Strategy

Driving Retail Forward with Digital Commerce Strategies

Thiago Garcia
Thiago Garcia October 15, 2020
Driving Retail Forward with Digital Commerce Strategies

Author’s Note: I began writing this article in April, and decided not to publish because I wanted to be sensitive to the pains and the hard choices many of my retail friends and colleagues were going through. This article on Wall Street Journal reminded me of the importance of releasing this story.

When I led digital strategy and e-commerce enablement for Samsung back in 2019, I had the opportunity to plan our joint business strategies with some of the largest retailers in the US. During that time, I had the chance to ask this question to top executives across the country, “what’s your digital strategy?”

“To drive store traffic,” they would often say. “We are opening additional locations this year.”

It was a sobering realization. Some of the most important executives in the retail industry were telling me that their digital strategy was to bring people into their physical stores.

Why were they not embracing e-commerce as the future of their businesses?

Despite raising my concerns about their digital strategy and overall survivability, they were challenged with changing their entire business model. E-commerce required new teams, new processes and new technologies. We were talking about major shifts in forecasting, buying, marketing, selling, supplying, distributing and operating. To most retailers in 2019, digital commerce was not big enough to be prioritized over other channels. The economics just didn’t make sense.

Then COVID-19 Happened

According to CB Insights, over 80 retailers in the US have filed for bankruptcy since 2015, and that trend has only accelerated in recent months. Besides declining store traffic, CB Insights points to mounting debt and failure to produce a solid digital strategy as reasons for the Retail Apocalypse.

And that was before the spread of COVID-19.

We may look back in time a few years from now and say that the tipping point for digital commerce occurred in 2020. Analysts polled by Digital Commerce 360 in March 2020 pointed to the unique opportunity store closures provided e-commerce businesses who could withstand the economic downturn. John Ghiorso from Orca Pacific (an Amazon agency) predicted that COVID-19 would push e-commerce 10 years into the future

Here are some facts:

Over the past few months we have witnessed the rise of online categories such as grocery, household essentials and over-the-counter medication.

Thanks to Premium Video on Demand (PVOD), Trolls World Tour has made nearly $100 million without playing in a single theater. Disney went ahead and released Mulan via Disney+ in September after postponing it four times.

And for someone who has always championed the importance of Direct to Consumer (DTC), I never  expected to see what is happening today. Pepsi, Heinz, and Fritos have all released their own DTC websites at breakneck speed (some in under 30 days).

But all that progress has come at the back of one of the world’s deadliest crises. As if the tragic loss of life weren’t enough, we are now facing the highest unemployment rate since the Great Depression. And without a vaccine in sight or proven therapies, this new norm could persist for the rest of 2020. Indeed, economists and even the Fed have predicted an economic recovery may stretch through the end of 2021

It should come as no surprise then that retailers like Neiman Marcus, J. Crew and JC Penney have filed for bankruptcy. In fact, that article by Yahoo News puts this year as one of the deadliest ever for the former mall icons

It is not a zero-sum game

And yet, there are some retailers knocking it out of the park during the pandemic. To quote Jeff Bezos in his testimony to Congress in July 2020, it’s not a zero-sum game in e-commerce. 

Take for instance their top competitor: Walmart’s e-commerce jumped 74% in May, and then they did it again in August, beating even the bulls with a 97% year-over-year increase in digital commerce.

You want triple-digit growth? Target’s digital sales have grown by more than 100% since February. Costco’s e-commerce followed suit with a whopping 108% increase in digital sales in May, 2020.

And it’s not only the top retailers who have invested in e-commerce strategies who are being rewarded for their foresight. Our own VTEX US customers in August have posted an average increase of over 62% in same store sales compared to last year. I have customers in the sporting goods industry that have grown over 100% in Q2, 2020.

They attributed their 2020 growth to digital commerce readiness. They had modernized their operations, they had invested in digital technology andthey had improved their online experience. So that, when the pandemic hit and they had to close their physical stores, they could pivot their efforts to a digital-first world and continue to operate.

Retailers need e-commerce leadership to capitalize on the shift in consumer behavior

Digital commerce is here to stay. Five million people shopped at Target.com for the first time in Q1, 2020. Two  million of those used curbside pickup. E-commerce is no longer a trend. E-commerce is not even a channel, or a strategy anymore. E-commerce is a behavior. It is becoming the primary way people acquire goods and services. 

Retailers, brands and businesses of all sizes need to adapt to this new reality. 

So I have decided to join VTEX, a Visionary digital commerce platform according to Gartner. And we are on a mission to save retail. To accelerate the commerce transformation of businesses everywhere.

We are here to help organizations transition to new business models, to build the next chapter of Macy’s or Nordstrom. Retail is good business. It impacts hundreds of thousands of people, from suppliers to consumers. Retail just needs bold, new leadership to guide them in the age of digital commerce. “Innovate or die,” as Bob Iger (former CEO of Disney) would say.

I am also willing to lend a hand to those business leaders in need. Reach out to me directly. You don’t have to be a customer. 

I believe that all of us e-commerce professionals could do more to help businesses of all sizes survive this digitalization of the world. This is our moment. We can’t just sit and watch century-old companies simply disappear because they are not digitally native. The cost to our economy is too great, the pain in the loss of jobs too severe for working families. If I can do something about it, even if it is to answer a question, audit a website or help make a business decision, please let me know.

For starters, here are three tips on how to shift your business to a digital-first world:

1. Make your e-commerce store your #1 store

Deploy resources to grow online sales until that is your #1 store. How much investment? As much as it takes. Look at the case of Disney+. It is a success story only because Bob Iger put focus, resources, and strategy to make it a success. And because he believed that technology and consumers were on a converging path.

Once your online store becomes your #1 store, continue to ride the trend and complement your first-party assortment with a marketplace model. Remember: it is not a zero-sum game.

2. Model your cost structure around your online operations

One of the failures of creating a sustainable online business is to assume that your operations and logistics today are able to support it.

Do you need more distribution centers? Do you need a carrier partnership? Better payment gateways? The devil is in the details. 

Once you find the right cost structure, business service providers, and optimal logistics to support your online business model, you are future-proofing your operations.

3. Retool your stores to a new kind of experience

While you are following the shopper behavior and investing in online user experience, build a sticky website and load it with differentiated products and services that engage your target audience. Own that relationship with your consumers and earn the right to have their business. That approach will pay dividends down the line.

More online sales means less foot traffic. So, what to do with all the real estate? Besides rationalizing space, you can use some of the stores as distribution channels, pick-up locations, or warehouses to expedite delivery. 

And then there are some who are investing in experiences that you can only have in the real world: retailtainment (it is a thing). Reinventing retail means having a connection between the virtual and the real world, and building different kinds of touchpoints in the consumer journey. 

The sale might ultimately happen online, but your stores will become places where consumers experience products in innovative ways.

And I will throw in a tip #4 for you: 

4. Put e-commerce professionals in key leadership roles

We are the people disrupting retail, after all. Why not allow us to kill your business from within, and benefit from the process of transformation? Many Boards would disagree – but to me now is the time to be bold and embrace the journey – or succumb to innovation.

In this day and age, companies that try to disrupt themselves are in the process of reinventing themselves. Look no further than Netflix, Walmart, Disney, or even Amazon. They are embracing technology and using it as an accelerator. They are charting their own future instead of becoming history.

If your digital strategy is to increase foot traffic to your retail stores, you are in need of a new strategy. And I am here to help.

Together we can reinvent traditional business models. We can focus on what’s next. We can accelerate commerce transformation and build a new era for retail in the US.

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