Why you need to abolish your e-commerce department

online shopping, e-commerceI have come across my fair share of unfortunate stories about retailers hastily entering the “promised land” of digital commerce.

Some retail organisations spent more money on e-commerce software than on their POS systems, yet despite the hefty investment these businesses now find themselves impaired in their ability to function well in the modern retail environment.

Their customers who register online are not visible in stores and vice versa, store gift cards cannot be used interchangeably with those purchased online, online sales are not visible in stores so returns cannot be validated, a separate warehouse is used to fulfil online orders and it requires regular replenishment from the main warehouse, promotions defined for the stores do not work online, and it takes at least 24 hours to update critical data in their web shop, if they are lucky.

Such businesses usually manage their marketing and promotional activities for stores and online separately, lacking coordination and causing customer confusion and inefficiencies across the business.

Sounds like a nightmare suffered by a rare few? You would be surprised how many retail organisations bear the burden from a similar impediment. Here is why:

  • Mistake number 1: As e-commerce emerged and became an essential part of modern retailing, retailers were conditioned to think about their business in terms of separate channels.
  • Mistake number 2: Such urgency was placed on quickly mastering the new digital frontier that rushed, huge investments in e-commerce were made and, at the same time, many fundamental structural corners were cut.

This is why many retail businesses now have to deal with the consequences of business fragmentation within their enterprise as they seek to embrace real omnichannel operations. I suggest that it is time to end the notion of channels in retail and bring the business back together.

It is essential to create a coherent internal ecosystem, which can then collaborate easily with the increasing number of external systems, such as eBay, Amazon or JOOR, as well as web shops of large retailers and shopping centres. If the internal system is disjointed, such external connectivity becomes difficult.

“E-commerce is dead”, deal with it

A few weeks ago I was pleased to see that I am not the only one to bring up this increasingly pressing issue. In October 2016 Gabrielle Hase, a UK-based e-commerce specialist published an article titled Ecommerce is dead. Long live retail!

Gabrielle’s key point was that retailers need to realise that there is nothing special about trading online anymore. Instead, retailers need to start working on absorbing their detached e-commerce arm back into their ‘business as usual’ model.

The sooner retailers eradicate the silo mentality, the better. Managing two separate marketing, logistics, and customer engagement processes within a single retail business puts the breaks on both profit and progress.

In the article Gabrielle also talks about the holy grail for retail: IT technology that provides a holistic view of the customer’s journey as they interact with the retailer. Few retailers can claim to have achieved this.

I took heart from this emerging voice of reason, which echoed the message I have been advocating for years – the essential need to adhere to the principle of one business, one system. And, by system I mean any system – technology, business process and management. 

The (not so) black art of e-commerce

Let us focus on the IT system and marketing department within a retail enterprise, as poignant examples of how retailers have allowed their businesses to become fragmented as they delved into the world of e-commerce.

All the technical complexities, the new media mystique and seemingly infinite promise that surrounded this new retail space shrouded the fact that e-commerce means just a few more stores in the retailer’s portfolio. Are they different? Yes, but in the era of omnipresent internet access all stores now need to be different.

Failing to recognise this, most retailers have fallen under a spell that has led to accepting e-commerce operating as a separate department, independent from the rest of the business – running its own marketing, disparate IT systems and different logistics, all with a blurred, and often hidden, operating costs base subsidised by the other parts of the business.

As the capabilities of e-commerce and the demands of the technology-empowered consumer crystallise for all to see, it is time for retailers to start working on demystifying the digital domain and re-incorporating it into the mainstream business.

Retailers must regain control over this important component of their day-to-day operations and achieve the synergy that is only possible in a truly connected enterprise. It is necessary to eliminate the culture of thinking in channels and enable customer engagement across all touchpoints in a coherent, real-time manner.

Reversing the spell

Absorbing your e-commerce marketing department into the rest of your business will take time and requisite skill – a fundamental shift at a management-level is required, as most businesses will unlikely be able to cope with a sudden fusion of the digital and physical offering.

Leadership experts agree that people produce great results based on the combination of two factors: capability and behaviour. Both need to be enhanced to succeed in this transition.

The starting point needs to be education within the senior management ranks to build additional capability, so senior managers can understand all the key concepts in the digital space well before the business can proceed to the next stage – to make the behavioural change and start running as a unified entity.

I would argue that the parallel process of re-incorporating e-commerce logistics into the mainstream supply chain is easier to achieve than to merge the marketing teams, as the former does not need such a paradigm shift.

What does it feel like to drink from the holy grail?

 If the business ‘reunification’ is handled well, the retailer will end up with a marketing department that is focused on business success rather than divisional success. The expense of new projects and services will be assessed holistically, taking into account the increased cost of labour and logistics needed to service online fulfilment.

This can (and should) lead to the re-integration of store and online fulfilment into a single logistical platform, which can handle simultaneous bulk store replenishment and piece-meal customer order fulfilment, without duplicating warehouses and the related infrastructure.

Finally, it will lead to a reevaluation of the IT systems, so they too can be consolidated, enabling the retailer to achieve a single version of the truth – both for the consumers and the people within the organisation.

The most valuable information about customers is their transactional data. Retailers must make sure that customer details and their transactions are available in real-time, on a single platform. Once this is achieved, such data can be enriched with external information.

We can then reach a situation where POS software will cease to exist in isolation and will seamlessly align with retailer’s online, mobile and Head Office systems, all in real-time. Conversely, the online systems will have full visibility of the POS data and all systems will share the retailer’s logistics and customer loyalty platforms.

And, be aware that it is not the cloud that will make this IT transformation possible. What needs to change is the systems architecture within the retail enterprise. Then, the decision of whether to place a retailer’s central database in the cloud, on premises, or use some hybrid arrangement will matter little. As IT experts say: “There is no cloud. There is only someone else’s computer”.

Bringing it all together

 If your business still has a separate silo for e-commerce, it’s time to start thinking about taking down the walls. Yes, untangling the web of loosely connected systems and processes will take time, effort and money. For some businesses it will be a very difficult cultural shift, because many retailers have allowed their user communities to make their own technology decisions for years. This needs to change and corporate IT strategy must find its way back into modern retail.

The end result will mean substantially better customer engagement and increased profit. An integrated retail organisation will be hard to compete with, as its synergies multiply across all areas of operation.

The alchemist’s gold isn’t found in mastering of your individual channels, but rather in the unity of business, systems and your people.

Andrew Gorecki is managing director of Retail Directions and a 30-year veteran of the Australian retail industry. He can be contacted at [email protected].

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