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Read Professor Moorman’s analysis of key survey results.

How To Overcome ECommerce Growing Pains

Holly Larson, Lauren Kirby, and Torren McCarthy contributed to this post.

Attention online shoppers: It’s harder to connect with you than expected. The CMO Survey from Duke University, sponsored by Deloitte LLP and the American Marketing Association, reports that companies average only 12.2% of sales through the Internet, up from 8.9% of sales in 2013 when they represented only 8.9% of sales (see Figure 1).

Figure 1: Company Sales Over the Internet

What can we learn from this?

First, physical retail has refused to die, as retailers evolved their customer experience. Amazon, which dominates the United States market with 49% of all ecommerce sales, owns only 5% of total retail spend. That’s why Amazon bought Whole Foods and is experimenting with Amazon Go stores. In a word, this strategy boils down to one idea: facetime.

It’s a whole new world of retail. Forget showrooming (where consumers try, but don’t buy) or webrooming (where they research online and then buy offline). Analysts are now talking about “blended retail,” where online and physical retail work together synergistically and success is measured in experience per square foot. Yes, customers research online (both at home and on mobile devices in stores), but the reality is that they often move from one channel to another and back again before making and receiving a purchase. That’s why we’ve seen new trends emerge, such as ordering online and picking up in stores.

Second, ecommerce penetration varies across sectors. The CMO Surveyfinds that B2C product (15.6%) and services (14.2%) sales outpace B2B products (9.7%) and services (11.5%). That’s not surprising, given that B2B sales are often more complex, involve multiple decision makers, and often constitute significant Geld verdienen met crypto casino spellen investments. Similarly, ecommerce penetration varies by geographies. While the market is relatively developed in Western countries, Amazon, Walmart, and others are making a big push into India and other markets, adapting their merchandising and sales strategies to reach 800 million new customerswho lack easy access to either stores or the Internet.

Third, marketers cite four key challenges to selling more products and services online (see Figure 2 below). They say that:

  • Their business requires more human interaction (56% agreed).
  • They need a new business model (49% agreed).
  • That the product/service is too complex to sell over the Internet (46% agreed).
  • That the business requires more customer experience than can be delivered over the Internet (39%).
Figure 2: What Factors Prevent Greater Sales Over the Internet? (Check All That Apply)

A first impression is that these are reasonable explanations. While it’s easy to sell commodity products online, many companies sell goods that require extensive research, in-person inspection, cross-product line analysis, and interaction with sales and service. The common wisdom is that finalizing these types of sales require facetime with sales staff. However, digital capabilities are continually evolving and online consumer behavior is keeping pace, meaning that even large expenditures are moving online. Let’s look at how businesses are innovating to reach digitally-wired consumers.

Eliminating (or reducing) the need for human interactionUS Foods, the second-largest food distributor in the United States, used phone and fax-based sales strategies before 2013. Leaders knew that the company needed to evolve quickly to meet customer expectations. The company launched an ecommerce and mobile technology platform to improve transaction speed and to gain access to key analytics. The new platform enables customers to place orders online; track deliveries using the company’s mobile app; and leverage analytics to optimize processes, such as budgeting and spending, inventory management, and menu engineering. In just three years, the company has booked $16 billion net sales through eCommerce and its independent restaurant customers who order online have higher retention rates and purchase volumes.

Creating new business models: While there are many new digital business models, subscriptions (for both physical products and digital goods) have been particularly successful. In the B2C arena, Stitch Fixoffers consumers digital clothing style consultations (driven by real stylists and algorithms) and monthly “bento” box sales. The company added an “Extras” service for undergarments to push per-sales spend, much the way Amazon offers Amazon Basics and subscriptions.

In the B2B arena, Adobe was an early pioneer into subscriptions, which disrupted its own business model. Adobe gave up larger, one-time software sales (often with physical CDs to match), to deliver a fully functional product delivered on a modest monthly pay-as-you-consume basis. Adobe CMO Ann Lewnes worked to drive that transformation, which was not well accepted by customers at the time. Now, however, Adobe is a market leader in creative services and digital transformation precisely because it was prescient enough to anticipate—and pivot its business towards serving—the Subscription Economy.

Simplifying complex products for sales online: If there is any B2C product that requires in-person sales, it is car buying. Users typically research online, but visit dealerships to see cars in person, conduct test drives, decide on features, and talk financing.

Not so with Carvana, which has revolutionized the used car-buying process by teaching customers to kick the digital tires. Recognizing that many customers don’t enjoy visiting dealerships or haggling over prices, Carvana has entirely digitized the car buying experience. That’s in line with customer behavior, as most users spend 13 hours researching online and just 3.5 hours in dealerships. Customers can filter and scroll through more than 10,000 cars and purchase or finance the car directly online. Buyers can then schedule to pick the car up at one of Carvana’s Car Vending Machines or have it delivered to their home, often as soon as the next day. Carvana overcomes buyers’ usual inhibition to spending large sums online by offering a no-questions-asked, seven-day money back guarantee.

Delivering more customer experience than can be delivered over the internet: Sephora has used technology to become the top specialty beauty retailer in the world. The company uses smart technology to deliver an omnichannel shopping experience and connect buyers to a digital catalogue of more than 14,000 products. Here’s how a shopper experiences Sephora in its new, smaller-format stores. A robot greets buyers at the entrance of the store and gives them a virtual shopping basket. Sephora’s app uses beacons to provide real-time marketing information and wayfinding. Buyers can tap NFC-tagged goods on screens to get information and use augmented reality make-up apps to try on makeup digitally, in stores. At home, they can connect with Sephora’s app on Google Assistant or interact with chatbots on the company’s website. All of these innovations and more help deliver a differentiated experience that engages and delights users and drives sales.

Creating An “Always-on” Digital Marketing Organization

As the examples above demonstrate, marketing has become the warp and woof of business. Much digital transformation today is led by marketing and customer experience teams, to ensure that the changes are what consumers actually want. In addition, digital marketing is moving to an “always-on” model. Leaders who rethink their businesses to engage more powerfully with consumers in this way can generate powerful data they can use to innovate and optimize processes. Amazon has ably demonstrated how companies can create leap-ahead advantages by using analytics to fine-tune services and then move into adjacent products, markets, and businesses.

The CMO Survey finds that companies are spending more on digital marketing. Respondents say that their companies will spend 12% more on digital marketing in 2019 as part of a 7.5% increase in overall marketing spend in the next year. However, marketing leaders report only average or below average contributions of mobile and social investments to company performance.

Why is this?

Part of the challenge may be that marketers haven’t achieved digital marketing maturity. If they haven’t driven digital to the heart of the business, there is the danger that marketers are thinking about marketing as a series of ongoing campaigns or as a standalone function rather than a journey taken with other key business functions. If so, it is time to take two other important strategic actions.

First, build digital marketing capabilities. CMO Survey results demonstrate that these capabilities are currently underdeveloped in companies—reaching only the mid-point on survey KPIs. For companies, this means gaining executive sponsorship for a strong push into digital by: promoting or hiring the right leadership; building partnerships with the business, sales, and customer experience organizations; developing business case-led strategies; hiring or developing the right staff; and solving problems that cause business and customer pain. This is a long process that resists quick fixes. Those organizations that succeed find a way to deliver value to the business to gain commitment to this path forward.

Second, CMOs must work hand-in-hand with CEOs, CIOs, and digital leaders. Digital marketing should transform how the company operates, including its culture, its leaders, decision-making, customer and employee engagement, technology investments, cross-functional cooperation, and learning and development. Unfortunately, The CMO Survey reports weak performance on these features of a digital marketing organization, meaning that many companies still need to dig in.

We believe that the verdict is in. The longer companies wait to reimagine themselves as digital businesses with marketing-led strategies, the less likely it is that they will compete within their industries. Look to the success of companies such as US Foods that trimmed fat from operational processes and harnessed technology to engage with users. See how Stitch Fix and Adobe reinvented product development, marketing, and sales with subscriptions. Analyze how Carvana simplified complex sales, moving them entirely online. And understand how Sephora created a blended retail experience that enhances in-store shopping and increases digital sales.

There’s no time to wait on driving digital marketing into the heart of the business.

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