How retailers can capitalize on a boom time for digital commerce


Boris Lokschin, CEO of Spryker Systems

I often warn the clients I work with, “don’t be the next Sears!” As such retail mainstays pull the shutters down on stores all over the country, leaders need to react fast or risk being the latest victim to the digital commerce behemoth.

Most of those retailers I speak with know they need to change, and they know the pandemic is forcing their hand. McKinsey’s research backs this up. More than 90% of retail executives say the pandemic will fundamentally change how they do business over the next five years and how their customers behave.

In commerce, the direction of travel is clear: customers migrate online in ever greater numbers and stay there after the crisis. Navigating this fast-evolving market successfully would be challenging at any time—much more so when cost pressures remain high, supply chain concerns abound, and customer loyalty is hard-won but easily lost. Most retail executives think this will be the most challenging period of their career. But there is a way forward and I’ve seen it in action. In this new landscape, composable commerce presents an opportunity for retailers to think bigger—using a modular approach to drive increased scale, accelerated time-to-value and lower costs.

Digital commerce is changing

As the pandemic took hold, like everyone, I did even more of my shopping online. From my weekly groceries to the latest bestselling “must-read” to fill those extra hours at home, digital commerce was my outlet. And while this hurt bricks and mortar sales, naturally, it gave a considerable boost to digital spending. What’s more, this trend has continued. I have found that even as we emerge from the crisis-phase of the pandemic, I’m still doing a lot of shopping via web or app.

I’m not alone. According to some estimates, U.S. consumers will spend more than $933 billion online in 2021, an increase of almost 18% year over year. That will make digital more than 15% of total retail sales. Some sectors will grow by over 20%, including furniture and health and personal care. Everything that retailers can trade online will be traded online eventually. The growth rate won’t slow down for a long time.

Grocery retail has long been an outlier in US digital commerce—far behind mature markets like France and the U.K. However, even here, the pandemic has had an impact. Research reveals that just 3-5% of sales in the sector were online pre-COVID. This soared to 20-30% during the crisis. It’s now settled at around 10%, after a shift that accelerated the market by up to five years. Consumers are also overcoming their traditional reluctance to buy online in other categories. Google claims that more than a third of them now shop online for items they had not previously purchased through this channel.

But today’s customers don’t just want the same static web experiences that firms have been delivering for years. Increasingly they’re looking to mobile commerce, embedded VR/AR, video and voice, and other innovations. What’s changed is that retailers are now leveraging technology innovations to entice consumers and enhance their shopping experience. Consumers will be keener to buy products they cannot touch and feel if they can use tools like virtual headsets and videos to engage closer with the items on their shopping list.

Look east to the future

There will need to be a lot more innovation if retailers want to continue their momentum. This applies to organizations of all sizes, especially the mom-and-pop stores that moved online in their droves during the pandemic. Already squeezed by the bigger retailers and marketplace providers, small, local businesses are the backbone of the US retail industry—providing a service consumers can’t get elsewhere, as well as millions of jobs nationwide. But in a sector where most businesses are online, going digital alone is no longer enough.

So, what do you need? Increasingly, China, not the US, provides a glimpse into the future of digital commerce. Some of the best examples I’ve seen in recent years have come from brands like Tencent, which has joined up with social media platforms like WeChat to make it easier for retailers to build virtual stories. And Alibaba has long been expert at using video as part of its digital commerce strategy.

When I’m talking to retailers, I often tell them to start with video to compete with the big names. Embedding live streaming or pre-recorded content on offers consumers another way to interact with items. In the case of the former, it allows shoppers to ask questions in real-time to find out more about a product and its back story. Links in the content take shoppers directly to a payment page for optimized conversion. Nearly two-thirds (62%) of US consumers say they’re likely to rely on photos and videos to help qualify a product they’ve found online.

With three-quarters of US households set to own a smart speaker by 2025, voice commerce is another technology popularized in China that represents an ample opportunity for US retailers. Like many others, I’ve become used to speaking to my phone or smart speaker to make or research a purchase. The AI-powered tech on smart devices like phones and TVs allows consumers to search for products and reviews and create shopping lists. It’s claimed that around half of shoppers have already bought online using voice commands. As with video, live chat, and—eventually—AR and VR, the key will be a seamless integration into the overall retail experience.

The rise of the composable business

The bottom line is that digital commerce can be a complicated and expensive business. From order and inventory management to wish lists and shopping cart rules, countless elements must be optimized and integrated. If any part fails, the impact could be disastrous in today’s highly competitive environment. PwC claims that a third (32%) of consumers would walk away from a brand they love after one bad experience. I’ve done it myself. A bad website or a faulty app will quickly cause me to look elsewhere.

A composable platform approach makes sense with so many individual elements to manage. Composable commerce refers to packaged digital commerce capabilities stitched together in a best-of-breed style. It gives the retailer the choice to mix and match multiple vendors to get the capabilities they need at the right price to deliver the online shopping experiences customers crave.

With the right platform, you can drive down the total cost of ownership while accelerating time-to-value. A modular approach will also deliver the flexibility to scale as your business grows—adding innovative new features like voice and video as and when market demands evolve. B2C has come a long way in a short space of time. To continue growth in the new post-pandemic era, retailers need the right technology foundations to build on.

Spryker Systems is an ecommerce technology provider.

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