As one of Ernest Hemingway’s characters once said, businesses go bankrupt two ways: “Gradually, then suddenly.” Sounds like the swath of businesses that are not converting from brick-and-mortar to ecommerce.
Those who haven’t already better move fast. According to a Wall Street Journal report, a shocking 8,600 retail stores closed in 2018.
In our strategy practice we are currently working with half a dozen such companies trying to disrupt traditional business models–some rooted in 100 years of history and best practices. To do so doesn’t only mean retraining customers on how to buy, but requires that a business completely reframe its offer.
Here are seven critical considerations for companies converting from brick-and-mortar to ecommerce:
1. Start with a strategic plan.
The decisions you’ll have to make when switching from physical to digital are not simple. Don’t make them in a vacuum. Your first step should be to consider these variables within the broader context of your business strategy and how omnichannel approaches can improve the overall customer experience.
For example, some ecommerce providers are targeting specific customer groups online. A misperception has pervaded that millennials prefer to shop online, but research reveals that buying behavior among urban, affluent shoppers is completely different from young rural shoppers, who transact more like their parents. Know exactly which customers you are trying to reach and under what circumstances.
2. Build the right supply chain footprint.
Amazon Prime is flipping the script on the entire supply chain. Customers expect their product in 48 hours. Zero-click (which will incorporate AI into the buying experience) will be among the most disruptive technologies of our lifetime, and will require suppliers to rethink fulfillment. Companies need to build their footprint from the ground up to ship from multiple points within a market on the same day. There is a range of third-party logistics (3PL) networks available to accommodate this requirement.
3. Be direct.
Building an Amazon store is not hard to do, which is both the opportunity and the problem. There are no barriers to entry and little opportunity to build enterprise value.
Almost all our clients with Amazon stores are trying to reach at least 50 percent in direct volume on their own dot-com sites. Job one is to preserve pricing online, and minimum acceptable prices (MAP) are under attack. Amazon, Walmart and others talk a good game about MAP, but do everything they can to bastardize margin. It’s like being in an auction against yourself.
In brick-and-mortar, categories and items within them usually fulfill a role. Amazon can be your volume channel, and dot-com your value-creating channel.
If enterprise value is your end game, build an independent channel that you control.
4. Be maniacal about performance metrics.
Online conversion is a game that is part art and part science. Ecommerce stores need the right layout and aesthetic. The great ecommerce marketers know how to manipulate every page to initiate trial, cross-sell and move the buyer to action.
The savvy online seller knows the result of every action from click-through to conversion, by page, by item. Build your store from the beginning with these principals in mind, and A/B test your entire site to gauge actual shopping behavior.
5. Up-level your online store.
Choosing the right ecommerce technology is a critical discussion. If you fail to build enough functionality from the onset, you won’t have the tools to enable conversion or extraordinary experiences. There are big decisions to make on which ecommerce platform to use (open-source, SaaS, CaaS) and where to host (cloud or on-premise). You better have a big enough pipe.
These decisions are made more complex by the requirements of being a legitimate seller today. These include providing quality assurance, security, and when buying an off-the-shelf solution, sacrificing control for speed. You’ll also need to maintain PCI compliance (security standards ensuring that companies keep credit card information safe).
6. Fuse the physical and digital channels.
To succeed in multiple channels at the same time is tricky. If your enterprise is a traditional brick-and-mortar business, there may be habits that are hard to break. How do you protect your distributors and salespeople?
Channels don’t have to be in competition with each other. In fact, they can be complementary. A national lighting retailer installed kiosks in its stores that promote more selection through an online channel. Salespeople within the store are paid a commission every time a product is sold through the kiosk. Don’t pit channels against each other; find ways for them to coexist. More commonly, online sellers are providing pickup points for products, and the other way around.
7. Use social media as an enabler.
Glade once created a Museum of Feelings in New York to reinforce the power of scent. Illuminated halos of light and clouds created an emotional response, and a video about the museum yielded more than a billion media impressions. In this case, social media was leveraged to create an immersive viral experience. Use it to engage, initiate trial and meld the physical and digital worlds.