The retail outlook has rapidly switched. Businesses are facing spiralling costs and on-going supply chain disruption, whilst the cost of living crisis continues to affect customers’ buying behaviour. After years of ecommerce growth, how will the retail outlook be affected by these changing socio-economic factors?
Opportunities for profitable growth continue if businesses take the right strategy – by drawing on “the proven playbook for success in a world of slower growth, higher inflation, and more expensive capital,” according to McKinsey. The management consultant advises companies to consider four key areas: rebuilding the supply chain for resilience and efficiency; continuing to invest in sustainability; searching for growth opportunities; and building talent.
Of course, each ecommerce retailer will have a different set of challenges and priorities associated with these key areas. For instance, when it comes to addressing the talent gap, is it possible to find the right skills when UK unemployment is at its lowest level since 1974? Or is it time to think laterally and explore mature third-party service alternatives, from fulfilment to marketing, even finance? The right technology can also play a key role in overcoming staff shortages – is now the time to consider digital transformation? Investment in technology is a key objective in 2023, from automation to improve efficiency, to business intelligence tools to attain more insight into customer behaviour and day to day performance.
Efficiency and resilience enable cost control
Despite varying priorities, every retailer has been impacted by supply chain disruption over the past few years – and experienced the knock-on impact on both customer experience and costs. In a market that is increasingly cost sensitive, it is worth exploring any supplier changes that minimise exposure to supply chain problems. For example, adjusting transportation modes and routes, considering options to avoid customs clearance issues and trade tensions can reduce problems, feed into strategic sustainability goals and even potentially lower transportation costs.
A similar outlook can be applied to the downstream end of the supply chain and achieve a far more efficient approach to meeting customer expectations without incurring unnecessary costs. Returns, for instance, are one of the most significant drains on profitability for ecommerce businesses – despite the recent shift towards charging for returns. Prioritising the idea of taking the time to understand the cause of returns can be a revelation. It can highlight problems not only with picking accuracy and delivery damage, but also product misdescriptions. Tackling these inefficiencies should be a primary objective.
Retailers can quickly release essential working capital and provide space for higher margin products through identifying slow moving stock and the associated cost of storage. Adding improved fulfilment processes will also maximise the value of these higher margin goods, boosting both the quality of customer experience and profitability.
Customer awareness fuels growth
Experts agree this is not the time to retreat from growth plans, however companies must gain a far better understanding of changing customer behaviour to ensure they focus on the most promising opportunities. Recession is rarely experienced consistently across all retail sectors, markets or geographies. Opportunities still abound for retailers ready and able to respond to changing customer behaviour. Inflation prompted consumers to buy early for Christmas, for example. Additionally, 42% more shoppers worldwide and 37% more in the U.S. planned to start buying gifts earlier than before in hopes of stocking up before prices would rise too much, according to Salesforce research.
Identifying what customers are buying enables retailers to maximise these opportunities. For example, how relevant is a current customer product offer? How much room is there for discount – for any future seasonable marketing campaigns? It is also important to reassess digital marketing activity and ensure the spend is delivering value for money. Are consumers more susceptible to promotional offers? Is price sensitivity affecting all product segments or only certain areas? Sustainability is increasingly important to customers too – 31% of retailers expect more sustainable delivery options and ‘click-and-collect in-store same-day’ to be the highest demand delivery options in 2023.
It’s vital for retailers to invest time in understanding what is selling, in what volume and where it is being sold. They need to understand customers’ delivery expectations – from speed and price to sustainability options. Taking advantage of this awareness with an accurate cost of product sale will help identify fresh growth opportunities and maximise value from both marketing and merchandising perspectives.
Conclusion
Despite the likely challenging trading period ahead for retailers, the mood remains hopeful and positive. 67% of UK retailers expect sales to be higher in 2023 than 2022. However, reflecting on internal processes is now crucial to ensure those sales are profitable. Actively exploring current operational processes will ensure retailers are best placed to eliminate inefficiencies, to access and maximise any potential, and realign the company towards the most profitable opportunities. In doing so, these businesses will likely surpass merely surviving the upcoming months, and find themselves perfectly placed to develop quickly as the market picks up again.
James Hyde is chief product officer and founder, James and James Fulfilment
You are in: Home » Guest Comment » GUEST COMMENT Ensuring ecommerce growth in an economic downturn
GUEST COMMENT Ensuring ecommerce growth in an economic downturn
by James Hyde
The retail outlook has rapidly switched. Businesses are facing spiralling costs and on-going supply chain disruption, whilst the cost of living crisis continues to affect customers’ buying behaviour. After years of ecommerce growth, how will the retail outlook be affected by these changing socio-economic factors?
Opportunities for profitable growth continue if businesses take the right strategy – by drawing on “the proven playbook for success in a world of slower growth, higher inflation, and more expensive capital,” according to McKinsey. The management consultant advises companies to consider four key areas: rebuilding the supply chain for resilience and efficiency; continuing to invest in sustainability; searching for growth opportunities; and building talent.
Of course, each ecommerce retailer will have a different set of challenges and priorities associated with these key areas. For instance, when it comes to addressing the talent gap, is it possible to find the right skills when UK unemployment is at its lowest level since 1974? Or is it time to think laterally and explore mature third-party service alternatives, from fulfilment to marketing, even finance? The right technology can also play a key role in overcoming staff shortages – is now the time to consider digital transformation? Investment in technology is a key objective in 2023, from automation to improve efficiency, to business intelligence tools to attain more insight into customer behaviour and day to day performance.
Efficiency and resilience enable cost control
Despite varying priorities, every retailer has been impacted by supply chain disruption over the past few years – and experienced the knock-on impact on both customer experience and costs. In a market that is increasingly cost sensitive, it is worth exploring any supplier changes that minimise exposure to supply chain problems. For example, adjusting transportation modes and routes, considering options to avoid customs clearance issues and trade tensions can reduce problems, feed into strategic sustainability goals and even potentially lower transportation costs.
A similar outlook can be applied to the downstream end of the supply chain and achieve a far more efficient approach to meeting customer expectations without incurring unnecessary costs. Returns, for instance, are one of the most significant drains on profitability for ecommerce businesses – despite the recent shift towards charging for returns. Prioritising the idea of taking the time to understand the cause of returns can be a revelation. It can highlight problems not only with picking accuracy and delivery damage, but also product misdescriptions. Tackling these inefficiencies should be a primary objective.
Retailers can quickly release essential working capital and provide space for higher margin products through identifying slow moving stock and the associated cost of storage. Adding improved fulfilment processes will also maximise the value of these higher margin goods, boosting both the quality of customer experience and profitability.
Customer awareness fuels growth
Experts agree this is not the time to retreat from growth plans, however companies must gain a far better understanding of changing customer behaviour to ensure they focus on the most promising opportunities. Recession is rarely experienced consistently across all retail sectors, markets or geographies. Opportunities still abound for retailers ready and able to respond to changing customer behaviour. Inflation prompted consumers to buy early for Christmas, for example. Additionally, 42% more shoppers worldwide and 37% more in the U.S. planned to start buying gifts earlier than before in hopes of stocking up before prices would rise too much, according to Salesforce research.
Identifying what customers are buying enables retailers to maximise these opportunities. For example, how relevant is a current customer product offer? How much room is there for discount – for any future seasonable marketing campaigns? It is also important to reassess digital marketing activity and ensure the spend is delivering value for money. Are consumers more susceptible to promotional offers? Is price sensitivity affecting all product segments or only certain areas? Sustainability is increasingly important to customers too – 31% of retailers expect more sustainable delivery options and ‘click-and-collect in-store same-day’ to be the highest demand delivery options in 2023.
It’s vital for retailers to invest time in understanding what is selling, in what volume and where it is being sold. They need to understand customers’ delivery expectations – from speed and price to sustainability options. Taking advantage of this awareness with an accurate cost of product sale will help identify fresh growth opportunities and maximise value from both marketing and merchandising perspectives.
Conclusion
Despite the likely challenging trading period ahead for retailers, the mood remains hopeful and positive. 67% of UK retailers expect sales to be higher in 2023 than 2022. However, reflecting on internal processes is now crucial to ensure those sales are profitable. Actively exploring current operational processes will ensure retailers are best placed to eliminate inefficiencies, to access and maximise any potential, and realign the company towards the most profitable opportunities. In doing so, these businesses will likely surpass merely surviving the upcoming months, and find themselves perfectly placed to develop quickly as the market picks up again.
James Hyde is chief product officer and founder, James and James Fulfilment
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