The 'evolution of the high street' is a widely discussed topic amongst retailers as brick-and-mortar stores are, by and large, becoming secondary to online stores and footfall continues to decline. Last year alone, 1,772 shops disappeared from Britain’s town centres and 18.2p of every £1 spent by consumers went towards online sales. This has exploded 4.5x since 2008, when just 4p of every £1 was spent online. As Gavin Masters, industry principal, e-commerce, Maginus explains in this piece for RetailTechNews, that means the online channel is booming, as it reflects the way that today’s consumer wants to shop, and physical stores are increasingly becoming more akin to showrooms, where consumers go to ‘experience’ products that they may later buy online.

Having a digital strategy in place has, therefore, become far more significant than it may have been previously. Retailers need to evolve to become far more ‘digital first’ in the way that they operate; but a wider issue is that too many underestimate what it takes to truly run a successful business online. In the face of such a challenging and rapidly changing landscape, retailers need to embrace e-commerce in a way that doesn’t just provide them with the bare bones of a platform that simply presents products for consumers to buy online. Rather, they need to integrate a platform into their wider strategy, which provides full visibility over all operational costs, from marketing through to delivery and warehouse management, that enables them to deliver a far more profitable, scalable online business.

Thinking beyond the simple digital interface

It’s a frequent observation, when an established retailer goes into administration, that they simply failed to adapt to the modern retail landscape and underestimated the importance and value of having a solid online strategy in place. Many retailers are running at fine margins (and even finer profits) and the slightest change to their competitive line-up, or an inability to adapt to their environment, can tip them over the edge.

Toys “R” Us is the perfect example of a retailer that was slow to adapt, because it implemented a poor digital strategy that failed to seamlessly connect with the in-store experience and lacked effective personalisation. Yes, Toys “R” Us rolled out omnichannel strategies like click-and-collect, ship from store, and had inventory visibility on their websites; however the experience was very complicated, disconnected, and far from an easy experience for the customer, which didn’t enable the business to build brand loyalty or, ultimately, a profitable business. Furthermore, the business never capitalised on the rich data it was able to collect from consumers that naturally followed the Babies “R” Us brand right through to Toys “R” Us. For example, it could have offered a higher level of personalisation, following the lifecycle of a parent from when they first bought a pram from Babies “R” Us, to then promoting toys suitable for a slightly older child as each year went by. This isn’t the only reason Toys “R” Us went under, but shows how a basic and poorly thought out digital strategy can result in disaster for a retailer.

Gavin Masters, Industry Principal, E-commerce, Maginus

On the other hand, Debenhams, the department store currently undergoing significant stability issues, is a great example of how even having a good online offering through the eyes of the customer is not good enough to make the business profitable. Organisations have to understand the impact that selling online has on their overall business. We are travelling through an online bubble, with many businesses throwing huge amounts of money towards trying to clone the 'Amazon experience' for their own brand. But the bottom line is that retailers shouldn’t put all of their eggs in one basket trying to be another Amazon. Online is a means to end for a retailer, it isn’t the golden bullet. Simply owning a website will not make a business grow; digital strategies need to be well thought out with input from all parts of the business. This strategy includes a vital, but often forgotten, factor: visibility into the 'hidden' costs that build up behind the scenes.

Visibility is key to business growth

Many organisations will have an e-commerce platform that is five-plus years old and not see a reason to upgrade, possibly arguing that they don’t make many sales online. In fact, the reason for this may be that their system is slow and prone to crashing, giving consumers a poor experience. Furthermore, a legacy system could be at risk of cyberattacks, costly to operate, and expensive to host. All of these factors can be incredibly damaging to the bottom line and reputation of a retailer. A dated or very basic e-commerce platform will also give retailers very little visibility into the costs that their business accrues behind the scenes.

This lack of visibility makes it very challenging to identify where many key business opportunities and risks lie. Visibility into all costs is absolutely key, so that retailers can have insight into where they can successfully scale-up or down when required. Anybody can have a particular bad month because of factors such as technology failures, weather issues, or fulfilment problems. Retailers need to be able to see the real-time impact these factors may have on the bottom line and need to know how they can effectively flex the business in order to react to problems.

All retailers have a minimum point that the business needs to transact in order to break even. This can relate to overall profit, but can also relate to smaller incomings and outgoings; for example, what is the minimum number of orders that needs to be put through the payment provider to get the best rate through the payment gateway? Having real-time visibility into not just the big numbers, but also these smaller transactions, enables key decisions to made. What are the implications for not meeting agreed specifics, like the number of products delivered per week, on a prolonged basis? Do you need to change agreements with suppliers to reflect that your average order value is less than you initially thought when putting together your supplier contracts? A lot of the time, these costs are hidden because retailing businesses can be very siloed: sales, marketing, IT, and manufacturing can all be working completely separately with very little insight into what colleagues are doing and spending. Having one common operating picture, that identifies all costs in one place, can enable the business to work together to establish a break-even point and reassess any parts of the supply chain where costs can be reduced.

E-commerce isn’t a golden bullet, especially if you under-invest

You can’t just throw money at an e-commerce platform and expect ROI, particularly if there are hidden costs involved in your online strategy that are unmanageable and unscalable. Many retailers, particularly traditionalists, may see in the news that businesses with seemingly well thought out online strategies are still failing and will hesitate before investing in a quality e-commerce solution. This could also be because they simply do not understand the ROI, or they may argue that it can be hard to attribute digital spend to direct results. However, there are many Board-ready reasons to invest well in a good e-commerce strategy and platform.

In the face of the evolving high street, a well thought out and innovative (and it really is important to have both of these) digital strategy ultimately leads to higher customer engagement and more sales. Also important, is that fact that the right e-commerce platform can give you visibility over all aspects of your supply chain, helping you to overcome the hidden costs of digital retail that could be plaguing your business without you even realising. The Board will see the value of an e-commerce solution that can identify and reduce hidden costs, giving the business the cleanest shot at achieving and exceeding profit targets. This visibility will then allow for more strategic innovation, allowing retailers not just to try to be another Amazon but to actively excel because they are doing something different, not just online, but perhaps also on the high street.