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Dynamic Commerce: Building in a Shifting Landscape

It’s no secret that retailers today are facing an immense amount of pressure. After the retail boom of the COVID-19 pandemic and the supply chain disruptions and economic downturn that followed, many retailers are reeling from all the change. While eCommerce growth has reverted to pre-pandemic levels, it is still a growing portion of overall sales, and our shopping journeys are increasingly connected to our lives online, presenting a unique set of challenges and opportunities for brands.

Retailers are facing unprecedented levels of competition, which means they must fight tooth and nail to attract consumers that are bombarded with products at every turn. For a while, digital advertising with third-party cookies was the go-to solution. Recent changes in privacy laws and policies have made that pathway more expensive and less effective than ever. And the challenges don’t end once a consumer has reached a brand’s website: the likelihood of an item in a cart converting into an actual purchase is surprisingly low (70%+ of online carts are abandoned.) No wonder retailers are desperate to cling to the consumers that reach their site, select an item, and make a purchase. Given the upfront barriers, customer loyalty and advocacy is critical to growth. This means the work continues long after an order is placed. Quality customer service and a smooth delivery process are essential. But rising to this challenge can be expensive and logistically complex. With all this pressure, it isn’t a surprise that retailers’ costs have increased by 60% over the last five years.

Because of all this, many brands are leaning more heavily on eCommerce enablement tools to manage different elements of their business. While these tools were once nice-to-haves, they are now necessities. But most brands do not have endless technology budgets. So how does a brand address the challenges of this industry while managing an increasingly expensive and complex technology stack? There isn’t a silver bullet, but we believe that three emerging shifts in mentality will help retailers prioritize and position themselves for the future of commerce.

Consumers need everything everywhere all at once

This is the first mindset shift retailers must adopt. For decades, we saw multinational retailers enter the eCommerce market to compete with up-and-coming brands. Then, we saw a wave of eCommerce first businesses, like Allbirds and Casper, open brick-and-mortar stores to address the limitations of an online-only presence. But it is no longer enough to have a presence in these discrete channels. First, channel options are proliferating and blurring rapidly. Consumers are shopping on mobile, social media apps, and live streaming platforms. Brands must think creatively about when, where, and how products are placed in a consumer’s consideration set. We anticipate commerce being even more embedded into our lives over the next decade. Whether that’s in leisure activities, workplaces, or smart devices, brands that think creatively about context will be poised to win the battle for conversion.

Channel selection is just the first step. Ensuring a connected, seamless experience across channels is even more important. Consumers want to effortlessly explore options and make shopping decisions, which means brand interactions should travel seamlessly across mediums. This more connected, expansive mindset requires brands to think beyond individual products. It isn’t enough to know that a consumer is purchasing workout clothes in-store. That should be connected to the running shoes they purchased on Instagram two days ago, and the questions they asked on your website about the wear and tear associated with different workouts. By connecting these behaviors, a brand can build an understanding of someone embarking on a fitness journey and engage them at the most critical points.

This connectivity can also reach beyond the organization itself. As retailers look to build loyalty, many will emphasize consortium models. By offering complimentary products and services from other companies, retailers will help customers extract more value from each purchase and lean more heavily on trusted brands. This has already been effective in sectors like travel and hospitality (i.e., partnerships between airlines and hotel chains), and as retailers adopt a more connected mentality, it will likely become a bigger part of our shopping experiences.

So, retailers should look beyond obvious channels, beyond individual products, and even beyond their organizations to build a cohesive ecosystem that amplifies moments of joy and purpose in the shopping journey. When it comes to selecting technology products, this mentality will lead to product management, payment, and rewards solutions that prioritize ease and flexibility.

It’s not enough to learn from the past, you have to see the future.

This seems like a tall order, but relying on historical data is not enough for the modern retail landscape. Supply chains, for example, have grown incredibly complex. We learned over the last few years how challenges with a given supplier can ripple throughout a network and cause costly delays. It’s estimated that supply chain disruptions cost businesses an average of $182m in 2021 — often because historical data could not account for the unprecedented circumstances. Brands are now looking to diversify their supplier base, find suppliers closer to home, and integrate digital tools into their processes. Modern logistics and inventory management products leverage real-time data to understand fluctuations in demands, customer preferences, and system shocks. Retailers will increasingly leverage this data for more accurate forecasting and more efficient solutions like load pooling and dynamic re-routing. They will also opt for more responsive and embedded financing solutions at every point in the value chain.

For customers, this real-time data leads to a more tailored, transparent experience, and one that aligns their preferences with a retailer’s current options and limitations. This means that pricing, sales, and rewards can be tailored more effectively. Currently, 40% of the largest retailers use dynamic algorithms to optimize pricing based on supply and demand. As access to data increases, and retailers face more margin pressure, solutions like this will become more prevalent for retailers of all sizes. Data sources will also expand beyond supply and demand, to include competitive dynamics, internal factors like inventory levels and KPIs, and external factors like market sentiment.

Brands that adopt this mentality will opt for solutions that make every aspect of the value chain more forward-looking. Supply chains will anticipate needs and instantly adjust to accommodate changes. Shoppers will have hyper-personalized shopping experiences, complete with curated product and payment options. Imagine a world where consumers will be directed towards payment methods that optimize their preferred goals–from maximizing rewards to building credit scores. The winning brands of the future are preparing for such experiences.

Less is more.

It’s clear that retailers have a lot on their plates… so how can they ease the burden while keeping costs manageable? Increasing integration between disparate systems is a critical first step. Over the last few years, there has been a dramatic rise in the number of available eCommerce enablement tools. These products help smaller, online brands achieve the sophistication and efficiency of industry leaders like Amazon. As retailers look to build more unique and compelling shopping experiences, they will continue to opt for a modular, composable tech stack that maximizes flexibility and performance. But these point solutions typically address one discreet problem or function — like online search, credit, returns, etc. To ease the burden on retailers to reconcile the relevant data between systems, we believe that brands will increasingly opt for more integrated solutions. Such products are built to connect throughout the tech stack and ensure that data flows seamlessly. We also anticipate the emergence of orchestration platforms that bring point solutions together for a more connected backend infrastructure. As brands make critical decisions about technology solutions, solving for greater integration should be at the top of the list.

Opting for more automated solutions will also help retailers maximize value. Advancements in machine learning and generative AI are making it easier to automate decision-making and execution. For example, new tools can discern patterns in customer service complaints and generate responses with a greater likelihood to address issues in a timely manner. Other products are emerging that generate stock images and landing pages in real time based on the preferences of individual consumers. Automated solutions like this reduce the need for manual intervention and help retailers combat rising costs.

While brands are facing challenges from all angles, they have never had more tools at their disposal. We believe that groundbreaking innovation often emerges at times like these. The shift to a more connected ecosystem, forward-looking analytics, and greater integration and automation opens the door to dynamic retail experiences. At Anthemis, we already back incredible companies building in this space, like MoonshotPack DigitalQover, and Power (exited.) And we are excited to connect with anyone that is driving the future of commerce.

Have an idea?

We would love to meet with you! We are passionate about tackling the largest challenges and opportunities being faced in every aspect of the eCommerce stack. If you are building a FinTech or embedded finance business in this space, please reach out to me at bukie@anthemis.com.