Strategy

Collaborative Commerce: Embracing the competition for a mutually beneficial alliance

VTEX
VTEX August 4, 2021
Collaborative Commerce: Embracing the competition for a mutually beneficial alliance

An Olympian strategy

It’s often all too easy to assume two complementary concepts are opposites. Love and hate are probably the most commonly mistaken binary, for the true opposite of love is apathy. Similarly, people generally think of competition as being the opposite of teamwork, but this is not necessarily true; in fact, when employed strategically, they can work together as one machine. Competition is the fuel, and teamwork is the engine.

Take, for example, the Olympics. Each group of athletes from a certain country is considered a “team” even when they’re not competing in team sports. The Olympics are simultaneously about personal and national glorification. Thus, two American swimmers would regard each other as competitors, but still consider it a victory in a way if the other won, because it’s a win for their shared country. Even the whole idea of the Olympics, though rooted in rivalry, is a time for countries to put their differences aside and come together to share spirited gameplay that will entertain the entire world.

Collaborative commerce is the same concept: various vendors, suppliers and more becoming allies leaning on each other in a new kind of partnership.

What does collaborating accomplish?

Let’s begin with the omnichannel marketing strategy, which involves turning a one-dimensional shopping experience into so much more. Using an OMS entails connecting all your inventory management (warehouse and in-store) to make purchases that much easier for your customers. Even if the product they want isn’t at the location they’re in, you won’t miss out on that sale because they’ll be able to buy it online with ease.

It also empowers you to handle all of your business in one place, so you don’t have to keep track of each sales channel separately. Rather, everything is connected. This makes it simpler to sell on multiple platforms and implicitly to create a more seamless experience, not only for the customer but for you.

This is where collaboration comes in. Once you’ve started integrating each aspect of your business, it becomes the natural next step to collaborate with partners and suppliers. You can enable dropshipping to sell more without raising inventory costs. Not only can you sell on multiple marketplaces with no sweat, but you can even start your own, using the same OMS. Indeed, there is little additional effort involved if you go down this route, yet you are significantly increasing the ease of shopping and stock availability to the consumer.

Finally, whether selling on other marketplaces or your own, collaborating with competitors will become a key part of your strategy. They can sell on your marketplace, you can sell on theirs, and you’ll be side-by-side on another one. What this does is it gives customers options, and that is what customers want. Even when shopping in a physical store, it is common for customers to whip out their phones to compare the pricing and quality of different products before committing to a purchase. Allowing the consumer to easily compare what you’re selling with what your competitors are selling makes it easier for them to make a decision.

And yes, sometimes they will choose the competitor, but your product will get more exposure in a marketplace than if you were simply selling on your website with nothing but one brand of products to choose from. In addition, you will have greater access to the data behind every conversion. Who were you compared with before the customer did, or didn’t, purchase your item? You will have more chances to up your game and challenge the competition.

It may seem different at first blush, but it is pretty easy to transition, and ultimately it is an effective strategy that will benefit businesses and consumers alike. In actuality, the collaborative model is a more accurate reflection of traditional retail than the regular marketplaces with which we’re familiar.

The natural evolution

Imagine you’re in the market for a new coffeemaker and that you’re living in a world without the internet. Not only do you want a better one than what you have, but you’re interested to learn more about the different types of coffeemakers available so you can decide which features interest you the most. Are you more likely to patronize an appliance store that sells every model from one brand, or a store with a wider selection of brands and models? Sure, maybe that one brand has a large variety of coffeemaker styles, but it would still be nice to compare how the other brands have executed those styles. Maybe you decide you like Style B, but with Brand C. Even if you do end up just choosing one from that original brand, you’ll feel more confident and satisfied with your purchase, knowing definitively that you made an informed decision and picked the one you truly like best.

Now, doesn’t that same experience make sense to translate online? Everything about the internet has been about trying to not only imitate real life experiences but improve upon them. Take, for example, the countless skeuomorphs in the digital world that have become second nature; you click a little magnifying glass to “search”, virtually add products to a “cart”, and delete items by “moving to trash”. The idea is to make the transition from the physical to the virtual world as smooth as possible while making the experience better. You don’t have to worry about your trash folder becoming too full or manually emptying it out, after all. 

Omnichannel marketing and collaborative commerce are fantastic solutions for ecommerce retailers to experience the full benefits that they would from selling in person while improving upon that online. Rather than having to keep all your eggs in separate baskets, you can consolidate everything you need so it’s all in one place, to a level that can never be possible in the physical world.

Only the beginning

In 2018, Grupo Soma, a Brazilian fashion conglomerate, transitioned with the help of VTEX from solely brick-and-mortar operations to a seamless in-person-to-online experience, including not only those two types of shopping, but the areas in between, such as pick-up in-store or click-and-reserve. This transition helped essentially turn each of its 200+ locations into “mini-distribution centers” and its sales soon increased by 15%.

In addition to its own nine brands, Grupo Soma has over 3,000 wholesale partners, which it can now integrate into its own marketplace, so it helps them and the partners. The fashion group also found a way to include online sales in commission programs with its employees. Fernanda Grangier, Grupo Soma’s Ecommerce Manager, notes that “As Grupo Soma has been in the market for over 20 years, the mindset of our employees was never built for going online; it was an offline mindset. So we had to account for all the possible conflicts omnichannel might pose”. Each employee gets a personalized code and can promote them individually on their social media. This results in cheap advertising for the business and increased earnings for the employees.

After just the first year of replatforming, Grupo Soma saw 80% growth, and its Director of Technology and Innovation, Alisson Calgaroto, comments that “If we hadn’t had omnichannel, the pandemic would have been catastrophic for our company”. During the pandemic, Grupo Soma experienced a 200% increase in its digital commerce, so it’s good that the management had the foresight to upgrade the ecommerce platform when they did.

According to Andrew Clement, the Chief Customer Officer at Kimberly-Clark Professional, channel consolidation can help to “streamline supply chain logistics and strengthen partner relations, due to more open and consistent communication with distributors”. L’Oréal also enlisted the help of VTEX to consolidate the angles of its business, including B2C, B2E, B2B and marketplace operating on a single platform. Furthermore, VTEX assisted DIA, a supermarket network with over 6,600 stores across four countries, in utilizing omnichannel in its Argentinian operation to increase its YoY conversion rate by 100%. Indeed, VTEX has been behind many large brands’ journeys to digital selling, including Coca-Cola, Walmart, Sony, Samsung, Crate & Barrel, Adidas and so many more.

Despite total retail sales worldwide decreasing by 3% in 2020, retail ecommerce sales increased by 27.6%, so the demand for premium online shopper experiences is higher than ever. This was the first time ever that ecommerce was responsible for all retail gains. It is projected to increase by another 49.3% from 2020 to 2024, and it is expected that ecommerce will take up 20.4% of all retail sales by the close of 2022.

What’s to come

There are many more benefits and aspects to collaborative commerce to explore, and we’re just getting started. Next week we’ll discuss how it can be used to compete against titans of industry, dig deeper into the “frenemy” relationship you can develop with competitors and how it’s changing the future. You’ll get more details of how collaborative commerce works and how you can make it work for you.

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