The Digital Transformation of Retail and How to Stay Alive Online

With physical stores going away, a lot of brands are left attempting to navigate their own online transition. These growing pains and this fundamental shift in how retail does business, and will do business in the future, is bigger than most realize. Yet with this sense of impending doom, to the old ways of brick and mortar, adoption of new ways has been slow.

Let’s Talk Process First

In the “old days”, large wholesalers like Nordstrom and Macy’s had buyers. Those buyers would find designers, designs, brands, trends, and bring those into the store often by purchasing large bulk orders from that designer or brand. The buyer would say, “I will take this, this, and this”, the designer would get a purchase order, and then take that to manufacturing, where they would have the order shipped to the store. Now, if a wholesaler has traffic, they expect the designers to come to them, to figure out the dropshipping, and to promote on their own as well. This is such a huge shift, and really only one element of the changing retail landscape ahead of us.

Operating Systems That Operate

Sales and marketing, especially for midsized brands, is a tough place to be right now. Margins are tight, budgets haven’t moved, yet plenty of these brands have lost a lot of physical sales to the digitization of retail. Jan-Christopher Nugent, from Branded Online, pointed out that when these brands lose thirty to forty percent of brick and mortar sales, they often only make about fifteen to twenty percent of that back in the digital world, leaving a lot on the table. Branded Online offers commerce operating systems and solutions for this level of midsized player who needs to compete with bigger brands, but with a smaller budget and often with less teams or expertise in-house.

Nobody Believed Bezos

When Bezos dreamed up what Amazon would be, I think it’s safe to assume that very few (if any) shared in his massive vision. We were so offline and private, as consumers, it was difficult to fathom that level of ecommerce, or why anyone would even want that. Fast forward to now, and for all the good Amazon does for small business, they also shine a glaringly bright light on gray areas of midsize brands. Things like logistics, shipping costs, returns processes and simplicity of the end-to-end process that Amazon offers leaves little room for error. If a consumer knows they can spend the same (or a little less or a little more) on the same or a similar product and they don’t have to worry about shipping, they know when it will arrive, and if necessary it will be easy to return, Amazon will win every time.

This Is A Major Retail Gap

The problem is that midsized brands don’t have the budget Amazon does, or the infrastructure, or the teams, or the coverage. So leveling the playing field, where ecommerce is achievable and affordable for midsized brands is a task all in itself, which is only a small element of a business’s operational requirements. Everybody looks at the tip of the digital iceberg, while ignoring the giant mass lurking below the water with the capacity to sink the entire ship.

Online Went From Risky to Normal

Another piece of this shift in retail that nobody really talks about is how quickly the public perception shifted. Seemingly overnight (although online OG’s will tell you it was much more long nights) the public went from hitting the malls on weekends and their local Macy’s or JCPenney for one-off purchases, to buying a significant amount online. According to Statista, In 2016, 209.6 million U.S. people were online shoppers and browsed products, compared prices or bought merchandise online at least once. These figures are projected to reach 230.5 million in 2021, positioning the United States as of one the leading e-commerce markets based on online shopper penetration.

Brands Need A Plan

Nugent encourages brands that he talks with to come up with a strategy. Start asking questions. This needs to be a conscious shift, where brands start asking themselves the tough questions.

1. What should I be doing?

2. What are the channels I should be in?

3. What stores do I need to look at?

4. What teams do I need or need to supplement?

5. What are the technology solutions I’m missing?

6. Get to know your content. Content today quickly becomes a lost asset for brands that don’t understand how to: a) expand the capacity of their content; and b) t rack the efficacy of their content.

7. Design your future organization. It’s not always about absolute reinvention. But brands need to look at their logistics management, their digital media resources, their online services, and find the gaps to accelerate their progress.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.