark store, click-and-collect, or some combination thereof. Similarly, the retailer will need to know more about the supply side of the equation, because delivering a seamless shopping experience will require the synchronization of a number of moving parts from both sides.
Additionally, data must be mined by both parties in order to quantify costs that touch, or impact, the shopping experience. In other words, for the first time, manufacturers and retailers will be truly united from concept to consumer.
Moving forward we will see an informational convergence –- one that is fueled by capabilities made possible by applying advanced analytics to big data. New insights, extracted from a number of data sources, including transaction logs (on and offline), syndicated data, loyalty cards/programs, social listening, one-on-one conversations, etc., will enable the industry -- as a collective -- to meet the needs of the consumer, just like it's done for more than a century.