Tradeswell hosted a virtual roundtable with SignalFire, “The DTC Squeeze,” where we uncovered the top ecommerce challenges that threaten brand loyalty, sales growth, and bottom line profitability.
Speakers Rizal Hamdallah, Chief Innovation Officer at Clif Bar & Company, Todd Lutwak, Former VP Selling at eBay, and Kathleen Booth, SVP Marketing at Tradeswell drove the candid conversation around what it’s like leading a team and business in the complex era of real-time commerce.
There’s Never Been More Complexity or Opportunity in Ecommerce
Ecommerce leaders are getting squeezed from all angles—labor shortages, supply chain issues, the pandemic, and emerging ecommerce technologies. At the same time, there’s tremendous opportunity in ecommerce.
Separate reports from Tradeswell and Salesforce found that there’s a 57% YoY increase in global online sales, a 40% increase in net new customers shopping online, and 95% of online businesses now sell in two or more online marketplaces.
However, the more channels a company sells in, the more complex ecommerce becomes. 63% of online companies that sell on multiple marketplaces say ecommerce is becoming increasingly complex.
Top Drivers of Complexity
- Rising customer acquisition costs (CAC): It’s no surprise that Facebook ad performance has dropped dramatically, causing a rise in CAC. Marketers that long relied on performance advertising are now scrambling to find new ways to grow the business.
- Increase in competition: Ecommerce platforms like Shopify and WooCommerce have made it significantly easier for brands to adopt digital channels and sell online.
- Supply chain challenges: Companies struggle to keep their digital shelves full and meet customer demand.
- Algorithmic marketing and sales channels: Marketing and sales channels, such as Google, Facebook, and Amazon, constantly change their algorithms—making it difficult for brands to game the system.
- Lack of visibility into data: As brands sell their products across more channels, it presents a new challenge of harmonizing data at the SKU level and making the data accessible across the organization.
- Tight margins: Supply is more expensive, CAC is rising, there’s an increase in chargebacks—all of this tightens margins.
Customer Behavior is Changing
The pandemic accelerated the shift from shopping in brick & mortars to shopping online through DTC sites and marketplaces. As the online space becomes more crowded, there’s now a battle for customers. “Alignment, data unification, and speed are critical for being successful in the world of real-time commerce,” said Kathleen.
“Alignment, data unification, and speed are critical for being successful in the world of real-time commerce.”
-Kathleen Booth, SVP Marketing at Tradeswell
According to Gartner, leading organizations are integrating digital commerce into every aspect of the business. By 2025, organizations with distributive responsibilities for digital commerce initiatives will outperform those without by 25%.
Think Beyond Performance Advertising
As CAC rises on once reliable channels for driving traffic and sales, brands must think of new ways to engage with customers. “The share of voice is becoming crowded, and it’s requiring a different game and approach for brands to survive,” said Rizal.
“The share of voice is becoming crowded, and it’s requiring a different game and approach for brands to survive.” -Rizal Hamdallah, Chief Innovation Officer at Clif Bar & Company
Scaling a brand on performance advertising alone doesn't work—brands need to understand what matters to their customer and what they’re looking for. This is where new brands have an opportunity to emerge with fresh ways to interact with customers. For example, Chubbies used content (i.e., memes, user-generated images) to cultivate an authentic, nostalgic brand that personally connects with customers.
Todd added, “I think it’s increasingly more important for brands to identify who their most passionate users are and double down on conversations with them.” Because of the increase in acquisition costs, marketers are finding ways to drive more sales within their existing customer bases.
“I think it’s increasingly more important for brands to identify who their most passionate users are and double down on conversations with them.” -Todd Lutwak, Former VP Selling at eBay
Use Data to Drive Strategies
Companies have access to more data than ever before. “The challenge is translating data into insights and action,” said Rizal. To be successful, companies need to:
- Turn data into insights
- Align the organization around those insights
- Quickly take action (or automate those actions)
“Data and insights have to be a core competency,” noted Kathleen. We’ve seen legacy companies invest in data and give up because they don’t have the right organizational structure to make the data useful. By contrast, digital native brands have an advantage because they were built to be data-first from the start.
“The challenge is translating data into insights and action.” -Rizal Hamdallah, Chief Innovation Officer at Clif Bar & Company
Clif Bar recently went through a restructuring to break down data silos and make it easier to collaborate across functions. The restructure moved IT, customer insights, analytics, DTC, and marketing under one department. This structure allows the team to unify and align data and present a cohesive customer experience.
Differentiate Sales Across Digital Channels
Large companies often lump all digital sales into one bucket rather than looking at DTC versus marketplaces. As a result, they don’t have an accurate picture of how each channel performs. By differentiating sales by channel, companies can understand each channel’s profitability and product performance and the nuances in customer behavior across channels.
Future Opportunities and Risks in Ecommerce
As we wrapped up the roundtable, each speaker gave their perspective on future opportunities and risks in ecommerce.
- Supply Chain Disruptions
- Risk: It’s going to get worse before it gets better, making it challenging to keep up with customer demand.
- Opportunity: As companies look at elements of the supply chain, there’s an opportunity to find significant market advantages.
- Less Reliance on Performance Advertising
- Risk: Companies that rely on traditional digital advertising channels, such as Facebook, will likely fall behind their competitors.
- Opportunity: By diversifying paid and organic marketing strategies, brands can discover new avenues for acquiring shoppers and growing customer relationships. (The speakers agreed that metaverse as a marketing channel is still likely a few years away.)
Curious about how consumer demand and ecommerce is trending? Be sure to grab our latest quarterly research report.