Can a retail plus media model resolve e-commerce’s supply chain crisis?

The 2021 festive season is in danger of bringing e-retailers some very different challenges and not much good cheer, says Neilson Hall, Head of e-commerce at Reprise EMEA…

The headlines in recent months have painted a rather bleak picture about what the festive period in 2021 may or may look like for British consumers. Talk of ‘saving Christmas’ has filled the newspapers, photos of empty supermarket shelves continue to circulate social media and HGVs remain parked up in warehouse yards whilst hauliers scramble for drivers to get them on the move.

But as retailers warn British consumers that they should get their orders in early this year, is this narrative around ‘saving Christmas’ a very real concern for the e-commerce sector, or is it more a case of tabloid hyperbole? Whatever it is, retailers approaching this key sales period need to think differently about how they plan on delivering – both physically and experientially – what their customers expect in 2021. 

A perfect storm of challenges

What we saw from the COVID-19 pandemic was something of a tsunami of challenges that has headed the way of most developed economies around the world, and these are issues that many industries are still grappling with.

The cost of shipping containers has increased three-fold since the end of 2020, as a result of logjams in ports, containers being stuck in the wrong places and ongoing challenges with COVID-19 forcing working restrictions around the world, but particularly in key port cities in the Far East. 

It has meant products haven’t been arriving on time, making it much more costly and time-consuming to get them from the ports to their final destination when they do arrive, and meaning it is next to impossible for retailers to plan ahead for those important sales periods.

The levels of product availability consumers have come accustomed to expect, the margins retailers have come to rely on and the operational efficiency that they depend upon are all very different to previous years. It means that retailers need to think differently to maximise the performance of their marketing activity and keep their customers engaged.

Retailers will find performance in a retail plus media model 

The danger many e-commerce brands may find themselves facing is that, if they don’t get their media and promotional plans right, they risk significant harm to their marketing performance, as well as their brand reputation. The supply chain crisis increases the risk of brands being in a position where they are trying to promote products that they haven’t got in stock. It increases the risk that they may end up effectively ‘overtrading’ on certain lines, either because they haven’t anticipated the consumer demand or been able to source sufficient quantities of product. It increases the risk that they damage their carefully cultivated brand reputation and customer loyalty by delivering frustrating online experiences. 

This issue is really going to come to the fore this winter, and it’s why it's never been more important to have a ‘retail plus media’ model. 

What this model does is take all those important marketing metrics and more closely align them with your core retail metrics. These marketing metrics are the ones you will traditionally associate with digital media and communications, but made to work harder from an e-commerce perspective when talked about in the context of stock level data, the cost of SKUs and operational and logistical efficiency.

In taking that approach, you can arrive at a much more robust e-commerce strategy and adapt a media plan to ensure you’re not promoting products you can’t deliver across channels, such as DTC and marketplaces.By integrating that same data into the eCRM, you can ensure your upsell and cross-sell strategy is promoting products you can provide, rather than disappointing customers by highlighting those you can’t. This approach minimises those key risks – by minimising the risk of advertising spend being wasted on products with no or poor availability, it also minimises the risk of overtrading because you can adapt your ad strategy to reflect demand, ensuring you continue to deliver that joined-up, frictionless customer experience. 

With both marketing and retail operations working more closely together, brands can find a profitable and effective strategy in what is a very turbulent market. 

Shared operational models and marketplaces could be a lifeline for smaller retailers 

Whilst the logistical challenges that have presented themselves in 2021 affect all e-commerce retailers, scale is often something of a safety net in times like these. The larger retailers that have the logistical infrastructure are in a better position to ride out these challenges and absorb many of the costs that the supply chain crisis has brought about, but that creates challenges that are much harder for smaller e-commerce brands to shoulder. Is a customer expectation of free and fast delivery sustainable for smaller retailers in an era where the trajectory of haulage and shipping costs is only going upwards? 

This is where retailers can lean on marketplaces, as well as collaboration with other retailers, to overcome many of the supply chain issues we are currently seeing, to make sure customers are being fulfilled as efficiently as possible. 

Hybrid direct-to-consumer and marketplace models are starting to become more common, and this is likely to grow in response to supply chain shortages. We may see smaller e-commerce brands looking to protect themselves from many of the increased costs we’re currently seeing, by shifting more of their product point-of-sale to marketplace platforms such as Amazon, where products are sold and fulfilled within that highly efficient eco-system. 

There are also some interesting discussions taking place around shared logistics and operations, and this is potentially a major growth area amongst those brands that don’t have those established infrastructures and the distribution networks. The shared fulfilment centre concept, where e-commerce brands share resources with non-competing brands, is growing in popularity as retailers look to protect themselves from the new cost and resource pressures.