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    April 3, 2020
    7 minute read

    A Pivotal Moment for the Digital Shelf: Part 2

    by: Christian Hassold

    Over the past few weeks, our team has invested an extraordinary amount of time speaking with customers and prospects to understand how this crisis is impacting business. We have done this to help drive some of our own decision-making, but we have also been overcommunicating to understand the impact these events are having.

    With more than 700 customers globally and active users in 60 countries, Salsify is positioned to gather valuable real-time insights on how this current crisis is impacting brands and what executives are doing in response.

    We thought it valuable to share what we have learned through these conversations, so we can all learn from one another. (Click here to read the first part of this content series, “The Digital Shelf and COVID-19, Part 1: A Pivotal Moment.”)

    Urgent Shifts From Executive Leadership

    The findings we have uncovered are split into two categories. First, we look at strategic shifts — those that are largely being driven by executive leadership in the current environment. Second, we have some general findings around tactical shifts — recurring themes around how resources are being reallocated.

    We identified three strategic shifts that C-suite and ecommerce leadership are focusing on with a heightened sense of urgency.

    Strategic Shift 1: Double-Down on Digital Shelf Investment

    The world's largest brands are responding bullishly toward ecommerce in light of this crisis. As early as mid-March, we have seen the C-suite at some global brands instruct ecommerce leadership to double-down on digital shelf investments, accelerating existing plans to respond to the rapid shift in online consumer behaviour.

    Most global brands have well-established ecommerce organisations, but some were highly dependent on funding from other teams, such at IT and marketing. These dependencies had previously caused friction in decision-making and forced teams to make short-term tactical decisions that did not scale and limited growth opportunities.

    Many global brands have taken this moment to surface these frictions with leadership. As a result, we are hearing of IT and marketing spend being shifted to ecommerce investments.

    Strategic Shift 2: Amazon-Only Is No Longer Enough

    In the exact words we heard from one ecommerce leader: “Finally … executives understand ecommerce is not just about Amazon."

    It should come as no surprise that a large number of brands have built their entire direct-to-consumer (D2C) strategy around Amazon. It is hard to argue with that approach, given Amazon’s incredible command of ecommerce, which was about 30% in 2019, according to eMarketer.

    But what about the other 63%? Nearly $366 billion in ecommerce is driven by many other retail channels and brands running their own D2C businesses. Many brands are now seeing just how important the long-tail of the digital shelf is for retail and why D2C investments must be a priority.

    It appears that Amazon shutting off the shipping and fulfillment of nonessential products has exposed the risks of an Amazon-only ecommerce strategy.

    Strategic Shift 3: D2C Is a Priority

    It would be inaccurate to say all of the brands we have spoken with are having an easy time right now. To be sure, there are many categories like apparel and jewellery that are experiencing significant business disruptions due to economic uncertainty.

    But even within some troubled categories, we have heard of several cases where brands that have an ecommerce presence and the ability to fulfill directly to consumers are seeing upticks in business.

    Nielsen research recently observed higher online sales growth in the fast-moving consumer goods (FMCGs) category in Europe, noting that supply disruptions were driving consumers to buy directly from manufacturers when possible. This trend is causing some consumer packaged goods (CPG) brands to seriously investigate how to fulfill directly to consumers.

    “As shopping behaviour stabilises post COVID-19, many consumers are likely to continue to embrace manufacturer-direct technology solutions. This represents an ongoing opportunity for big and small manufacturers to assess not only their engagement platforms, but also their sales channels,” said Nicole Corbett, director of intelligence at Nielsen.

    Prior to this crisis, most brands had placed D2C initiatives further down the priority list. Across many brands we have spoken with, D2C initiatives are a common topic of discussion, but many are not sure where to begin.

    Tactics for Moving Forward

    Here are three of the most common tactical shift trends we have heard in brand discussions:

    1. Ecommerce investment shifts: Trade spend and marketing spend has been shifted toward ecommerce investments. Similarly, Amazon Marketing Services (AMS) spend is being reallocated to other areas of the business as well.
    2. Speed to market prioritisation: Brand manufacturers are urgently prioritising getting product content updates to retailers as fast as possible as more consumers are on digital.
    3. Role shifts to support ecommerce: Field sales employees and staff that otherwise were focused on wholesale business are being moved into roles to support ecommerce.

    Another important movement we wanted to give special attention to was how many global brands are shifting their manufacturing focus onto essential items. For example, 3M is boosting production of its trademark N95 respirator masks that are in high demand globally.  In hard-hit Spain, homegrown fashion brand Zara is using its factories to produce hospital gowns and masks for patients and medical workers. And even though beauty brand Coty is forecasting a decline in its revenue, it is increasing its focus on ecommerce and is manufacturing hand sanitiser to help with the ongoing supply shortage.

    A Pivotal Moment

    It is still early, and we are all continuing to learn how the current global crisis will change digital shelf operations. If one thing is certain, it's better to lean into ecommerce investments now rather than taking a wait and see approach.

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