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The Pandemic As A Catalyst to Online Retail

The global health crisis has impacted retail in many ways, as we see the silver lining to speed up the digital transformation, with a massive shift to Online Retail. During 2020, the e-commerce business in the US has been growing in 5 months as much as it did in the previous 5 years [1]. The pandemic has brought a clear acceleration of existing trends and improving customer experience becomes the key differentiator of this opportunity.  Retail, Consumer Products and Goods (CPG), and brand companies enter a new era of shopping experience that requires them to respond in real-time to customers' expectations.

Consumer companies can attain profitable day-to-day business and long-term growth by leveraging four key drivers of monetization:

  • Real-time contextual customer experience: As the complexity and digital footprint of customer and consumer journeys dramatically increase, understanding the context of the journey is essential.

  • Customer and consumer data valorisation: Data sitting in spreadsheets needs to be organized, accessible, and usable in consumer companies, with a platform approach.

  • Contact-less business models with new channels: As new offerings and pricing models emerge, it is fundamental that consumer companies innovate the capabilities that underpin such models at speed and scale.

  • Focus on sustainability: The accuracy and transparency of customer data across the extended consumer industry value chain are paramount for sustainability.

Which New Monetization Models In Consumer Industries?

Consumer companies need to align their revenue streams to the latest consumer market trends to innovate how they generate value for customers together with their partners' ecosystems. Therefore, retail, CPG, and brand companies should start as soon as possible to monetize through new channels across different interfaces and assets:

Subscription and pay-per-use. These models are becoming table stakes, as consumer companies' direct-to-consumer strategies aim to respond better to urgent and volatile customer needs and expectations. Such dynamics have required CPG and brands to develop more agile and innovative business models in which revenue streams are based on offering subscription services and pay-per-use options. For example, in 2020, Lululemon acquired Mirror, a tech company that offers a digital mirror device for home gym classes. Mirror's revenue model is based on consumers purchasing the device and paying a monthly subscription to access classes.

Multi-sided business and revenue models. The dramatic rise of e-commerce in response to the challenges that the pandemic has caused for brick-and-mortar stores and the entire consumer industry value chain ramps up the need for retail, CPG, and brand to reach the customer anytime and anywhere and to handle unprecedented transaction volumes. In the consumer industries, customer engagement is enhanced through multiple interfaces such as mobile apps and social media, via e-commerce, the creation of new marketplaces, across multiple brands, and the upcoming opportunity of IoT commerce.

Zalando provides an example of how an e-commerce pure player combines consolidated and innovative business models and revenue streams. The company's complex portfolio of services and revenue streams generates equally complex and continuously growing data workloads. This required Zalando to set up and leverage a flexible and scalable revenue and billing management system that now enables the company to handle all the entailed business processes efficiently and effectively.

Contact-less store. The brick-and-mortar store remains a critical place of customer interaction. Seamless, friction-less, and contact-less commerce shapes the in-store customer experience. Companies are re-imagining the role of the store

  • by leveraging the enabling technologies of contact-less — including AI, IoT, and AR/VR — to strengthen the customer journey. This goes from  enhanced employee assistance, contextualized promotions, to inventory visibility for instance.

  • by delivering more efficient store operations with such things as more pickup options, premium delivery, better inventory management, or yet fraud prevention. As the store becomes the delivery center of an increasing number of services, data flows increase in complexity and volume.

New monetization opportunities from new services generate new processes that consumer companies need to handle at scale.

Multiple payments. The pandemic represents a turning point for retailers that need to adapt to social distancing and extensive contact-tracing requirements. Already, retailers such as Valora and Ahold Delhaize have introduced automated self-checkout and mobile payment systems. Technology enables contact-less business use cases and provides customers with a variety of electronic payment options that make them convenient, safe, secure, and simple. At the same time, multiple and flexible payments options are a fundamental asset to address the unforeseeable economic crisis in the consumer market. Consumer companies such as Etsy, H&M, Wish, and Zalando are introducing "Buy Now, Pay Later" options, offering their customers the possibility to pay only for the items they actually keep — and even pay in smaller installments.

Sustainable business models. Offering a sustainable digital experience is essential to improve customer loyalty and trust. An increasing number of fashion, food and grocery, and home and garden companies are launching new initiatives. Their aim is to convert the extended retail value chain for a more sustainable and transparent business model, adapting their offerings and related capabilities to the major principles of circular economies. For example, the retailer La Redoute has a history of digital transformation and has recently announced the launch of La Reboucle, a new consumer-to-consumer (C2C) platform allowing customers to sell their used items.

More examples in Retail? Check it here

Prepare Your Quote-To-Cash Process Accordingly

Leveraging an agile technology architecture is key for consumer companies that want to enable new data monetization, business models, and revenue stream opportunities. The implementation of the right consume-to-cash platform enables consumer companies to:

Increase profitability and margins while reducing operational costs. Automating the invoice-to-cash process when going direct-to-consumer, or expanding across channels and geographies becomes a must-do in order to reduce manual cash collection operations and decrease revenue leakage.

Make it easier for the customer for ordering and paying and therefore increasing stickiness and trust. Focusing on real-time contextual customer experience to propose customized offerings, or yet providing the capabilities for the consumers to create their own guided orders including products, additional services and subscriptions will increase customer satisfaction. At the same time, proposing multiple payment options from cash-on delivery, differed payments, to end of the month invoice, all of this being differentiated with cross-country taxation, will contribute to a better basket conversion rate.

Be ready to scale at speed. Preparing your sub-ledger to ingest a high volume of transactions becomes an absolute necessity when you start to expand your business to new offerings,  new services, new partnerships and new geographies.

Manage revenue share models. Expanding co-innovation and partnerships with the ecosystem should be executed to safeguard healthy revenue streams and quite often an improved customer experience, for a better service offerings or yet enhanced product catalog. However this will require partner settlement capabilities with pay-out end-to-end visibility.

Effectively respond to business model evolution. Monetizing subscriptions offerings, new services' options such as Premium delivery,  or yet multiple data sources coming from IoT resources requires an agile capability to collect, manage, process, and price them accordingly

Key Take-Aways to Succeed and Unlock Value

Transforming consumer industry business models requires consumer companies to adopt a comprehensive approach to change and innovation among all stakeholders. Finance plays a central role in managing the ratio between reducing costs and increasing margins and allocating financial resources for long-term innovation and growth.

Improving customer experience at speed and scale remains a top priority and major driver of change. Consumer companies' ability to leverage multiple monetization and payment methods enables real-time contextual customer journeys — a cornerstone of competitive differentiation.

Data monetization within and across organizations, as well as among multiple players (such as suppliers, CPG and brand companies, retailers, and IT vendors), enhances the value of data and fosters ecosystem collaboration. Revenue stream data is fundamental to enhance daily operations and build data-driven innovation strategies.

[1] US Centrus Bureau

Want to discover new trends, challenges, customer stories and order-to-cash key functionalities to adopt for your business model transformation?

  • This blog, co-written with IDC to be based on their market insights, is part of a blogs series

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