Digital platforms are key to future diversification

As we ride the wave of post-pandemic recovery, it is clear is that it is not enough for businesses to continue to digitise. They also must look beyond channels on which they already sell, and seek out international sales as a simple means of growth. Only those businesses with the agility built in to adapt to any changes will grow, says Tony Preedy, Managing Director of Fruugo.
If global covid-19 lockdowns have shown businesses anything, it’s the importance of diversification, maximising opportunities across borders, and building in flexibility for all circumstances and protection against risks built into their model.
As we ride the wave of post-pandemic recovery, it is clear is that it is not enough for businesses to continue to digitise. They also must look beyond channels on which they already sell, and seek out international sales as a simple means of growth. Only those businesses with the agility built in to adapt to any changes will grow, says Tony Preedy, Managing Director of Fruugo.

With the advent of the internet, most businesses with the right digital capabilities can sell across borders. Retail in particular, which has already been steadily shifting from physical to digital channels for over two decades, is a sector where international opportunities are boundless. This has been catalysed by the advent of a very active market in international e-commerce logistics. While small and light items are the most traded type of goods across borders, even heavy and bulky items can now be shipped economically, particularly to mainland Europe. This competitive environment makes it possible and practical to sell most types of consumer goods internationally.

Covid-19 has also accelerated the long-term trend of digital shopping, seeing a rapid increase in the proportion of retail sales conducted online. Forrester predicts that while the value of global retail sales will see a compound annual growth rate of 1% between 2019 to 2026, the growth rate of e-commerce will be more than ten times that. Many consumers are expected to stick to their new e-commerce shopping habits even when restrictions are removed. The fact that consumers are and will continue to do more of their shopping digitally is inescapable, with billions of further transactions migrating to online channels in most major economies over the next decade.

However, if global Covid-19 lockdowns have shown businesses anything, it’s the importance of diversification – for retail, this means a dynamic mix between brick-and-mortar and e-commerce, maximising opportunities across borders, and building in flexibility for all circumstances and protection against risks built into their model.

Spreading the net

For any business, using multiple sales channels spreads risk. Yet in this age of uncertainty, diversification requires spreading risk and maximising opportunities across digital channels also. Online platforms like marketplaces that cater to cross-border trade, for example, can be used along with owned websites and e-commerce portals. In fact, research firm Forrester estimates marketplaces are growing by 16.5% each year compared to sales on retailer’s own websites only expected to rise by 10%, and by 2026, more than two-thirds of all online shopping revenue will be generated through marketplaces. If sales on one start to reduce, or one region is experiencing particular difficulties, you can ensure there are other channels and regions to rely on.

Integrating with digital platforms like marketplaces may seem like a strenuous project, but it’s usually a lightweight task and once complete provides a stream of income stretching indefinitely into the future. Retailers that expand their e-commerce offerings in this way can be certain to maximise sales in both the short and long term. Digital platforms also offer a key benefit beyond sales, they offer ways to better understand and use data. This covers everything from product data, which can provide inventory and supply chain efficiencies, through to larger and more detailed customer data, making it much easier to implement effective marketing campaigns, and reach a broader, more diversified range of potential buyers while implementing accurate targeting.

Navigating uncertainty

Diversification also protects retailers against uncertainties. British businesses have not only suffered through lockdowns, supply chain shortages and recessions due to the ongoing pandemic, they’ve also had to grapple with the end of the Brexit transition agreement looming, and the challenges it places on the supply chain. These revenue barriers would be far easier to overcome if sellers have a broad scope internationally through which they are selling to. Of course, adaptations have to be made to meet the requirements and regulations of each market, but with the right platform and tools, this can be easily dealt with and often automated. More importantly, this happens at no risk to businesses; many marketplaces only require a fee once they deliver a sale to the retailer, helping retailers maintain sales throughout crises. This is a blessing for many smaller businesses for who expanding online can be a very tall order, as digital platforms can take on a lot of the logistical work and help optimise marketing.

Taking advantage of atomisation

The key benefit of diversifying across channels and borders is that sellers can de-risk their future by massively expanding the number of customers reached. Traditionally, retailers have a core set of customers who are exposed to their products and who ultimately make a purchase. However, the advent of online marketplaces means sellers no longer need to focus on or rely on a certain kind of customer for revenue, as categories of customers who buy your products open up. This would inherently lead to increased sales and profitability,  but would also mean less reliance on a particular type of customer for revenue, which is better for a long-term business outlook.

We call this paradigm the “atomisation of retail”. Traditional retailers think in terms of seasons and ranges, with shoppers expected to shop a curated assortment. Whereas digital platforms let consumers hunt online for specific items or solutions to a problem they have, and is completely agnostic about who sells it to them. If the product they want is available in their locale, at a price they like, they’ll buy it regardless of where the retailer is located. This is shopping at the atomic level.

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As we ride the wave of post-pandemic recovery, it is clear is that it is not enough for businesses to continue to digitise. They also must look beyond channels on which they already sell, and seek out international sales as a simple means of growth. Our transition to procuring goods and services online will not retract anytime soon, and only those businesses with the agility built in to adapt to any changes in consumer demands and economic outlook, and ready for contingencies, will grow.

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Author

  • Digital platforms, Leadership, Digital platforms are key to future diversification

    Tony leads the team at Fruugo with more than 25 years of experience in direct and digital marketing at Shop Direct Group, Otto Group and at multi-channel kitchenware retailer Lakeland. For the past decade, he has worked on International Business Development, particularly using marketplaces.

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