We all remember when vast sectors of the economy came to a grinding halt due to the pandemic. Already under pressure from online marketplaces, retailers had to adapt fast to survive — scrambling to create or expand their eCommerce presence and reconfiguring store layouts to meet safety mandates.

Next, the great resignation and re-shuffling of the workforce created and continues to generate massive staffing headaches from the shop floor to back-office operations.

And let’s not forget the waves made by ongoing supply chain issues. Empty shelves and unfulfilled promises have left both retailers and consumers confounded and frustrated. Will the new oven that I ordered a year ago ever arrive? And, yes, the massive container ship did get stuck in the Suez Canal; you didn’t imagine it. This is on top of pandemic-related bottlenecks. I guess our supply chains are way more fragile than we realized.

Short cut to today. Just when we thought things were on the up and up, another storm is on the horizon. The inflation that everyone hoped would just be a temporary blip is proving quite stubborn — causing shoppers to tighten their belts and think hard about spending their discretionary dollars.

While pundits are divided regarding whether a deep recession is imminent, everyone is keeping a close eye on the Fed and the consumer confidence index.

consumer confidence index - retail


Lynn Franco, Senior Director of Economic Indicators at The Conference Board — the organization that produces the index, had this to say about the April results.

“…Purchasing intentions are down overall from recent levels as interest rates have begun rising. Meanwhile, concerns about inflation retreated from an all-time high in March but remained elevated. Looking ahead, inflation and the war in Ukraine will continue to pose downside risks to confidence and may further curb consumer spending this year.”

Are you worried yet? Maybe I should just cancel the order for my oven.

The eCommerce bright spot — or is it?

Okay, so it hasn’t been all doom and gloom on the retail front. Haven’t eComm sales been going through the roof?

The graph below from research firm McKinsey & Company clearly shows the hockey stick growth that happened in the first few months of the pandemic.

US ecommerce penetration - retailAnd while the curve has indeed flattened since those heady days, online sales have continued to grow even after many brick-and-mortar stores reopened. McKinsey reported a 27% YoY growth in eCommerce sales in the US in March 2022. That adds up to an overall increase of 33% from the onset of the pandemic — not too shabby!

But just how profitable are online sales for retailers? Well, it may be one of those things you’re not supposed to say out loud, but for many — eComm is a bit of a dud. Sorry to burst your bubble if you hadn’t already heard.

Why is that? So, it turns out that there are several factors. Let’s start by talking about returns.

According to a National Retail Federation and Appriss Retail report published earlier this year, online sales reached $1.050 trillion in the US in 2021, roughly 23% of the overall $4.583 trillion retail sales. The average return rate for online sales was 20.8%, up 18.1% from the prior year.

How does that compare to returns for in-store sales? I hear you ask. Well, that number was 15.3% in the same period. We all know that returns are an expensive, logistical hassle and an avenue for fraud, so it’s no wonder that retailers and experts alike are sounding the alarm.

Mehmet Sekip Altug, an associate business professor at George Mason University, put it like this, “As online sales increase, the return rate has also increased significantly, and I don’t think it’s a secondary problem anymore.”

Moving right along. If you’ve been running digital acquisition campaigns for a while, no doubt you’ve noticed that your customer acquisition costs, or CAC, as people in the know like to say, have shot up. Why? There have been several new privacy regulations, each with its long acronym.

But the big deal was when Apple changed the rules of the game. After April of 2021, iOS users had to opt-in to sharing their digital footprint information with advertisers — and of course, the majority chose not to. Both factors have made it more costly to attract and convert new customers — eating into what, in many cases, were already razor-thin margins.

And last, but by no means least, low average transaction values for online sales combined with price pressures and increased shipping costs have also chipped away at the bottom line.

The real bright spot is omnichannel

While a pure-play eCommerce approach may not make sense for all retailers, omnichannel can be a real winner. And as the chart below shows, consumers are all in.

US consumers in omnichannel retail

After all, nothing in the digital world can replicate touching and feeling a product — something that’s especially important for premium brands. Physical locations also give you the opportunity to create the memorable, immersive in-store experiences that today’s consumers both expect and crave. Experiences like those created by iconic brands Vans, Ikea, and Toms that build an emotional connection with the consumer, drive sales and loyalty, and can even command premium prices. And the proof is in the pudding — or, more accurate, in the storefront.

Even digitally native brands like Away, Warby Parker, Bonobos, and Everlane have invested in brick-and-mortar to boost credibility and drive sales across channels. This type of activity, of course, has left those who predicted the imminent death of stores feeling quite sheepish.

The question is not whether you need to go in on omnichannel — that ship has sailed. Today, it’s all about making omnichannel work for your business. The critical questions to answer are:

  • How can we deliver outstanding, seamless experiences across our customer touchpoints?
  • How can we be agile and not be left flat-footed the next time the market changes?
  • How can we make swift cross-channel merchandising decisions given supply chain uncertainty?
  • How the heck do we do all of that with our skeletal IT and operations team?

So, wasn’t technology supposed to help us with this?

Err, yes. But here’s the reality. Remember back to the dark days at the beginning of the pandemic? Many retailers (not you, of course) were scrambling to create or expand their digital channels. So, they invested in an eCommerce engine and probably some other tech to facilitate BOPIS and the like.

The trouble is that the new tech didn’t exactly work with the tech they already had — POS, CRM, inventory, order management systems, and the like. That meant a lot of extra work for IT and operations — not great, given what we said earlier about the great resignation.

But the big problem with this band-aid approach was that it didn’t create the stellar omnichannel customer experiences that make loyal, profitable customers.

“What do you mean I can’t return the sneakers I bought online to the store?” or “Why doesn’t my in-store purchase show up in my online account?” or “Why doesn’t your store team see my previous online purchases in your system?” or my personal favorite, “How come your website says the item is in stock at this location, but it’s not here?”

Your customers don’t care that the root cause of many of these issues is the mishmash of technology solutions in your back office. They want you to know everything about them, however, and whenever they interact with your brand. They want you to make their life easier. In short, they want convenience and they want to feel valued.

The unified commerce solution — tech and people

You’ll be glad to hear that there is a solution to make your omnichannel dreams come true — whatever economic storms lie ahead.

Here at KWI, we provide a unified commerce platform so you can maximize sales and profits while delivering great omnichannel experiences that create happy, loyal customers. Our cloud-based platform includes everything you need for omnichannel brilliance — POS, merchandising, eCommerce, Order Management, CRM, and more. No more band-aids and wasted time cobbling together integrations.

But while our software is impressive in its own right, our people and commitment to your success set us apart. Our omnichannel platform comes with our team of in-house retail industry experts that are here for you every step of the way — from implementation through to the day-to-day management of your software and hardware. And all of this included in your fees.

With KWI at the helm, your scarce resources can focus on what they do best — building great retail experiences and driving sales.

For over 35 years, we’ve helped retailers like you navigate stormy waters and reach new destinations stronger. We’d love to do the same for you. Please reach out to us, and we can arrange an initial chat. Bon voyage!