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Vertical Integration and the Business of Retail

Posted by Quincy K on August 24, 2017

Ecommerce technology continues to alter the retail marketplace landscape. Retailers can unlock new business opportunities through vertically integrating ecommerce solutions with performance marketing and operations. Vertical integration can be a silver bullet for cash-strapped merchants needing to keep up with rapidly changing consumer expectations while improving their success and profitability.

Common Advantages

Expanding retail operations and enhancing business functions deliver certain advantages. Data sharing technology allows organizations to fully leverage internal data and external collaboration. Integrated systems allows business leaders to redesign workflows, processes and structures to meet shared quality and efficiency goals. For example, organizations that coordinate online digital marketing with their ecommerce platform can adjust media buys and messaging for inventory changes or dynamic pricing. Having access to timely data and real-time monitoring helps to control costs, increase profitability, respond to consumers and support different departments.

Product Differentiation

Product differentiation now includes the entire experience a customer has with a brand. That experience can mean the difference between commercial failure and success. This is especially important to small- to medium-sized retailers that must deal with growing competition, more selective consumers and more critical search engine algorithms. Some retailers have found that the path to product differentiation may be achieved through multiple functions, which include merchandising, creative design, digital imaging and video and even call center services. By maintaining unified management of these areas, retailers can easily and safely experiment with different digital marketing approaches using a direct feedback loop from the front lines. It's this ecosystem that elevates the right strategies to meet their and their customers' individual needs.

Cost Control

Lack of cash flow and financial knowledge are the primary reasons that many businesses fail within the first few years. Retailers can use ecommerce solutions to take advantage of better technology and streamlined processes. A retailer that controls their fulfillment and distribution operations, as well as their merchandising and performance marketing functions, will enjoy better control over the value chain. The more that retailers gain coordinated control over distribution and marketing functions, the faster they can grow.

Competitive Advantages

The emergence of personalized experiences across digital channels has extended to product design and manufacturing.  Retailers that vertically integrate business services with the supply chain can gain a critical competitive advantage over larger players. Stephen-Curry-Wraparound-Pass-Dunk.jpgFor example, they may be able to gain early access to scarce resources and exclusive markets. Or, more likely, they can turn customer feedback into fast-turn designs. Speed to market from ideation to production keeps a brand's customers on trend and loyal. Retailers that actually invest in manufacturing firms may gain access to patents, trade secrets and proprietary technology. 

The Case for Integrated Marketing

Within a vertically integrated ecommerce solution, there are opportunities to integrate within key functions. There are many approaches to marketing, but an integrated performance marketing function is critical because it focuses on achieving goals and milestones through shared initiatives and commitments. The foundation of an excellent performance marketing strategy is a single version of the truth. This includes revenue attribution, brand positioning and targeting of specific customer segments. All online engagements, whether it's an Instagram post, a product video view or an add to card can inform optimization across all channels. In addition to making every media dollar more efficient, it won't be long before these "micro-conversions" inform better product design and brand experience across the entire organization.

Ecommerce Technology

Retailers that engage in ecommerce must all deal with their unique. They should invest in ecommerce platforms that are both nimble and scaleable for a vertically integrated omnichannel organization. The platform should facilitate a single source of customer and inventory data that is transparent to both customers and especially store associates.  It should also be well-funded to adapt to as yet unseen changes to consumer behavior and technology adoption.

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Topics: Ecommerce, Retail, performance marketing, vertical integration

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