How To Drive Retail Merchandising In Times Of Growing Marketplaces

By Rakesh Kumar, Global Services (A Happiest Minds Company)

From adversity, also arrives opportunity. After seeing retail businesses go through one of their most difficult phases, global retail e-commerce surged 17% in 2021 to $4.9 trillion. As a subset to that, not only did prominent online marketplaces (Alibaba, Amazon, E-Bay, etc.) sell $2.67 trillion in 2020, several other marketplaces (Etsy in the U.S. and Ozon in Russia) grew nearly 100%.  

While retail merchandising gains newer dimensions every day, it is the digital ‘marketplaces’ that have evoked special consideration of merchandisers. No wonder that in 2021, 3 out of 5 e-shoppers bought from them, in a segment where Amazon isn’t even the leader (China-based Taobao and Tmall are the world’s two biggest).

The reasons marketplaces continue to thrive are many - falling price of technology, the proliferation of personal devices, lower prices, custom solutions, and self-service options. For retail merchandisers, however, the die is cast the other way. So, while marketplaces invest heavily in the platform and set up self-service models, the responsibility of curating products, crafting the brand experience, and driving sales performance all falls on the e-Retailer.

This unprecedented control, gives way to a dichotomy where marketplace shelves are owned by the customer (and not the retailer), even though the product belongs to the retailer. Type the word “shoes” in a search bar and watch as any number of products pertaining to material, occasion, gender, brand, color, etc., pop out. No matter how narrow is the search string, the permutations that come up are endless, and even so, the results shift based on what is trending.

In fact, 90% of all product views on Amazon come from its product search and not from merchandising ads or product aggregators.

Today’s eRetail Story Can Be Told In A Single Word - Algorithms

So, if algorithms determine shelf positions - and not so much a retailer’s brand promise or curated experience - retail merchandisers must intensely re-examine their digital footprints. Through data-driven approaches, the need of the hour is to catch invaluable insights into what people are searching for and buying, which fortunately enough, is also a rich source to capture consumer moods.

As the current crisis accelerates the adoption of marketplaces, retail merchandisers will face challenges from various quarters: increased competition as dozens of marketplaces open across the globe each month, higher costs, steadily rising labor costs, and most importantly, the increasing number of digital natives and disruptors who raise the bar for personalized service.

Winning In Tomorrow’s Marketplace - What Will It Take For Retail Merchandisers?

Here are five ways.

1. Get your data management in order

There is no bigger currency for success in the digital marketplace than effective data management. More so, with a perfect storm brewing around the retail sector with shipping delays, uncertain inventory status, and global trade stalemate. Analyzing product data in isolated silos, or just-in-time inventory management (where it’s difficult to keep track), will no longer make the cut. For retail merchandisers, the ability to consistently pick customer insights and learn from search trends across all marketplaces (and not just one) will aid in maximizing product performance. Therefore, putting consumer intelligence and competitor data to good use will mean long-term strategic investments in Artificial Intelligence (AI) and machine learning (ML) capabilities. The proficiency with which merchandisers can work out the complexities of channel strategy, inventory allocation, and customer service will ultimately separate the achievers from the has-beens.

Additionally, as the PwC December 2021 survey reveals, managing data well is a key requisite, with 59% of consumers feeling more protective about their data in the last six months.

2. Personalized product experiences

Retail marketing was about savings yesterday. Today it is about experiential marketing. An interesting case in point is Farfetch - a popular eCommerce platform for luxury goods that centered their physical store around augmented reality (AR), to make shopping more human-centric. But then how do e-tailers move beyond the cliched white backgrounded product display pages? Actually, the answer to offering personalized product experiences and assuming data management is in order lies in the series of decisioning activities that follow - from using customer segmentation and analytics, identifying value triggers, to creating a library of personalized marketing campaigns, and finally developing a multichannel decision engine that drives maximum value per touchpoint.

Another way e-tailers can personalize product experience on marketplaces is by intelligently using technologies like digital twins to create a single digital asset and dynamically tailor it for different regions, personas, and promotions.

3. Easy adoption of newer technologies

Starting in 2007 as a gallery space, Pigment expanded to become a boutique curation for home goods, furniture, and gifts. Ten years down the line, the company discovered Faire, a San Francisco-based online wholesale retailer that helps store owners discover new products and buy wholesale without the hassles of tradeshows or paperwork. The minimalist eCommerce type marketplace has grown to 300,000 retailers and 40,000 brands. Today Faire is a $12 billion company with plans of launching a credit card and evolving into a wholesale operating system, with tools like a CRM for brands and inventory management for retailers in the future.

Faire is part of a ‘specialty’ marketplace ecosystem. But in the partnership between Pigment and Faire sits a valuable lesson for all merchandisers – ‘adopt to adapt.’ With increasing investment in online marketing, retailers must adapt their strategies and embrace technology innovation – from live streaming and virtual try-on to direct checkout on social-media channels - to accommodating shifts in consumer behavior.

4. Keep updating your digital infrastructure

Between 2019 and 2024, Amazon will invest $100 billion more in IT than any other company. Even though Amazon, Walmart, and Alibaba are monster ecosystems set on stratospheric growth trajectories, the number still underscores the importance of digital infrastructure. For one thing, the idea that a shopper can compare, contrast, and order a product for next-day delivery is enormously gratifying. We take that experience as ‘hygiene’. But hidden in the labyrinthine are arrays of systems that chug seamlessly - from dynamically responding to AI algorithms to adapting to user’s browsers and servicing omni-channel personalization requests, retail merchandisers are on the ‘never-ending-treadmill-runs’ to revise and reinvest in digital infrastructure.

What does the future hold? A McKinsey report crystal gazes into what retail will look like in 2030. While a few developments appear sci-fi, it is safe to say that retail merchandisers keen to capture and retain the customers’ attention must do more than reinvent homepages, optimize product pages, and offer personalized product recommendations.

5. Simplification and automation of activities

Eventually, the four ‘how’s’ discussed - managing data, hyper-personalizing experiences, adopting new technology to adapt to shifting customer demands, and spending on infrastructure upgrades – should add up to that one attribute most retail merchandisers lose sight of – simplicity. Here are some insights from EY’s 2021 Future Consumer Index on why simplification is important:

1. 57% are trying to save more than in the past
2. 60% are more cautious spenders than earlier
3. 48% are saving money by buying less
4. 58% will focus more on value for money in the future

The data shows why e-tailers need to radically simplify the entire buying process. To do that well is the job of retail automation, a fast-growing sector that is expected to reach $23.5 million at an 11% CAGR by 2025. By employing Robotic Process Automation (RPA), top merchandisers are improving product availability, creating smarter promotions, adding speed to order and return processing, and freeing up time to improve customer experience.

Conclusion

In parting, driving retail merchandising in times of growing marketplaces calls for getting quite a few things correct. Firstly, if e-tailers look at the ratings and reviews of what sells or not and the trending categories, they are sure to identify inchoate customer needs. Strategically acting on customer insights, they can then operate differently across different marketplaces. Once the primary content for merchandising is in place, the rest of their evolution journey will depend on how eagle-eyed they can stay on data-driven performance, centralized management, and optimizing portfolio performance via AI and ML.

About The Author

Rakesh Kumar is Chief Technology Officer at Pimcore Global Services (A Happiest Minds Company). He is responsible for designing high-performing and scalable cloud applications and managing engineering and pre-sale functions across geographies. Pimcore is an open-source platform for product information management (PIM/MDM), digital asset management (DAM), content management system (CMS), and eCommerce.