Retail vs. eTail: Don’t bring a knife to a gun fight

Business Director, Commerce & Retail
Valtech DK
Søren Thingholm

October 27, 2014

Since world wide web driven eCommerce first saw the light of day in the mid-90s, many have forecasted the imminent death of retail as we know it.

However, as we can see whilst walking the streets of a major city, the death of retail seems a bit exaggerated. Nevertheless, a number of categories, especially within consumer electronics and apparel, have been hit hard by eCommerce and more categories will soon follow.

E-commerce seems to be on a winning streak against the old-fashioned retailers. Multiple categories of retailers find themselves attacked by ruthless eTailers who, with great knowledge and expertise, go into battle using advanced technology. And, if you bring a knife to a gunfight, you will soon learn that you have not chosen the right tool.

I am eagerly waiting to see how the old-fashioned retailer will look at these new eTailers, and what, if anything, they can learn from them. I am not talking about opening a webshop and diving into the blood red ocean. Rather, I am talking about learning the very fundamentals that make eCommerce a great sales tool and how those can be adapted to retail.

As no two retailers are the same, there is not one solution that is applicable to all. With a strong foundation in the retailer’s strategy, the tools and metrics of the eTailer can actually be used in an offline world. However, they must be adapted in a way that adds value and fits the strategy in each specific case.

Use eCommerce metrics

“Who is our best shop manager?” a CEO of a retailer could ask. Well, who is he – the best shop manager? Is it the shop manager at Times Square who always has a lot of customers and a high turnover? Maybe not if the retailer takes rent, salaries and such costs into account. Are the top and bottom line of a store’s yearly statement really the best way to measure a success? Not if you ask me. A more granular look into the details of each store might tell a whole other story!

eTailers look at a lot of metrics – all of them cut into short abbreviations like CPM, CPC, CPA, COGS and LTV. These metrics help the eTailer, in a very sophisticated way to fine-tune their online store. If done correctly, this fine-tuning will have a very positive effect on both the top and bottom line and provide great customer insight.

Imagine yourself as a retailer with the ability to, in real time, track the conversion rate, the “abandoned baskets” and see with your own eyes how an “empty search” is killing conversions. If this were possible you would begin to understand the true mechanism that lies within each store and in each customer segment and be able to turn this knowledge into a superior customer experience.

New technology like image recognition, iBeacons and such are making this possible with increasing speed. In addition, loyalty programs paired with smart devices (instead of yet another plastic card to add to the stack in one’s wallet) create unprecedented value-adding customer knowledge if implemented intelligently.

Do you want fries with that burger?

Imagine your last few visits at eCommerce websites. You were probably engaged by a so-called “recommendation engine,” which told you what other customers have bought and presented you with a range of products you might be interested in.

Do they work? Yes they do. These recommendation engines actually help customers find the product that they are looking for – and help the eTailer grow his ABV (Average Basket Value). On top of this, if it is a complex, technical category, the engines can help the customer combine products that work together, like an iPhone and a cable/cover/charger/headset.

I find it somewhat odd that I am rarely engaged in a physical store by a compelling sales man asking me if I have considered other products than the actual ones I hold in my hand. Come to think of it, the only time I can remember being asked such questions is at the gas station and during a Sunday morning head repair at the local McDonalds. Other customers may have the same experience when visiting physical stores and their purchasing potential goes untapped.

Indeed, retailers have a huge opportunity for improvement by looking into the way that eTailers cross and upsell, but legacy systems and cash registers from the late 90s are making the retailers drag their feet. Are iPads and other smart devices ready to take on the task of working as a cash register on a busy Saturday in a large grocery store? Probably not! Nevertheless, there are many ways that this could be implemented to work alongside an existing platform to support a better customer experience. This would bring the retailer one step closer to Nirvana, where every potential customer leaves the store having bought exactly what he needed, maybe even something that he didn’t know he needed, and the transaction done in a professional, personalized, customer centric manner.

Place it in the hands of the staff

Try calling a leading eTailer and asking them some product specific questions. Chances are that the customer service employee will leave an impression of being very competent and know-it-all about the products. These customer service interactions are actually based upon relevant product data, which could include some data that is not visible to the end user. Quick, searchable information, made available in the devices that support the context, leaves the impression of a very competent staff. This actually helps staff to convert and to maximize the total turnover.

Why would a world-leading eTailer like Amazon do this? Because old fashion retail, where one can visit a store, talk to competent staff, get inspired and instantly bring my purchases home, still has a number of superior advantages compared to a visit to a webshop.

Still, eTailers are closing the service gap each day by adding value-adding features to their webshops.

When will the retailers pick up the gun instead and head for the O.K. Corral?