Glow Capital Partners

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So you think it’s time for a digital transformation?

There’s no denying that the pandemic created the perfect conditions for online retail. A combination of more time at home, more time spent online and shop closures meant that online purchases rocketed. 

Reports on online retail sales over the main lockdown periods of 2020 and 2021 show exceptionally large growth - with a recent Australia Post report finding that online retail sales growth in 2021 had doubled the pre-pandemic growth baseline, with an annual increase in online sales of 12.3%.

And while many shoppers have returned to brick and mortar stores, it’s clear that ecommerce is here to stay.

So, how can traditional retailers take advantage of the opportunities online, stay relevant to their customers, and embrace an omnichannel sales approach? 

If you’re looking at venturing into the direct to consumer world of digital sales, here are five common challenges to consider, to help you be strategic about your move online. 

1. Disruption to distribution channels 

First, consider your existing distribution agreements and channels. Many brands might find themselves locked into legacy distribution agreements that prevent them from selling online independently, or that allow distributors to undercut them online. There is also a risk that shifting online could have a detrimental impact on your existing offline sales. 

The solution: Careful strategy and execution is key. You might need to take a step backwards before you can move forwards, so be patient - it’s normal for it to take six to nine months before you see positive results. Rather than trying to do it all at once, you could start by considering one geographical market at a time, or testing the online channel via specialty retailers. 

2. People power 

Digital transformation isn’t as simple as quickly hiring a digital marketer and hoping for the best. Hiring new people can be expensive, and competition means that good people are hard to find. And even with new talent, for your transformation to succeed you’ll need strong collaboration across your existing organisation, including IT, marketing, operations and customer service.

The solution: Take the whole team with you on the transformation journey, keeping communication channels open at all times. Look at the existing talent in your team, and how you might be able to insource through upskilling your people. And consider outsourcing specialised roles and tasks to contractors, rather than hiring in permanent employees, especially in the early days of establishing your digital presence.

,3., ,Brand awareness and marketing strategy

Gone are the days when you could spend small on social platforms like Facebook and see a huge return on your investment. Changes to privacy policies on major platforms and an increasingly competitive digital space mean that most businesses have seen Return on Advertising Spend (ROAS) drop significantly (we’re seeing successful e-commerce businesses achieve 2-3x ROAS, although this varies significantly by size, sector and geography).

The solution: 

Investing in a strong brand is more important than ever, and moving online creates an opportunity to take full ownership of that brand. If you’ve got lower brand awareness, you can also consider a marketplace such as Amazon as a way to reach new customers and build brand awareness. 

4. Product range considerations

The economics of direct to consumer online selling can be challenging, thanks to increasing costs in marketing, logistics and freight. Having a limited product range available means you're limiting your potential for higher order values and repeat customers. 

The solution: Look at how you might be able to extend your product range with tactical additions to the range to encourage repeat purchasing and higher order values - for example, if you are selling pet food, consider testing out new product categories such as bowls and feeders that can be purchased as companion items. 

,5. Upfront costs 

Moving into a hybrid sales model across offline and online selling can require a significant upfront investment. Expect to spend on your people, product, digital infrastructure and inventory. 

The solution: Digital transformation isn’t cheap, but with the right execution, it has the potential to completely transform your business - we’ve seen businesses dramatically grow their sales within a year of moving online. Take a slow, strategic approach, and be mindful that it can take a while to recover your costs. Play the long game, and you’ll be sure to eventually reap the rewards of your investment.

This article first appeared on Inside Retail. Licensed by Copyright Agency. You must not copy this work without permission.