Retail and e-tail collide creating internal chaos for bricks and mortar retailers. The result is a non-performing channel.
Ecommerce is a long term strategic play, and must be thought of as a business channel not to be rushed.
Bricks and mortar retailers venturing into ecommerce find themselves stuck in this chaotic period characterised by poor profitable performance, marred with consumer complaints, operational inefficiency, and no proactive management.
The entire business is reactive to the problems it creates.
This chaotic period can be unsettling for retailers, unsettling for consumers, jeopardise brand reputation, and waste money. It will continue until the right change (or changes) are made.
This comes not as a result of competitive pressure or other external factors, but from a single or series of decision making from the top down.
There is a right way to manage and work through the infancy of an ecommerce channel and it's the primary function of the leader within the retail organisation to prepare and navigate the business through common mistakes replicated over and over again.
Here are the 12 most common mistakes to avoid and recommendations on how to avoid them:
Building a solid ecommerce foundation: infrastructure
Legacy technology continues to slow the growth of ecommerce for retailers. Old technology not having the ability to effectively communicate to newer ecommerce systems and other touch points.
The retailer is heavily reliant on the old technology for business operations and is forced to do a “work around” for the ecommerce solution. These “work arounds” affect the integrity of content, operational efficiency, and scalability.
Retailers need to think differently about their infrastructure and how it serves the customer journey through all touch points (digital and physical), and think in terms of building a customer experience ecosystem.
Infrastructure built with this mindset is:
...a visual representation of the relationships among the employees, partners, processes, policies, and technologies that support a customer journey. And this is where many business architects begin to connect the dots between what is happening along a customer journey and the back-end capabilities the company uses to deliver customer value. There can be many capabilities required to support a particular customer touchpoint.
The root cause of failure at a customer touchpoint may result from a design flaw in a particular business capability far removed from the actual touchpoint. By understanding the principles behind customer experience design, IT professionals are positioned to become an extension of the customer experience team, bringing to the team a deeper understanding of the supporting business capabilities in the customer experience ecosystems, and helping to design more effective customer journeys.
One must be pragmatic in this instance and recognise large retailers will not simply discard existing systems. An effective solution is the introduction of new technologies serving as a facilitator or “middle man” passing information between legacy technology and new ecommerce channels.
Creating a middle layer retains the integrity of the legacy technology, and delivers a nimble infrastructure for digital channels allowing offline retailers to compete with pure plays who have digital infrastructures built from the ground up: flexible, scalable, able to deliver content to multiple touch points, manage customer data from multiple touchpoints and geared for high volume single item dispatch and returns.
Ecommerce technology: stick to the basics
Many retailers get this wrong. Ensuring the basics of ecommerce functions to a very high standard is the early focus. With shopping cart technology being readily available and cost effective, many retailers become caught up in launching with all the “bells and whistles” with no regard as to whether it adds value to the buying process of a target market.
Add functionality for the right reasons. Technology is meant to enhance the buying experience not hinder it.
Solution number one
Fancy stuff comes later. The old "KISS" acronym is very relevant for ecommerce. If the selection of the ecommerce technology is done well, the retailer will be able to add the "bells and whistles" later.
Everyone forgets how basic Amazon was when it first launched.
Solution number two
No two ecommerce technologies are created equal. A rigorous process to define the needs of the business is necessary in order to prescribe the most suitable ecommerce technology fit.
In terms of the high level basics, ecommerce technology needs to:
- Have a presentation layer with flexibility to change and adapt to the continuous improvement process, and digital marketing initiatives.
- Have a database structure to allow for the retailer product mix.
- Have the architecture (API’s) to connect to third party systems.
- A series of features to compliment the buying process of consumers.
- Have a development road map focusing on future development of functionality.
- The ecommerce technology has an 'upgrade path' ensuring the retailer is always on the most current version of core code.
- Strong support.
The act of short-term decision-making negatively affecting long-term strategy exacerbates the performance issues and extends chaotic period.
Senior management with little or no experience in ecommerce perceives non performance as an online business model flaw, or a flaw in the strategic approach, resulting in 'knee jerk' decision-making.
To remedy this the ecommerce manager builds a strategic plan incorporating micro stages with micro benchmarks (KPIs). Once every micro stage is completed and performance is measured against KPIs.
If KPIs are achieved, confidence is built with the senior team. If not met the ecommerce manager must explain why and either provide adjustments in their approach, or further prove the path they are on is the right one.
By doing this two positive things happen:
- Senior management sees the ecommerce manager keeping him/herself honest by challenging their own KPIs. They are less prone to get involved.
- If changes to the strategic approach need to be made, the ecommerce manager makes these decisions, not senior management.
Senior management can and should be involved in the solution process; however, the ecommerce manager needs to drive this process because he/she understands all the moving parts and knows if a solution will damage the integrity of the overall plan.
This top down buy-in and support is critical in the long term. To build harmony with the executive team requires a communication style they are used to.
Monthly executive/board reports are a useful communication tool to show the incremental improvement over time and force a discipline of documenting performance for the ecommerce leader.
It's a formal forum to document operational issues and recommendations.
Making the wrong changes
This common mistake is an extension to the point above (reactive decision making). If everyone agrees change is required, what is to change?
Making the wrong changes extends the chaotic period by years. Retailers have changed their ecommerce technology numerous times thinking this will solve the problem only to find they have the same problem in a different form.
The ecommerce technology is an easy scapegoat. When sales are down, it's the fault of the "salesperson". Right? Wrong. Be careful on this judgment.
To build a business case to replatform requires many facts to be presented. To determine the true issue(s) requires a complete audit on all channel activities (including the ecommerce technology).
If a retailer had a non performing bricks and mortar location, does it make sense to replace the storefront, the displays, the sales people, and the tills without conducting a thorough business review?
The right partnerships
This is not necessarily partnering with vendors who perform poorly (but that is a part of it); it is more to do with finding vendors who are perfectly aligned to the needs of the retailer.
An example is the issue of poor support delivered by ecommerce (technical) vendors. Poor support translates to changes to the site being slow and arduous, affecting any continuous improvement process, and speed to market comes to a complete grinding halt.
The ecommerce vendor is a company full of developers and technical people, they do not have a customer support bone in their body. Are they to blame? No.
Who conducted the vendor selection process? Was there a selection process or did a member of the senior team know someone who knew someone, who owned a development company?
Retailers need to increase the level of accountability for the performance of all vendors who deliver support and services to the ecommerce channel.
Non-performance comes as a result of too much trust between vendors and retailers.
The ecommerce manager must:
- Create and sign off on extremely tight service level agreements.
- Protect the retailer by ensuring they are not "locked in" to a vendor for a set period of time.
- Make sure if a certain technology is selected, other technical companies can service the technology.
- Develop KPIs for vendors and micro manage those vendors who under perform.
- Be more ruthless when applying due diligence on the skills and past experiences of candidates when recruiting digital team members internally.
The last point is another important element to this common mistake. Building the right relationships extends to the internal digital teams.
Retailers can be very relaxed in their recruitment process for digital team members purely because they don't understand how to look for an individual with skillsets they have never seen before.
Employees are more difficult to let go than vendors. Check the experiences, speak to references, and if you are looking for specific skillsets, hire a digital agency to test the individual.
Making the most of bricks and mortar
Many retailers create a digital channel in a silo and avoid interaction with their physical entities (can be caused by an inadequate infrastructure not allowing the interaction).
The focus is to drive the cross pollination of consumers from digital to physical retail, and physical retail to digital through numerous initiatives. The goal is to create multichannel consumers, the most profitable consumer type.
Retailers need to embrace showrooming and exploit it. Showrooming is a method to combat the threat of international websites that are taking market share from Australian and New Zealand retailers.
Perfecting the 'last mile' is an ongoing challenge, but most retailers only address half of the problem. The half normally focused on relates to achieving the 3 R's....getting the Right product, to the Right place, at the Right time.
The forgotten half is perfecting the fourth R, “Reverse logistics” (streamlining returns for consumers). With a bricks and mortar presence this ads simplicity to consumers and complexity for retailers.
Perfecting logistics requires the collaboration of multiple business disciplines:
- Creation of policies defining engagement with consumers.
- SLA’s and management of couriers.
- Inventory management.
- Accounting. It’s one thing to efficiently receive a returned product, however, there is an entire new set of challenges in producing credits in a prompt manner.
- Dispatch logistics.
- Inwards logistics.
Logistics is heavily influenced by infrastructure and the development of an ecosystem focused on the customer journey.
Taking customer service seriously
The customer service function cannot be looked upon as a cost. Using an existing call centre function for the retailer is only acceptable if the call centre has access to customer information relating to online purchase and purchase history (this comes back to infrastructure).
Customer service needs to be considered an important part of the acquisition, retention and engagement strategies.
This feedback loop will also be a part of the strategy to combat the threat of overseas sites, and assists in driving the continuous improvement process. The reliance on this function in the early stages of an ecommerce channel is critical.
The customer service function:
- Identifies content needs for the site.
- Facilitates testimonials and user generated content.
- Identifies performance issues of the website and/or the conduct of the ecommerce channel as a whole.
- Indicates certain policies not in alignment with consumer needs (i.e. returns policies).
Retailers will remain stuck if feedback loops are ignored and ecommerce managers do not understand the concept of always be testing.
The absence of an internal discipline to review data, review analytics, and closely monitor the social feedback pouring in slows growth, and stifles the organic evolution of a digital strategy.
Ecommerce managers have the challenge of driving and growing a constantly changing and evolving channel. It is the most dynamic business environment there is.
The key to keeping a tight grip on growth and direction is via a continuous improvement process embracing insights and adopting the philosophy of challenging the status quo through testing. These insights are the catalyst for decision-making and strategic shifts ensuring alignment to target markets.
There are two things to get right in hosting, one is to make sure the site never goes down, and two, make sure the site loads quickly regardless of traffic volumes. The expectation of consumers is very high with respect to websites being responsive.
The old days of picking a hosting package and guessing/assuming the traffic volumes are gone. Hosting technology has dramatically advanced over the last few years creating scalable and flexible infrastructure making costs far more manageable with greater reliability on a high standard of performance and “up” time.
This comes back to partnering with the right technology vendor and the ecommerce leader being clear on service level agreement expectations.
Taking 'old school retail' strategic principles and applying online
Bricks and mortar retailers cannot solely rely on the tactics that made them successful in physical retail. It does not necessarily transfer over to digital.
The physical strengths of location, location, location, and “one stop shop” are not a value proposition for consumers who buy online. This thought process comes from the larger more arrogant retailers who feel their substantial brand equity will see them through to ecommerce success.
Bricks and mortar retailers go through a process of reinvention in order to succeed in the ecommerce channel and in doing so develop a more effective method of communicating and selling to consumers.
This reinvention positively affects the performance of the physical retail operations. This delivery of value from digital back to bricks and mortar is unexpected and embraced (i.e. John Lewis).
It's at this reinvention stage the point of difference begins to grow exponentially.
The positional power and senior level support for the ecommerce manager will determine his/her success.
Three indicators that the culture of a retail organisation is not ready to take the ecommerce channel seriously are:
- The ecommerce manager and the team report to Marketing.
- Senior management recruits an ecommerce manager who is not capable of taking on executive personalities. They become pushed into a corner and are told to speak when spoken to and react to the whims of the senior management team.
- The organisation appoints an internal member of the marketing team into an ecommerce leadership position.
The ecommerce manager is a change agent. To create a new business channel or fix a non-performing channel requires change. The ecommerce team needs to have influence in all elements of the retail business: pricing strategy, marketing, customer service, logistics, inventory, management, supply chain, accounting.
if you are in the middle of a chaotic non performing period and have been desperately making changes to the business to lift performance, audit your ecommerce channel against the 12 mistakes listed above.
If you have questions or would like more detail on any of the mistakes and/or recommendations, leave a comment below.