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06/28/2021

Why E-Commerce Doesn’t Work for Every Retail Business

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The calendar may say 2021, but retailers are already competing like it's 2031. From grocers to fashion and luxury brands, the past year's extraordinary circumstances have aged the retail landscape by three years in terms of e-commerce adoption.

Yet is it a shift that retailers and consumers were ready to embrace?

The Unintended Impact of the Great Brick-and-Mortar Migration

For generations, brick-and-mortar retail has been a staple of consumer life. Local stores have dominated main street, offering unique products for everyday needs. Mega-malls have served as a mecca for everything and anything a shopper's heart could desire. Even department stores have been a one-stop place for a wide variety of collections for our closets and homes that can make everyone feel and look fabulous. 

Lately though, the car traffic that once went to these physical locations has been replaced by delivery trucks as the adoption of e-commerce continues to surge. For most towns and cities, this was not a shift that their infrastructure was created to support. Cobblestone roads are beginning to crumble. Narrow, quiet backroads are noisier and more challenging to navigate. Even thoroughfares are taking a beating, forming potholes at historic rates. 

This unintended consequence of the COVID-19 pandemic is not only straining the infrastructure of roadways worldwide. It's pushing the infrastructure of most retailers to their limits, too. 

Ironically enough, setting up an e-commerce site is not the issue. Many retailers had one up and running as quickly as the first wave of store closures was mandated. The real problem centers around poor understanding and miscalculation of the infrastructure needed to support this digital direct-to-consumer business model.  

From establishing fast transactions and responsive fulfillment processes to optimizing inventory assortments and adjusting for brand constraints, most businesses do not have the capabilities, processes, technologies, and people skills needed to support e-commerce. So instead of pulling away from the competition, they fall further behind — regardless of top-line growth and traffic rates. 

The Secret to Scaling the Infrastructure for E-Commerce 

By the time they realize their business model is not appropriately scaled for e-commerce, most retailers are already in financial trouble, lacking free capital to overhaul their processes and digital capabilities. Consumers are watching this reality unfold with a string of bankruptcies and closures among department stores (JCPenney), luxury brands (John Varvatos), national chains (J. Crew Group), home goods (Tuesday Morning), grocers (Dean & Deluca) and many more. 

How can retailers help ensure their e-commerce operations don't get to this point? The secret is scaling the business infrastructure and connecting all sales channels — no matter if there are 2 or 22 — as one ecosystem operating under the fundamental principles of an omnichannel business model

  1. Shopper data capture: Capture consumer behavior based on privacy compliance to optimize e-commerce operations, layout, and price points; detect trends; and support personalized clienteling.
  2. Store performance: Turn consumer data into comprehensive, real-time insights into all areas of the business provided through role-based dashboards and enable employees to act on them productively with continuous learning.
  3. Store automation: Embrace artificial intelligence that pulls from an intelligent ERP core of consumer information to support auto-replenishment, RFID-enabled store transactions, and in-store up-selling and cross-selling.
  4. Clienteling: Base shopper recognition on consumer-chosen privacy settings and gain machine-generated recommendations for promotional offers based on known and predicted shopper preferences.
  5. Store experience: Adopt interactive augmented reality and virtual reality to leverage interactive product features and in-store navigation services that include frictionless checkout, click-and-go shopping concepts, and easy-to-follow product education.
  6. Omnichannel service: Consider the e-commerce site as a part of the total buying experience. The overall digital experience can include click and collect, curbside pickup, endless aisle, and last-mile delivery, as well as seamless returns processes and dark store fulfillment processes.

By taking all these steps, retailers can bridge the gap between online and physical stores. Their consumer experiences are relevant and keep up with demand and expectations through merchandise and inventory precision, dynamic task and fulfillment management, and one-to-one consumer engagements.  

Retailers must also recognize that such an effort requires a strong partnership between marketing and sales executives and their IT leaders. The relationship may be tenuous or distant right now; however, the business cannot succeed without a great reset. Together, these business leaders can help ensure every digital investment delivers outcomes as promised, even if an executive leaves the company midway through the transformation journey. 

A High-Speed Trajectory Toward the Store of the Future 

The pandemic undeniably forced retailers to rethink their business models, but the brick-and-mortar store is far from disintegrating. We're witnessing a reimagination of the traditional shop for a world of consumers that prefer the convenience, access, and ease of digital experiences.  

Like any other great transition, the point of this change is to make the sale — no matter what. So how can retailers make e-commerce work for them? It all comes down to going beyond treating e-commerce and physical stores as separate entities and competitors to form one resilient, high-speed, and responsive infrastructure that consumers will always love. 

Kristin Howell is global VP, retail solution management at SAP.

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