In a world where digital transformation is accelerating, an unprecedented expansion of eCommerce can be noted. According to the Fevad, “in a context of declining household consumption (-0,1%), overall sales on the Internet grew by 14% year on year, reaching €22 billion in the second quarter of 2018, a “good performance”.
The several changes due to this digital revolution force brands to re-evaluate their commercialization strategy. Two different strategies can be adopted:
- Developing its own digital channels and operating an ecommerce website
- Leveraging existing channels to distribute its products online and engaging in an eRetail transformation
Which strategic challenge should be addressed first? The question arises for any brand wishing to act before it will be too late. Addressing first the second strategy and mastering eRetail, a booming digital distribution channel, allows to obtain quick business outcomes: managing brand image online, taking the lead on eRetailers, enhancing customer experience and driving conversion. This will not prevent multinational companies from developing their own digital channels in a second phase.
At a time when digital technology appears as a major pillar of development, how to master eRetail with efficiency in an evolving and competitive environment?
1. eRetail: global context and benefits
An ecommerce expansion has been noted over the past 5 years, as evidenced by record figures. Ecommerce is about to reach 90 billion sales in 2018 in France and giants such as Amazon and Alibaba continue to thrive. According to a study by eMarketer and as reported by “Les Echos”, Jeff Bezos’ company is expected to generate about 48% of US ecommerce revenue in 2018. This transformation makes change inevitable, as well as other factors:
- Multinational companies’ digital maturity is accelerating and we can observe a consolidation of retailers at regional or global level.
- The explosion of online sales changes landscape and mindset. Driven by the development of new technologies, the way of doing ecommerce has profoundly changed. The augmented customer, equipped with his smartphone or computer, can find any information and compare prices worldwide.
- More and more hubs are being created today and we can note an optimization of operations into hub/regional.
In this context, eRetail offers everything that today and tomorrow’s consumers are seeking, from the added value of instant purchases to the accessibility of innovative products and services. However, what concrete benefits can businesses reap from this transformation?
- Firstly, the potential reach is unparalleled with anything you’ve ever seen before. 85% of researches on products and services are made online, your customers are no longer just those who visit stores and they can buy your products, even when you’re closed.
- Another significant advantage is consumer intelligence. While it’s difficult, nay impossible, for you to identify the real needs of your potential customers when they see your advert, look in your window, go into your store or attend a promotional event, (e)Retail gives you the power to engage in genuine dialogue with consumers.
- eRetail also represents a powerful arena for product and service innovation. New digital services can be built around existing products, paving the way to lands of endless opportunities for the more creative out there. And those who do will set themselves apart from their competitors who remain stuck in the simple product age.
- Last, and by no means least, embracing (e)Retail is an opportunity to drastically cut the budget needed to expand the sales force, not only with regard to marketing and manpower, but also rent and other physical expenses. If part of a calculated and innovative approach, economies of scale can cut the resources necessary to manage the same turnover as B&M retail by 95%.
Thus, of the many strategic matters, eRetail is surely one of the priorities: successfully integrating this new sales channel into a global Retail strategy could have an enormous impact, both short and long term. However, what are the issues companies are facing in this brand new environment?
2. Multinational companies’ challenges
Whether they concern strategy, governance, partnership management or decision making, new issues have emerged for any multinational company wishing to achieve successful online business:
- How to make business grow in this new environment? How can I define my value proposition for the online sphere?
- How to adapt and transform organization to address the challenges of eRetail?
- How to increase prices without failing?
- How are products positioned on eretailers’ platforms? How to build a balanced partnership and maintain perfect execution?
- How to collect data from a wide range of sources, including eretailers? How to leverage this data to glean insights into market needs and satisfy them before competitors?
In a context of strong local disparities and particularities of eRetail at a global level, which may be linked to the structure of distribution or the maturity of markets and digital purchasing behaviour, some companies and brands have successfully engaged in eRetail transformation, as evidenced by their initiatives. As mentioned by Frenchweb, Carrefour is partnering with e-merchant Jumia to strengthen its presence in Africa. El Corte Inglés, Spain’s largest department store chain, has teamed up with Alibaba and will sell its products worldwide on Tmall or AliExpress platforms. The Swiss group Richemont, the world’s second largest luxury group, has joined forces with Alibaba to distribute its luxury products in China.
Engaging in eretail transformation thus appears as a strategic challenge. How to do so? What are the keys to success?
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3. How to engage in eRetail transformation?
Through our own experience, there are five steps to master eRetail:
- Define the most efficient organization for the eRetail
Brands have adopted various kinds of organizations: by BU, by region, by segment… Are these operating models, tailored by the relations with traditional retail, really relevant for eRetail? Wouldn’t it be better to consider a “digital native” organization? What processes follow to efficiently control the eRetail? What kind of agility use to support the rapidly evolving market and e-commerce technologies?
Finding the answer to these questions often requires insights from experts. And organizational change is more effective if is accompanied by training and coaching.
- Evaluate and enhance digital maturity of sales teams
People are the key of sales performance. However, BU managers and Key Account Managers who deal with e-retailers are not necessarily digital experts. To increase sales team efficiency, you need to accurately assess their web & mobile fluency… and measure their level of mastery in digital practices.
From that assessment, you will implement actions to fill up the gaps: recruitment, training and coaching, making these key positions perform better and be more demanding with your eRetailers.
- Assess partnership level with eRetailer, and control its execution
How to better negotiate with an eRetailer if you don’t know exactly its positioning towards its competitors and the level of partnership you can establish?
Depending on the maturity of this partnership, you will act using the appropriate levers that will enhance the involvement of your digital retailers. You will precisely monitor and control the execution of merchandising and sales policy for each eRetailer. These continuous improvement processes involve reporting and steering tools driven by measurable KPIs!
- Innovate and share best practices, every time and everywhere
E-commerce is a fast moving world: what works today will not necessarily work tomorrow, what is good in a country can be bad in another one. You need to challenge your opinions to build strong key beliefs. And you will have to check that on a day-to-day basis: key beliefs will change as your digital business evolves.
Let’s take the example of conversational commerce, a new trend which pops up new questions: how to adapt merchandising in the conversation that a “chatbot” will have with a consumer? Good practices are emerging and must be tested, and, in case of success, they must be quickly shared between BUs or geographical areas, taking into account local culture and business specificities.
- Professionalize eRetail in all its dimensions
Increasing the level of professionalism for brands in the eRetail is a process involving the whole company. Choosing a tool and deploying it rapidly is rarely enough, if the teams are not coached to adopt this profound change.
To make such a strategic project successful, it is key to select priority markets, according to objective criteria based on opportunities and constraints in each country or region of the world.
Then the project will be fully deployed by waves of countries with the adaptation of the organization, sales teams skilling up, tools setup along with training & coaching. Not to mention the animation and emulation around the “Test & Learn” approach which needs to keep its first impulse, otherwise the risk of failure is real.
Proven methodology and tools with coaching by experts guarantee to avoid waste energy and resources without tangible results, which reinforces the sense of helplessness and breaks the strongest motivations.
To sum up, multinational companies wishing to achieve online business success have to engage in eRetail transformation to establish a collaborative relationship with their eRetailers, set up qualitative trade terms and a selective distribution.
Addressing this strategic matter in a pragmatic way is paramount. Through our own experience, a step by step approach, engaging teams when relevant and appropriate geographies together is the way to success.