The digital landscape has been significantly impacted over the past two years, particularly within the retail industry. Retail companies were compelled to accelerate their digital capabilities and now face the challenge of optimizing and refining these digital practices to scale. While e-commerce is expected to continue gaining a greater share of retail, more work is needed to increase profitability.
Publicis Sapient and Salesforce partnered with Ipsos, the third-largest research and insight company in the world, to conduct the Global Retail Decision-Makers survey. This study was designed to understand what retailers are prioritizing regarding e-commerce investments, the steps they are taking to improve e-commerce profitability, and more. Ipsos surveyed approximately 300 Retail Decision-Makers based in seven markets: United States, United Kingdom, Germany, Denmark, Norway, Sweden, and Australia.
As businesses shift toward digital, there is an increased need to find ways to increase profitability with e-commerce. Retail Decision-Makers expect e-commerce revenue growth to outpace e-commerce profit growth, and many see e-commerce profitability as a challenge.
To meet COVID-19 pandemic demands, Retail Decision-Makers recount a significant ramp-up of efforts that were not always executed optimally due to the fast-paced nature of the implementations. This indicates a need for greater investments for retailers to face current challenges and seize future growth opportunities.
An overwhelming 9 in 10 Retail Decision-Makers claim to know what steps are needed to improve e-commerce profitability; however, half struggle to make the necessary investments.
Retail Decision-Makers believe that digital customer experience and omnichannel commerce represent the greatest potential to boost e-commerce profitability.
E-commerce-only retailers are twice as likely as those with brick-and-mortar stores to say they are not currently profitable (44% vs. 20%), and nearly twice as likely to say they are struggling to make the investments necessary to improve profitability (69% vs. 39%). They are also more likely to see service as paramount to improving profitability (50% vs. 29% among brick-and-mortar).
Grocery retailers face unique challenges and are among the least likely to expect improvement this year in e-commerce profitability (61%). However, they rank digitizing the store as the number one investment being made today. Within this category, robotics for in-store cleaning or inventory management is the leading digital store investment, with 36% investing. Supply chain modernization ranks as the second most important investment area for increased e-commerce profitability (43%).
Identifying ways to be more profitable with e-commerce is essential in the shift towards digital.
There is a near-consensus among Retail Decision-Makers that the COVID-19 pandemic has forever changed the nature of retail. 85% hold this view overall, with a significant difference between brick-and-mortar operations and e-commerce-only retailers. There is even greater agreement that e-commerce will continue to grow, regardless of what pandemic twists and turns lie ahead (96% overall).
In line with expectations for e-commerce growth, 82% of Retail Decision-Makers anticipate their e-commerce revenue improving in the next year. However, expectations for e-commerce profit are not as high; just over 73% expect increases in the coming year.
Some of the weakest expectations for e-commerce profits come from the grocery sector (61% expect improvement), pharmacy/corner shops (57%), retailers with less than $500M in annual revenue (60%), and Nordic retailers (59%). Notably, there is less of an e-commerce profit gap in the US (84% expect revenue to improve, while 80% say the same of e-commerce profits).
E-commerce business struggles to achieve profitability; 1 in 4 say e-commerce is NOT profitable.
In line with the e-commerce profit gap, many Retail Decision-Makers acknowledge e-commerce profitability challenges. Among those who have both e-commerce and brick-and-mortar operations, nearly half (46%) say that e-commerce is less profitable than in-store business. Almost 37% of Retail Decision-Makers overall agree that their e-commerce business is not meeting profitability targets, while 27% say e-commerce is hurting overall profitability, and 25% say it is not profitable at all.
E-commerce-only Retail Decision-Makers are roughly twice as likely as those with brick-and-mortar locations to agree that e-commerce is hurting profitability metrics and is not currently profitable. The largest-revenue companies ($5B+) are above average in saying that e-commerce is less profitable than their brick-and-mortar operations. Australia-based Retail Decision-Makers tend to over-index on profitability challenges.
| Segment | Less profitable than in-store (B&M) | Below profit target | Hurting overall profitability | Not currently profitable |
|---|---|---|---|---|
| Total | 46% | 37% | 27% | 25% |
| Retail | 45% | 37% | 28% | 25% |
| Grocery | 54% | 39% | 25% | 23% |
| E-commerce Only | – | 50% | 42% | 44% |
| Brick & Mortar | 46% | 34% | 23% | 20% |
| Segment | Less profitable than in-store (B&M) | Below profit target | Hurting overall profitability | Not currently profitable |
|---|---|---|---|---|
| US | 54% | 35% | 27% | 19% |
| EUR | 36% | 27% | 13% | 13% |
| Nordics | 42% | 42% | 34% | 34% |
| AUS | 62% | 60% | 52% | 52% |
| <$500M | 47% | 44% | 36% | 33% |
| $500M-$750M | 45% | 47% | 34% | 33% |
| $750M-$5B | 36% | 28% | 20% | 15% |
| $5B+ | 56% | 37% | 26% | 24% |
Significant efforts to meet pandemic needs were executed, but were they done well?
Upwards of 93% of Retail Decision-Makers say their retail company made significant changes to meet the demands of the COVID-19 pandemic. This sentiment is consistent across markets, revenue classes, and retail sectors. However, the sudden onset of the pandemic caused many to ramp up digital efforts in less-than-optimal ways. Fully 70% of Retail Decision-Makers hold this view, with e-commerce-only retailers (78%) and those in the specialty non-apparel space (80%) being among the most likely to agree. The lower the revenue, the more likely the retailer is to agree that while they made changes quickly, they didn’t necessarily optimize those changes: 76% among retailers earning less than $500M in annual revenue, 77% among $500M-$750M retailers, and 67% among $750M+ retailers.
9 in 10 claim to know what’s needed to improve e-commerce profitability, but half struggle to deliver.
There is broad agreement among Retail Decision-Makers that their companies know what improvements are needed to boost their e-commerce business (90%). While this view largely holds up across retail subgroups, mass merchants are somewhat lagging (82%).
However, being able to identify necessary improvements and actually investing in them are two different things. More than 44% say their companies struggle here. Those most inclined to agree include Nordic retailers (71% struggle), those based in Australia (60%), department stores (67%), and e-commerce-only businesses (69%, significantly higher than retailers with brick-and-mortar operations at 39%).
Revenue tells a compelling story: roughly 20 percentage points separate those bringing in less than $750M in annual revenue from those earning $750M+ on finding it difficult to invest.
Digital customer experience and omnichannel commerce have the greatest potential to boost profitability.
When asked which investment areas are most critical to increasing profitability, digital customer experience and omnichannel commerce take the top spots (50% or higher among Retail Decision-Makers). Supply chain modernization and marketing technology/data monetization form a middle tier (selected by roughly 4 in 10). Customer service, digital store, and strategy land at the bottom (cited by about 3 in 10).
Decision-Makers at brick-and-mortar retailers are more likely than e-commerce-only retailers to see investment in omnichannel commerce as necessary to improve profitability, while the opposite is true for customer service. Supply chain modernization slightly edges out omnichannel commerce as the second-most important investment area among grocery Retail Decision-Makers.
Holistic omnichannel digital experience is the clear priority.
Whether looking at short-term challenges or longer-term opportunities, Retail Decision-Makers overall and across key retail groups gravitate towards investments in a holistic omnichannel digital experience. This is also the top area where retailers are actually making investments today.
Looking at the next two investment areas — the mobile app and things like social selling, live streaming, and agent-assisted shopping — there are a couple of callouts. In the short term, there is generally little variation across key retail audiences on these items. Yet when looking further down the road, social selling, live streaming, and agent-assisted shopping generally trump the mobile app. The only exception is e-commerce-only retailers, where the two are virtually tied.
| Segment | Digital Customer Experience | Omnichannel Commerce | Supply Chain Modernization | Marketing Tech/Data Monetization | Customer Service | Digital Store | Strategy |
|---|---|---|---|---|---|---|---|
| Total | 53% | 50% | 43% | 38% | 33% | 28% | 27% |
| Retail | 55% | 52% | 42% | 40% | 33% | 27% | 27% |
| Grocery | 46% | 39% | 43% | 27% | 30% | 34% | 30% |
| E-commerce Only | 53% | 31% | 33% | 53% | 50% | 25% | 25% |
| Brick & Mortar | 53% | 54% | 45% | 35% | 29% | 30% | 28% |
| Segment | Holistic Omnichannel Digital Experience (Near-term) | Mobile App (Near-term) | Social Selling/Live Streaming/Agent-assisted Shopping (Near-term) | Holistic Omnichannel Digital Experience (Long-term) | Social Selling/Live Streaming/Agent-assisted Shopping (Long-term) | Mobile App (Long-term) |
|---|---|---|---|---|---|---|
| Total | 54% | 23% | 23% | 53% | 31% | 16% |
| Retail | 54% | 24% | 22% | 55% | 31% | 14% |
| Grocery | 57% | 18% | 25% | 43% | 32% | 25% |
| E-commerce Only | 47% | 28% | 25% | 44% | 42% | 14% |
| Brick & Mortar | 56% | 21% | 23% | 57% | 29% | 14% |
Replatforming and expansion through marketplaces are top challenges today, with current investment backing this up. Long-term, dynamic pricing comes into play. Grocery looks a little different throughout.
The leading short-term Omnichannel Commerce challenge overall and among most key retail subgroups is re-platforming. Expanding through marketplaces is a close second. Retailers investing in Omnichannel Commerce are putting their money in these areas as well. When taking a longer view of growth opportunities, expansion takes the top spot, followed by dynamic pricing and promotions.
In each of these areas, Retail Decision-Makers in the grocery sector diverge. For instance, the shift to the cloud ranks second among the list of current challenges and areas where retailers are investing. Moreover, microservices and headless e-commerce are the second most pressing long-term opportunity.
| Segment | Replatforming (Near-term) | Marketplaces (Near-term) | Dynamic Pricing (Near-term) | Microservices/Headless (Near-term) | Shift to Cloud (Near-term) | Marketplaces (Long-term) | Dynamic Pricing (Long-term) | Microservices/Headless (Long-term) | Replatforming (Long-term) | Shift to Cloud (Long-term) |
|---|---|---|---|---|---|---|---|---|---|---|
| Total | 28% | 24% | 20% | 18% | 11% | 30% | 26% | 17% | 16% | 11% |
| Retail | 28% | 24% | 21% | 18% | 8% | 32% | 24% | 16% | 16% | 11% |
| Grocery | 27% | 21% | 11% | 18% | 23% | 18% | 32% | 21% | 16% | 14% |
| E-commerce Only | 25% | 36% | 19% | 8% | 11% | 28% | 33% | 17% | 11% | 11% |
| Brick & Mortar | 29% | 23% | 19% | 20% | 10% | 31% | 23% | 17% | 17% | 11% |
Shipping optimization and offering multiple shipping options are top challenges today, supported by investments. Looking ahead, retailers want to tackle MFCs and automated fulfillment.
The top short-term Supply Chain Modernization challenge overall and among key retail subgroups is shipping optimization. Providing multiple shipping options typically ranks second across groups. Today, these are the top investment areas among those investing in supply chain modernization as well.
MFCs (Micro-Fulfillment Centers) rank as the #3 challenge among Retail Decision-Makers overall and #2 among those in the grocery sector. When looking ahead to future opportunities, MFCs move up to take the top spot, along with shipping optimization.
| Segment | Shipping Optimization (Near-term) | Multiple Shipping Options (Near-term) | MFCs/Automated Fulfillment (Near-term) | Inventory Visibility (Near-term) | Sourcing/Nearshoring (Near-term) | Returns Optimization (Near-term) | Manual Picking App (Near-term) | MFCs/Automated Fulfillment (Long-term) | Shipping Optimization (Long-term) | Multiple Shipping Options (Long-term) | Inventory Visibility (Long-term) | Sourcing/Nearshoring (Long-term) | Returns Optimization (Long-term) | Manual Picking App (Long-term) |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Total | 27% | 18% | 14% | 13% | 12% | 12% | 4% | 25% | 24% | 17% | 12% | 11% | 8% | 4% |
| Retail | 26% | 20% | 13% | 13% | 13% | 12% | 4% | 24% | 23% | 18% | 12% | 12% | 7% | 4% |
| Grocery | 32% | 7% | 21% | 11% | 7% | 14% | 9% | 25% | 30% | 11% | 11% | 5% | 14% | 5% |
| E-commerce Only | 22% | 19% | 7% | 19% | 6% | 14% | 3% | 22% | 19% | 22% | 19% | 8% | 8% | - |
| Brick & Mortar | 27% | 20% | 14% | 12% | 12% | 11% | 5% | 26% | 25% | 16% | 10% | 11% | 8% | 4% |
Business intelligence and analytics are a top focus for many; Retail media platforms/site monetization “pops” among Grocery and e-commerce-only retailers.
From short-term challenges to longer-term opportunities, to areas where retailers are already investing, business intelligence and analytics are key. This investment area ranks in the top two among Retail Decision-Makers overall and across key retail groups. Personalization often lands in second place as both a short-term challenge and an area where retailers are currently making investments — and a close third as a longer-term priority.
Work toward onsite and offsite advertising carries more weight among Grocery and e-commerce-only retailers.
| Segment | Business Intelligence & Analytics (Near-term) | Personalization (Near-term) | CDP/Data Lakes/Customer 360 (Near-term) | Retail Media Platforms/Site Monetization (Near-term) | Content Management/DAMs (Near-term) | Search Platforms (Near-term) | Business Intelligence & Analytics (Long-term) | CDP/Data Lakes/Customer 360 (Long-term) | Personalization (Long-term) | Retail Media Platforms/Site Monetization (Long-term) | Search Platforms (Long-term) | Content Management/DAMs (Long-term) |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Total | 34% | 18% | 15% | 15% | 12% | 8% | 30% | 20% | 19% | 17% | 8% | 8% |
| Retail | 35% | 17% | 15% | 13% | 12% | 8% | 30% | 21% | 20% | 16% | 6% | 7% |
| Grocery | 25% | 23% | 14% | 25% | 9% | 5% | 32% | 11% | 11% | 23% | 14% | 9% |
| E-commerce Only | 25% | 25% | 3% | 28% | 11% | 8% | 22% | 14% | 6% | 28% | 22% | 8% |
| Brick & Mortar | 35% | 17% | 17% | 13% | 11% | 7% | 31% | 21% | 21% | 14% | 6% | 7% |
Self-service and chat are generally the most pressing.
Whether looking at short-term challenges or longer-term opportunities, Retail Decision-Makers overall and across key retail groups are keenly interested in self-service online customer support tools. This initiative takes the top spot in terms of where retailers are actually investing — in all cases except e-commerce-only retailers, who are putting more into chat-based support.
Apps for sales associates to help with clienteling are also important to grocery Retail Decision-Makers (near-term and long-term) and those working with e-commerce-only retail organizations (long-term).
| Segment | Self-service Support (Near-term) | Chat-based Support (Near-term) | Apps for Sales Associates (Near-term) | Video Support (Near-term) | Self-service Support (Long-term) | Chat-based Support (Long-term) | Apps for Sales Associates (Long-term) | Video Support (Long-term) |
|---|---|---|---|---|---|---|---|---|
| Total | 41% | 30% | 21% | 8% | 40% | 27% | 21% | 12% |
| Retail | 41% | 31% | 21% | 7% | 39% | 28% | 22% | 12% |
| Grocery | 43% | 23% | 25% | 9% | 46% | 21% | 21% | 14% |
| E-commerce Only | 36% | 33% | 22% | 8% | 33% | 22% | 25% | 19% |
| Brick & Mortar | 42% | 30% | 22% | 6% | 42% | 28% | 20% | 11% |
This concludes the main content sections of the report. All data and insights are retained as presented in the original transcription, with improved readability and logical flow.