Is there any other industry seemingly so committed to a race to the bottom, so near-universally beholden to price cutting and profit gouging than the retail industry?
This is epitomised on Black Friday.
When you look at the numbers behind the screaming headlines, Black Friday is not even particularly impressive in terms of sales.
Shoppers spent £1.1 billion on Black Friday in 2015. That sounds impressive until you realise that, spread over a year it equates to just £21 million a week or a revenue increase of just 0.3% on the sector’s average weekly revenues (excluding the £1.1 billion from Black Friday).
Is it believable that retail cannot find a way to drive sustainable revenue increases of just 0.3% – without driving down profitability and doing untold damage their brands?
The answer is online – specifically, in finding a better way to monetise the huge numbers of visitors to e-commerce sites who leave without buying.
In fact, despite massive spending on e-commerce solutions, the vast majority of retailers have failed to convert huge traffic numbers into sales.
Online, conversion rates have remained well below the 10% mark since e-commerce’s year dot – and lag miles behind in-store conversion rates.
That failure is down to merchandising and the user experience.
E-commerce sites have failed to inspire people to buy or made it too hard to buy, or both – and its now almost impossible to escape the conclusion that a rethink is long overdue.
It’s high time retailers found an approach to e-commerce merchandising that reflects the complexities of the context.
At present, retailers still rely on a manual approach to merchandising that is unsustainably labour intensive.
Unsustainable in terms of resource demand – just look at the sheer number of online merchandising jobs retailers are currently trying to fill.
And unsustainable in terms of results – how long will retailers continue to attempt to prop up results with sticking plaster solutions and promotions rather than address the core issues?
Automation and AI
The truth is that retailers are failing to grasp a nettle that other sectors tackled long ago – automation.
But not just any automation. The automation of online merchandising’s heavy lifting – the vast number of repetitive but vital tasks that are practically made for machines – but, crucially, carried out by technologies with artificial intelligence and big data capabilities.
This kind of intelligent automation has two immediate virtues.
First it enables retailers to deliver better, more relevant experiences for each customer, by adapting everything from search and navigation to recommendations and even product display according to individual behaviour and intention in real time.
That would truly be a watershed moment: The moment when retailers finally embrace the full potential of e-commerce – the ability to shape and instantly adapt product discovery and the entire customer experience according to the needs of each and every individual customer.
Doing all that across product exposure, search, navigation and recommendation of course, neatly takes care of both inspiration and ease of use – the twin failings that have to date held back conversion rates.
Second, it frees merchandisers from a tyranny of spreadsheets, and enables them to focus on the high level tasks that really require their specialist input.
That could include the development and execution of the holistic product exposure strategies that would be necessary to guide automated merchandising.
>See also: China Singles Day: a retail goldmine
These high level strategies could be shaped by real merchandising priorities – business objectives like revenue, profit margin, stock oversupply and consumer trends (be they micro or macro).
The technologies that enable this new kind of e-commerce merchandising are already available.
The question now is how long it will take retailers to accept that the old ways do not work and embrace a new beginning for e-commerce.
The answer: ‘not long’.
After all, there is plenty to like about an e-commerce operation that inspires purchase through absolute, individual relevance, but which also makes it easy to shape merchandising strategies according to business metrics – and which makes that revenue gain of 0.3% feel eminently achievable.
Sourced by Frank Schoutissen, advisor to Apptus