Online shopping continues to rapidly grow in the U.S. and global markets, yet most retailers are still figuring out how to do business in an omnichannel world. E-commerce driven companies like Amazon, on the other hand, are crushing brick and mortar focused retailers in online shopping revenue. More than half of every $1 of retail e-commerce growth in the U.S. is already earned by Amazon, according to a recent report by Macquarie Research. Traditional retailers are also losing ground in store-front sales across America with Amazon grabbing 24 percent of total retail growth in 2015.
This disruption should come as no surprise as technological innovations have radically altered other industries. Public transportation with Uber, cable TV and movie rentals with Netflix, and vacation accommodations with Airbnb are just a few examples. While impressive, successes like these pale in comparison to the potential of e-commerce to displace leading retailer’s revenue streams.
Retailers who are behind in e-commerce are often plagued with the same problems. New features are launched after months of delays. Their traditional agency model of building e-commerce halts innovation and quick thinking. Often what ends up happening is when their site is updated, it’s already years behind their customer’s expectations. Here’s how retailers can fight back, survive and thrive in a digital world.
1) Become a Technology Company
The retail industry is at a pivotal moment with online sales resulting in nearly a quarter of all sales, according to recent estimates. Revenue from e-commerce will continue to quickly grow, and retail companies of any size can’t afford to ignore the surging popularity of online shopping. Instead, retailers must embrace innovation as part of their core business strategy and operate like a technology company to deliver what customers want, whenever they want it.
To help with the transition, traditional retailers must first examine and learn from leading online retailers before implementing a winning e-commerce strategy. Amazon, with $107 billion in revenue in 2015, is a prime example of what it takes to excel as a technology focused retailer.
Amazon now pushes code live every 12 seconds and can test a feature on 5,000 users by turning it on for 45 seconds. For some perspective, consider this: Walmart has 7,100 software developers; and Home Depot 2,500. Major retailers are making a serious investment in technology.
So how do brick and mortar retailers compete against an established lean e-commerce machine that runs 24/7 and never stops improving?
Amazon didn’t always have a massive team of industry leading engineers building the gold standard of e-commerce platforms. They had to develop and design everything from the ground-up and failed hard and fast many times over before e-commerce dominance was realized.
Retailers need to start operating as technology companies if they want to keep pace with their customers and competitors like Amazon. To do this, retailers must create specialized teams across departments to rapidly build and test cutting-edge software that can support an omnichannel experience in the same codebase (see image below for additional details).
2) Build Rapidly and Test Everything
Once your rockstar team of technical talent is in place, Agile development and design methodologies must be at the forefront of all future projects and business decisions.
Agile is a proven development and design workflow that has been shown to outperform the traditionally used Waterfall process. Tasks are prioritized into 1-2 week sprints and goals are reached on a weekly basis. This iterative approach allows for early customer involvement as users can rapidly test how software looks and functions through weekly software releases. Testing is always ongoing and iterative based on customer’s usage of new features and releases. These data-driven development decisions ensure more effective software built in very short time frames.
Waterfall development, on the contrary, involves lengthy 6-12 month cycles before any code is released into customer’s hands. This method is an outdated and often ineffective way to build software, unless your company miraculously gets everything 100% right the first time, without any testing. Many retailers are familiar with the pain of spending an entire year building an app, only to discover at the project’s end that customer’s wanted something completely different. Waterfall software development should be avoided in highly time-sensitive situations, especially if there are new and untested features being implemented.
Agile development and design benefits for retailers:
- Ensure there is a problem before investing in a fix.
- Minimize development required to test the hypothesis
- Stop the focus on large feature development
- Many features are often found to be unnecessary or ineffective after testing
- Accurately identify customer problems you are trying to solve
- Fail fast and small to reduce learning costs and development time.
The image below further illustrates the differences between agile development (used by digital retailers) vs waterfall development (used by most traditional retailers).
Agile development and design need to be adopted by retailers to survive and capitalize in today’s e-commerce economy.
3) Use Analytics to Make Data-Driven Decisions
Retailers must integrate analytics and user testing to further improve and enhance the e-commerce experience. This data-driven, continuous delivery model enables retailers to iterate based on results and make rapid changes in weeks instead of months or years.
Keys to making data-driven decisions in retail:
- Utilize analytics to identify underperforming areas of the shopping experience
- Consume all available customer data points such as customer surveys, customer service and site feedback, store associates, etc.
- Conduct user research to find additional insights
- Learn from previous tests and frequently iterate and adapt to find out what works.
Ultimately, retailers refusing to take a technology-first approach will be unable to keep up with shifting customer demands and will eventually fall behind competitors that provide amazing omnichannel shopping experiences. To survive and thrive in a challenging environment, retailers must think like technology companies, build rapidly and test everything using Agile development and design and analytics to make data-driven business decisions.
Perhaps most importantly, retailers must not forget to celebrate successes along with failures. Failure is an important part of building incredible software as lessons learned from things that didn’t work are often more valuable than insights gained through success.
Still have questions on how to build a leading ecommerce platform and omnichannel shopping experience? Contact Rangle, a leading web and mobile development and design firm, to learn more about strategies that have worked for retail clients including Aldo, Uniqlo and Priceline.