The Impact of the Digital Path to Purchase

Stephen DeAngelis

April 30, 2019

Thirty years ago few people would have predicted a growing number of consumers would complete much of their shopping using a mobile phone. It was only 29 years ago Tim Berners-Lee invented hyperlinks which gave rise to web browsing and eventually led to e-commerce. The impact of e-commerce and the consumer digital path to purchase has been significant. Steve Osburn (@skosbu), Managing Director at Kurt Salmon — a part of Accenture Strategy specializing in Supply Chain, observes, “E-commerce customers in the U.S. are becoming increasingly demanding. A recent study from Accenture Strategy found that 62 percent of U.S. consumers expect orders, with free shipping, to arrive within three days. Many retailers are struggling to deliver on this expectation.”[1] Empty malls and struggling brick-and-mortar retailers also bear stark witness to the impact of the digital path to purchase. Howard Yu (@HowardHYu), the LEGO professor of management and innovation at the IMD business school in Switzerland, bluntly states, “No industry is failing faster than retail. … Shoppers now purchase more online, making fewer trips to stores and seeing fewer in-store promotions.”[2]

Understanding consumers

To succeed, retailers and manufacturers need to understand what consumers want, how they want to purchase it, and where they want to accept delivery. They also need to understand the customer is king on the digital path to purchase. Michelle Evans (@mevans14), Global Head of Digital Consumer Research at Euromonitor International, explains, “The internet has put more power in the hands of consumers. Brands no longer control information about their products and services. Instead, informed consumers walk into commerce transactions armed with information about what they want and what they should expect to pay.”[3] One of the upsides of the digital path to purchase is that it generates oceans of data that can help businesses find answers to those questions. According to Evans, “Data is now considered one of the most important commodities. An explosion of consumer data has enabled companies and brands to more easily forge one-to-one relationships by offering tailored experiences and recommendations to end-consumers. Now, these savvy consumers have come to expect this type of personalized interaction from consumer-facing companies.” Of course, having data available and making sense of that data are two different things. Fortunately, explains Lou Jordano (@LouJordano), Chief Marketing Officer at Crimson Hexagon, new technologies are available that can help. He writes, “The emergence of AI (artificial intelligence) holds great promise in helping [organizations] make better use of [all types of] data. The benefits of AI right now are inarguable.”[4]

Consumers have demonstrated enormous flexibility when it comes to getting their hands on products. This consumer flexibility has resulted in a corresponding retailer flexibility. Most retailers are implementing omnichannel strategies that include home delivery and click-and-collect schemes as well as traditional in-store shopping. Yu insists retailers need to go beyond being flexible to understanding fully the new business landscape. He explains recent start-ups have been established as digital age companies and they understand the digital business landscape. “These startups,” he explains, “despite being manufacturers, digitalize all customer touchpoints (like Netflix), control the user experience by forward-integrating into the brick-and-mortar realm (like Amazon buying Whole Foods), and then run data analytics to optimize merchandise mix and inform product innovation (like Alibaba’s Taobao).” All of this is accomplished using artificial intelligence. Evans concludes, “The ability to make sense of the avalanche of data will be what distinguishes the winners from the losers in the next decade.” The following infographic from Magneto shows how AI will impact e-commerce in the coming years.

Is Artificial Intelligence(AI) Revolving The eCommerce In Future?

The impact of e-commerce on supply chains

Supply chains need to be as flexible as consumers. Osburn explains, “Managers need to build flexibility into everything they do. The market is changing quickly, and [supply chain] networks cannot be the reason that prevents companies from keeping up.” When asked how supply chains would change in the coming years, Osburn responded, “Networks will become much more sophisticated. Retailers do not have enough inventory to get all SKUs close to the customer, so companies will have to differentiate SKUs by velocity and take a more thoughtful approach to distribution instead of keeping inventory all in one location. Labor availability — from warehouse workers to truck drivers — will also continue to be an issue, driving companies to explore new technologies that enable automation. Furthermore, capacity constraints — particularly around the holidays — will continue to be a challenge.” E-commerce fulfillment has made warehouse space the hottest commodity in real estate as retailers and manufacturers attempt to locate products closer to consumers to ensure faster deliveries. AI solutions can help determine where warehouses should be located, what carriers to use, and where inventory should be located.

John McAteer, Vice President of Sales, Retail, and Technology at Google, writes, “In retail, there’s no space for standing still. Empowered by mobile, people can get exactly what they want instantly and effortlessly, and they expect retailers to meet their needs faster than ever before.”[5] He adds, “With shopping behavior constantly evolving, the backbone of retail — product merchandising — also needs to evolve. While retailers have had data sources in the past, we’re now able to deliver new sources of insights at a faster rate. The access to new data points can help shift product merchandising from an art into a science — offering retailers deeper insights to better understand how to meet the demands of today’s always-on customers.” Evans insists consumers, especially younger ones, want personalized shopping experiences. Making this happen, she writes, “is an important shift in strategy because approximately half of connected consumers globally desire to be distinct from others.” She adds, “This desire is highest among the youngest cohorts, with nearly 60% of millennials and Gen Z agreeing with this sentiment, showing that this desire will not likely fade anytime soon.” Cognitive solutions, like the Enterra Shopper Marketing and Consumer Insights Intelligence System™, can leverage all types of consumer data to provide high-dimensional consumer, retailer, and marketing insights. These solutions can help ensure challenges created by the digital path to purchase are intelligently confronted.

Footnotes
[1] Patrick Burnson, “Accenture Weighs in on E-Commerce Supply Chain Challenges,” Supply Chain Management Review, 21 February 2019.
[2] Howard Yu, “What Big Consumer Brands Can Do to Compete in a Digital Economy,” Harvard Business Review, 4 December 2018.
[3] Michelle Evans, “Why Data Is The Most Important Currency Used In Commerce Today,” Forbes, 12 March 2018.
[4] Lou Jordano, “Drowning in Social Media Data? Three Ways AI Can Help,” MarketingProfs, 5 April 2018.
[5] John McAteer, “Data-driven merchandising: Moving from an art to a science to reach today’s shopper,” Think with Google, March 2019.