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Costs associated with websites, mobile apps and omnichannel services like in-store pickup contributed to the decline in retail profit margin, according to accounting and consulting firm Deloitte. Profit margin decreased to 6.7% in 2019 from 9.7% in 2012. That rebounded to 8.6% in 2022, helped by pandemic-fueled demand for goods over services and government stimulus checks, says Lupine Skelly, retail, wholesale and distribution research leader at Deloitte.

Lupine Skelly, retail, wholesale and distribution research leader, Deloitte

Profitability — as defined as median EBITDA [earnings before interest, taxes, depreciation and amortization] — was lowest for retailers in such non-discretionary categories as grocery, drugstores and warehouse clubs. It was highest for such discretionary categories as apparel, home goods, department stores and specialty. Retailers that sell primarily online and other direct marketers were in between.

“Online isn’t super profitable,” Skelly says. “It’s still a costly business unit for retailers.”

Higher costs played a big role in the 2012-2019 decline in retailer profitability Deloitte uncovered from an analysis of 99 publicly traded retailers, Skelly and Deloitte U.S. research leader Rodney R. Sides explained in a 2021 article in the MITSloan Management Review. A recent update based on an analysis of 86 public retailers — the number declined due to bankruptcies — showed profits bounced back during the pandemic, Skelly tells Digital Commerce 360.

However, Skelly says, retail executives Deloitte interviewed recently are concerned that profits could be pressured again in 2023 by higher costs due to inflation and consumer resistance to paying higher prices. That, she says, makes it essential that retailers focus on containing costs, including those associated with online sales.

How retailers can cut costs and boost profits

Skelly highlighted three areas where retailers can contain online-related costs:

• Free shipping: “Free shipping can’t last,” she says. “It’s getting to a breaking point.” She encourages retailers to waive shipping fees only for their best customers or as part of loyalty programs.
• New online features: Retailers should take a hard look at adding new online services that often involve fees to technology providers. As an example, she cites the growing popularity of buy now, pay later. She says BNPL services typically cost up to 50 cents per transaction plus 10% of the value of the sale. “That can add up pretty quick,” she says.
• Returns: Returns can cost retailers 15%-30% of the sale value in handling fees, which is ruinous for online retailers that only make about 5 cents in net profit for every dollar of sales, Skelly says. She says tools that help online shoppers visualize products can cut returns by 40%, and “return bars” run by vendors that take returns for many online merchants can cut costs by 20%. She also advises retailers to credit shoppers quickly for their returns as calls from consumers wondering when they will be reimbursed are common, and each call typically costs about $5.

Merchandise and selling costs for different retail categories

The costs associated with selling online show up in Deloitte’s analysis of return on assets. Profits as a percentage of invested assets kept declining for online retailers and direct marketers during the pandemic, even as they bounced back for other retail categories.

Online and direct retailers also spent the highest percentage of their revenue on selling, general and administrative expenses. That likely reflects the costs associated with operating websites, marketing online and printing catalogs.

However, those direct-to-consumer retailers on average spend the least on merchandise as a percentage of revenue.

For most retailers, the cost of goods sold as a percentage of revenue declined in 2022 from 2019, after rising during the earlier period. The exceptions were retailers in the grocery and drugstore category, a likely result of persistently high food prices in recent years.

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Overall, SG&A expenses and cost of goods sold add up to 90.5% of revenue for internet retailers and direct marketers. That’s less than the 93.9% for highly competitive, low-margin categories like grocery and drugstores. However, it’s above the 88.6% for higher-margin categories like apparel and home goods.

But in all retail categories, profits are tight, which means containing costs is a priority. And while the Deloitte analysis was based on publicly traded retailers, which tend to be larger companies, Skelly says smaller retailers likely are being squeezed even more by rising costs, given that they typically lack the technology resources that can reduce costs.

“I would assume smaller players are probably seeing this even more,” she says.

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Mobile is fueling omnichannel activity as shoppers leverage retailer apps for an array of uses. The breadth of categories shopped and the consumer’s interest in conducting even more omnichannel shopping in 2023 means retailers who elevate their game will be rewarded.

When it comes to omnichannel interest, online shoppers reach and exceed prior-year levels. Year-over-year, those activities that stood out included checking online for product availability at a nearby store and BOPIS orders.

Online shoppers are embracing omnichannel activities, from checking inventory availability to in-store pickup to same-day delivery

Checking inventory availability is now integral to the online shopping experience. For starters, 68% of online shoppers have checked online for nearby store availability.

Online shoppers have also readily adopted in-store pickup, curbside and its associated conveniences. Half of the survey respondents have completed an in-store pickup while 35% have taken advantage of curbside or drive-up options. 11% have ordered online to a pickup location other than the store of purchase as retailers give shoppers more choices.

In-store activity includes being able to find and place orders across the enterprise. When shopping in-store, 23% have checked for inventory at another location and 11% have placed an order for delivery when inventory was not available. Additional purchase behavior is a revenue driver, with 26% spending more money during store pickups and 17% doing so when completing a return.

Shopper interest in getting products faster results in their taking advantage of same-day options from both web-only (38%) and store-based retailers (31%).

32% of shoppers welcome loyalty programs across all channels where omnichannel benefits are seen as desirable.

Return behavior means choices in both methods and locations. 24% of survey participants returned their Amazon orders to another retailer like Kohl’s, while 19% used a nearby Amazon return center. Just 4% completed a curbside return, though with Target announcing this service, numbers could quickly grow.

In-store and curbside pickup activity

On a side note: 11% used financing to make store pickup purchases. Meanwhile, 9% completed an in-store pickup after viewing an ad while streaming.

One measure of online shopper interest is the volume of in-store or curbside pickups in 2022 vs. pre-COVID. Shoppers are aggressive in their use of omnichannel options. 68% are doing more of these in-store and curbside pickup transactions post-COVID. A quarter are doing about the same, and only 7% are doing less, which bodes well for growth.

Shoppers embrace in-store and curbside pickups. There seems to be an uber-omnichannel shopper who leverages this service quite often. 35% of surveyed omnichannel shoppers completed 11 or more in-store or curbside pickups in the past six months. 61% made between one and 10 omnichannel transactions.

Over half of surveyed shoppers have completed a store pickup at Walmart and Target

Beyond those two mass merchants, the breadth of their omnichannel purchase categories is also a positive. Many categories are seeing strong interest as well, with hardware and home improvement (37%) and department stores (34%) leading the charge. One in five shoppers completed an omnichannel purchase in the consumer electronics, apparel/accessory or health and beauty categories. The upside is they are likely to select this option when considering future needs and are willing to test with new retailers given their past experiences.

Shopper satisfaction with in-store and/or curbside pickup is strong

Strong satisfaction rates will continue to accelerate omnichannel adoption and frequency. Seasoned omnichannel retailers and newbies rose to the occasion, executing in-store and curbside initiatives well. A quick look at the excellent (9-10 score) for BOPIS at 60% and curbside at 52% is impressive. When addressing 7+ scores (BOPIS at 83% and curbside at 75%), there is still room for improvement, but fairly strong numbers have been secured.

A smooth experience, store wait times, product availability and initial turnaround once an order was placed drive shopper satisfaction

The quality of the overall experience is most important to shopper satisfaction, and here that starts with the pickup experience, which was smooth and confusion-free for 40% of those surveyed.

Knowing the product is in stock for same-day pickup is a critical first step for shoppers and fosters a willingness to use this channel.

Timing matters, from the initial “ready for pickup” notification to turnaround at the store and wait time, along with communication.

Important factors for omnichannel shoppers

• Wait time upon arrival at the store: 37%
• Same day pickup availability: 35%
• Turnaround time when store pickup is ready: 29%
• Ability to schedule within desired time windows: 25%

Convenient locations are critical to an efficient experience. 20% noted store location hours for pickup being important, along with the ease of finding the in-store (18%) or parking lot location (17%).

14% cited retailer communication as being key. The human experience, while important, does not play as significant a role in shopper satisfaction, as only 17% of respondents called it out. Lastly, the retailer’s mobile app was a factor in the score for 14%.

Time savings, convenience, and an avoidance of the store and shipping fees propel online shoppers to choose omnichannel options

It all starts with omnichannel’s ability to save time, as almost 48% of surveyed shoppers put it top of the list. Second to time savings was convenience at 47%. Speed played a role as well for the 34% who needed product faster than home delivery would allow and the 32% who wanted product the same day. For the remainder, 16% appreciated the ability to get whatever else they might need at the store while the weather played a role for 16%. 13% didn’t want to bring children inside the store.

The store avoidance factor is in play for 38%, and 20% just felt this was a safer option in a post-COVID world.

Money was also a consideration, with 36% looking to avoid shipping fees. For some of us true shoppers, 17% can exercise greater control this way and refrain from making impulse purchases in store.

Along the same lines, 29% can zero in and get exactly what they need. Meanwhile, 21% felt more confident they would get product given inventory constraints. 19% shared that curbside/in-store availability helped when product was not in stock online and available for delivery.

Online shoppers leverage apps to buy and facilitate omnichannel activities

Over the years, I have seen steady improvement to the apps making it even more desirable to choose the omnichannel option. It appears I’m not alone.

Apps are fostering shopper activity at all points in the omnichannel journey. Our survey respondents were active, including buying a product (45%), locating a product in store (34%), and facilitating an in-store or curbside pickup (28%). And 13% indicated they were even incentivized by the retailer, which is an added bonus.

The in-store experience has been altered as well. App store interactions including the use of QR codes to gather information and make purchases continues, as 24% cited. Some in-store checkout by individuals (18%) and associates (13%) is taking place, and 14% have opted to make a mobile purchase while in the store. This all suggests that the mobile phone is an invaluable device for shoppers. If the past is any indication, once tested, behavior appears to be adopted.

Shoppers also embrace a range of mobile activities with growing influence, including:

• Took product image and did an image search with retailer to find a product match: 15%
• Used QR code in non-store physical location: 13%
• Made a purchase after interacting with an ad on a mobile device: 10%

Shoppers use mobile devices to connect with retailer associates. 10% have texted a retailer for customer service and 6% have scheduled and completed a virtual appointment.

One important gauge of the app’s importance can be seen when participants were asked, “When it comes time to placing or picking up an order for in-store or curbside pickup, which best describes your usage of the retailer’s app?”

With seven in 10 frequently or exclusively using the app, this serves as an excellent testament to its value.

Apps are facilitating shopper activity including the buying, locating and facilitating of in-store product pickup. The three-year growth curve (2023-2021) remains impressive. The most critical aspects remain relatively consistent as detailed below (in reverse-chronological order):

• Buy a product: 45%/44%/49%
• Locate a product in store: 34%/31%/31%
• Facilitate in-store or curbside pickup: 28%/25%/28%

The app facilitates communication before and during store pickups

Mobile apps excel when it comes to communication. At the top of the list for desirability among omnichannel shoppers was being notified the order is ready (60%). Next, 47% appreciated getting text notifications about the order. Other communication elements that were seen as desirable were the ability to communicate with a retailer upon arrival at the store location (31%) and to notify the retailer you are on the way (34%).

The app’s ease of use propels online shoppers to adopt omnichannel even more, and 42% believe it is easier to shop on the app. The app’s efficiency is important for locating inventory, as 39% of survey respondents enjoy being able to find where products are available.

Online shoppers also appreciate the convenience of mobile communication. This includes saving gift cards and coupons (35%), as well as storing one’s personal profile, including payment and vehicle information (28%) and tools such as shopping lists (18%).

29% of survey respondents also noted merchandising offers, as they are able to peruse promotions and see the trends retailers highlighted.

Our survey ends on a positive note. 33% of survey respondents anticipate their in-store and curbside pickup volume will be more in 2023. The majority (58%) say it will be about the same and only 9% say less.

Shoppers continue to tell us that they like the omnichannel options for picking up a product. We can expect that retailers will invest to continually improve their mobile apps to best support the experience. The convenience it provides is impressive, and it’s hard to beat the time-savings. Now, it’s about maintaining today’s high satisfaction rates with strong execution critical for growth.

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To guide that reflection, Digital Commerce 360 and Bizrate Insights surveyed 1,023 online shoppers in January 2023. Once again, “more” begins with Amazon.

The real story is often told by what shoppers do more of in the critical holiday season. First and foremost, we begin with buying, and year over year, shoppers gravitated more to Amazon (59%). In general, they also spent more online (36%), and more also meant embracing the mobile website and app (30%). Beyond Amazon, marketplaces continued to garner shopper attention more (27%), and shoppers bought from a wider range of retailers (26%). Lastly, 9% scrolled social media more for shopping purposes.

Shoppers were hyper-aware of economic challenges particularly inflation

With prices top-of-mind, 30% comparison shopped more to ensure they got the best deals. Similarly, 20% tracked promotions more in hopes of getting the best prices.

Ironically, 16% of these same shoppers paid for shipping on their orders more. My feeling was that free shipping just wasn’t available as it had been in the past. With some retailers visibly promoting their price matching like Target, 10% of those surveyed reported that they in fact sought price adjustments more. For those who didn’t have the money or chose not to pay outright, 9% financed their purchases more this year and retailers advertised this payment option to garner participation. And given the global nature of ecommerce, 7% purchased beyond the U.S. even more to save money.

Shoppers were cautious, and inventory was also on their minds as 20% paid greater attention to retailers that had products in-stock. They have enjoyed the same-day delivery option getting products quickly, and 12% embraced it more over the holidays. Additionally, based on retailer warnings, 10% ordered earlier to ensure timely deliveries.

Coming off ignited interest in omnichannel delivery options and its convenience, shopper usage was strong as 22% used buy online, pick up in store (BOPIS). 18% used curbside pickup and, sadly, 8% avoided physical stores more due to crime.

Lastly, 9% embraced a more exciting experience, watched livestreams of products more.

Online shoppers are savvy about finding and taking advantage of promotions

It’s always important to remember that no given promotion is relevant to all shoppers, so the opportunity can be inherently limited.

Four in 10 online shoppers found adequate promotions and said they believe they got their fair share. Meanwhile, 20% unfortunately felt the promotions were not on items that interested them. For the 34% who encountered steep promotions, 22% reported being able to make some purchases while 12% couldn’t capitalize on those offers due to personal circumstances. Unfortunately, 26% of those surveyed said they only encountered limited promotions.

One thing we know for sure is that online shoppers will go to great lengths to track promotions in the interest of saving money. 22% spent some time tracking promotions prior to making purchases. Meanwhile, 13% of survey respondents spent significant time tracking promotions.

Delivery, delays and omnichannel options

Prior to the holiday season, there was a great deal of discussion around deliveries and whether orders would be delayed. Retailers need to pay attention to delivery times, as speed is a distinct advantage in shoppers’ minds.

While 40% of 2022 online deliveries seemed to take about the same time, 30% seemed to take longer than in 2021. In positive news, 26% were actually faster.

Communication about delays is ideal, and retailers should have it in place to alert shoppers to their status. Positively, 18% received notifications from retailers about delays. Retailers have an opportunity to leverage omnichannel options, though many prefer delivery choices. With that in mind, 8% selected BOPIS. We had also feared that this choice might resonate less than during COVID, so it was positive that only 5% did less curbside pickup than in 2021.

Higher prices reduced spending among online shoppers. As such, it will be critical to monitor inflation patterns in the coming year. Retailers will continue to evaluate product pricing in 2023 and will want to understand where incremental spending will come from if high prices remain.

Spending took a big hit, as 42% of online shoppers said they spent less online over the holidays as a result of inflation. 35% spent about the same and, ironically, 23% spent even more, not impeded by the inflation numbers.

Prices and stock drive retailer selection

Next, we delved into the prices and promotion discussion. We wanted to understand how shoppers chose the retailers where they did business over the holidays.

Our findings showed prices (especially free shipping) matter most to retailer selection. Free shipping, which 56% of respondents cited, remains a customer favorite when selecting retailers and likely emanates from their Amazon Prime experience. Following close behind from a price perspective was the 41% who cited fair and competitive prices. Shoppers also appreciate the option to return their purchases for free. 25% of survey respondents noted such a preference. Other price-driven factors included appealing promotions (23%), email offers (17%) and deferred payment options (6%).

For 43% of participants, having products available was a key factor in selecting retailers. Logistically speaking, 18% noted guaranteed delivery times while 9% said they valued express shipping options.

Online shoppers remember past experiences and make future retailer selections accordingly (36%). Shopping fundamentals, from product selection to the perception of fair pricing and appealing promotions, factor into retailer selection as well. Also important to retailer selection: featured products (29%). Meanwhile, exclusive items were much less of a factor at 14%.

From a brand experience and customer service point of view, the following factored into retailer selection.

• Loyalty program member: 22%
• Wish lists: 20%
• Flexible return policies: 18%
• Retailer had good customer service: 16%
• Longer time period to return items post-holiday: 7%
• Social stance, charitable giving and or/sustainability: 4%

Price and logistics-driven conveniences, including free return shopping, resonate with shoppers. That included the ability to return items to a physical store (16%), BOPIS (11%) and curbside pickup (9%)

Returns are a hassle for online shoppers

Returning products remains a factor for online shoppers, and retailers must balance the conveniences they extend and costs they incur. 30% of online shoppers find returns to be a hassle. That likely results in just over half planning to return the same or fewer orders. From a volume perspective, 32% of surveyed shoppers expected to return fewer products, while 23% saw their returns on par with last year. Only 9% believed they would be returning more. Providing better product information will continue to keep return rates lower. Choices in how returns could be made continue to grow.

Respondents expected to use the following means to make such returns:

• Stores like Kohl’s that accept Amazon returns: 13%
• Amazon return centers: 10%
• Services like Happy Returns: 7%

Online channel still sees traction

Online shoppers will continue to embrace online shopping at the expense of store shopping if the user experience and inventory levels can be maintained. Of course, some online shoppers will continue to gravitate to the store for specialized services.

Three in four online shoppers intend to shop about the same (46%) or less (32%) in physical stores in 2023. With only 22% shopping more in stores, the web is likely to be the beneficiary.

Online shoppers’ 2023 wish list is long

Perhaps the most important question of the survey is what improvements shoppers would like to see from retailers in 2023. Online shoppers are hoping for faster delivery and more in-stock products, complete with a price match reassurance.

Balancing supply chain constraints and consumer inventory demands will be a challenge in 2023. Shopper desires start with more inventory in stock (32%). Equal in importance was the online shopper’s desire for faster delivery (32%). BOPIS at 12% and improving curbside pickup at 5% rounded out the logistics.

With inflation still hovering, policies like price matching and extended return polices will be favorable among online shoppers. More price matching and extended return policies (27%) speaks to that concern as well.

Attention to customer service among retailers is always a factor, with better customer service important to 13% and live chat support called out at 11%.

Retailers must be vigilant in optimizing the user experience. That starts with a simpler checkout (21%) and better product information.

Personalization is welcome as 20% noted liking promotions tailored to their preferences. It’s important to remember that tracking and privacy efforts must be controlled, as 18% prefer less tracking of website activity/advertising.

Additional customer experience elements — at 17% of those surveyed — include:

• Better product information/robust images
• Improved search results
• More special promotional codes via social

Others in double digits include easier shopping on mobile devices (15%) and faster website speeds (11%).

For better for worse, one in four shoppers expect to shop the same. One in five will be shopping more online, and this bodes well for growth. It’s still important to pay attention to the 10% who intended to shop more in physical stores. Others that were particularly interesting include the role of prices and promotions, a direct response to 2022’s higher prices. 11% of shoppers believe they would have less spending overall, and many of the answers were tied to personal circumstances. Some shoppers also want to getting smarter about their shopping, which can include buying early among other options.

2023 will be an interesting year. It’s too early to tell about inflation and how prices might pan out. Retailers should spend their time focusing on what they can control. They must continue to get the fundamentals right. That includes product, ensuring stock levels are adequate and embracing category-centric merchandising. And, of course, timely delivery will go a long ways toward customer satisfaction.

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The post The Shopper Speaks: A 2022 holiday post-mortem appeared first on Digital Commerce 360.

Salesforce’s estimate of U.S. sales during the holiday period is higher than an estimate last week from Adobe Inc. November’s online sales were lower than in 2021 and 2020, Salesforce said.

Other notable points in Salesforce’s data:

• Shoppers saw better deals than during the 2021 holiday season — a 21% average discount compared with 19% the year prior. Top discount categories included beauty, skincare, and makeup with an average discount of 29%.
• Nearly one out of every five online orders placed globally this holiday season were via buy online, pick up in store. BOPIS adoption by consumers peaked at 35% of all orders on the Friday before Christmas as shoppers retrieved last minute gifts.
• When the ground shipping window closed on Dec. 15, U.S. companies that offered BOPIS grew their revenue nearly 7X faster than those that did not.

“Retailers closed out the 2022 holiday season with stronger online sales growth than expected — driven in large part by U.S. demand, steeper discounts on peak days, and BOPIS options,” said Rob Garf, vice president and general manager of Retail for Salesforce, in a written statement.

That good news for ecommerce retailers was tempered by Salesforce’s estimate that shoppers also returned a shocking number of items during the holiday season.

Salesforce data shows that returns reached 1.39 billion, accounting for 13% of total holiday orders and a 63% increase in returns year over year. These numbers spiked in the six days after Christmas, with 16% of orders returned over that week — a 5% increase over last year. Salesforce had earlier predicted more than 1.4 billion orders purchased this holiday season would be returned.

“Staggering return numbers show that consumers are still cautious amid economic uncertainty,” Garf said.

Traffic referrals from social media hit an all-time high this holiday, driving 12% of all mobile traffic (+23% year over year). Belgium, Italy, and the U.S. represented the countries with the most social media-minded shoppers.

Methodology

Salesforce based its estimate on an analysis of aggregated data from more than 1.5 billion global shoppers across more than 64 countries powered by the company’s ecommerce platform Commerce Cloud, in addition to data from retailers that use Salesforce’s Marketing Cloud and Service Cloud services. Salesforce’s holiday data set includes 24 of the top 30 U.S. online retailers on the 2021 Digital Commerce 360 Top 1000 and uses publicly available third-party data sources.

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Web sales during the Cyber 5 period from Thanksgiving through Black Friday led to a 31% year-over-year increase in returns, according to Loop. Loop is a Shopify-integrated return-management software company. Its returns data comes exclusively from its more than 1,800 merchants using the Shopify platform. 

Loop processed a return every 1.25 seconds, on average, on Dec. 27, 2022, which the company said was its busiest day ever. Returns peaked at about 2 per second, on average, during its busiest hour that day. 

“We anticipated a spike in returns,” said Loop co-founder and CEO Jonathan Poma. “But we were blown away by these numbers. This is a lot of returns to handle for independent businesses of any size.”

Loop says it processed about 300,000 returns from Dec. 26, 2022, to Dec. 30. That’s an average of 60,000 returns a day.

Its three busiest days for returns in 2022:

• Dec. 26: 65,000 processed returns
• Dec. 27: 68,000 processed returns
• Dec. 28: 62,000 processed returns

The return process is an opportunity to upsell

Returns outpaced sales, according to Loop. But that’s not necessarily a bad thing for the company.

In addition to processing returns for refunds, Loop also allows Shopify merchants to exchange products or upsell. It allows shoppers to apply the value of their current return order toward other products they want. It displays items that a shopper could apply their return order’s value to. Loop also suggests to shoppers that they exchange their product for a new size or color, or for another item entirely. It displays out-of-stock messages directly from that exchange suggestion screen.

Loop said this helped its merchants upsell 38% more year over year in 2022. 

“We’re thrilled to have played even a small role in the successful holiday season of our merchants,” Poma said. “Especially at a time where gifts are bought for others, sizes and preferences are going to be wrong.”

Overall ecommerce return rate

Online return rates dropped to 16.5% in 2022 from 20.8% in 2021, according to a study from the National Retail Federation and Appriss Retail.

For the first time since online data has been captured as part of the survey in 2019, online return rates are consistent with the overall return rate, the report said. Furthermore, retailers lose $10.40 to return fraud for every $100 in returned merchandise accepted.

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But too often, online product content fails to describe such products effectively, leaving money on the ecommerce site for both manufacturers and distributors.

If only the creators of that content could view the effect their product displays were having on click rates and sales. That’s the view the Industry Data Exchange Association (IDEA) is out to provide with IDEA Insight. IDEA Insight is a new online content-monitoring service developed with Content Status. Content Status offers technology that lets manufacturers and their distributors view how well product displays reveal each product’s critical content, including their brand name, image, key attributes, and overall description.

David Oldfather, president, Industry Data Exchange Association

“There’s a difference between the product data distributors typically extract from manufacturers and what they actually utilize on their ecommerce sites,” says David Oldfather, president of the IDEA. In many cases, he adds, distributors develop product descriptions based on information in invoicing documents, “which isn’t complete and doesn’t have the brand and key attributes in the title.”

IDEA Insight tool helps creators view effects of product displays

The IDEA Insight tool, he adds, “enables manufacturers to see what their distributors are using and how complete it is.”

IDEA is a data management organization formed in 1998 by two electrical products industry groups, the National Electrical Manufacturers Association (NEMA) and the National Association of Electrical Distributors (NAED). It also provides tools and services that help manufacturers and distributors digitally syndicate product content internationally, share electronic data interchange (EDI) documents, and manage and enrich product data.

IDEA Insight scrapes product display content from distributors’ web pages and scores each display for critical content, including the product title, description, and overall accuracy. On a scale of 1 to 5, with 5 the most valuable, the tool scores each display section based on industry-wide information IDEA has compiled on how content engages website visitors.

The effectiveness of a product display can vary based on such details as the number of characters in a product title, which typically should have at least 30 characters but ideally even more – placing them on par with the high-level content typically found on Amazon.com and other established ecommerce sites, Oldfather says.

He adds that electrical product distributors as well as manufacturers are showing interest in using the IDEA Insight tool. “Distributors want to know what manufacturers would like to see and what content they should post on their ecommerce sites.”

Oldfather says that, for now, IDEA Insight indicates how well content is searchable and meets a buyer’s requirements, which are likely to result in higher click rates and fewer product returns. Eventually, he adds, IDEA expects the tool to evolve to also show how well specific content generates revenue.

The cost to deploy IDEA Insight is based on the number of SKUs and distributor websites a client wants to track, Oldfather says. IDEA recommends companies start out small – tracking perhaps 10 SKUs across 10 or 15 websites – to see how some product displays score, then test different groups of SKUs and websites. For most manufacturers and distributors, the monthly cost is likely to start at about $200 and go as high “the low thousands” based on the number of SKUs and websites.

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The marketplace will bolster Macys.com’s assortment, as it is adding 400 brands across 20 product categories. Those include apparel, beauty, home improvement, toys and pet products.

On each product detail page for a marketplace product, Macy’s notes the product will ship from a third-party seller. Shoppers should feel “minimal difference” in the overall shopping experience, the retailer says.

Macys.com notes a product is sold by a marketplace merchant with the “shipped and sold by” text at the top of the product detail page, beneath the product name.

Macy’s says marketplaces sales will still count toward the Macy’s loyalty program, however there are some restrictions when using loyalty points for marketplace purchases, a Macy’s spokesperson says without providing more details.

Returns, however, operate differently. Shoppers can’t return items to a Macy’s store and have to return products to a seller within 30 days, according to Macys.com’s FAQ page. This is a deviation from the merchant’s typical 90-day return policy to stores or by mail.

“Customers are encouraged to ship returns directly back via UPS, but our stores are available to assist our customers if needed,” the spokesperson says.

Macy’s is No. 16 in the 2022 Digital Commerce 360 Top 1000.

Macy’s joins a growing number of retailers launching marketplaces

Retail chains launching a third-party marketplace is a recent trend. For example, Target Corp. (No. 5 in the Top 1000) launched its marketplace in 2019.

In 2016, only five retailers within Digital Commerce 360’s Top 1000 operated a marketplace on their ecommerce site. That number grew to 18 merchants in the Top 1000 in 2020, and to date, 34 retailers in Digital Commerce 360’s Top 500 operate a marketplace. This number is likely to be even higher for the entire Top 1000, but Digital Commerce 360 Research has yet to release these figures.

Of the 34 merchants with a marketplace, 11 are apparel retailers and seven are mass merchants.

When Macy’s announced the launch in 2021, it said the new business model would be a way to expand its assortment for a “low incremental cost,” while helping the chain gain incremental revenue.

“Our digital business is targeted to generate $10 billion in sales by 2023,” said Matt Baer, chief digital and customer officer, in the 2021 press release announcing the marketplace. “And we expect the new marketplace platform to produce incremental revenue on top of that target.”

Macy’s selected marketplace software provider Mirakl to build its marketplace. Macy’s declined to reveal the cost of building the marketplace.

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