CommerceNext brings together marketers from leading ecommerce brands looking to discuss the today and tomorrow of retail and other direct-to-consumer organizations. Held June 21-22, 2022 in New York City, the event saw top execs from companies such as Lands’ End, Kate Spade, Tapestry, LLBean, American Eagle, and more discuss how their individual companies are navigating an economy being driven by massive inflation and the possibility of a recession.
From strategy to execution, we’ll discuss what we learned at CommerceNext from industry leaders who are planning to overcome today’s obstacles with a roadmap that foresees rough patches but ultimately ends with them in an advantageous spot.
The current state of ecommerce
Over the past few years, online retailers have experienced an era of incredible growth due to the COVID pandemic requiring shoppers to go digital. The Census Bureau’s Annual Retail Trade Survey (ARTS) found that ecommerce sales shot up 43% in 2020, the first year of the pandemic, rising from $571.2 billion to $815.4 billion. 2021 was another prosperous year, with U.S. ecommerce sales increasing by 14.2%.
However, 2022 is bringing new challenges due to headwinds from record inflation, major supply chain issues, and market uncertainty.
With inflation comes stiffer competition for consumer dollars. McKinsey found that U.S. shoppers are less loyal to brands now than during the pandemic — most saying that price determines where they shop. Lack of inventory further impacts customer loyalty, as companies with out-of-stock items for long stretches are being replaced by those who’ve proven to be more reliable. These challenges caught the attention of investors, stirring a panic that’s led to the biggest stock crashes since the late 1980s for some of the nation’s largest retailers.
Because business was good, it was easy to underwrite growth. And so retailers could do growth at any costs, which means that they could give discounts and incentives sitewide to essentially drive growth. Now, margins get tougher, and the supply chain is really a problem that only turns into an inventory issue when solved — leading to missed sales on sold-out items and discounts on overstocked products later on.
Manish Malhotra, head of data science and co-founder, Session AI
Growth during downturn
CommerceNext brought together top minds in the ecommerce space to curate discussions around how the industry can combat current growth hurdles. Panel topics ranged from headless commerce to new payment options to data privacy, each centered around what it will take for retailers to succeed in this economy: customer centricity.
At its core, customer centricity is the company’s ability to put their consumer in the driver’s seat by truly understanding their needs and placing the correct goods in their path that’ll help increase their sense of satisfaction — while also planting a seed of brand loyalty. However, with upwards of 90% of digital consumers being anonymous, knowing them and their needs is getting harder for retailers.
Let’s discuss how industry leaders are continuing to be customer centric, even with little to no personally identifiable information (PII) at their disposal.
Customer centricity with headless commerce
Going headless separates the frontend of an ecommerce site from the backend, allowing the two to exist independently (making updates to one won’t affect the other). Both the front and backend communicate via an API that sends information in real time, enabling greater flexibility and more rapid response times to evolving industry and technology trends. Perhaps the greatest benefit of headless commerce for retailers is the enhanced customer personalization features.
Going headless empowers online retailers with the ability to instantly split test sitewide. This can provide the data needed to optimize the customer journey and boost conversion rates. A study by Google found that consumers are 40% more likely to spend more than originally planned when they identify their experience to be highly personalized. Headless commerce gives ecommerce companies the agility to provide this level of customer experience.
Customer centricity by going to the consumer
Younger shoppers are using new outlets to find and purchase products and services. Understanding the importance of adapting to consumer trends, Old Navy collaborated with the Boys and Girls Club to create a collection of non-fungible tokens (NFTs) for 94 cents — creating brand loyalty with Gen-Z by providing them with access to an otherwise unaffordable arena.
Meanwhile, American Eagle adopted new mobile and social technologies into their strategy by:
- Creating an outfit builder using augmented reality (AR)
- Designing a 3D try-on feature in Snapchat
- Offering branded apparel in video games like NBA2K
- Selling their own NFTs and virtual clothing for the Metaverse
These organizations are maintaining growth by going to their customers with hyper-relevant products and services.
Customer centricity with in-session intelligence
Incentivizing shoppers with discounts, free shipping, and other rewards has been the safety net of ecommerce. However, declining margins are forcing retailers to rethink this strategy. With the impending recession, the price sensitivity of consumers is sure to intensify. This creates a challenge where business is not growing as easily as before and acquisition costs are increasing due to our privacy-first world.
Businesses need to be smarter about how they incentivize prospective customers. This requires new intelligence models. Leading-edge intelligence from Session AI opens an entirely new approach to predict buyer intent without knowing anything about the consumer.
Being differentiated in your offers based on in-session micro-behaviors and price sensitivity is where companies can improve their customer centricity. Brands that have grown by being offers-focused are getting smarter about how they utilize promotion budget. Concurrently, luxury retailers that previously avoided offers are now exploring how to provide incentives without diluting their brand by targeting those who may need persuasion during a tough economic environment.
Manish Malhotra, head of data science and co-founder, Session AI
While the current state of ecommerce can seem shaky, the CommerceNext panels were great examples of how to avoid decline — so long as you have the right strategy in place. Growth in today’s economic environment depends on the same thing it did the past two years: the customer. By focusing on their needs rather than those of the company, online retailers can continue to build upon the success they realized in 2020 and 2021.
