"Covid has lit the digital fuse and merchants need to keep up or risk becoming obsolete"
The message from eCommonSense founder Andy Scothern is crystal clear: digital transformation for merchants is far more than a nice-to-have or a passing trend: it’s absolutely critical for survival.
The huge acceleration of merchants’ digital transformation due to Covid may not be news in 2021, but the potential risk for merchants still resisting the shift to digital systems and ecommerce is growing by the day, says Andy Scothern of eCommonSense.
We caught up with Andy to get his thoughts and insights about integrated eCommerce, opportunities for merchants - and how bacon sandwiches can be a secret route to unlocking a merchant’s brand.
Why do merchants need to go digital?
In a nutshell? That’s what customers want. Yes, there may be a small number who prefer traditional ways of doing things, but the vast majority of customers want the convenience, choice and ready information that online offers.
If you think about how you shop yourself, you’ll know that habits have changed. There’s a whole new generation coming through who have grown up with the internet in their pocket – that’s their baseline expectation and anyone not in that arena just won’t get a look in.
Almost every product search these days starts with Google. If you’re not in the mix, you won’t get found, so it’s vital that you not only feature online but that you know how to get your products, branches and business name found more easily by more people.
Done right, eCommerce can attract far more new customers than any individual branch can. I know there are concerns that a webshop could cannibalise sales from branches but actually the opposite is often true, as a good website attracts people into branches.
Think of the website as the hook and the branch as the net – both work in isolation, but work much better together.
We tend to see merchants with strong online presence growing the number of trade accounts and in-branch loyalty as a direct result of website use. So no, it doesn’t have to cannibalise sales – and if in a few cases it does, at least the revenue stays within your own business, not someone else’s!
The fact is, merchants represent a shrinking share of a growing market. They are losing out to online retailers and that gap is widening fast, so it’s vital that merchants take action to fight back.
What are the main obstacles stopping merchants adopting digital?
The biggest one I hear is “I’m too busy.” I get it, I really do; running a business is hard work and especially now, with COVID and Brexit, everyone is pretty much flat out. But digital is just too important to ignore. For one thing, having digital systems can actually save you time and make you more efficient and therefore, less busy, so it’s worth investing the time. But perhaps more importantly, it’s where the market is going, and if you’re left behind, you won’t necessarily be able to catch up later.
If anyone out there is thinking digital transformation is just too big a mountain to climb, and they will have more time next year, they need to realise that the longer they wait to adopt it, the steeper and harder it’s going to get. It might feel intimidating getting into the ring with the likes of Screwfix or even Amazon – but it’s better to be in the ring winning a few points than sitting on the other side of the ropes watching a fight you’re not even part of.
If you’re not in the ring within the next five years, I suspect it will be too late to get even a ringside seat.
But it does take time, doesn’t it?
Absolutely. To do it right takes time, investment and a business-wide focus. Going digital is far more than just tacking eCommerce onto your website, sitting back and expecting business to start booming all on its own. It requires research, investment, often a complete overhaul of your ERP system and back office processes, ongoing maintenance, marketing – and also, cultural change. But it’s not only worthwhile, it’s essential for the future survival of your business.
Isn’t eCommerce just a race to the bottom on pricing?
No! That’s a really common misconception around eCommerce and actually, the opposite is true.
The fact is, eCommerce usually maintains higher margins. While margins in-branch tend to average at about 27%, the equivalent online margin is around 40%, which is a lot of potential profitability for merchants to be missing out on.
Partly this is because the cost-to-serve is less per transaction, but it’s also because, contrary to popular belief, people are willing to pay for the convenience and ease of online shopping and the web is ambivalent to who is in front of them. Branch staff (humans), on the other hand, want to be liked; we as humans are social creatures and we struggle with upsetting people, so we give people we want to please a better price when they ask for it. That is great for humanity, but terrible for margins.
Increasingly, people value their own time more and will happily pay more to have products or materials delivered directly where they need them to go. Convenience, choice and availability of information rank far higher than price for most people as reasons to shop online. And yes, people will also usually not mind paying for delivery, so you don’t have to take a hit there either – though it’s worth thinking about how far afield you want to offer delivery services and charge accordingly.
But what if a merchant’s customers don’t WANT to shop online?
There will be some customers – often in an older age bracket – who prefer the traditional in-branch experience for shopping. But that proportion of customers is reducing and it’s being replaced by customers who do want to shop online, so if you are only catering for a shrinking percentage of the market, your sales can only go in one direction.
By not providing an online option you are closing your doors to an increasingly large proportion of your potential customer base, which limits your capacity for growth and future business dramatically. Plus, by fully engaging in eCommerce, you actually release more time to spend with the people who don’t want to trade online, while the people who do can serve themselves.
So how big is the opportunity?
Last year, Screwfix’s Click & Collect service grew by over 250%. Web sales are doubling in the market every year, and that’s a consistent trend even before COVID. The opportunity is massive – but perhaps more importantly, the risk of not being a part of it is greater.
What can merchants do to get ready for eCommerce?
A great eCommerce platform requires a lot of work behind the scenes and must be able to integrate with all your back-office operations. Stock availability is absolutely critical of course but it needs to tie into all your processes to ensure you can service the webshop properly and provide reliably, consistently good service for customers.
Don’t forget, customers have been taught what to expect from online shopping by the likes of Amazon, so they’re going to get frustrated pretty quickly by clunky systems that don’t do what they want. Investing in a well-integrated, digital ERP system that can tie everything together is critical.
What ERP system should merchants choose?
That’s up to them, but I’d urge merchants to choose carefully because having the right system is so important for the success of the eCommerce platform.
The best ERP systems tend to have an open architecture that’s fundamentally designed to link up with other systems; it should be designed to integrate, not solve every business problem itself. This lets merchants work with best in breed solutions for different functions. For example, as long as you can integrate with Xero or Sage for accounts, it doesn’t need its own accounting system because chances are, it won’t be better than the specialist solutions. Committing everything to single stack technology is dangerously outdated legacy thinking, as most successful retailers moved to flexible new architecture many years ago.
Usability is also key. You need a system that’s intuitive to use and that your staff can adopt quickly. If a system can make everyday tasks simpler and quicker for staff, you’ll increase productivity, capacity and profitability without even thinking about it. Never mind how much more attractive it is to new members of staff who can adopt a new system easily and who should be part of your succession planning.
Also, think about how accessible the system is going to be for your workforce. You want people to be able to access the system as easily as possible from wherever they are. If the last year has taught us anything it’s that flexibility is hugely important, and people need to be able to work effectively remotely. Therefore, browser-based solutions are great because they let people get onto the system and work from wherever they are.
Why is it so important to have an industry-specific solution?
That’s a bit like asking why you’d choose an Audi over a skateboard to travel across the UK. Yes, both are forms of transport but I know which one I’d rather be travelling in.
There are a lot of “off-the-shelf” eCommerce solutions out there which can be tempting, especially because on the face of it they may appear cheaper; Shopify, GoDaddy, Wix and so on. But for merchants, who usually have quite complex product portfolios and customer needs, they just don’t get close to delivering the slick online experience your customers expect.
There are so many reasons why an industry-specific solution, for both eCommerce and ERP, is so important. Integration with back office processes, product data, customisation, product specifications, reflecting your business model - being generally fit for purpose I suppose.
I may be biased, but investing in a proper industry-specific system for ERP and eCommerce is worth every penny and will provide a far superior foundation for your business to grow on than the one-size-fits all options and let’s be honest, if any of those ‘retail’ solutions worked, then Screwfix would be using them instead of spending tens of millions a year on a bespoke solution. It’s simply not realistic to think you can compete without investing appropriately.
Can’t we just do it ourselves?
Chances are – no. If massive global brands are investing 5% of their total revenue in online, then expecting to be able to achieve great results with inexperienced teams is, at best, optimistic. There is a reason developers are paid a lot of money. The best platforms are the easiest to use, but that doesn’t mean they’re easy to build, service or maintain.
The marketplace is simply too competitive, and customer expectations are too high, to be able to cobble together a homemade solution and expect it to get off the ground.
What do merchants need to do once they have a website?
Shout about it! You can have the best service in the world but if no-one knows about
it, it’s not going to do you much good.
You need to think about how people will find you. Often that’s via your products, so getting product information set up right to make it easily searchable is really important, and you need Google to be able to find you too, whether by words, image or voice. Technology is moving fast so it’s important to keep up. It might sound a bit overwhelming but there’s plenty of help available, and it's best to stick to what you do best - in this case, merchanting.
Reviews are important too, for establishing trust and credibility, and end users really do use them so it’s worth investing some time here. There are some good review sites out there which can help get you going, like TrustPilot and Feefo and so on.
How can merchants make sure their marketing hits the mark?
You need to know who your customers, and potential customers are, and how to reach them.
Marketing is really important. Too many businesses think they can sit back and wait for the customers to flock to them, but it takes work and the competition is fierce, so you’re going to have to invest time, effort and resources into it. But the dividends will be more than worth it when you get it right.
A really important part of effective marketing is segmenting your customers so you know who’s buying what, how they’re buying it, and therefore how to communicate with them in the ways that will prompt them to act. Trade and retail customers buy very differently, and different trades will vary in their habits too.
One of the great things about digital is that it produces huge amounts of information about they ways people shop, and you can use that information to your advantage to continually improve the experience for each sector.
Where do bacon sandwiches come into it?
Never underestimate the power of a bacon sarnie!
It’s all about understanding your customers, knowing their habits and lifestyles and finding ways to make contact with them in the places they’ll be, and in ways they will relate to. When trying to recruit builders, you need to hit them when they are not focusing on something else. The ideal time is when they are eating breakfast so why not put your adverts on the bag that the bacon sandwich is on? Local food vans will hand them out with every breakfast – literally into the hands of the people you want to bring into your branches.
Knowing your customers and providing the service they want in the ways they want it is how to thrive. And digital is what they want. But you have to let them know about it, so investing in marketing is a really important part of the equation too.
So if you had to give just ONE piece of advice for merchants, what would that be?
That’s a tricky one but really, it all comes down to removing friction, or put another way, removing the barriers than stop people buying from you.
Whether that’s about being able to find you in the first place, offering the products they need at the right prices, offering convenience, availability, great service, giving them the right product information, making opening hours and contact details clear, having the right layout – all of it comes together to make a great customer experience.