How Retailers Can Solve Margin Challenges Using Omnichannel Strategies
While eCommerce has seen massive growth during the COVID-19 pandemic, this growth also comes with its own set of challenges for retailers—namely, tighter margins and the rate at which the landscape has changed.
In order for retailers to mitigate the challenges that come with the broad adoption of online grocery shopping, they have to look at eCommerce as part of a broader omnichannel strategy. There are several key areas in which I think retailers have the opportunity to win.
eCommerce Growth Creates Opportunity
COVID-19 brought to light the discrepancies among different eCommerce models. Some of the big players were extremely well positioned to take advantage of the opportunity that Covid created. Others had more catching up to do.
Quotient also experienced massive growth in our own eCommerce platform. And while much of that growth has happened over the past three years, part of it was driven by the rapid adoption of online shopping during the pandemic. As a result, we’ve added capabilities, grown new retailer partnerships and honed in on our best practices.
McKinsey estimates that eCommerce penetration grew as much as ten years in just three months. Based on 89B annual retail transactions from exclusive partnerships, Quotient Internal Reporting shows that 40% of shoppers who signed up for eCommerce services during the beginning of COVID (March – April, 2020) repeated use of eCommerce in the following months. Those same shoppers placed seven eCommerce orders on average—a 2X jump from the same period during the previous year.
The pandemic created a situation in which people relied on eCommerce for a safer grocery shopping experience, forcing a shift in consumer behavior. Now that consumers have trialed these online services, retailers can focus on keeping their trust for the long term. I don’t believe we will ever return to a world in which people don’t shop online. Instead, the trend of eCommerce will likely flatten out over time. And as eCommerce usage levels out, I believe that we will see the big eCommerce players grow faster as the gap between them and their competitors grows exponentially.
The Challenges Retailers Face and How to Overcome Them
Due to the growth in eCommerce over the past 12 months, the importance of having a “hybrid” solution that works across all omnichannel offerings is critical. However, retailers are paying attention to a few key trends that have emerged.
Grocery delivery will be crucial to the success of this growth in order to ensure that the expense of delivery is reduced and the convenience of delivery is increased. Within grocery specifically, delivery is the key limiting factor and is a huge focus for innovation—which is a trend that will continue. Raising delivery costs may help, but ultimately this exposes retailers to push back from the shoppers. Picking, packing and delivering eats into margins. To have a sustainable long-term strategy to solve for this, technology and innovation must be the key.
One way for retailers to mitigate the risk of eCommerce reducing their margins is through side sponsorship. As retailers look to increase their margins and advertisers compete for share of voice on this ever-growing channel, the shift to onsite sponsored search and media programs continues to be a focus.
Gone are the days of advertisers offering sponsorship without insights into performance and data. Advertisers want to ensure that they are getting the best “bang for their buck,” and retailers who can offer this transparency and data are ultimately going to be the ones that attract the largest dollars from their advertiser partners.
As eCommerce growth continues and becomes a strong part of the omnichannel experience, the ability for advertisers to deliver campaigns through self-serve solutions at scale is now becoming a must-have factor. As this becomes more sophisticated, I believe advertisers will want the opportunity to execute price reductions at the same time. Bringing couponing and onsite sponsored search and media together, in an integrated way to deliver this, is the next natural step forward. I think this is one area where we will see a lot of growth and innovation in the coming months.
Embracing eCommerce as Part of the Hybrid Future of Shopping
Ultimately, shoppers will shop how they want to shop. It’s up to retailers to provide those channels and service customers appropriately. But it has to be seen as part of an omnichannel strategy.
To learn more about how Quotient is bringing innovation to eCommerce, contact us at [email protected]