E-commerce sales have steadily and consistently increased over the last decade. Since total consumer spending is maintaining, this means that e-commerce sales will eventual take over retail sales. Historically, online sales have been viewed as a necessary service, but not a primary means of conducting business. As the face of retail sales continues to change, here are the three stages of this evolution.
- Sales Phase. Some product categories will remain resistant to the online market. For example, books and consumer electronics are two categories that are sold the most online. Whereas groceries and home improvement are among the lowest. Identify where your product or service fits into the online market. Capturing this market will require investing into transactional websites, CRM and fulfillment capabilities. Start now to prepare your business. Keep in mind that mobile e-commerce is an ideal opportunity. Simple, sophisticated apps are important to allow consumers to view your products on a smaller screen. Consumers expect to buy products at the lowest price possible. Mobile technology has created a “showroom” approach. Consumers will be in a store viewing products, and using their mobile device to compare store prices; many times finalizing the sales from another online vendor while still in-store.
- Consumer Phase. Creating the ultimate experience, by building a seamless shopping journey. Focus on tailored products and personalized offers. Success in this phase will require an instantly responsive supply chain; being able to deliver within the expectations. Consumers want to buy anywhere, have delivery everywhere, and both completed at all times. The right fulfillment infrastructure can position a business for the best growth and development. This can be done by building your own or by leveraging a retail store to fulfill the orders. Focus on the consumer convenience. Over the next five years, the logistics and fulfillment innovation of a business will minimize any disruption coming from decreased in-store sales.
- Profitability Phase. As a rule, profit margins are lower in the online market. This was easier to absorb when online sales only accounted for a single digit share of the business, but this is set to change, and is expected to become as much as 25% of the total business sales. Diminished margins mean profit is to be made on a larger scale. When at scale, online sales provide increased marketing efficiency. Focus on the ability to offer lower prices, a broad selection and increased convenience. These will likely lead to higher sales growth to offset the lower margins.
Consumer demands are driving this changing market, made possible with today’s technology. Retailers that opt to stand still will become lost.
Caden Crawford
