Two years ago, venture capitalist Boris Wertz wrote about vertical integration as the next big thing in commerce. Today, his words are proving true. Commerce brands like Frank & Oak, Bonobos, and ShoeDazzle (the list goes on) are disrupting how we buy merchandise online. Each one can offer customer experiences and prices that most traditional retailers cannot. They do it by building their entire supply chains, on their own.
For more traditional retailers, this disruption is intimidating. You may even be losing business to one or more vertically integrated commerce brands. You may be wondering how you could possibly compete. Rest assured, this disruption doesn’t mean you need to turn your commerce business upside down.
The more traditional retail model still works. You can still be immensely successful selling through your own website, sourcing from suppliers, using marketplaces like eBay and Amazon, and shaking a new customer’s hand in your brick and mortar store. But, to be successful in the modern commerce world, you’ll need to adopt some new strategies.
- Invest in supply chain optimization to pass efficiency benefits on to your customers.
- Take advantage of the fact that you can scale your product variety up and down more quickly.
- Embrace the modern, technology-driven reality.
Invest in supply chain optimization.
Vertically integrated commerce brands own their entire supply chain from product development to the customer’s hands. It allows them to create efficiencies, which they pass on to the customer through lower prices and unique customer experiences. For established retailers, it isn’t realistic to completely restructure your commerce business to match. Instead, focus on optimizing your more traditional supply chain to create similar efficiencies.
Look for the inefficiencies in your own supply chain and use technology to optimize them. Do you have trouble keeping your inventory synchronized across your stores and website? Is it difficult to track status of a customer’s order? Is your product data duplicated, out of date, or just plain wrong? Solutions, like nChannel’s managed drop ship features, are out there to solve these problems.
By using technology the correct way, to streamline your own supply chain, you can lower your transaction costs and provide better customer experiences. You can pass the same kinds of efficiencies as the vertically-integrated brands on to your customers.
Expand product variety for a competitive advantage.
Companies that own their entire supply chain are at a scaling disadvantage. When they want to add a new product or product line, they have a lot of work to do. These problems are much easier to overcome in a more traditional commerce model. Use that to your advantage!
Your commerce brand, using the more traditional model, can offer variety. It can offer competing products. It can offer alternatives. You can add new lines of business. You have the ability to more flexible with your product portfolio, enabling you to compete on multiple fronts. You can add (and if required, remove) suppliers more easily. This makes you more flexible and scalable than a company with complete vertical integration.
But, you can’t snap your fingers and make it so. It requires the right infrastructure. You must be closely aligned with your suppliers. You must have clear visibility into your entire supply chain. You must have the technology to make business decisions in real time. Your multiple channels of business must be constantly in sync.
Embrace the new reality.
There was a time when all business was handled with good eye contact and a firm handshake. We no longer live in that time. You must acknowledge that technology and the innovation it enables has changed everything. You’ll need to use technology to scale trust in your brand. You’ll need to facilitate relationships with customers across the globe. You must move faster than manual processes will allow.
In spite of these new expectations, some things haven’t changed. Consumers still demand trust. They still want their purchase to be as convenient as possible. They will still evaluate price and quality the way they always have. Technology has given consumers more power to seek alternatives—to be critical of what you offer. What has changed is how you must use technology to address those fundamental issues for your customers.
Seek out the expertise to help you utilize technology to embrace the new reality. Doing so will give you the tools to thrive in today’s ultracompettive, global economy. You can be bigger, better, and faster than you are, today. You can deliver the best possible experience for your customers.