It’s the time of year when leadership teams across the industry gather around the table to chart their strategic course and make plans for the coming year. These exercises often involve looking back over the previous year for clues to what worked, what didn’t and what has changed. It’s safe to say any 2-3 year plan drawn up at the beginning of 2020 can be balled up and thrown out. Let’s review a few lessons learned in the past year and how they may influence your digital commerce planning from this point forward.
The COVID-19 pandemic altered the buying behavior of consumers to a significant degree that is likely to last. In recent years, we had grown accustomed to charts portraying the 15 percent to 18 percent year-over-year growth in automotive eCommerce parts and accessories sales. Along came the stay-at-home orders and after a severe decline in all forms of commerce, digital sales came roaring back like a bungee cord that had been drawn taut. Jon Hedges (hedgescompany.com) tells us that since May 1, weekly ecommerce sales are up 64 percent year over year (YOY). When the numbers are annualized, 2020 will reflect an increase in eCommerce sales of more than 40 percent. Growth that was projected to be as much as 18 percent turns out to be more than 40 percent. That represents an incremental $2 billion in ecommerce sales. Strategic planners have to ask themselves, “Did we get our share of that explosive growth in digital commerce?”
There are those among us who look forward to a day when things go back to the way they were. They will describe the burst of digital sales as a fad driven by home confinement. That may eventually be true of restaurant sales and commuter miles traveled to the office. But the convenience of shopping online is a learned behavior that will stick with most consumers who tried shopping for anything from the comfort of their couch. Strategic planners have to ask if they are managing their channel with a “digital-first” approach. A year ago, the word de jour was omnichannel. That is to say online shoppers should have total freedom of choice in how and where they shop and take ownership of products. Add to that digital first and your strategic decisions should be guided by the assumption that online is where customers will prefer to go first to research, locate and buy products.
In a digital-first world, brand owners and retailers must put themselves in the shoes of a customer and ask if the digital content online is the best reflection of the product and contributes to a great customer experience. An automotive merchant with Walmart recently confided that some of their current sellers “are not reliable to provide A+ content to increase content quality scores.” This “leads to a decrease in customer satisfaction with the brand.” What Walmart advocates is for brands to directly set up their full catalog of fitment data (ACES) and product content (PIES) even if they don’t feed the inventory. “This will allow us to have the full assortment with right content…to portray best-in-class experience for the brands.” To brand owners the message is that whether you choose to sell to Walmart directly or not, don’t leave the reputation of your brand and the customer satisfaction to chance. Set up a direct relationship for your content.
Finally, we’ve seen the eCommerce pendulum swing from full distributor fulfillment to manufacturers selling full assortments of product directly to major marketplaces (only to get most of it returned due to sub-standard inventory turns). Marketplaces value high levels of service and fast delivery more than the lowest acquisition cost. Manufacturers typically only have one or two distribution centers to service the country. This makes low-cost second-day service to all corners of the country difficult to achieve. Besides, most manufacturers are optimized to pull, pack and ship large order volumes – cases, pallets and trucks.
For this reason, an eCommerce fulfillment hybrid model has emerged that routes orders to a network of distributors for what they do best – fulfill small orders fast and efficiently. But since online marketplaces expose 100 percent of the SKUs in a brand to online demand, it’s important for factory stock to be listed in partnership with distribution and available to drop ship as a backstop for product not carried in WD inventory. The model of brand owners and distributors working in partnership to make the most of the eCommerce opportunity supports the notion that digital commerce doesn’t replace distribution. Digital commerce needs distribution.
There have plenty of lessons to learn in 2020. We all discovered how to be flexible, adaptable and creative in our business planning. When it comes to planning for success in the digital channel, remember to think digital first, own your brand’s reputation online and think of channel partners as allies and not foes. Let’s raise a glass to a better 2021 and the success of your strategic plan.
