Short-termism is putting the brakes on eCommerce investment but mindsets might be the bigger barrier to overcome...
During the height of the COVID pandemic, brands enjoyed a significant surge in eCommerce growth driven by consumer demand for online shopping. In recent times, however, growth has slowed - as consumer retail habits have continued to evolve and in-store shopping has returned.
This changing landscape presents challenges for brands to enhance their maturity and emphasise the significance of eCommerce and omni-channel to their business. As eCommerce sales growth slows and economic uncertainty takes hold, brands are increasingly challenged by resource and investment constraints, and this could stymie efforts to invest in eCommerce, leaving it underdeveloped. The result is that brands may not be able to fully realise the opportunities that eCommerce affords over the long term. Despite the uncertainty in the short-term, it’s those that play the long game that are likely to reap the spoils of their eCommerce investment through market-share gains and increased customer satisfaction.
Arktic Fox’s 2023 Digital & Marketing in Focus report analyses the state of eCommerce in Australia and offers valuable insights on the opportunities and challenges in eCommerce for retailers and FMCG brands alike.
eCommerce is increasingly important to consumers, but what about brands?
eCommerce has seen significant growth in recent years, with $63.8bn spent online in 2022, up 1.7% year-on-year, according to CommBank iQ. While the rate of growth may have slowed, there’s no denying the power of the channel. By 2033, around 1 in every 3 dollars spent in retail will be spent online, according to AusPost’s 2023 Inside Australian Online Shopping report.
However, whilst eCommerce is growing in importance and will represent a larger share of overall retail sales overtime, it’s falling short when it comes to the relative importance brands are placing on it. Many retailers and FMCGs / CPGs still don’t see it as an integral channel. There is inherent risk in not investing in their eCommerce play because what they do today sets the scene for future success. The study found that only 38% of leaders believe that eCommerce is perceived as an integral channel within their organisation.
When we look at this from a retailer and FMCG point of view, the data shows that 55% of retailers see it as integral - which means 45% don’t. At the same time, only 8% of FMCG / CPG brands see it as an integral channel - which are numbers the industry should be worried about, based on the growth trajectory over the next 10 years.
Building maturity can’t be done overnight — it takes a number of years to reach, and with 82% of Australian households shopping online in 2022, according to the AusPost report, they’re leaving themselves vulnerable to lost opportunities.
It’s clear there’s still a lot of potential to improve and enhance performance and for brands to gain their fair share of revenue. But what our report reveals is that the importance of eCommerce within organisations is directly linked to success. If it isn’t seen as an integral channel, it’s less likely to attract investment and will be deprioritised within the organisation - which in turn drives lack-lustre sales performance.
For instance, our data reveals 47% of respondents find that resourcing is the top challenge they face, something that demonstrates the relative importance placed on it.
Investment is just the tip of the iceberg
When it comes to what’s holding back retail and CPG brands, barriers are evident in different areas, reflecting the fact that their challenges and levels of maturity vary.
In the retail sector, half of all respondents stated that their tech stack limits flexibility, whilst 35% pointed to their agility as a key inhibitor impacting their ability to move with the market, alongside investment constraints. Legacy platforms and processes that were often built in a pre-digital era and the orientation of the organisation around stores can really inhibit progress and the ability to build maturity.
Whilst, for CPG and FMCG brands, half of respondents say the organisation is too focused on maintaining and protecting the core part of the business – which points to mindsets and behaviours being by far the biggest inhibitors to building maturity, alongside of a real struggle to get investment dollars and resources to scale their eCommerce strategies.
Whilst the challenges for retailers and FMCGs / CPGs are very different, most sell via retailers and, therefore, as their maturity and thinking lags the market, they risk leakage to players embracing digital commerce.
How can brands lift their eCommerce play
So how can brands position themselves to harness the opportunities that will come from the steadily growing ecommerce market?
Re-think the investment and return equation Brands need to shift away from measuring investment based solely on today's return. They need to view investment as an important way to future-proof their organisations, and make investment decisions based on the potential opportunity over time- not solely on the bottom line today.
Challenge old assumptions Utilising past data to predict future performance at a channel level is dangerous - as newer and emerging channels increasingly drive greater share of eCommerce sales. Making decisions based solely on past channel performance creates a significant blind-spot for organisations and can lead to a lack of investment in key growth channels.
Quantify “digital influence” on in-store sales Unfortunately, whilst eCommerce is highly measurable, it isn’t often measuring the full impact of digital investment on sales. In the FMCG and CPG space- as much as 60% of all instore sales are now influenced by digital. Therefore, investment in eCommerce and the digital shelf is as much about driving in-store decision making as it is helping consumers buy online.
Remove silos Today, many organisations still manage eCommerce as a separate department, and it operates quite separately from other core business activities. Digital has to be how we do business. That means we need to reduce internal siloes and embed eCommerce horizontally across the business – in sales, in marketing, etc - in order for it to become a more integral part of business operations.
Download the Arktic Fox 2023 Digital & Marketing in Focus study to gain valuable insights about how to steer your brand through these uncertain times and industry challenges.