The E-commerce success journey still developing
BECOMING INDISPENSABLE: MOVING PAST E-COMMERCE TO NEXT COMMERCE
INTRODUCTION
An effective transition cannot eventuate beneficial for us to lead the way to the next horizon of digital commerce indispensable for the companies to get genuine embracement of the customer is valuable us and have the courage to take bold actions if it serves the benefits for customers. Companies can face the threat of its existence if sustain during and after the next e-commerce wave, and become a leader. Because of new experiences with the customers and their very wide acceptability resulting from the business of e-commerce by turnover doubling in the past five years and markets expected to almost double again by 2026, companies are making sizable investments in their e-commerce infrastructure platform capabilities. The problems of many of these companies are locked into an increasingly outdated view of e-commerce as a “bolt-on” to the main business. This approach to e-commerce needs a big upgrade grounded in a commitment to become indispensable to the customer through an exponentially deeper level of engagement online and offline. Delivering on this vision requires companies to put digitally driven commerce at the core of their organizations so they can compose experiences that meet customers’ ever-rising expectations. Based on the nature of the business that emerged, we treat it as the next horizon of value NeXT commerce. Some large incumbent companies are generating tens of millions of dollars in new value through a long-term commitment to digitally driven commerce and doing swiftly to catch the opportunity much before cutthroat competition becomes a norm in this sphere. But many companies are still doubtful of the new opportunities and profit on the big investment or channel-conflict concerns.
THREE CORE FINDINGS
Six global forces, from very fast trending customer behaviors to an exponential growth of new technologies, are employing tremendous pressures on traditional business models. Successful companies are becoming obligatory to their customers by using digital to move past basic transactions and provide experiences that resolve a much broader set of their customers’ problems. Many companies are shirking the hard adoptions they need to make, often because of internal politics, fear of channel conflict, and large gaps in capabilities and tech, thereby missing out on the full potential value available to them. Most leaders’ thinking about e-commerce is too small. Time and again, we see companies trying to optimize existing products, services, or processes, thinking along the old question lines of “How can we improve our widget?” instead latest of “How can we better serve our customers?” To become indispensable to customers, companies need to develop a radically deeper and broader understanding of what their customers really want and how to provide it.
MAKING THAT DRIFT STARTS WITH SOLVING OF THREE PERSPECTIVES.
Are we delivering a new class of experience to our customers or our stakeholders across channels? Few will have missed the unprecedented growth in the number of channels (and variation across those channels), from live commerce to the nascent metaverse. As of the end of 2021, B2B customers were typically using ten channels to complete their buying journeys, up from just five in 2016. Channel strategy can look a bit like an exciting, challenging, and very addicting new game, with businesses rolling out new channels in an effort to “catch up” to their customers and, as a result, trying to manage a feel unsteady array of channels, each with its own tech stack or data models. This generates major limitations on creating seamless and scalable customer journeys. Next commerce brands have instead pursued a “headless” channel strategy, where no single channel is favored over another, in order to serve customers wherever they are, online and off. They have built fully integrated customer, inventory, and order management systems that manage data and experience flows across channels and inventory locations based on what customers prefer rather than on how systems are set up. Grainger embraced this headless approach to provide whatever its customers needed by installing vending machines on factory floors so workers could access parts immediately. The machines are connected to automatic refill systems. The company also developed and continually added a range of services to its website and mobile app, such as access to previous orders, 24/7 customer service, and advanced search, as well as e-procurement and digital stock-fulfillment solutions. These digitally-driven ingenuities are now responsible for 75 percent of Grainger’s revenue.
In China, trust issues mean that consumers will typically visit eight touchpoints before making a decision, putting a premium on consistency across every channel. This dynamic has thrust stores and specifically salespeople in stores into the omnichannel limelight, as consumers often turn to them for advice about products or services. On the back of these interactions, salespeople are incentivized to deepen customer relationships by getting them to sign up for loyalty programs and communicating offers to them through WeChat. Chinese retailers have developed highly automated CRM-like capabilities to feed salespeople customized services and coupons to send to their customers to drive online purchases. Kering, the luxury-brand holding company, has embedded this capability through an app called LUCE, which 16,000 sales associates worldwide use every day to drive customer engagement.
E-COMMERCE GLOBAL INITIATIVE, NEXT COMMERCE?
If we wish to make a goal of selling more products that we don’t understand all our customers’ needs? Incumbent businesses often have unique advantages, including customer relationships, data, and infrastructure. But they generally do a poor job of thinking creatively about how to build on these advantages. Instead, they default to thinking about how to do a better job selling a product—for example, a running shoe—rather than about how to help their customers with all the issues related to that product, such as the full running experience. We’re starting to see changes in this direction, such as car companies becoming “mobility” companies. This shift requires a total rethink of customer experience to condense the full range of customer issues and interests related to a business’s core product. Analyzing data and using focus groups help, but detailed ethnographic research to understand every single consideration and activity is crucial and the key to becoming indispensable to customers. This goal animated Mars Petcare to expand from selling pet food to offering pet-care services. The ultimate goal is the creation of a “loyalty loop,” a set of managed experiences that not only expands the ways companies can serve customers but also builds up their data advantage.
Do customers trust us enough to accept our moves into new markets? Companies have always moved into adjacencies, but NeXT commerce casts a wider net of market opportunity: tech companies can offer payment services; retailers can offer banking services; marketplaces can offer media. Making this kind of ecosystem move requires a critical mass of customers, deep insights into their broader needs, and—perhaps most important—a sufficient foundation of customers’ trust. Flipkart, an India-based e-commerce company, invested heavily in building customer trust—for example, by making the digital sales process as accessible as possible. It pioneered, for example, cash-on-delivery services, since 60 to 70 percent of its target customers weren’t comfortable paying digitally. This foundation of trust has allowed the company to rapidly expand into new sectors such as travel and healthcare.
Companies without the same size and scale advantages will need to develop a range of alliances, partnerships, and even acquisitions to serve the broader array of customers’ needs. Making the rise to operating a NeXT-commerce business begins with a long, hard look in the mirror and facing some painful truths. The most important is that the majority of companies, despite their protestations, simply do not put the customer first. A range of pressures—stakeholder agendas, internal politics, managing channel conflict, short-term financials—leads to significant compromises. Leaders committed to moving forward into NeXT commerce should begin with an unwavering appraisal of their current reality and answer four critical questions.
1. IDENTIFICATION OUR PROFITABILITY BLIND SPOTS
No company gets into e-commerce not to turn a profit but future prospects and cannot left behind as and when opportunities. But many companies settle down for revenue over profits or have opaque notions of turning volume into value at some future date. Executives still see the primary role of e-commerce as driving revenues (67 percent) versus driving profit. This is a self-destruction act, particularly with assumed economic uncertainty ahead. “Brands need to be very practical and ask: How do we protect profitability in e-commerce looking ahead?” said by global head of e-commerce at Lenovo. NeXT commerce preserves profitability as a core capability based on two things: know what our customers value and where we are the odd out in both meanings positive and negative, and remain distinctive. Customer acquisition costs have risen an average of 60 percent over the past five years. To redress this issue, companies need to do less paid marketing (essentially buying shares) and more engagement. Unfortunately, many companies have incomplete, narrow, or simply incorrect views of what their customers care about. In many cases, this is a result of engrained mindsets or incentives that reward people for only optimizing experiences within the confined narrow bounds of their own operational responsibility. Addressing this blind spot starts by separating table stakes from distinctive sources of value to the customer that competitors will have trouble copying. When Alibaba set up its HeMa grocery business, it maintained market parity for delivery times (around 30 minutes) and pricing. It distinguished itself, however, by identifying “key value indicators,” which included having the freshest seafood and providing ready-to-cook meals for young couples. For many B2B companies, finding this value entails using tech to help sales and service people. Grainger organized data about its customers to make it easily accessible. When a customer calls about broken kitchen equipment, for example, a Grainger service person is able to access a database immediately to identify the needed part and ship it quickly. Operational efficiency. Logistics typically are among e-commerce’s highest costs and quickly erode margins. Fulfillment costs, for example, can account for 12 to 20 percent of e-commerce revenues, squeezing margins and making profitability a mirage.
The truth is that most companies have not effectively designed and implemented cost-efficient operations. But companies can often unlock sizable value by using AI to systematically optimize the full range of operations, from pricing and assortment to single-trip productivity and order pooling to long haul and last-mile delivery configuration and order density, to name but a (very) few. It requires a Toyota factory mindset to squeeze efficiency out of every process with the help of advanced analytics. One US-based energy company, for example, was able to save $20 million annually by using an advanced-analytics model to identify the root causes of repeat customer calls. As Eddie Huang, the chief strategy officer of SF Express, said, “The stability of operations and logistics, among other things, is critical to service quality and customer experience
Given the costs, companies will first need to focus on the biggest pools of value. Some companies, for example, are segmenting their products, customers, and locations to prioritize the highest-value options. Others will need to rely on partners, particularly for last-mile delivery. Similarly, companies should approach cloud service providers (CSPs), with their increasing number of offerings, like partners who can provide them an accelerated on-ramp to advanced capabilities. To support this extensibility, companies will need to put in place a core set of digital mechanisms to enable the necessary connectivity, from AP Is that connect to different systems to cyber practices that protect data.
2. Ensure customers changes to meet our people
Many of the most promising e-commerce programs falter because the business is simply not ready to change. There are a variety of reasons, but many of them boil down to a lack of expertise in digital and fear of altering the status quo. Three actions are crucial to combat this tendency: Hire “doer” talent at scale. The natural tendency in addressing talent issues is to hire a head of e-commerce or a head of digital. But companies often don’t provide these leaders sufficient authority or resources to make the necessary changes, leading many of them to leave in two to three years. Companies need to commit to hiring digital leadership and enough supporting digital talent to create a critical mass for change. And while they need key skills—data science, cloud engineering, design—it’s more important that they have key “doer” traits: a preference for action over analysis, an obsession with the customer, and a willingness to test ideas quickly with real customers. At one retailer, the e-commerce head hired 62 people within three months to sustain a digital business. This focus on talent at scale is so critical that we have seen successful CEOs spend as much as 70 percent of their time on recruiting. Promote risk-taking and learning over safe bets. The pace of change will reward those companies that are the fastest to learn and adapt. The best learning happens through constant experimentation. That requires companies to not only become comfortable with failure but also make experimenting easy and cheap. That means creating dedicated areas to test ideas and then capturing and sharing the learnings through transparent reporting and reusable code libraries that are easy to access. As a former digital executive for P&G said, “Fast-cycle learning is a killer app because it leads to a cumulative advantage that is hard for competitors to catch up to.” Use data to break through stalemates. Without clear data that everyone is comfortable with, decision-making is challenging and often slow. Good data helps create alignment and gives leaders the confidence to make decisions quickly, even when these decisions are not in line with historic experience.
SOCIAL COMMERCE: THE FUTURE OF HOW CONSUMERS INTERACT WITH BRANDS
. Are you rewarding your tech organization for delivering better customer outcomes?
Companies need to operate like digital natives, using tech to quickly test new ideas and scale the best ones. But IT at incumbent companies is often more of an inhibitor than an enabler of these efforts. The most important point to remember is that NeXT commerce goals should drive technology decisions, not the other way around. Three issues predominate: Large, outdated systems constrain companies from moving and scaling at speed. Companies need to focus on creating an infrastructure of services to untether them from their legacy systems. Microservices (code that performs discrete tasks) allows them to easily test and swap out selected capabilities without affecting the entire system. Those services can be bought outright and installed directly or used as part of an offering from a CSP. Through APIs, companies can allow this array of services to access data and algorithms trapped in legacy systems. Flipkart, for example, has relied heavily on APIs to allow systems across the enterprise to communicate with each other to deliver complete experiences. IT’s incentives generally aren’t tied to customer or business outcomes. Creating the right incentives begins with developing metrics so that problems cannot hide. The solution requires specific IT objectives and key results (OKRs) that are tied to customer experience and profitability, a set of input metrics to identify root-cause issues quickly, and a system of strict enforcement of those metrics. Incremental changes just take too long. The only antidote to incremental changes and glacial speed is a big-bet commitment to developing a cloud-based architecture to serve the most pressing needs, such as customer experience.
4. ARE ALL RELEVANT FUNCTIONS FOCUSED ON DELIVERING THE BEST CUSTOMER EXPERIENCE?
NeXT commerce requires a massive coordinating capability across the enterprise. That’s because so many parts of the business are needed to deliver on the customer experience—smooth and fast delivery, inventory availability, tailored prices and promotions, consistent marketing, and informed sales. Mars Petcare’s general manager of e-commerce, Jessica Hauff, had a clear view of how to make that happen: “My job was to build capabilities across the entire enterprise, so I embedded e-commerce teams in functions, including supply chain, product management, and sales.” These teams are responsible for both helping functions better understand how to take advantage of digital capabilities and collaborating across functions on specific product initiatives. In China, a “middle office” capability has developed to manage and support various business needs across verticals and channels that interact with customers. It can orchestrate activities and roll out capabilities, such as personalization and content development, in a consistent way to each vertical. This organizational shift must come with a big change in incentives and performance management. Sales reps simply won’t encourage customers to use digital channels unless there are incentives and goals to reward them for doing so. Each function in the business needs to have clear incentives oriented to customer experience. Becoming a NeXT-commerce business requires a commitment to becoming indispensable to the customer. That means hard choices and significant change. But a handful of large companies have shown that it’s not just possible but also profitable and sustainable to make the leap from now to NeXT.
SOLVING THE PARADOX OF GROWTH AND PROFITABILITY IN E-COMMERCE
Global omnichannel players that crack the code will be well-positioned for the years ahead. Four imperatives can support their journey. During the early stages of the COVID-19 pandemic, e-commerce was one of the biggest stories in retail. Lockdowns and public health concerns for retail workers and consumers alike resulted in a mass migration to online sales. The pandemic essentially squeezed ten years of digital sales penetration into three months. In response, retailers scrambled, innovated, and adapted their distribution and brick-and-mortar operations to keep pace. Eighteen months later, online sales have shown few signs of reverting to pre-pandemic levels. Retailers that may have initially viewed e-commerce as a lifeline now take a slightly more negative view. For the majority, skyrocketing online sales have been accompanied by costs that have risen just as fast. Fulfillment costs, for example, can account for 12 to 20 percent of e-commerce revenues, squeezing margins and making profitability a mirage. Retailers must now recognize a few truths: all growth is not the same; unprofitable growth destroys value; and healthy, sustainable growth should be the goal. Success will require a concerted, organization-wide effort. The good news: our analysis identified some common trends among leading retailers and highlighted four imperatives that can point organizations down the path to profitability.
The e-commerce catch-22
Even before the COVID-19 pandemic, consumers had begun to embrace the selection and convenience of e-commerce. In 2019, e-commerce represented approximately 25 percent of total retail sales.1 Since the onset of the pandemic, consumer intent to purchase goods through e-commerce channels has increased by 40 to 60 percent compared with pre-pandemic levels across categories from everyday essentials to clothing and accessories. These shifts in consumer behavior will stick over the long term as individuals become more accustomed to purchasing online. More than 50 percent of consumers expect to continue their online shopping habits after the pandemic abates. This pattern will fuel the growth of online sales, which are expected to contribute to 100 percent of the increase in sales of soft goods over the next three years. Forecasts suggest online sales could account for nearly half of all retail revenues by 2024. However, the results are not all positive. Our analysis of total shareholder returns (TSR) for 100 large retailers found digital growth alone does not necessarily lead to positive outcomes (exhibit). In fact, the retailers with the most growth in online sales saw the biggest decline in the margin (and thus TSR). In comparison, top performers increased shareholder value more than ten times for every percentage point of digital growth compared with companies in the bottom quartile. Retailers that overemphasize e-commerce revenues could actually be damaging their prospects. Indeed, digital growth is not enough; only profitable digital growth will create value. Since e-commerce is a significant contributor to growth for most retailers, they must not only have a strategy for how to generate more growth from this channel but also ensure that the strategy creates value for the organization. Depending on a company’s product categories and business model, it may have inherent advantages when competing in e-commerce. Consider a few examples: Higher item value and basket size in categories such as home, sporting goods, and electronics incur lower shipping costs as a percentage of sales. In comparison, a fast-fashion retailer with a low free-shipping threshold may need to absorb a large number of negative-margin sales. Retailers that offer a unique or custom product or service are more likely to protect their margin. By contrast, a consumer-electronics retailer may need to aggressively price match to generate sales. Categories with lower return rates, such as furniture, have lower costs related to returns logistics and markdowns. But a women’s apparel player may face a return rate of up to 40 percent on items such as dresses and jeans. While built-in advantages can increase the odds of achieving profitability, companies can still take action to improve their performance and reduce costs. Our analysis found that three markers separate top-quartile performers from the pack regardless of their starting point.
Category diversification
Retailers in categories with lower price points, higher ability to cross-shop, or high return rates have mitigated these disadvantages by entering into new categories with more favorable intrinsic economics for e-commerce or by launching private-label brands to gain more control over margins. For example, Target has launched 30 private-label brands in the past five years, and more than ten of these brands generate at least $1 billion in annual revenues each. Similarly, Amazon has established more than 100 private-label brands across categories, with penetration as high as about 10 percent in apparel.
Effective EBIT management
Retailers are increasingly faced with a paradox: brick-and-mortar revenues are in decline while a host of fixed costs remain, but the growth of online sales fuels a rise in variable costs (such as fulfillment, delivery, and digital marketing), thus eroding margin. What is the winners’ secret? They start with transparency on the total cost to serve by identifying key cost drivers and implementing coordinated strategies across end-to-end commercial levers, from pricing and promotion to merchandising and fulfillment. When done well, this approach enables leaders to pinpoint shifts from brick-and-mortar to e-commerce and determine how those shifts affect markdowns, return processing costs, marketing, and credit-card fees, among other costs. Levi’s “premiumization” strategy demonstrates the effectiveness of this approach. By initiating impactful collaborations and launching hot-spot pop-ups, the company elevated its brand and drove consumer demand, enabling it to strategically reduce its markdowns and increase pricing by about 5 percent in the second quarter of this year across all geographies and channels. These efforts raised gross margins by about one percentage point.
Curate a brand experience to drive loyalty beyond reason
Leading retailers invest in consistent and friction-free experiences, a strategy with a clear link to value across omnichannel. Sephora is a leading example of how to implement consumer-centric strategies that seamlessly blend digital and physical shopping experiences. Ranked number one in Sailthru’s third-annual Personalization Index, the retailer creates a personalized consumer experience through the combination of its Sephora app and digitally enabled frontline staff who can access a customer’s purchase history to offer real-time recommendations. In addition, Sephora uses augmented-reality tools such as facial scanning so customers can conduct virtual product testing via mobile or in-store. Some of the savviest retailers subtly nudge customers to take certain actions, such as returning products to the store, obtaining a discount rebate, and paying with a debit card to reduce processing fees. The total impact of these efforts can strengthen customer loyalty, increase customers’ lifetime value, and improve margins.
Four imperatives to boost e-commerce profitability
Getting to break even in e-commerce has proved elusive for most companies because of its tremendous complexity: retailers must connect the dots between growth and cost levers and align incentives across the organization. While a retailer must tailor its strategy to its particular starting point, a successful approach should include four imperatives
1. Align on the ‘North Star’ and set clear objectives for the whole organization, enabled by data visibility
Achieving profitability in e-commerce requires a move from functional thinking to system thinking, with different parts of the organization working closely together and making conscious, informed trade-offs. Establishing quantifiable objectives and key performance indicators (KPIs), informed by the “North Star,” can support the decision-making process required to achieve desired outcomes. This process starts with a clear understanding of total cost to serve. Accounting for previously “hidden” costs of serving customers—for example, the allocation of upstream personnel such as designers and salespeople—can quantify the true cost of doing business by channel as well as customer profitability. A case in point: promoting two-day shipping may help the commercial team achieve its revenue targets, but this decision will likely have a negative impact on the logistics team’s cost-management goals. In many cases, commercial teams lack visibility into operations costs at an item level, which means that they might make unprofitable decisions unknowingly. Retailers may need to invest to build this granular cost visibility to enable aligned incentives and shared KPIs.
2. Generate more value from fixed assets
Retailers can deploy several strategies to improve the margin of each transaction and maximize the value creation from fixed assets. First, performing profitability analysis at the SKU level can allow retailers to be strategic about which products to offer online and promote on the digital shelf. Targeted communications and offers can result in bigger baskets. For example, retailers can identify opportunities in the purchase journey to engage customers—such as outfit recommendations or in-cart add-ons—to reduce the per-item cost of fulfillment and shipping. In addition, since customers likely won’t be thinking about a retailer’s expense in delivering their goods, companies have an opportunity to nudge them toward lower-cost options, such as no-rush shipping or ship-to-store. Another way in which a retailer can improve transaction profitability is to expand offerings into higher-margin categories where the retailer has the right to play. For example, an apparel retailer may consider entering skincare and cosmetics or soft home, categories that not only have better economics but also are complementary to core apparel offerings, which enables basket building. Alternatively, retailers can consider launching private-label brands, which offer more control over margins through decreased price comparability and promotional intensity.
3. Reduce operating costs while providing an excellent consumer experience
Not all cost-reduction measures have a negative impact on consumer experience and revenue potential. In fact, some tactics, when wielded artfully, can improve margins while boosting sales. Using stores as micro fulfillment centers can help retailers meet increasing customer expectations for fast delivery while avoiding skyrocketing costs. With more than 90 percent of consumers believing two- to three-day delivery is standard, retailers with an existing physical footprint have a unique advantage to meet customer demands while controlling costs.5 Omnichannel services, such as buy online, pick up in-store (BOPIS), and ship to store, can help decrease the cost of fulfillment and logistics and bring additional foot traffic to stores, resulting in incremental sales. To take a step further, retailers such as Amazon are leveraging self-serve lockers to further reduce operating costs while increasing efficiency in simple in-store transactions such as pickup and returns. Taking a multicarrier approach can also present an opportunity. Although the approach is complex, when retailers invest in the right tools and supplier development, a larger stable of carriers can enable retailers to actively manage fulfillment costs and maintain customer service-level agreements (SLAs). Returns have remained a vexing challenge—and one that can eat away at margins. Simple tactics such as encouraging consumers to return merchandise to stores can cut processing time by up to 18 days and improve the chances an item can be resold at full price. Since e-commerce return rates can reach 25 percent, even small improvements can have a significant impact on the bottom line.
4. Accelerate the speed at which the company organizes and operates
The increasingly complex matrix of omnichannel engagement creates friction points that can cloud decision-making. Long-standing questions such as “What should be integrated versus stand-alone?” and “What should be owned by the digital versus functional areas?” continue to challenge leaders. One thing is certain: the pace of change and operating rhythm is only accelerating. Retailers are no longer in the world of weekly reviews. The cadence has shrunk to by-the-minute sales operations. Two priorities can help organizations increase their pace. The first order of business for retailers should be to establish an agile operating model that can enable a rapid test-and-learn culture and streamline decision-making. Since e-commerce functions such as merchandising are commonly shared with stores, retailers must establish clear ownership and metrics to ensure accountability. Forming agile squads with a cross-functional team can enable retailers to run rapid A/B tests to evaluate different profitability strategies and use the results to shape large-scale rollouts. This approach helps reduce the risk of new strategies or practices while allowing teams to be innovative. Second, retailers that have traditionally focused on brick-and-mortar operations likely have workers who lack the necessary digital knowledge. As e-commerce and digital technologies become larger parts of the business, developing this knowledge will be critical to foster effective collaboration—not only in digital and e-commerce teams but also across the organization. A baseline of digital fluency will enable retailers to achieve true cross-channel coordination.
The spike in e-commerce over the past 18 months has led retailers to focus on capturing the growth, with mixed results on profitability. To win in the years ahead, retailers must scale their digital channels while maintaining a relentless focus on costs. Addressing several questions can help guide the way: How well aligned is the organization on digital growth and profitability objectives? Does the organization currently have clear visibility into the full set of cost drivers in the digital and omnichannel business? Which types of initiatives and services can nudge consumers toward low-cost channels and help the organization notch quick wins? Prioritizing transparency, selecting and measuring the right KPIs, promoting cross-functional collaboration, and accelerating the operational speed of an organization represent important first steps.
Digital resilience: Consumer survey finds ample scope for growth
Opportunities are there for the taking in mobile, new digital services, and improved digital experiences. Digital is here to stay, with 125 million new consumers in the United States and Europe adopting digital channels since the onset of the COVID-19 pandemic. But there are still plenty of opportunities out there, according to McKinsey’s third annual global consumer sentiment survey. That should be welcome news for CEOs and other business leaders who are looking to bolster their companies’ resilience in this period of economic and geopolitical uncertainty. The survey uncovers three “opportunity sets”: new opportunities with consumers in large demographic segments, such as those in rural areas, younger populations, and emerging markets, who are digitally underserved engagement opportunities through specific services consumers are looking for, particularly in banking and telco, with mobile channels emerging as perhaps the most important digital route to engage with consumers opportunities to protect, where companies need to shore up their flanks, such as addressing both consumer dissatisfaction with digital experiences and their concerns with how their data are used and protected. The following charts examine the survey findings and reveal insights on digital users and where further opportunities exist.
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The big surge in digital adoption is the real deal
Any concerns that digital habits would evaporate with the end of pandemic safety measures can be put to rest. With the pandemic waning, adoption (that is, individuals accessing businesses digitally or digitally with assistance) is still strong even as consumers venture out of their homes to shop and conduct business. Consumers are accessing twice the number of industries online, on average, as they did before the pandemic, even after an expected leveling off of digital adoption numbers. But there is more. Our survey shows there are 25 million consumers in the United States and Europe who “tasted” digital during COVID but have since settled back into old habits. They represent billions of dollars of untapped value if businesses can lure them back. And that doesn’t even account for the massive opportunity of the metaverse, which has the potential to generate up to $5 trillion in value by 2030; some 79 percent of consumers active in the metaverse have made a purchase.1 With large swaths of people still digitally underserved (see more on this in the next section), we believe that digital adoption has not yet hit 50 percent of its full potential. The leader in digital adoption rates so far? Asia, with Europe and North America not far behind.
ut, not all consumers are onboard with digital yet
The surge in digital adoption hides a compelling fact: there are still millions of customers who are not yet digital adopters. In Europe and North America, for example, the average age of digital adopters during this period is 45 and 46, respectively, well above the highly sought-after 18–34 demographic. Businesses in these regions should renew their focus on younger consumers who are traditionally more likely than other age groups to use technology. Poring through the demographic data, a number of other underrepresented groups stand out. In Europe and North America, for example, more than 50 percent of digital users have higher levels of education (at or above a college or university-level education), while in emerging markets, that number is as low as 28 percent. Similarly, in emerging markets around the world, going digital is primarily an urban affair, with an astounding nearly 100 percent of adopters living in and around cities and towns.1 That leaves a significant group of people who are underserved digitally. Given the high penetration of mobile phones in many of these markets (see more on this in the next section), there is an opportunity to bring these consumers important digital services.
Mobile is the most effective on-ramp to digital growth
The Who’s 1971 classic “Going Mobile” or Beyoncé’s 2008 “Video Phone” could be the anthem for digital growth. Industries, where mobile apps are the main channel of contact, tend to have a larger share of digital adopters. That “mobile premium” is particularly pronounced in emerging markets, where mobile phone penetration, including smartphones, is strong and is the most-used channel for interacting with businesses (40 percent compared to 30 percent in Europe and North America). The value potential of mobile is poised to become even more pronounced. For one thing, mobile use is still growing (460 percent from 2011–21), while the use of other media has decreased over that same period. In the United States, retail and grocery sales in mobile are expected to grow by 20 percent year over year, about three times more than sales through other devices. In banking, our analysis shows that about a third of customers will use mobile payments by 2024, up from around 25 percent today. One area to watch is social commerce, which is primarily conducted over mobile. By 2025, nearly $80 billion in purchases of goods and services, or 5 percent of total US e-commerce, is expected to be made through social-commerce channels, up from $36 billion in 2020. On a global basis, the social-commerce market is expected to grow to more than $2 trillion by 2025. In China, which is at the forefront of social commerce, brands have seen conversion rates on social platforms approaching 30 percent
Five sectors are surging ahead of their peers, and one is falling way behind
The big digital-adoption leaders, at least so far, are banking, telco, insurance, entertainment, and utilities. Digital adopters make up 90 percent of consumers in these sectors. The opportunity for these percentage points of adopters as pandemic-driven growth has begun to settle. These industries can “translate” that stickiness into revenue by digitizing more-complex transactions that users still mainly do in person or via paper, such as mortgage applications and insurance claims. The followers fall into the following sectors: government, retail, healthcare, and travel. They had strong pandemic-driven digital growth but are struggling to keep digital customers. Digital adoption for government services, for example, has declined by some seven percentage points. These institutions have yet to connect online services across multiple channels, which frustrates users. The laggards, including apparel, telemedicine, and education, are those in which consumers prefer face-to-face interactions, and these sectors are struggling to maintain digital-adoption levels. Grocery is the furthest behind.
Demand for new features and solutions in digital banking
Consumers worldwide are primed for new digital-banking solutions. In developed economies, fintech’s are driving digital competition and consumers’ digital expectations. About 60 percent of consumers in Europe and North America say they would increase their use of digital banking if these institutions offered new features. A similar percentage would consider digital solutions for all of their banking needs. Emerging markets have the strongest appetite in this area. More than 80 percent of Asia–Pacific, Latin American, Middle Eastern, and African consumers say they would increase digital use if more banking services were on offer. A similarly high percentage would consider doing all their banking digitally. The most in-demand service across the globe? Instant transfers outstrip other needs, including virtual cards; buy now, pay later; and cryptocurrency. Latin American consumers have the strongest desire for all digital-banking services, including virtual cards, buy now pay later, and cryptocurrency.
Telco consumers want more services and entertainment
Telcos have significantly larger opportunities in emerging markets than in developed countries. Consumers in these countries are nearly twice as likely as their peers in North America and Europe to say they would increase their spending if there were better services. Better connectivity is the main driver for increased spend for some 50 percent of emerging-market consumers. This compares to slightly more than 20 percent of consumers in North America and Europe, where infrastructure is more developed. New technologies, including low-to-mid-frequency 5G and the next generation of Wi-Fi (Wi-Fi 6), are improving connectivity in emerging markets. In addition, the number of under-connected consumers, who only have access to 3G or less, is expected to drop by 50 percent by 2030, from 40 percent of the world’s population to only 20 percent. Globally, twice as many consumers say they are willing to purchase entertainment from telco providers as those who would buy home security or utilities. Content aggregation (media from multiple sources accessed via a single platform) and unlimited streaming are strong drivers of increased media purchases in Europe and North America. Some 60 percent of consumers would increase their spending on digital media if these were available. Content aggregation is in especially high demand in Latin America: almost 90 percent of consumers say its availability would boost their purchases of digital media.
Cutting grocery delivery costs may fuel growth
In just five months, the grocery industry saw as much digital growth as it had during the previous five years. That growth rate has substantially slowed as people have resumed in-person shopping. Reducing delivery costs may offer the largest payoff in redressing that rollback. Some 50 percent of consumers worldwide would increase their online grocery shopping if delivery costs weren’t as high as they are. In fact, low delivery costs are far more important to consumers than faster delivery, greater availability of stock, and the ability to track orders in real-time. To minimize capital outlays and move forward quickly, grocers have started to work with technology companies to provide cheaper and faster delivery. Grocers are also partnering with third-party delivery services to control costs and expand delivery options.
Customer satisfaction is stumbling
Customer satisfaction with all channels has been declining globally during the three years of this survey. Many businesses around the world moved quickly to meet digital demand during the pandemic. Customer experience suffered, with consumers most dissatisfied with product selection and payment experience. While customer satisfaction has actually increased in Asia, consumers there complain that they can’t figure out if a product fits their needs. Companies can address these challenges by providing more detailed product information and using virtual reality to provide customers with a more precise understanding of how a product will look or fit.
Concern about new tech is strong in countries with higher incomes
Two groups of consumers have a positive outlook on new and emerging tech trends, such as artificial intelligence: those in emerging markets and those in European countries whose per capita GDP is less than $40,000 per year. They believe technologies such as AI, the metaverse, and crypto will have a significant impact on their societies. Reflecting this sentiment, the Chinese government has set a goal to become the world’s leader in AI by 2030.1 Consumers in North American and European countries above that $40,000 per capita income line, however, have a less positive outlook, expressing concerns about what impact these new technologies might have. The reason for this hesitancy is unclear, though concerns about how these new technologies might threaten jobs or be used without sufficient accountability may be contributing factors.
Consumers are worried about hacking and data handling
consumer trust in digital channels is moderate but shows signs of waning, especially in Europe and North America. Our survey found that trust has declined by six percentage points since 2021. Concerns about how their data are handled and cyberattacks top the list of trust issues. Recent McKinsey research shows that companies have made varying degrees of progress in addressing these concerns.1 Only 41 percent of executives say their organization is mitigating cybersecurity risks across most of the enterprise; 31 percent report the same for data privacy. The research also shows that shoring up digital-trust practices could do more than provide protection and meet consumer expectations. Digital-trust leaders are not only less likely to experience downside risk via negative data and AI incidents but also more likely to see revenue and EBIT growth above 10 percent annually. Businesses seeking to gain the public’s trust in the digital experiences they offer should invest in strong customer-data practices, including collecting only the data that they need to conduct business, being transparent about the data they have and what they plan to do with it, and steering clear of capturing passive data, such as browsing history, unless it creates better shopping experiences. Similarly, they should invest in effective cybersecurity measures, such as implementing “security as code” practices and putting in place rapid-response teams and capabilities. The thing B2B sales leaders should do is truly understand where their deals stand. Which are the most important? The most likely to close? The most profitable? What, if anything, is delaying them? Look at the facts and the data. Once you do that, you can identify and prioritize maybe ten, 15, or 20 attractive deals in the pipeline that are pretty advanced, but not quite ready to close. Those are the deals where you might accelerate a decision and affect first the outcome.
Tactically, what does that mean? There are a couple of actions you can take. The first one is to adjust your value proposition. In times of uncertainty, many buyers are hesitant because they want to keep options open. Sellers can provide flexibility for their customers. The value proposition might be that a client is not ready to sign a large contract, but they might be OK with signing something smaller. A client might not be ready to buy all 15 elements of an offering, but they might be ready to buy five or ten. The client might not be ready to commit to a long-term payment plan. Instead, they might want the flexibility to make some decisions now and leave the door open to make other decisions later. Adjusting the value proposition means potentially changing an actual offering itself, as well as some of the terms and conditions. You need to meet your customer where they are right now “In times of uncertainty, many buyers are hesitant because they want to keep options open. Sellers can provide flexibility for their customers
The other thing to do is to create a “win room.” Select a group of cross-functional colleagues—from pricing, marketing, and product, plus some leaders of the organization. Get them together in a room, say, on Tuesdays and Thursdays for one hour each time. And bring in the 15 deals. The account executive who owns the deal will come to the table and say, “This is the deal. This is what we need. These are the decision-makers, and these are the roadblocks that we’re running into.” Roadblocks can be that the deal is not the right size, or the deal is too expensive. Maybe you’re not meeting the buyers’ needs, or there’s an incumbent vendor already in there and it’s hard for you to replace them.
Internal sales cycles take a tremendous amount of time and energy. Lots of homework needs to happen beforehand. By having a winning room, you’re accelerating the sales cycle. When you get the right set of decision-makers in the room to talk about the top deals that are the most time-pressing and critical, you create a cadence where you’re accelerating that momentum by several weeks. You can have a huge impact, both in the terms and the timing of a deal.
You can make quick and dirty changes. You don’t have to have beautiful dashboards that pop up. One client had supply chain issues and products that were out of stock. They came up with a simple rule that when a product came back in stock, an email would be generated and sent to every seller saying, “The product’s back in stock. Here are customers who were interested in this product. Call them now and sell it.” Over time, they integrated that into the CRM system with all the fancy bells and whistles. But don’t wait to have the pretty system before you start activating plans. The difference between now and previous times of uncertainty is that all of us have learned that things change, and we need to be more agile and nimble. Organizations are now much more sophisticated at identifying and trusting the data that truly matters. We know that customer expectations continue to increase: customers expect to have an omnichannel experience where they can go to a website, talk on the phone, or have access to the head of sales. In a B2B sales world where you add complexity to uncertainty, how do you keep all the pieces of the puzzle together? The sales executives I work with today have gotten much closer to the customer. More leadership engagement and cross-functional ways of working, along with better data, make for a much better sales experience.
The domino effect: How sales leaders are reinventing go-to-market in the next normal
Top sales innovators are embedding data and technology throughout their organizations to reimagine sales. Here’s how they do it. Sales have always been a “sensing” organization, attuned to changes in customer sentiment, shifts in demand, and the requirements of different buying stages. But those senses are being flooded as customers shift to digital engagement, leaving sellers with more channels to cover and more interactions to manage. The pandemic has amplified these challenges, exposing weaknesses in existing sales models and gaps in digital readiness. In many ways, this data revolution in sales matches what happened to market departments three to five years ago, when they were forced to reorient their functions to be more analytically driven. With more data flowing in from nontraditional sources such as video calls and webinars—few of which are captured by current sales processes—understanding which customers to focus on, what they care about, and how they want to engage can often feel like a guessing game.\However, some sales organizations have reduced that guesswork. They are bringing science to sales and are harnessing data in ways that deliver double-digit gains in return on investment (ROI). These organizations start with centralizing commercial operations and generating insights from internal and external data sources, including web and email scrapes, information from virtual calls and pitches, and other analyses. These improved insights allow sales organizations to be more agile in aligning their resources and adapting their operating model. To hardwire these capabilities, smarter automated processes are built into a new operating model. Performance metrics and coaching are then tailored to the needs of the company and the requirements of the individual salesperson. The result is a domino effect: one event triggers the next, and the impact grows cumulatively. At present, only a handful of companies have lined up their sales functions to deliver these capabilities at scale, most of them big tech players. But gaining this level of data mastery and dexterity doesn’t need to be the preserve of digital natives. Instead, sales organizations that prioritize the following four steps can trigger greater sales productivity and performance in the next normal.
1. Centralize commercial ops and generate actionable insights
Many sales organizations face significant challenges in guiding teams dispersed across large territories. This limits the ability of sales reps to share best practices, access valuable customer insights, and expedite sales processes that can make a meaningful difference to their bookings. To make the most of the abundance of data and draw the right insights, forward-thinking sales leaders have centralized commercial operations functions and created “commercial hubs” that distribute better and more targeted insights as well as drive more agility in the organization. Commercial hubs bring together three elements: the right talent with deep experience in sales, analytics and data science, and product; an operating model capable of interacting seamlessly with the reps (including the ability to tailor those interactions); and access to a data and analytics infrastructure optimized to the hub’s needs. This kind of hub can develop and scale the delivery of tailored insights and sales plays to reps, track and manage performance, provide coaching based on what’s working in the field, and enable day-to-day efficiencies that eliminate waste and drive bookings. For example, a software company had almost a dozen sales forces scattered across the United States, each with its own way of gathering customer inputs and managing sales. The company’s customer base was equally scattered, consisting of large, global players all the way down to mom-and-pop establishments. Lack of coordination among sales groups made it hard for the company to align coverage, and limited data and knowledge sharing meant reps lacked timely information and insights to inform their sales approaches. To improve sales intelligence and efficiency, the organization knew it needed to centralize its commercial operation and use it to generate and disseminate better insights. The company appointed a senior executive to lead the effort and brought in sales and technical talent (including engineers and data scientists). This team focused on standardizing and analyzing data and systematically capturing the online and offline interactions between reps and customers. They also brought in outside talent with expertise in analytics to design algorithms that could surface employee performance and customer insights. Centralizing the commercial hub delivered 5 percent more productive and contributed to greater bookings within the first year. Today, the hub is the heart of the company’s sales-insights engine, responsible for capability-building programs, performance and incentive plans, and sales play to support the sales forces
2. ENABLE AN AGILE GO-TO-MARKET MODEL
With the insights generated by the hub, sales leaders can use advanced intelligence to better align sales reps to the right sales opportunities, pull the right people in at the right stage of a deal, assemble teams with the necessary skills to innovate and design products and services that customers want, and providing insights that help close opportunities. For example, instead of simply assigning larger accounts to field reps and smaller ones to inside sales, a global telecommunications company now lets the type of transaction—what is being sold to whom, and when—determine the go-to-market approach. Simple transactions are handled by inside sales or digital channels, while field reps (after an initial lead-nurturing stage by the inside sales team) cover more complex purchasing. In the past, when a prospective customer initiated a query on the company’s website, the digital-sales team referred it to an inbound call center that had basic technical and selling capabilities but was unable to convert complex transactions. Data has shown, however, that inside sales can effectively follow up remotely by bringing in experts from a centralized pool in the commercial hub for guidance. The final negotiation and close are then managed by field sales. This new go-to-market approach speeds time to market raises customer satisfaction and lowers costs. Better analytics can also help sales organizations create a more flexible and agile operating model. One software provider used analytics to identify which products and services customers were most likely to want to buy. It then used that information to move from fixed teams in predefined roles to “hunting pods” made up of a mix of the most relevant experts from across the commercial hub. These hunting pods evaluated potential deals, designed solutions, developed the best pitch for each customer and brought together the right expertise to the most important sales meetings. Our experience shows that sales organizations that embrace this more agile, data-driven go-to-market approach can improve conversion rates and lower the cost to serve by 5 to 15 percent.
3. Design smarter, automated sales processes
With a centralized commercial hub generating insights and an agile operating model redefining how sellers work, sales organizations can trigger the next level of value by redesigning their core sales processes to make them more “intelligent.” In the average company, for example, reps spend only about 16 percent of their day in front of the customer, virtually or in person. By contrast, reps in the best-performing sales organizations spend 40 to 50 percent of their time in front of the customer. The difference? The top organizations redesign their sales processes and thoughtfully automate whatever they can. McKinsey’s research shows that up to 30 percent of sales activities can be automated. Automation can be applied across sales processes. Analytics embedded into lead generation, for example, can identify leads with the best conversion potential. Chatbots reach out to them over text or email, using artificial intelligence to understand the contact’s response and assess the conversion potential. This solution allows sales reps to contact only those leads where there is clear buying interest, saving time, reducing cost, and improving conversion rates. Other common applications leverage AI and robotic process automation to streamline the bid process, reducing the time it takes to analyze and respond to proposals. Instead of completing proposal questions manually, it uses predesigned proposals that are automatically populated with internal data. Early adopters of sales automation consistently report increases in customer satisfaction, efficiency improvements of 10 to 15 percent, and meaningful sales uplifts.
Boosting your sales ROI: How digital and analytics can drive new performance and growth
4. Empower and reskill the front line
In many organizations, capability building and sales training are undifferentiated. Centralized commercial hubs, smart processes, and responsive go-to-market structures can help sales reps significantly improve both their performance and job satisfaction, as long as they understand how best to adapt to the new operating model and leverage the insights to which they have access. To deliver on that opportunity, organizations need to update not just what they teach their sales reps but also how, by establishing tailored learning journeys. For example, the software-solutions company mentioned earlier was troubled by high churn rates in its inside sales force, which consisted largely of younger reps with little experience. After the centralized commercial hub closely examined performance and retention data, they discovered that these sellers’ transition moments, such as when they mastered a role or began looking for a new challenge, were different from those of more established reps. Four months into their job, for instance, young sellers typically plateaued. By intervening earlier with fresh training, leaders were able to change their performance trajectory, sharpening their skills in ways that made them more productive and helped them feel more successful. These changes improved performance and retention significantly.
The use of analytics to support reps is particularly important because the shift to virtualized sales models has increased the importance of thoughtful, timely, and relevant coaching and change management. A tech company that moved from a static account model to a more flexible and collaborative method knew it needed more intensive performance management and training to help reps use available tools and insights. The sales organization created personalized digital dashboards that made it easy for reps to access key customer data and pipeline analysis as well as recommended actions. The dashboard’s backend reporting allowed managers to track activity against goals to identify top-performing reps and those who needed more support. The training was also provided to support mindset and behavioral changes. Sales coaches trained teams on what a “day in the life of a seller” could look like under the new agile design. Role-playing allowed sellers to test the multichannel sales approach in different customer scenarios. Salespeople enjoyed the empowerment that came from approaching sales more strategically. They also saw that allowing different channels to take on the deal stages most suited to their experience made the reps’ own roles more rewarding. Together, the tools, training, and support drove a 7 percent increase in quarterly revenues.
Key questions to help get started
Any redesign of the sales organization around these “dominos,” however modest, requires thinking through a variety of business and technical considerations to shape the overall vision and outcomes. The following questions can help leaders begin those discussions. How empowered is your commercial hub, and can it deliver critical sales insights? The most effective commercial hubs have the institutional authority and clout to set strategies and redesign core knowledge processes. Success requires strong leadership and committed engagement as well as ongoing consultation with the sales force to identify what tools, processes, and analytics can deliver insights in the most useful way. What technology investments should you prioritize? Taking inventory of existing data repositories, tools, and systems across the organization can often be eye-opening, revealing hidden gems in the form of underused business and customer data as well as critical gaps. Those insights can help leaders determine where to prioritize tech spend and hiring. Benchmarking capabilities against peer organizations can also be instructive. How quickly can you align resources against attractive customer opportunities? Leaders need to make sure they have the data and analytics in place to understand changes in demand and to adapt their operating model. Segment and behavioral analyses can shine a light on shifts in customer buying habits, helping sellers better align their commercial strategy and go-to-market approach. What will the seller profile of the future look like? As sales organizations shift to digital models with centralized commercial hubs, smarter processes, and “boundaryless” structures, they need new capabilities. Likewise, new verticals and segments may become more important. Investing time upfront in anticipating key post-pandemic capabilities can help sales organizations adapt more quickly. Success in the next normal will require sales organizations to analyze virtual interactions, derive insights in near-real time, embrace digital channels, and adapt their sales reps. By focusing on building and scaling proven capabilities, sales leaders can trigger the frame deal sourcing and opportunistic deal evaluation.
CONCLUSION
We know e-commerce is now the new normal. Some of the key success factors to strategize the e-commerce business may be seen below: E-commerce seems to become more popular as online retail sales. The statistic clearly reveals that retail store owners prefer online selling to get more sales. As more and more retailers are focusing on online selling, the e-commerce industry is facing stiff competition. Thus, in order to carve out our own niche in e-commerce, we need to implement several strategies keeping in mind the most important factors for successful hacking. That being so, what activities will make us stand apart from our competition?
MOST IMPORTANT KEY FACTORS FOR SUCCESS IN ECOMMERCE
Even though there are struggles, running an e-commerce business amidst these competitions is feasible. The implementation of the following successful e-commerce strategies.
Which are 1. Creating a memorable brand name, and its consistency, and avoiding changing our domain name. 2. Design the store, create an easy-to-use interface, and transparency in information. 3. Search Engine Optimization (SEO) by making customer friendly, making your site SEO-friendly, Using relevant keywords, and Mobile responsiveness. 4. Multichannel marketing, Promoting on social media, Content marketing, and Email marketing. 5. Personalized buying experience, Customer Satisfaction is the key, make the customer work simple, discounts & deals. 6. Multiple payment methods. 7. Easy check-out process, and 8. Customer service.
The digital market has space for everyone who wants to succeed in their own e-commerce business. We can follow these successful e-commerce strategies to stand out from our competitors and also achieve success in our e-commerce business.