It’s no secret that today’s retail margins are under intense pressure. They’ve been cut dramatically over the past decade, exacerbated by intense competition, higher fulfillment costs, and higher return rates.
Furthermore, consumer behaviors and preference are rapidly changing and retailers are trying to adapt. In CommerceNext’s 2022 Digital Trends and Investment Priorities Report, 57 percent of brands cite higher customer acquisition costs as their top concern, and ChannelAdvisor’s 2022 Online Consumer Behavior Global Report reveals that 82 percent of consumers visit two to five websites prior to making a purchase, while 60 percent of consumers price-check before buying.
However, by embracing new approaches and new data-driven insights to flexibly meet consumer needs through unowned inventory and enhanced delivery/fulfillment, retailers can not only adapt, but can actually thrive in these challenging times. They achieve this by expanding product assortment on a spectrum based on intelligently predicted consumer demand, desired customer experience, and operational resources aligned to profitably meet growth objectives.
This approach breaks down into three buckets:
- Customer Experience: Consumers always have a choice, and they’re also looking for a great experience. Long-term customers are the driving force behind sales, and that’s truer than ever in a recession. It’s time for retailers to look in the mirror and ask, “Am I providing my customer a positive experience from shopping cart to doorstep to keep them coming back?” Many online stores struggle with delivery promises, especially for third-party inventory. Therefore, give a consistent, accurate and close date range to the customer so you can be reliable, sustain those long-term relationships, and build some new ones. Adding that to your brand offerings and uniqueness sweetens the deal if you can consistently deliver. Double-down on your loyal customers so they never have reason to go anywhere else.
- Profitability: This economic downturn has already seen a swing from the model of “growth at all costs” to one of profitable sustainability. We’re not doing our customers any favors if we drop out of the market — and that means we’ve got to think about profits in a sustainable way. For example, the ability to have a delightful shopping experience built into your back-office functionality is a great value-add. And if you’re running a fulfillment program, shipping compliance is important so you don’t pay for unnecessary or incremental charges.
- Risk and Investment: We’ve already noted that consumers are shopping around now more than ever. How can you ensure you have what they’re shopping for? You only have so much cash for inventory. This is where third-party or unowned inventory programs are increasingly important.
The beautiful thing about a third-party retail network is that retailers and brands can make connections with zero third-party investment risk. Instead of betting the farm on one single prospective winner, you can pick a roster of likely winners and cost effectively complement their offerings with third-party inventory.
As a result, if your customers want that pink jacket that you’re only going to sell a few of, instead of the black jacket that you’re going to go really deep on, you can offer both, ensuring that the customer experience is the same as if you actually owned the inventory for both items.
To help you thrive in a challenging environment, look for partners investing time and money into advancing solutions in all three of these buckets. We continue to innovate and to advance a suite of solutions around these new approaches because we want retailers to continue to thrive regardless of the economic environment.
Blaine Nielsen is senior vice president of services and customer success at CommerceHub, one of the world’s largest commerce networks and provider of software solutions connecting supply, demand and delivery for retailers and brands globally.
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