Powerful inventory and order management software
Finding a reliable and actionable guide to navigate that maze is nearly impossible.
Why? Because mainstream media is dominated by the hype circle of new innovations and yet-to-be-tested trends. Deep-dive white papers are hidden behind paywalls or — worse — thinly veiled sales pitches for the publisher’s products and services.
That maze is why we created this article — to unlock the current state of retail and wholesale in its entirety.
Definitions are far from the most exciting element of business. And yet, clear language leads to clear thinking. And clear thinking to the right action.
What is retail?
Retail is the sale of products or services from a business to a consumer (or, consumers) for the buyer’s consumption or use. The sale itself can occur through any number of “channels,” but what defines retail as retail is that the purchaser and consumer are one and the same.
Purchase categories fall into two broad types defined by how and where the sale takes place …
Extensive data is provided in section two below. For now, a big-picture view of retail sales worldwide will suffice to set the stage:
Data via Planet Retail (2018 projected)
Notice that eCommerce — while third in revenue — has experienced exponential growth over the last decade. Even more vital is to understand the projected growth of online retail moving forward:
Out of retail’s $30.4 trillion in worldwide sales by 2020, $4.1 trillion will take place online. And that pales in comparison to online wholesale and B2B’s $6.6 trillion.
Data compiled within the Retail and Wholesale Report
With prices starting at only $39/month, QuickBooks Commerce gives you the power of inventory management software without all the time consuming data entry or human errors.
Given the revenue dominance of the top 10 online retailers, let’s examine each one looking for common characteristics to classify as best practices:
What is retail merchandising?
Merchandising is any activity that promotes the sale of products or services. While akin to marketing, it is normally reserved for presentation in retail outlets online and off (hence, “visual” merchandising, as it’s often called).
A useful way to think about the difference between merchandising and marketing is inside versus outside.
Merchandising is an inside strategy: it’s how you drive sales once someone has reached your site or store. Marketing is an outside strategy: it’s how you drive people to your site or store in the first place.
Visual cues play a huge role in how customers experience your product. Naturally, this includes words, but more viscerally encompasses colors, lighting, symmetry, balance, contrast, and focus as these elements all trigger psychological responses.
Music and other ambient noises affect in-store behavior. Your approach to sound should always be balanced between your target market’s preferences and your external settings (i.e., environmental limitations).
Depending on your product, the importance of giving customers tactile experiences varies. Most often this means paying close attention to packaging so as not to needlessly limit this sense.
As odd as it might sound, “scent marketing” is a science unto itself with a growing collection of academic studies and case studies of global brands. Smell is directly linked to parts of the human brain that control memory and emotion.
The internet is a visual and auditory medium. Therefore, excluding try-before-you-buy offers (touch) or enabling offline free samples (smell and taste), sight and sound are at a premium.
This demands paying close attention to four elements:
Every page or piece of online content has a visual hierarchy that moves visitors along a path from dominant to non-dominate.
High-quality images and videos are non-negotiable given the rise of platforms like Instagram and Pinterest. Likewise, so is having a responsive storefront for mobile and onsite search that includes pictures and prices.
The color scheme you select has a profound effect on the psychological interpretation of your products and (because of that) conversions.
Even the best “best practices” pale in comparison to running your own user experience (UX) tests to determine how visitors interact with your online merchandising; Crazyegg, Hotjar, and Google Analytics can unlock these often mysterious patterns through click, hover, and scroll mapping.
Image courtesy Baymard
What is multichannel retailing?
Multichannel retailing means selling and advertising everywhere your customers spend their time. More than just marketing, multichannel enables native commerce across sales channels. Native refers to the ability to purchase directly from within the channel rather than being led elsewhere (as most marketing does: e.g., from a Facebook ad to an online storefront).
This applies to …
Doing so allows you to reach out to a wider base of prospective customers and build brand recognition. Studies have shown that retailers who sell on multiple channels reap a number of benefits.
Data from SAP and documented within The Multichannel Guide
What is omnichannel retailing?
Omnichannel retailing moves beyond multichannel by uniting every channel and touchpoint. It creates a single and consistent experience no matter where or how someone interacts with your brand:
The biggest difference between multichannel and omnichannel retail is that the former focuses on maximizing different sales channels independently, whereas the latter is much more consumer-centric. Omnichannel retail focuses on enhancing the customer experience by offering more flexibility to consumers to engage with the brand through one seamless journey.
In addition, omnichannel is commonly associated with online-to-offline (O2O) commerce — connecting physical and digital retail — whereas multichannel applies more to a diversified eCommerce strategy.
What are digitally native vertical brands (DNVB)?
Digitally native vertical brands (DNVB) are a subset of retail eCommerce. Among the more notable DNVBs are names like Warby Parker,Glossier, Bonobos, Everlane, AWAY Luggage, HappySocks, Dollar Shave Club, and an army of D2C mattress companies led by Casper.
Image courtesy of Jay Kapoor (via Medium)
Digitally native refers to the “born online” roots of these direct-to-consumer (D2T) businesses, who — in the words of Bonobos CEO, Andy Dunn — are “maniacally focused on the customer experience and they interact, transact, and story-tell to consumers primarily on the web.”
Vertical means that DNVBs control the production and distribution of their goods. In addition, numerous DNVBs use offline retail spaces or pop-ups as vehicles to connect directly with customers.
Fashion, beauty, home goods, and especially consumer packaged goods (CPG) are all experiencing a revolution at the hands of DNVBs.
Why? Two reasons:
First, physical retail sales of CPGs within the U.S. have all but flatlined at 0.5% year-over-year growth across all channels:
Data from the Interactive Advertising Bureau (IAB)
Second, at the center of the DNVB revolution is a fresh emphasis on “brand equity”:
“[T]he value of a brand … [as] determined by consumer perception of and experiences with the brand: awareness, recognition, trial, preference, and product loyalty are each vital components of this measure.”
By majoring on brand equity and D2C relationships, DNVBs — or whatever you choose to call them — simultaneously maximize all of marketing’s five Ps: (1) product, (2) price, (3) place, (4) people, and (5) promotion.
What is wholesale?
In simplest terms, wholesale is the opposite of retail. Retail means selling products or services to the end customer so that the person (or people) who buys is also the person (or people) who consumes: i.e., business to consumer (B2C).
Wholesale is selling to an intermediary business that then sells to the end customer. In this way, wholesale is a type of business-to-business (B2B) transaction but the two are not interchangeable. B2B is the overarching category; wholesale is a subset.
Traditionally, brands have fallen into either B2C or B2B models. Today, those lines are blurring thanks to eCommerce.
In fact, the move to eCommerce cuts both ways. B2B companies are rapidly creating online portals to digitize the ordering process that used to take place via salespeople and through paper, fax, and email forms. So too, B2C online retailers are now leveraging wholesale storefronts online to streamline and extend the sale of their goods to large and small outlets alike.
We’ve endeavored to make this resource as exhaustive and up-to-date as possible. For ease of use, here’s an overview of the data we’ll cover below:
Data via U.S. Department of Commerce
Data via Frost & Sullivan
Data via Frost Sullivan
Data via eMarketer
Data via Statista
Data via eMarketer
Data via Statista
Data via Statista DMO
Data via Statista DMO
Data via We Are Social and Statista
Data via eMarketer
Fashion and apparel
Data via Statista
Data via Statista
Data via Business of Fashion and McKinsey
Beauty and cosmetics
Data via Euromonitor
Data via L’Oréal
Data via Statista
Data via Nielsen
Data via Statista
Home goods and furniture
Data via Statista
Data via Statista
Data via Statista
Data via Statista
Over and against Statista’s $7.66 trillion in 2017, Frost & Sullivan predict that worldwide B2B eCommerce will reach $6.6 trillion by 2020 with $1.9 trillion in the U.S. Even with that longer timeline and lower total, $6.6 trillion still dwarfs Frost & Sullivan’s own projection of $3.2 trillion in B2C eCommerce by 2020.
Moving forward, adopting an online approach to B2B and wholesale is non-negotiable. This is not only due to the incredible monetary value of eCommerce, but also B2B buyer’s demand.
Data via eMarketer
So, what do you do with all that data? Before moving into growth strategies, let’s examine the common impediments to a thriving retail or wholesale business…
To find out what businesses themselves say is holding them back from growth, QuickBooks Commerce commissioned Golfdale Consulting to poll over 1,197 small business operators around the world, of which 573 were businesses that offered products versus services. These included 123 businesses in Australia, 385 in the U.S., and 65 from other countries globally.
In order to better identify the challenges you can expect to face, we divided responses along annual revenue lines:
Insufficient time is a perennial concern for new entrepreneurs. But where does all that time go?
Interestingly, businesses under $1M spend over 90 hours on inventory management, product sourcing, and managing orders every month. That means the real challenge is to find a sweet spot to reduce the amount of time wasted in operations without sacrificing accuracy.
To put a real dollar value on what the wrong inventory and order management practicesmay be costing you, we’ve created a simple calculator …
Businesses that want to save time need to stop competing in the “Spreadsheet Olympics.” When you start adding up all the minutes and hours spent creating and filling out home-grown solutions, you can see why many small businesses fail to thrive.
For growing businesses, tough competitors was the number one challenge. This applies just as much to direct competitors within your space as well as monolithic competitors like Amazon.
Thankfully, your competitors can become your greatest allies.
This doesn’t mean partnering with them, but instead … studying them. You most likely can name your top five competitors without hesitating. If you haven’t done so yet, conduct a competitive analysis of their:
The last piece of advice may sound the most counterintuitive, but nothing will teach you more about your competitors than experiencing them for yourself.
Tough competitors again top the list. But this time, let’s look at the second impediment: hiring the right staff.
For scaling companies, Jim Collin’s classic From Good to Great highlights this principle over and over:
The executives who ignited the transformations from good to great did not first figure out where to drive the bus and then get people to take it there. No, they first got the right people on the bus (and the wrong people off the bus) and then figured out where to drive it.
They said, in essence, ‘Look, I don’t really know where we should take this bus. But I know this much: If we get the right people on the bus, the right people in the right seats, and the wrong people off the bus, then we’ll figure out how to take it someplace great.”
While not on the lists above, complexity is another pressing concern, especially as a company grows. Nowhere is this more obvious than the proliferation of sales channels businesses within the three segments identified.
However, in many ways, simply knowing what channels your peers identified as the most effective goes a long way in mitigating complexity by giving you clear direction:
The study also revealed exactly which channels those 573 businesses were “selling more” through as well as those that had stagnated:
The study also revealed exactly which channels those 573 businesses were “selling more” through as well as those that had stagnated:
As a final word of caution, we also asked, “What do you wish you could spend more time on in your business?” Knowing these answers offers priceless insight into the areas of your own business that deserve a reinvestment of your efforts:
Addressing all those challenges — even if you limit them to your current or soon to be level of annual revenue — can feel overwhelming. That’s why we’re going to focus on the biggest opportunities and turn our attention to five key strategies:
A common temptation when facing challenges is to direct your attention toward the challenge itself. Often, this results in businesses devoting themselves to fixing their weaknesses rather than honing their strengths.
Instead, aggressively pursue what makes your product, organization, and community of customers great. This is very much what DNVBs do and has led to their success. Even better, this approach leads to clear differentiation from your competitors.
Next, assess your current sales and marketing channels. Resist the urge to jump into the channels your peers are experiencing the most success through and instead — heeding the advice of strategy one — ask yourself, “How can I expand the reach and revenue of the channels we’re already successful in?”
Only after that should you turn back to the ranked list of channels and begin testing. Start small and be rigorous in your documentation.
Much has already been said about the value of time. And yet — at the risk of being cliche — it bears repeating: time is the only nonrenewable resource you have.
Clearly identify the areas in your business that are “time sucks.” If you aren’t pouring your working hours into your strengths, a hard line may need to be drawn.
Most businesses wait too long to outsource time wasters because they don’t see time as money. This could mean hiring additional staff, but it always means reassessing your technology stack for places to automate.
That last idea is so important it deserves a point all of its own. The good news is that you don’t need to be or have a CTO to start automating.
Many of the tasks small-to-medium businesses languish under are the very tasks QuickBooks Commerce exists to eliminate. Instead of spreading yourself, your team, and your operation across a host of spreadsheets and programs, look for solutions that combine them.
The reason you got into business wasn’t to optimize supply chains, warehousing, fulfillment, and reverse logistics. Nonetheless, these task are part and parcel of why you did get into business: to deliver a world class product and delight your customers.
As opposed to strategy one, here it’s critical to dig into the areas that are causing you the most frustration and pain.
But it’s not all bad news.
In fact, 45% of businesses operating above $1M identified fulfillment expectations as one of their biggest opportunities and 50% of those at $5 million or above: warehouse automation.
Don’t overlook where and how your customers experience your products after all, that’s precisely what lies at the core of retail and wholesale success.
Amidst all the definitions, stats, challenges, and growth strategies, one theme stands out:
The future of retail and wholesale belongs to businesses that can merge the best of online and offline commerce into a seamless whole.
Invest in your strength, particularly what makes your business unique: the products you create and the people you serve.
Offload your weaknesses wherever possible by looking for solutions that guard your time, automate manual tasks, eliminate “spreadsheet olympics,” and simplify complexity.
All your products, customers, orders and transactions synced and secure in the cloud.
