© David Feinleib 2017

David Feinleib, Bricks to Clicks, 10.1007/978-1-4842-2805-0_7

7. The Retailer Challenge (and Opportunity)

David Feinleib

(1)San Francisco, California, USA

“The challenge of the retail business is the human condition. We’re only as good as the moment, that fragile moment when we please or hopefully don’t disappoint the customer.”

—Howard Schultz

Partnering to Win in E-commerce

Over the past few years in e-commerce, we’ve helped develop e-commerce strategies not just for the world’s largest brands but also for the world’s largest retailers. Some retailers we read about every day in the news—but not for the reasons we’d like. They’re closing store after store, taking hundreds of millions if not billions of dollars of writedowns in the process. These retailers have been too slow to recognize and respond to rapidly changing shopper behavior.

These shoppers are highly mobile, big on convenience, and heavily influenced by what they read online. They’re distrusting of paid advertising and quick to shop around if they think they can find a cheaper price elsewhere. It’s not that they’re not loyal—they’re simply looking for the best value for the best product, and they’re armed with a lot more information than shoppers of the past. They’re in control of the buying process like no consumer has ever been before.

The millennial consumer is truly the “me” generation. Millennials have products delivered to them instead of them going to pick up the products. To go somewhere, millennials summon an Uber when they want one—and pretty soon that Uber will be a self-driving car. Millennials expect to be able to buy products and return them if they don’t fit, don’t meet their needs, or aren’t as advertised, no questions asked. Millennials expect everything to be mobile ready. In fact, some 70 percent of purchases today start on a mobile device.

And yet there is a way to work with this consumer—by becoming the consumer’s best and most trusted source of information. Information is important not only for today’s consumer but also for the search engines and search algorithms by which many of today’s products live and die. With this context in mind, we turn to what you can do to balance things out, while putting yourself in an even better position to serve the demanding millennial consumer.

The biggest difference we see between bricks retailers and their bricks-to-click s counterparts is the extent to which bricks-to-clicks retailers have empowered their suppliers. By modernizing supplier portals, making it easier to set up new items and update item content, and giving suppliers more control over the shipping and selling process, the bricks-to-clicks retailers have truly partnered with their suppliers to enable a better customer experience.

Supplier Portals

When it came to product content management and syndication, we originally worked with large numbers of suppliers to help them update their content on Walmart.com. Helping Walmart suppliers update their product content was a natural extension of the reporting we were providing them. Almost without fail, when we would tell a supplier on a call where their opportunities for improvement were, they would ask us for help in updating their content.

Before working with us, some suppliers were experiencing delays of two to four months when trying to update their product content. With our system, suppliers have been able to update their content in a matter of seconds.

At the same time, suppliers were asking us for help updating their content across multiple retailers. The differences in image formats, content requirements, and update templates made multiretailer content updates an incredibly slow and painful process.

As we continued to build out support for more and more retailers, however, we noticed that these retailers lacked modern supplier portals. Many of them relied on Excel spreadsheets attached to e-mails from suppliers to ­buyers, some required images to be uploaded to legacy FTP servers, and others received XML feeds from various content sources but the content that came with these feeds had to be manually copied over from one system to another. This resulted in extremely slow update times and occasionally lost imagery and content. One retailer even required suppliers to provide physical CDs with images on them to make image updates.

The reality is that many of the systems retailers run on were not built with the idea that there would be numerous and frequent updates to products once they were set up.

Note

Many of the systems retailers run on were not built with the idea that there would be frequent updates to product content. A great supplier portal coexists with these existing systems to make it easy for retailers to receive high-quality content on a regular basis from their supplier base.

In a bricks-only world, items went through an item setup process, appeared on the store shelf, and got marked down until they were sold. The idea that these items would have a virtual presence and that a supplier could change the branding for an item “in flight” was completely foreign to these legacy systems. What’s more, these systems were not designed for speed. When these systems were implemented, companies ran on annual planning cycles and prepared their items for market many quarters if not years ahead. Competitors operating via drop-ship models where new products come and go all the time did not yet exist.

The bricks-to-click s retailers are putting modern supplier portals in place. They recognize how important it is to help their suppliers operate quickly and be partners in delivering up-to-date and compelling content online.

The retailer version of our Master Catalog and content health reporting system—built to handle hundreds of millions of items—helps retailers who want to accelerate their transition from bricks to clicks. The solution is a fully hosted, cloud-based supplier portal for web-based item setup, ongoing item maintenance, and content updates. Think of it as Amazon Vendor Central in a box. It makes it easy for suppliers to deliver updated imagery and content to the retailer with no change needed on the retailer’s part to their existing systems.

From Actionable Data to Organizational Action

One of the biggest opportunities we’ve encountered in helping bricks-to-clicks retailers is finding innovative ways to make large quantities of data actionable. Buried in the data are dozens if not hundreds of opportunities for improvement. The challenge is unlocking those opportunities in an actionable manner.

One director we work with at a large retailer had joined the retailer from a large technology company. There he had to mobilize the organization to drive improvement in the company’s online performance. This challenge was not unlike the one we faced at the retailer in getting the organization to focus on and improve the health of its online content. Product pages needed to have multiple high-quality images, high-quality product descriptions, and mobile-friendly titles. The organization had to do this at scale across tens of millions of items.

The director shared two key insights with us. First, we had to present the data in a compelling, actionable manner. Second, it wasn’t enough to make the data actionable. We had to get the organization to take action on the data.

The first thing the director had us do was take all our content health reporting data for every single item on the web site and roll it up into a sitewide heatmap.

The heatmap is broken up by content health segment (imagery, videos, product descriptions, and the like) and by department. This way the retailer’s leadership can easily see where there are opportunities for improvement, which departments are hitting their content health goals, and which weren’t. No department head wants to have the most red area in the heatmap at a weekly or monthly review. By presenting all the departments side by side via the monthly heatmap, the department heads compete to have the best content health scores. Yet this bricks-to-click s retailer took things one step further. The retailer made content health scores a key element of merchant goals.

We knew the approach was working the day the merchants in a meeting at the retailer’s offices asked us how they could improve their content health scores. They cared because they were a goal for them.

Talk about organizational transformation for e-commerce. The director’s approach drove change across the entire organization. The key steps were incredibly effective.

  1. Get the right reporting in place.

  2. Consistently report on the data.

  3. Tie employee goals to improvements in metrics.

The result? We have seen double-digit sales increases for those who have adopted this methodology.

Pricing and Inventory

In addition to providing retailers with content health reporting, Content Analytics also delivers comprehensive pricing and inventory insights. Retailers use our solutions to alert their buyers when products go out of stock. They use our pricing reports to see how their top items are priced relative to the competition and whether any adjustments are needed.

Even retailers employing dynamic pricing algorithms often need to make manual adjustments to their top-selling items. Our reporting and alerting capabilities give category managers the key information they need, right when they need it.

Assortment

Assortment is another important area of focus for bricks-to-click s retailers. Here we see two distinct trends: a focus on a specific niche in the market or a drive to carry as many products as possible. Those retailers looking to increase their assortment are primarily doing so through marketplace s. Marketplaces allow third-party sellers to sell directly to shoppers while taking advantage of the consumer reach, brand recognition, and platform capabilities of the retailer.

In the marketplace model, retailers take a cut of the action, typically between 6 percent and as much as 25 percent. In the bricks world, our suppliers typically act as the category managers for their retailers. Bricks retailers simply don’t have the same kind of insight into e-commerce assortment as they do into store assortment. This is usually because their supplier partners haven’t dedicated the extensive category management resources to e-commerce that they have to in-store. Retailers often aren’t willing to pay for separate or additional category management resources in e-commerce. The other reason is that some retailer teams believe that the best approach to category management in e-commerce is an algorithmic one: feed the computers enough data, and the results will follow.

The challenge is that increasing assortment requires three key elements.

  • Identifying the assortment to be added

  • Getting the assortment online

  • Ensuring the new assortment has quality content so that the products appear in search results and deliver conversions once shoppers land on the item pages

Pure-play e-commerce retailers such as Jet, Wayfair, and Zulily have brought a number of unique innovations to assortment expansion. Table 7-1 highlights a few of these different approaches and their corresponding pros and cons.

Table 7-1. Comparison of Online Retailer Business Models

Marketplace

Jet.com

Wayfair

Zulily

Inventory update

Directly own (1P) inventory for one-third of SKUs to achieve two-day delivery.

Two-thirds of total SKUs are from partner sellers or third-party retailers.

Jet.com needs the sellers to integrate with Jet via an API, or through third-party channels, so inventory/product information can be updated on Jet.com.

Automatic updates: third-party channel sends automatic inventory updates periodically.

Manual updates: through seller portal.

Seller manually sends the product list, inventory, and contents to Zulily before a sale event starts (a sale event lasts 72 hours).

Seller is not able to modify inventory level during the event.

Payment

Jet.com collects payment from shoppers.

Wayfair collects payment from shoppers.

Wayfair pays the sellers after receiving invoices for each order.

Zulily collects payment from shoppers.

Zulily pays sellers two months after sales events because the site allows returns and refunds.

Fulfillment

One-third of total SKUs are fulfilled via Jet.com’s own warehouses/distribution centers.

Two-thirds of SKUs are shipped by partner sellers or third-party retailers.

Sellers download orders every 15 minutes through third-party channels and acknowledge the orders. They upload tracking information through third-party channels.

Automatic order download: order download every hour.

Order functional acknowledgment informs Wayfair that an order document has been received.

Order acknowledgment informs Wayfair that an order is shipped.

Order fulfillment upload: sends tracking information to Wayfair.

Invoice upload: invoices Wayfair for every shipped order.

After the event ends, Zulily sends bulk orders to the seller.

Sellers need to send bulk orders to Zulily distribution center with packing requirements.

Zulily does kitting and shipping to the final consumers in their distribution center.

Shipping

Orders fulfilled by Jet.com distribution centers are shipped by Jet.com’s shipper.

Orders fulfilled by third parties are shipped by the third parties’ shippers.

Wayfair sends shipping code for each order.

Third-party channels translate shipping code to shipping method.

Wayfair has contract shipper for specific items; sellers can also use their own shipper.

Wayfair receives tracking information automatically.

Zulily ships orders via their own shipper.

Storage

Three warehouses for one-third of total SKUs.

No storage.

Distribution center: temporary storage between receiving bulk orders and shipping out individual orders.

Customer care

Jet.com is responsible for customer care.

Wayfair is responsible for customer care.

Zulily is responsible for customer care.

Third-party channels

ChannelAdvisor: https://www.channeladvisor.com

Commerce Hub: https://www.commercehub.com

Zentail: https://www.zentail.com

Channel Advisor: https://www.channeladvisor.com

Commerce Hub: https://www.commercehub.com

SellerCloud: https://www.sellercloud.com

Not needed.

Pros

Ensure customer experience by fulfilling/shipping part of total SKUs from their own distribution center.

No storage, no fulfillment, no shipping.

No inventory risk.

Distribution center can consolidate items from different sellers.

No inventory risk.

Cons

May confuse customers who receive multiple packages from Jet.com, sellers, and third-party retailers for the same order.

Potentially higher operating cost due to owning warehouses and fulfillment centers and managing shipping.

Inventory and storage costs.

Even if a consumer places one order, items from different vendors will arrive in different packages at different times (shipping cost is relatively high; however, Wayfair products have higher value, absorbing the cost).

Pay twice the shipping cost (bulk order from the seller to the distribution center; individual order from distribution center to the consumer).

Relatively long wait times to receive orders (on average, 14 to 15 days from order placement to receipt).

Only suitable for flash sale model.

As we look to the future of e-commerce, we expect to continue to see evolving retailer business models. First-party sales, flash sales, marketplace s, and drop-shipping programs will all be part of the equation. More innovations are sure to come.

Item Setup

Streamlining the item setup process may be one of the least talked about yet more important aspects of delivering a robust online product assortment. Item setup continues to be a challenge for many traditional bricks retailers. We’ve seen retailers have as many as 800 or more individual forms for item setup. This often leads to confusion with suppliers and results in all kinds of data errors, further slowing down the process. Bricks-to-click s retailers are making a concerted effort to improve their item setup process.

By getting new items online faster, bricks-to-clicks retailers start selling sooner. They also become the content authority for those items, which in turn produces better search engine rankings.

Many item setup forms are still Excel-based templates with complex macros built in for data validation. At Content Analytics, we’re helping bricks-to-clicks retailers move their entire item setup processes online. We still support the Excel forms, but we also provide a complete web-based interface for editing and validating item setup information. Retailers that implement this kind of approach are empowering their suppliers. They give their suppliers the tools they need to perform most data validation up front and make changes as needed, thereby streamlining the item setup process.

The most sophisticated bricks-to-click s retailers are implementing application programming interfaces (APIs) that tools vendors can connect to for item setup. This gives companies such as Content Analytics the opportunity to design and develop streamlined user interfaces and data validation mechanisms, while enabling the retailers to maintain standardized programmatic interfaces for receiving the data they need.

At Content Analytics, we provide cloud-based APIs for retailers that don’t want or don’t have the resources to develop their own item setup API implementations. We also provide a complete cloud-based item setup and maintenance system for retailers that want a plug-and-play solution.

In parallel with adding more items to their online assortment, it’s also important for retailers to ensure that shoppers can find those new items. Often, new item pages are effectively invisible to search engines and shoppers alike because they lack great content. If item pages don’t have great content, no matter how many items a retailer adds, those pages still won’t be highly ranked in search engine and on-site (retailer) search results and shoppers won’t be able to find them.

Search Engine Optimization

The bricks-to-click s retailers have a heavy focus on search engine optimization (SEO) with very tangible results—more on those results in a little bit. First the why.

Their SEO investment is to ensure that their items show up in Google and other search engines when shoppers are looking for the items they carry. All have dedicated SEO teams who are responsible for managing their SEO efforts. SEO efforts require multiple initiatives.

  • Tracking the retailer’s search rankings in popular search engines. Retailers use software such as BrightEdge and Content Analytics to track which keywords they rank for and how high.

  • Optimizing item pages so that retailers can improve the number that get listed in search results. They do this by ensuring that product pages contain high-quality unique content, header tags, and alt text for images.

  • Reducing the number of outdated item and category pages that contain no content, poor content, or duplicate content from elsewhere on the site. These kinds of pages bring down the overall quality of the site in the eyes of Google and reduce the likelihood that even high-quality pages will be included in top positions in search results.

  • Ensuring that search engines can discover all the pages on their site. They do this by making sure their sites include up-to-date sitemaps to make it easy for search engines to find the relevant content on their sites.

The need for unique content highlights a subtle but important tension developing between suppliers and retailers. Google values unique content. The search engine penalizes sites that use duplicate content, considering those sites to be less authoritative. If you have too much duplicate content, Google may remove your entire site and all the links to its pages from its search results. When two sites have the same content, typically the site that publishes its content first is considered the original. That means getting item content (especially content that comes directly from suppliers and may be used on multiple sites) live on the Web quickly is paramount.

Yet suppliers and retailers have differing objectives when it comes to unique content. Suppliers typically want the same content everywhere because they want to maintain brand integrity. Retailers want unique content so they can rank higher in the search engines. And they ultimately decide which content appears on their sites. This tension is not likely to be solved anytime soon.

We’ve also seen that bricks-to-click s retailers undertake their own efforts to develop unique content. Since it’s not cost-effective to create unique, optimized content for every item on a site, bricks-to-clicks retailers focus on those items that have the potential to drive the most revenue.

What’s changed from in-store to online is location. Retailers are competing for the same small slice of search engine real estate.

Some retailers are turning to automated content generation, with mixed results. Automated content generation uses templates, natural language processing, and product specification data to generate product content. Other retailers rely on low-cost outsourcing agencies to produce content, also with varying results. Some use a mix of the two. In both cases, the quality of the content produced tends to vary greatly.

In the bricks-to-click s retailers, optimizing the most important items and leaving the rest for suppliers and sellers to deal with is the prevailing strategy. That said, we expect continued advances in natural language and hybrid natural language and human product content generation in the years ahead.

The bricks-to-clicks retailers also ensure that they’re tracking the health of all the different types of pages on their site and optimizing content accordingly. In addition to tracking and optimizing item pages, they’re also tracking and optimizing category pages, so when shoppers perform more general searches for terms like “televisions” or “strollers,” the pages on their sites will still come up.

The best category pages combine unique copy with algorithmically generated product listings. For example, if a retailer wants to push more of a certain product, that product will be featured on the corresponding category pages.

The bricks-to-clicks retailers also plan ahead when it comes to their SEO efforts. Search engines are crawling and indexing billions of web pages, so it takes time for updated results to appear. Plus, it takes time to develop unique content. That’s why bricks-to-clicks retailers start optimizing their site content well in advance of holiday shopping periods and other key events.

At Content Analytics, our goal is to provide retailers with a single place where they can find the SEO and content health information they need while also enabling them to get updated content from their suppliers.

In the process, we have seen page visits increase by 14 percent or more, and sometimes by as much as 30 percent, just by improving item page content. Although the investment to see SEO results takes time and dedication, it is still one of the most cost-effective and proven ways to drive web site visits.

A/B Testing and Personalization

Getting shoppers to your site is only half the battle. Bricks-to-click s retailers are also employing innovative approaches to increase conversion rate s. A/B testing is one well-known approach, where retailers evaluate the performance of two page layouts to see which one performs better. A portion of shoppers see one page, and a portion see another.

We expect some retailers to take this a step further in the future, gathering multiple product images and product descriptions from suppliers and sellers and A/B testing them to see which combination performs the best.

Interestingly, we’ve seen limited interest in personalization. Since the early 2000s, startups and large companies alike have invested in e-commerce personalization but to little avail. Massive data collection efforts, sophisticated algorithms, and other approaches showed little advantage over the basic yet effective “consumers who bought this also bought that” approach. It turns out that as shoppers, we aren’t as different from each other in our shopping preferences as we’d like to think. Yet at the same time, we are highly social creatures, who take the recommendations and opinions of both friends and strangers seriously—which is where ratings and reviews come in.

Ratings and Reviews

Product ratings and reviews continue to be extremely important in e-commerce. Products with one review do better than products with zero reviews, but the real tipping point is at 21 reviews. Studies have shown that products with 21 or more reviews receive twice as much traffic as products with no reviews. After that number, the law of diminishing returns kicks in, and the impact of reviews has a lesser effect from there on out.

Reviews can also be a great source of unique content, if managed properly. The bricks-to-click s retailers measure review counts and work directly with their suppliers on programs to get their products reviewed. Some third-party review programs are available, such as BuzzAgent. Amazon’s Vine program is another option, where Amazon provides products to a network of reviewers (who receive the products free of charge).

BazaarVoice continues to have, outside of Amazon, the lion’s share of the supplier review market because of a strong syndication network that reaches hundreds of retailers and because of its tight relationship with Walmart, where it is the only review provider currently supported on Walmart.com.

What are the benefits to retailers of supporting their own native review capability? First, they have more control over the user experience, less integration overhead, and no ongoing license fees like they have with a third-party provider. They can be sure that the reviews displayed on their site are original reviews, not reviews that suppliers have syndicated across multiple sites. The benefit of syndication, of course, is that a retailer doesn’t need to build up a big base of reviews from scratch—it can leverage an existing base of reviews. The downside is that the retailer can’t be guaranteed unique review content.

Unique, fresh content continues to become more and more important. As a result, the negative impact of using the same nonunique reviews that published on other sites is also increasing. Bricks-to-click s retailers are engaging their shopper base to write new reviews rather than relying too heavily on syndicated reviews. In the process, they’re building a unique and proprietary content asset that will have long-term, differentiated value in the market.

Connecting with the Shopper

The approaches retailers are using to engage with shoppers don’t stop with reviews. Retailers are using Q&A sections in their item pages where customers can ask (and answer) questions about products. They’re also experimenting with capabilities such as real-time chat. Similar to the chat windows now commonly available for consumers to get support on a variety of web sites, chat windows on e-commerce web sites enable consumers to ask questions and get answers in real time. But unlike typical support-style chat windows, the e-commerce chat approach lets the consumer connect directly with a brand/supplier representative.

Retail startup Welcome Commerce (formerly known as ChatID) is one company that’s focused on increasing real-time engagement between brands and shoppers through an online chat plug-in. The ChatID plug-in makes it possible for retailers to embed chat within the product pages of their web sites so shoppers can communicate directly with the brand. Other approaches don’t require an actual plug-in, simply a link embedded in an item’s product description that causes a chat window to open—no change on the part of the retailer is required.

The biggest challenge with real-time chat is that suppliers must have dedicated personnel available to respond to chat requests as they come in. Consumers dislike seeing the “real-time chat is not currently available; please leave a message” notice when they have the expectation they’re going to get real-time help.

The jury is still out on how successful the real-time chat approach will be. But the bricks-to-click s retailers are piloting these kinds of capabilities to gauge customer and to give suppliers an opportunity to engage directly with shoppers.

Membership and Subscription Models

Bricks-to-clicks retailers are experimenting with membership and subscriptions models—but in most cases not fast enough. No membership service has been quite as successful as Amazon Prime. Originally a loss-leader for the company when Prime was launched in 2005, Prime has now grown to more than 70 million members. The free shipping and guaranteed two-day delivery time (and in some cases now even faster delivery time) are benefits too great for most shoppers to turn down. A Prime membership also makes consumers—who have already invested $99 in their annual membership—think twice about shopping somewhere else.

Other retailers like Sam’s Club and Costco pioneered the membership model, but Amazon has been the fastest to drive up its numbers, in large part because it was willing to support Prime at a loss when they originally rolled it out.

In the subscription area, Unilever’s billion-dollar purchase of Dollar Shave Club highlights the strong demand (in this case by a brand) to get into the subscription business and have a more direct connection with the shopper.

Other nontraditional retailers are using subscription models with some success as well. Startups Ipsy and Birchbox are generating hundreds of millions of dollars in revenue annually each with their cosmetics subscription models. For a low fee, shoppers know they’ll receive a package of items they’re sure to like delivered to them every month. These companies may run into challenges as they scale because of increasing costs of customer acquisition and retention.

Bricks-to-click s retailers are also experimenting with rewards models. Shoppers accumulate points over time and can redeem those points for future discounts or special offers. Retailers like Sephora are using rewards programs to generate loyalty and keep customers coming back.

If there is one element in this area that separates bricks-to-clicks retailers from the rest, it is the amount of experimentation they’re willing to do to figure out what works. Just as bricks retailers experiment with different store formats, layouts, and locations, bricks-to-clicks retailers experiment with different sales and delivery models to make their customer relationships “stickier.”

Mobile Apps

Along with other retailers, Amazon and Walmart have both rolled out mobile-specific applications. One of Amazon’s insights was to make it easy for shoppers to comparison shop the price of in-store items with online items. The company’s unique mobile scanning technology works not only with bar codes but with product labels as well.

The big question in this area is how many applications consumers are realistically going to interact with on their mobile devices. Although millions of mobile applications have been developed, the number that consumers interact with on a day-to-day basis is in reality quite small—Messages, Facebook, Uber, Maps, and perhaps a banking application or two. Bricks-to-click s retailers are starting with basic mobile applications but face a challenge in making their apps compelling enough for shoppers to interact with on a daily basis.

The Omnichannel Experience

If there’s one company that has cracked the code on integrating in-store and online it is Apple. The Cupertino company has created an in-store shopping environment that delights the customer, with the ability to interact with the company’s latest products and get help for existing purchases. The Genius Bar is genius. Customers come into the store to get help with an existing piece of hardware or software and are likely to walk out with a new purchase in addition to getting their problem addressed. Apple’s in-store sales representatives, with their mobile point-of-sale devices, make it especially easy for shoppers to make new purchases.

Playing to the importance of convenience, Apple has also made it easy to order online and pick up in store. Walmart has done the same with its pick-up today (PUT) model, allowing consumers to see which items are available where. At the same time, Google is trying hard to compete, partnering with a variety of retailers to roll out same-day delivery of products from those retailers via Google Shopping. And now even Amazon is creating its own brick-and-mortar stores. Why have consumers go elsewhere to check out physical products when the company can keep those consumers inside its own brand?

With all that said, no matter which retailer you look at, delivering a seamless omnichannel shopping experience is no easy feat. It requires highly integrated supply chains, efficient logistics, and a streamlined customer experience so that shoppers don’t have to wait when they arrive at a store to pick up their items. As with mobile applications, the bricks-to-click s retailers will continue to experiment in this area as they figure out what works—and what doesn’t.

Grocery: The Next E-commerce Frontier

Online grocery represents a huge market opportunity, yet for many years it has seemed just out of reach. Consumers still want to pick out their own fruits and vegetables as well as prepared meals—although meal delivery services are trying their best to take aim at this segment of the market.

But in the last year, we’ve seen greatly increased demand from our supplier clients for analytics and reporting for online grocery across Amazon Fresh, Walmart Grocery, and Peapod. We also see key personnel within our supplier clients shifting their focus from core e-commerce to grocery.

A combination of three market factors are coming together to drive growth in the online grocery space. First, consumers are going through a generational shift. They are short on time and attention and have an ever-increasing expectation of convenience. Second, existing bricks retailers want to combine online and offline capabilities. Third, major suppliers are looking to establish pole position in the space. Where once these suppliers were taking a “wait and see” approach to online grocery, they now want to make sure they don’t get left behind as more purchasing moves online. We expect to see bricks-to-click s retailers continue to innovate in the online grocery area in the months and years ahead.

Competitive Insight

Retailers can never have enough competitive insight. We are seeing an increasing number of requests for competitive reporting. This reporting includes pricing and promotion data, assortment information, and evaluations of competitive product content quality and best practices.

In particular, retailers want to answer the following questions:

  • Which best-selling products are available on competitor sites but not on my site?

  • Which niche sites are beating us on selection or price?

  • What promotions are other retailers running, and what is the “out the door” price for equivalent items?

  • How are products are being priced on other sites, and are we competitive?

  • How is the assortment of other retailers changing over time?

  • What is the quality of content for item pages on other retailer sites?

  • What kind of creative, visuals, and messaging are other retailers using?

  • What search terms are competitors ranking for in Google and other search engines?

In one example, Jet.com included the prices that Amazon was charging for the same product directly on its site so that shoppers could see exactly how much they were saving over Amazon by shopping on Jet. By finding items from distribution locations closer to the consumer, Jet’s unique pricing algorithm delivers more savings to consumers as they add more items to the basket.

In an increasingly competitive market, bricks-to-click s retailers are asking these key questions and using sophisticated technology to give them insight into the competitive landscape. Based on this competitive information, they’re rapidly evolving their online marketing, pricing, and promotion strategies, often in real time.

Bricks-to-clicks retailers use competitive data as an input into algorithmic pricing, with pricing algorithms at retailers like Amazon and Walmart dynamically updating prices throughout the day based on the price other retailers in the market are charging for a given item. Competitive data is also used as an input into strategic initiatives such as assortment expansion—retailers can figure out which items they’re missing and prioritize those items to be added to their catalogs. In addition, bricks-to-clicks retailers are using competitive data for content and attribute validation—checking to see whether they have an equivalent or better number of specifications for items in electronics, for example, and then creating initiatives to increase their content quality and specification counts where necessary.

Specialty Independent Retailers

Another way that retailers are remaining competitive is through specialization. To that end, we’re seeing more and more specialty independent retailers spring up. These retailers have set up shop online using Shopify or other platforms and have typically developed a more targeted way to market to a narrower segment of the shopper market. They develop high-quality content, produce custom buyer’s guides, and use direct-to-consumer channels such as YouTube to drive visits and conversions.

Looked at another way, the market appears to be segmenting into a few big mass-market retailers, whose goal is to continue to expand their assortment to be as large as possible, and a large number of smaller, specialty retailers who have found unique ways to market to their target shoppers. Some bricks-to-click s retailers are even implementing narrowly targeted sites as spin-offs or spin-ins of their core offerings so that they too can target narrower market segments.

We expect to see more compelling content continue to emerge from these specialty independent retailers along with highly segmented marketing approaches.

Delivery and Drones

No chapter on the future of e-commerce retailers would be complete without a word on “last-mile” delivery. Jeff Bezos stole the limelight when he announced that Amazon was exploring Amazon Prime delivery using drones.

At the time, the idea seemed far-fetched. But today it seems much closer to reality. In March 2017, Amazon completed its first public U.S. drone delivery, “ferrying sunscreen to attendees at an Amazon-hosted conference in Palm Springs, California.”1 Drone technology continues to increase in sophistication. The cost of the technology keeps coming down. Perhaps most importantly, consumers continue to demand faster delivery. Don’t expect it to be too long before everyday deliveries are being made by drone.

Summary

In this chapter, we’ve explored the many ways in which bricks-to-click s retailers are partnering with their suppliers to win in e-commerce. These approaches include the following:

  • Rolling out cloud-based item setup and content maintenance portals that make it easy for suppliers to set up new items and update content. Retailers get access to the best content while still maintaining control over what ultimately gets published on their sites.

  • Developing unique, compelling content to engage their shoppers.

  • Using Content Analytics to measure and improve content quality, out-of-stock rates, and pricing, thereby empowering their organizations to deliver more visits and higher conversion rate s.

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