MULTICHANNEL
RETAILERS BLINDSIDED BY THE HIDDEN COSTS OF eCOMMERCE
VIEW ONLINE
Brands and retailers for whom eCommerce was either just a minor side-line or a strategy still in the planning, had to move fast to transform their businesses into true omnichannel connected retail enterprises.
Driven by the pandemic, the changes in consumer buying behaviour meant that orders flooded in, and retailers could congratulate themselves on their online success. Some now believe that the upsurge might be permanent.
But will it? Retailers must now ask themselves two key questions:
Is the change in customer behaviour and the sales mix structural or cyclical? In other words, when retail begins to normalise, will customers re-engage with brick-and-mortar stores?
Irrespective of whether the online sales volume will stay high or revert to pre-pandemic levels, how much net profit does the business really make from online sales?
Achieving a clear understanding of the above isn’t easy. Te speed with which retailers had to accelerate their online strategies - as they sought to make up for lost sales and capture the extended eCommerce audience - meant there was little time for planning and analysis.
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BY ANDREW GORECKI, CO-FOUNDER AND MD, RETAIL DIRECTIONS
Many retailers have experienced online sales booms during the pandemic as customers flocked online, denied the ability to shop in stores during lockdowns.
Online turnover and gross profit were the most common measures of success, and these looked good, encouraging further expansion online. Retailers have also been dealing with a literally captive audience, which both distorted consumer behaviour and their buying patterns.
With over a year of experience in this new, strange environment, some retailers are finally beginning to properly examine their omnichannel processes and numbers. For others that full cost/benefit and process analysis has still to come.
IDENTIFYING HIDDEN COSTS THROUGH ANALYSIS Once such analysis starts, several patterns emerge. Te most obvious one relates to the visibility of real cost. When operating brick-and-mortar stores, retailers know quite precisely what they are doing. Tey are dealing with a clean-cut cost structure, years of understanding around margins and net profit and how best to optimise business operations.
For eCommerce, true costs need in-depth analysis and retailers newer to the channel don’t always have a clear-cut model to assess the real, net profitability. If the customer behaviour change we have witnessed do turn out to be structural – i.e., permanent – then it’s even more important that retailers have a full understanding of the true cost of doing business in all channels. If not, they won’t be able to make informed decisions and could put their futures at risk.
homeofdirectcommerce.com | Direct Commerce
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