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Orderhouse Blog

What are the Economic Consequences of Delaying eCommerce?

“There are risks and costs to action. But they are far less than the long-range risks of comfortable inaction.” John F. Kennedy

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According to the National Retail Federation, the growth in 2017 eCommerce sales is expected to be 8-12%, three times higher than growth in the wider industry, with total sales in the range of $440 billion. While sales from brick and mortar locations are still important, it’s clear that digital and omnichannel strategies will be major growth drivers in the future.  

And still, many manufacturers are slow getting into the game. What are some of the reasons for this?

  • Reliance on Traditional Business Models – Many companies have built their business through traditional distribution channels. They’ve made an investment in sales and marketing to support their channel partners and have valuable relationships that span years or even decades. There’s a reluctance to deviate from the status quo and there may be concerns that DTC sales might alienate partners and damage channel relationships.
  • Analysis Paralysis eCommerce is a major initiative. It requires that you change your thinking and the way you do business. Your existing resources and infrastructure might not be adaptable. In addition to selecting the right technology platform, you must source or develop solutions for fulfillment, digital marketing, customer service, and more. And you need to make sure that these components fit together seamlessly. Developing a strategy and building out the operation can be a daunting task while managing the day-to-day demands of your business.

COO Jim Madaj discusses the impacts of waiting to implement an eCommerce strategy.

 

If you recognize yourself in the above, it might be time to evaluate the economic consequences of inaction. These include:

Falling Behind the Competition – This one is obvious. Your competitors that have gotten into eCommerce gain first-mover advantage. Not only are they forming direct relationships with their customers, but they’re also building their eCommerce expertise and fine tuning their game plan while you’re watching from the sidelines. It might be hard to catch up.

Profits – Manufacturers that sell DTC capture margins that once went to distributors and retailers. Your competitor that has an eCommerce strategy can leverage the increased profits to reinvest in product development and marketing and gain a competitive advantage.

Brand Loyalty – eCommerce provides numerous opportunities for consumers to engage with your brand online, building relationships and loyalty:

  • Personalization – Customer data can be used to more accurately pinpoint which products and promotions might be most meaningful and relevant to consumers on an individual basis. In addition to forging stronger brand relationships, personalized marketing can also increase sales.
  • Reviews – A happy customer can also be your best evangelist. Reviews carry weight – according to a survey by BrightLocal, 88 percent of consumers trust online reviews as much as a personal recommendation. That kind of feedback is impossible for consumers to get in stores. Savvy brands use it to build loyalty.
  • Rich Content – eCommerce platforms have functionality that facilitates extensive product information, including video. That means more brand engagement.
  • Rewards & Incentives – Special promotions or offers can be extended to consumers as a reward for interacting with your brand, such as posting a review or a “like” on social media.

In addition, consumers that have a strong affinity for a brand are often willing to pay higher prices for those products due to higher perceived value and status.    

Channel Mindshare – While it may seem counterintuitive to think that eCommerce can improve your position with retailers, consider the following:

  • Your channel partners are likely paying attention to the online identity (or lack of) that you and your competitors have created.
  • They are seeking products that have established strong online branding and are culturally attuned to their demographic – this helps drive retail sales. According to research by Time Trade, 85% of consumers still prefer to shop in stores. And many consumers research products online but buy in stores. So partners want and need suppliers that understand and support omnichannel trends.
  • Whether in-store or on your retailer’s website, competing products are often displayed side by side. The supplier that has invested in building their online brand and has a connection with their target audience will win the battle for the mindshare of retailers and earn more sales.
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Opportunity Loss - An effective eCommerce strategy can enable you to target markets and customers that might be beyond the reach of your existing channel partners. In addition, it will enable you to capture consumers that have drifted away from traditional retail and prefer to shop online.

  • 67% of Millennials and 56% of Gen Xers prefer to search and purchase on e-commerce sites rather than in store. (Big Commerce)
  • Fourteen major retailers have each announced they will close at least 100 stores by 2020. Store closings represent opportunities for suppliers to sell direct to consumers and reap the benefits of the direct relationship and increased margins.
  • Suppliers that have built a strong eCommerce presence capture and retain these consumers. There may not be a second chance.

If you’re reading this, you’ve probably been slow to act on your own eCommerce initiative. Is there a way to fast track your project and get off the launching pad quickly?

You can take the project in-house, which will likely require significant investments in technology, manpower and infrastructure. The budget for this is a fiscal non-starter for many businesses. If you outsource, you can select the solution components that are a best fit for your initiative. This is a more realistic path for many companies, but still time consuming and will likely involve integration challenges, since your outsourcing partners might be using systems that don’t link easily.

A third option is a turnkey end to end solution. A turnkey provider delivers and manages all the components needed for eCommerce. The systems and processes are already integrated and they operate on a revenue share basis with minimal upfront investment. With an infrastructure and operations model  already in place, a full service eCommerce business can be fast tracked to launch in 90-120 days.

For more insight on end to end eCommerce strategy visit this resources page. 

Topics: ecommerce