19 Nov 2019
Merchants: Digital presence and strategy are key to success in todays competitive environment
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By Andrew Quartermaine
Over the last decade, merchants across all sectors have gone through a metamorphosis of sorts, with new online merchants emerging and often growing fast and furiously, while many larger, physical anchor stores struggle to remain relevant in the face of digital displacement. Now more than ever, merchants need to innovate to stay relevant to their customers in a fiercely competitive landscape with constantly changing channel and buying desires. Our merchant eBook, How to become a Payments Trailblazer, recently published as part of the Culture of Innovation Index by ACI Worldwide and Ovum, explores the attitudes toward innovation among merchants across four key vertical sectors “ retail, hospitality, digital goods and telecoms. The index identifies five types of organisations, as defined by their approach to innovation and business transformation: Laggards, Emerging, Tech-led, Advanced and Trailblazers. The aim of the exercise is simple: to identify not only the factors that separate the most innovative businesses from the laggards, but also to find out what trailblazing merchants do differently from the rest.Merchants that have a strong digital presence will have the edge
Our research has delivered some interesting and surprising findings: digitally-driven mid-tier merchants are emerging as winners of the global innovation race “ for now. According to the index, 37% of mid-tier merchants with annual revenues between $5bn and $10bn are either Advanced or Trailblazers when it comes to innovation, whereas 23% in this group are classified as Laggards. Looking at the worlds largest merchants, the situation reverses: 37% of merchants with annual revenues of at least $10bn are Innovation Laggards; 22% are classified as Advanced and only 8% are Trailblazers. There are several explanations for this phenomenon. Merchants everywhere are challenged by pressure from new entrants, the breakdown of traditional industry boundaries, and growing customer preference for a digital-led or digital-influenced purchasing experience. Many of the mid-tier merchants in the $5bn and $10bn revenue range are relative newcomers, often ecommerce companies that are able to cater quickly to consumers preferences for a digital-led or influenced shopping experience, whereas many of the worlds largest merchants have also embarked on ambitious and challenging digital transformation programs, and they often have a large number of physical stores and legacy platforms to contend with. However, I am convinced that businesses that have a strong digital presence and strategy, whether they are big or small, will have the edge in todays competitive environment.
How to approach digital transformation as a merchant
The term digital transformation is widely used to describe a range of large-scale projects with an array of objectives and outcomes. In practice, these sit on a continuum between two extremes. Merchants need to differentiate between initiatives that are short-term responses to current challenges and those that are longer-term and designed to reshape how they do business. While both approaches are informed by the need to differentiate and enhance customer experience, the speed and agility required to address short-term priorities should not be achieved at the expense of strategic initiatives leading to more fundamental digital transformation. Merchants need to take a realistic look at how they balance these demands to plan properly for success.Investment in AI technologies is growing, and security remains a key issue
Our research also finds that the investment in AI technologies is growing, with the hospitality and telecoms sectors most heavily focused. Among hospitality businesses, 42% have clear plans around increased use of technologies such as machine learning and bots, while the figure is 39% for telecoms. In the case of hospitality, this reflects a growing emphasis on the use of data across operational areas such as supply chains, logistics and maintenance. Security remains a key issue. However, the need to provide a smooth customer experience while not compromising security remains a delicate balance. At a global level, 73% of merchants believe that their risks of a data breach are higher than a year ago, and 76% view security concerns as a brake on their ability to innovate. Interestingly, merchants in the Trailblazer category are less concerned about this point, perhaps reflecting on past investments in their fraud detection and prevention capabilities.
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