Digital touchpoints emerge as the "front door" of modern retail

When eCommerce emerged as a viable retailing channel in the early 2000s most retailers, as well as most consumer brands, segregated the teams focused on digital merchandising and marketing activities into specialized work groups focused solely on the development of their online businesses.? This segregated approach was intended to enable the eCommerce team tasked with growing the emerging digital business with the dedicated resources and specialized skillsets intended to assure their successful performance.?

At the same time, the legacy traditional brick & mortar functional team, which delivered the bulk of the organization’s sales and profitability, operated with the majority of the resources as well as the expectation to continue to deliver the bulk of the firm’s financial goals without being hampered by the potentially loss-making early days eCommerce business, which required not only specialized talent and expertise but also heavy investments in technology and logistics infrastructure to assure their rapid growth.

Fast forward to the early 2020s with the business impact of the COVID-19 pandemic and the concept of omnichannel retail…serving a consumer through any and all channels they wished to engage with…became less of a theoretical construct and more of a reality.? The pandemic pushed consumers previously reticent to shop online to now be open to doing so, either out of convenience or necessity.

Today the consumer's path to purchase has evolved in significant and profound ways.? The segregated online or in-store shopper has given way to an omnichannel shopper that uses online research before purchase, store pick-up of online orders, delivery from store to home locally, or in-store use of a mobile device to check pricing, location within the store, scan ratings & reviews or looking for similar items at another store. In short, the path to make a purchase no longer follows a straight line of either in-store or online shopping, but engages both experiences in increasingly dynamic ways.

In light of these changes in consumer behavior, leading brands and retailers are rethinking their go-to-market strategies, including how they organize themselves internally. Increasingly, gone are the siloed organizational structures of separate digital and legacy brick-and-mortar business teams that have defined the last 20 years. In their place is quickly becoming a move towards more integrated functional teams focused on product management, merchandising, shopper marketing, supply chain, and more. While the intention of these moves towards integrated organization structures is well intended, however, in many cases those moves are missing the mark.

A recent eCommerce Organizational Benchmark Study from Profitero sites research they say indicates that initial moves by consumer brands towards an integrated physical/digital organization are not working out as flawlessly as intended, with more than 40% of leaders they surveyed indicating the moves could have been handled better. The absence of role clarity in the new structure, aligned incentives and performance measures, and a pervasive lack of integrated joint business planning with key retailers are among the key missing elements Profitero sights as roadblocks to success based on their survey.

So then, how do retail brands position themselves for success in an omnichannel world? First, by moving from a "channels" strategy to an integrated go-to-market approach. For so much of the last twenty years, investment in digital consumer touchpoints has been viewed through the lens of sales by channel. While eCommerce certainly garners a larger share of retail transactions today than before the pandemic, most retailers and consumer brands don't have the necessary broad understanding of digital retail nor have they invested in it with a strategic eye toward how the modern consumer utilizes digital to research and make buying decisions that may, or may not, ultimately conclude in a physical store.

The best approach, in my view, is to treat digital retail touchpoints as the "front door" to your brand. In other words, the entrance for consumers to research, learn, compare, consider, and ultimately purchase your product offerings. Doing so means that how you view your investments in digital touchpoints like product detail pages, organic search optimization, product assortment planning, and investments in retail media are viewed on their measurable impact on commerce overall...not just through online channels.

If you agree, there are a few investments I'd recommend that you make heading into 2024 and beyond:

• Digital Retail Executive Education
• Clear roles and responsibilities in a new organizational structure
• Organizational alignment on KPIs that track performance across digital and physical retail touchpoints.

Leaders of newly formed business units, from senior executives down through line managers, often lack an understanding of digital retail merchandising fundamentals, key elements of the purchase conversion “funnel”, benchmarking success metrics, and critical aspects of providing leadership oversight of an integrated business team, enabled by eCommerce technology, tools, and processes.??

To lead a unified retail organization with responsibilities across all retail touchpoints, leaders at every level must now possess a working understanding of the fundamental elements of digital merchandising and marketing.? Such knowledge, which resided almost exclusively within the eCommerce team previously, is critical for integrated functional teams to operate successfully, and with a common understanding of the levers of omnichannel success.

Profitero’s study on omnichannel organizational benchmarks cited responses from firms that they had surveyed indicating that role clarity was a significant roadblock to successful organizational alignments where not only did the incumbent manager need to clearly understand their own role, but that the roles that intersected also must understand what the roles held by others across the organization also were accountable for.? Such clarity, when present, made the interaction and accountabilities more clear for every member of the broader team and also reduced friction and territorial disputes between teams in the new structure.

Alignment on an integrated set of measures, that track and reward the growth of business results across consumer touchpoints, appears to be a critical element of success for a newly integrated omnichannel business team.? Traditional metrics, such as sales revenue, profitability, and inventory are now joined by traffic, average ticket, conversion rate, as well as order fill rate, cost per order, and online share growth.? Measuring and incenting combined organizational goals with individual accountabilities for specific metrics that underly broader outcomes are increasingly becoming hallmarks of success for the fully integrated and optimized omnichannel business teams for retailers and consumer brands.

“Digital-First” Merchandising Strategies

For both retailers and consumer brands, online product assortments have been either separate or an extension of assortments made available through their legacy physical retail businesses. Brick-and-mortar product offerings have served as the primary source of revenue and profits while operating with physical constraints of shelf space in a store as well as the financial constraints of inventory investment across hundreds or even thousands of store locations. Legacy product assortment and promotional planning activities have first foremost been rooted in their brick-and-mortar locations.

However, a different approach has begun to emerge within the brand and retailer communities as the post-pandemic business strategies for retailing continue to take shape.? A “digital-first” approach whereby online assortments and product strategies are seen as the driver of a more robust go-to-market strategy in the omnichannel marketplace.? Strategies that can then be refined and segmented to fit the constraints of physical stores in the broader context, as well as specific store formats and consumer demographics in a given market or location are becoming more commonplace every year.?

To be certain, a digital-first product strategy would enable a broader view of a given product category and consumer profile without the constraints of physical retail.? Moving to such an approach would likely require experimentation in approach, and guard rails around financial investments, assortment planning timelines as well as an aggregation of consumer data across a given market.? A category at a time transition to this approach might make such a transformation more manageable and provide learnings from one category or business that can be leveraged to the next one.? At the same time, further refinement of the physical store assortment could then be derived by retailer, store size, consumer profile, geographic location, and more.?

Transitioning to a digital-first approach will certainly require a shift in mindset for the retail community at large.? However, my experience as a lifelong retail merchant tells me that such a transition provides for more data-driven decision-making, as well as greater insight into consumer preferences than the traditional brick & mortar-first approach that has been our community’s mainstay approach.? Some in our community will no doubt have the courage to experiment with a digital-first approach and refine it through trial and error.? I contend that those who do so will ultimately succeed in the retail marketplace of the future.

Scott Benedict is an accomplished retail merchant, educator, consultant, author, advisory board member, keynote speaker, and digital retailing executive with more than 35 years of diverse experience spanning traditional brick-and-mortar retailing, eCommerce, omnichannel, and international retail merchandising and operations. Scott can be reached at [email protected] or at (479) 366-1316.