Three Strategic Questions Retailers Must Address to Outperform Downturn
Walmart is down 10% on profit warnings, Shopify laid off 10% of its workforce, and the Fed raised interest rates .75% this summer (that's billions of new interest payments for current and future debt). There's a lot of doom and gloom right now in the macroeconomic world, but not everywhere as Coke and McDonald's showed strong quarterly reports this summer.
Forecasts for non-commerce sales are predicted to be up about 6% this year. That's 100 basis points over the compound annual growth rate over the last 10 years; there's still growth, but not huge. Current predictions are about a 10% growth number for eCommerce, which would be the lowest YOY since 2009.
So, short version; there is lots of instability out there, more than we've seen since the Great Recession, and this is uncharted territory since eCommerce was still nascent then for many. Brands will need to change and transform to navigate these tumultuous waters, and innovation is the sextant to sunny seas.
As a 25 year veteran of digital Commerce, I know that these are the conditions that cause companies to act rashly, make quick investments, and lose sight of larger objectives. I was fortunate to speak on FutureCommerce’s Step By Step podcast about the topic that brands, retailers, and really, all digital commerce companies, must address the following three strategic questions to outperform in today’s market.
Is Your Company Setting the Right Goals?
The Software industry gets it right. They work backwards towards an agreed upon endpoint. It's a tenant at Amazon. Everything is done that way. A lot of software companies follow that, but a lot of brands don't. All too often, they start with a reaction to something that has occurred. And then their perceived response to that builds a program.
Brands and retailers really struggle with the amount of data that they produce, and they have massive data lakes of information to mine through and find all this cool information and run down all of these various rabbit holes. But rather what they should be doing is starting with a KPI in mind and working backward and finding the data to inform how to get there, as opposed to starting with the data and working forwards towards defining a KPI.
Is Your Current Partner Ecosystem Aligned to Your Customer’s Goals?
Why does this matter? I can say this from both sides of having sat on the client side of the table where I'm hiring agencies as well as working at agencies that agencies and tech partners bring their culture and their work style to your company's efforts. Part of the agency's job is to impact change at that organization. That's their charge. We talk about what we do as we work as partners with folks, and it’s holistic and designed to support end customer goals.
Having worked at large agencies and well-known commerce companies over the course of my career, there's a large vendor mentality that if a solution says commerce on it, it's got a price tag that says $1 million and you scan the barcode and say, "Thank you, please go on your way." And then you have some agencies who are, for all intents and purposes, one solution shops. They specialize in one CRM, or a specific experience suite. And as a result, those brands and retailers that hire those companies are going to be steered in a specific direction, making no judgment about that.
But this directioning is often solution-first, not objective-first. Aligning toward an approach that solves short-term problems is easy, while developing shared language and shared goals that achieve your company’s customer’s goals is very difficult. In new research I encourage you to read, Forrester calls this “Common Cause”, and companies that achieve this are more likely than beginners to grow 20% or more. Not only should it be agreed upon in strategic partnerships, it can be used to craft unique engagement models as well. Don’t allow your business to become an agency's customer, you must work together in partnership to satisfy your commerce customers’ needs.
How Much of Your Organization is Involved in Innovation Planning?
When engaging with digital commerce companies I’m often asking "Why are you making the decisions you are today, and why are you doing these things?". And then we can get to the root of why they have been doing this either externally or internally themselves, and find better ways to do it. This requires innovation buy-in and accountability across an organization.
The downside of all of these tools being out there and ubiquitous where they're somewhat available to virtually everybody is it's like everything's a nail and we're walking around with hammers trying to find where to use them. And a lot of times you'll have brands or companies who go off and make rash decisions. They go buy that red sports car when really a Toyota Corolla would have been just fine. Or worse, the car remains in the garage due to organizational silos.
When companies tell me all about their challenges, we have to face it, the single unifying thing of all of your problems is you. But that's not necessarily always the answer. If we look at the end goal of "I want to have X amount of sales to X amount of people by this date." Great goal. That's fantastic! Let's work backward from that as opposed to a reactive statement of, "Well, my competitor is doing X, so I need to do X."
Higher organization maturity helps companies be less reactive. The chasm between being reactive, learning from things, and taking actions based on what you know and learning from things and predicting things and taking actions on what you think will happen is enormous. And very few brands are on the left side of that model there.
So hopping over that hurdle, that's the path to success and brands coming back to that innovation, they often find that there are several steps to innovate in order to get that maturity to set proper goals and achieve innovation cycles. Companies must own and collaborate on that innovation process. They can’t outsource and they can’t do it alone. Strategic partnerships are critical. We have to work together to be successful.
A Rally Call
Involving all key groups is critical to achieving true innovation and positioning your company for success over the next five year period. This allows brands and retail companies to establish a shared language, accountability, and needed innovation frameworks. Bounteous successfully deploys the Co-Innovation methodology in partnership with companies to develop the critical insights needed for planning, the hyper-personalized marketing and execution required to sell, and the right data, tech, talents, and methods to execute. Organization-wide adoption is critical to setting common goals, maximizing strategic and technology partnerships, and realizing the true goals of selling more products to happy customers.