An article written by Digital Wave Technology’s SVP Platform Strategy Dan Mitchell. Find the original article published by Drug Store News here.
Online retail sales are exploding. In 2024, retail e-commerce sales are estimated to exceed 6.3 trillion U.S. dollars worldwide, and this figure is expected to reach new heights in the coming years, per Statista.
Yet, to capture online customers and grow sales is no easy task for retailers.
Drug Store News sat down with Dan Mitchell, senior vice president of platform strategy at Digital Wave Technology, to learn what online retailers need to know to be successful.
Mitchell addressed the challenges facing online retailers and the importance of online planograms and data management. He also weighed in on future opportunities for online retailers as competition heats up.
DSN: What is the greatest challenge that online retailers face in meeting shoppers' needs?
Dan Mitchell: Securing trust and maintaining loyalty remains the greatest challenge for online retailers. Attracting a first-time customer can be difficult, especially when they are accustomed to shopping at their local store. Enticing new customers to choose your brand over others online is no easy feat. Why should they choose your brand when there are so many options? Do you stand out based on reputation, price, inventory availability, or customer service, or a combination of all these factors? Striking the right balance is crucial, and it requires a delicate blend of personalization tailored uniquely for different customer segments by category.
Those initial online shopping experiences are high-stake encounters that will determine if customers choose to shop with you again. Retailers often bombard customers with numerous offers to see what sticks, but personalization analytics hold the promise of selecting the right handful of products and promotions. However, this approach rarely works well for unknown customers. A better strategy focuses on a leaner shopping journey to learn more about their needs and preferences. Highly targeted promotions or product offers based on third-party data can feel intrusive and erode trust.
I recommend using personalization early in the customer’s journey to shape the online experience in a way that removes the noise and clutter of excessive offers. It’s crucial to curate the most meaningful products, poignant content, and relevant information using high-quality product data. Carefully engineering that ideal first impression establishes trust and encourages customers to share more intent data, incrementally building long-term loyalty.
DSN: Describe an online planogram and how it helps retailers manage millions of individual SKUs and their specific attributes and characteristics, to best reach customers.
DM: A ‘IRL’ (in real life) planogram is a schematic, blueprint, or map of where and how to merchandise items in a physical retail space. Retailers use these layouts to plan and communicate the ideal mix of products, inventory capacity to meet demand and shelf placement to ensure easy shopability. In the online world, the concept of planograms takes on a somewhat different purpose, as there are no shelf capacity constraints of a physical store—often referred to as the ‘endless aisle.' While the ability to offer an unlimited variety of items to customers is a game-changer, great care must be taken not to overwhelm them and slow down the shopping experience.
Ensuring you have a proper mix of items is still important but takes a back seat to properly displaying and sequencing products. To do this effectively, you need to accurately organize product information and attributes such as brand, text, images, price point, size, ingredients, inventory availability, and more, and keep all that data as up-to-date as possible. Once that is all in place, when a customer starts a shopping journey, the retailer must identify which of those attributes are the best to sort and shape the most streamlined digital experience.
For example, sorting items by highest to lowest price by default when a customer is looking for their favorite brand can lead to endless scrolling and shopper frustration. On the other hand, displaying products sorted by the most popular brands and sizes for a local region can bring customers to the products they want to shop for faster. This approach not only enhances the shopping experience but also increases the likelihood of conversion, ensuring that customers find what they need efficiently and enjoyably.
DSN: How does data management encourage category growth?
DM: Clean data, rich attributes, accurate sales and inventory metrics can unlock uncapitalized opportunities in a given category to help serve the unfulfilled demand with inventory that you have invested in. The real force multiplier for category growth emerges when you can share the information across the organization with others efficiently. When marketing, merchandising, operations, supply chain and vendors teams have access to all of the same data at the same time, they can make agile adjustments to expand margins quickly.
However, data management is much more than storage and software. It is an organizational investment and prioritization effort focused on curating the most accurate information for all stakeholders. Managing the sheer size, volume, and security of the data can be overwhelming – it’s a team sport. The challenges are even more dizzying with the exponential increase in data velocity and the expanding number of signal sources.
Investing in data skills and modern technologies at an enterprise level is a critical foundation for any business to monetize its data with AI. This strategic approach not only supports efficient operations but also drives category growth by enabling informed decision-making and responsive adjustments to market conditions.
DSN: How do you view the future opportunities for online retailers as competition for online shoppers continues to grow?
DM: Consumers continually raise the bar higher for shopping journeys that are trusted, predictable, and seamless, as online shopping increases across every segment of retail, dining, and service industries. For both new entrants and established players, the main challenge as the volume expands will be to scale the infrastructure for speed and security across all channels, while ensuring that the data used for decision-making is as accurate as possible.
DSN: Where do you see the category going in the next six months to a year?
DM: I anticipate that online retailers will race to offer more ‘ease-of-use’ functionality in their mobile applications as more shoppers embrace generative AI apps in other parts of their day-to-day lives. At the same time, the pressure will intensify as major retail players like Walmart and Amazon continue expanding into all remaining online product categories. While there are bound to be some missteps, retailers who prioritize building a trusted shopping experience will provide customers with the convenience that fosters long-term loyalty.
As businesses adopt AI to enhance the shopping experience, it will be critical for them to adapt their organization, technology, and data management practices to make monitoring and governance a part of everyday operations. The focus will be on creating unified, personalized experiences that meet the evolving expectations of consumers, ultimately driving growth and competitiveness in the online retail category.