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Recap: Samir Bhavnani and Gopal Shah on “Unpacking the Digital Shelf”
August 23, 2023
Having a general manager mindset is becoming increasingly imperative, as commerce leaders consider the current focus on profitability in the broader landscape. Exploring this very theme, an episode of “Unpacking the Digital Shelf” podcast by the Digital Shelf Institute places profitability squarely in the spotlight.
Samir Bhavnani, VP of Sales, and Gopal Shah, Head of Product Marketing at CommerceIQ, team up with hosts Peter Crosby and Lauren Livack to provide valuable insights into this exciting digital shelf journey. In this article, we provide an abridged version of their discussion as recap.
Peter Crosby: How are the roles or the focus of leaders changing in the present ecommerce path?
Samir Bhavnani: The surge driven by the COVID pandemic is a rising tide that lifted all boats regardless of everyone’s expertise at running a P&L. As we move away from an intense growth arena and into a recessionary time, there’s a need to embrace a more mature business mindset or what I call a “return to adulthood.” This demands a shift back to responsible business practices, in which we must address issues like preventing losses, optimizing product availability, and managing fees.
PC: Are the KPIs changing to be able to do that? Or what specific shift is taking place?
SB: It all comes down to brass tacks, centered on tactics, execution, and measurement of KPIs crucial to your business or subcategory. Performance gets a larger spotlight coming from the board to the investors. In contrast to a couple of years ago when there’s effortless growth, the current landscape is very competitive. It’s essential to understand not only how to prevent leakage events, but also how to shift to offense to capitalize on competitor vulnerabilities.
Lauren Livack: When we look at how brands are looking at their marketing mix model, what has really changed over time?
Gopal Shah: Building on Samir’s point, those overseeing retail media are taking on a general manager mindset. It’s no longer about KPIs in isolation, but the entire business. We’re seeing the focus shifting away from looking at Return on Ad Spend (ROAS) as your true north, as the emphasis now lies in driving the right marketing mix to enhance contribution profit. This includes promoting specific SKUs through retail media while potentially deprioritizing others. Now that growth is not a given, the shift is towards driving profitable growth instead of growth at all costs.
LL: Is this a big internal shift? And do you think different functions are ready to consider the approach more holistically?
GS: Yes, it’s an internal shift but it’s met with minimal resistance. I think the big challenge is just the fear of the unknown. Most retailers primarily provide data on ROAS, which leaves a data gap towards true incrementality. More people are utilizing Incremental ROAS (iROAS) to address this, as it involves measuring paid activity and organic halo and understanding the most effective bids, keywords, and SKUs.
Brands can either redirect savings to sustain the bottom line or reinvest in incrementality-based optimization for sustained growth. This is a step change anticipated across channels and industries and the focus now is on the importance of activating early.
LL: IROAS speaks so well to how organic and paid are complementary. Have you seen that convergence with some of your clients?
GS: The key lies in driving paid efforts to enhance organic growth, not only in terms of search relevance but also insights. Brand teams might own the content side and the shopper marketing teams might have retail media, but the optimal approach involves having a unified data set. Depending on the structure of the organization, all teams responsible for various aspects such as content and retail media should be marching in the same direction.
PC: We’re starting to see organizations reshuffle in this period and it seems like it’s working. Are you seeing this kind of redesign among the companies you work with?
GS: We’re seeing a mix out there. The most definitive development is the clear delineation of demand generation and demand capture in the P&L side, and how that aligns with the sales team. Demand capture involves performance marketing and paid search, so it’s unfortunately counted more as trade. Organizational structures vary, with some brands having unified end to end ecommerce groups, while others integrate ecommerce and performance marketing into brand teams themselves.
LL: I think the democratization of ecommerce across the business is the goal for every organization. It’s just about what the steps are and how long it’s going to take to do that.
PC: And it’s happening on the retailer side, too. Do you agree?
SB: A hundred percent. The focus is on optimizing spending. With changing methods and reduced silos, questions center on allocating a dollar – should it be spent on an end cap, an organic term, a DSP? Now, we have the ability to say the best way to spend, as opposed to the previous approach of blindly adding funds and assuming ROAS would improve. Now, we need to think about it from the lens of profitability to make sure none of that dollar is wasted.
LL: You made such a good point, because we’re all marching towards the same metric at the end.
PC: Another area that’s an incredibly important part of running a business is the order and payment terms. Are you seeing shifts on how brands are handling that?
GS: Two key themes emerge: an intense focus on reducing inventory carrying costs and the improvement of the cash conversion cycle, with payment terms and operational efficiency in focus. Brands are now actively addressing shortages, operational fees, and order to cash improvements for increased profitability. A couple of years ago, these concerns were buried in the back end, but now they are legitimate priorities to drive extra profit for the brand.
LL: Is this also connected to the management of in-stock versus out-of-stock situations and the collaboration of teams handling supply chain, sales, and marketing?
GS: This is the perfect example of how true integration yields optimal results for both brands and retailers. Historically, maximizing in-stock meant excess inventory, but supply constraints and carrying costs have shifted this approach. Now, the best practice is to make sure every single retail media activation is tied back to every single purchase order. Brands should be self-adjusting spend based on inventory levels. Brands that are excelling in this and partnering with their retailers to derive accurate forecasts are going to succeed.
PC: I can imagine the data necessary for that. Does it exist in the world today?
GS: It does. Brands are facing the challenge of tapping into and effectively activating against that data. Existing systems involve separate portals for purchase orders, inventory, retail media, and trade promotions. The ideal solution is a platform enabling teams to reference the same data and influence forecasting, supply, as well as demand through retail media.
LL: How are you seeing brands connect content back to sales and profitability, particularly considering the critical factor of in-stock versus out-of-stock situations on the digital shelf?
GS: Brands are focusing on the organic side that makes up 80% of the traffic. Obviously, priority will be on content and in-stock situations. A good example of this is one of our customers in the alcohol category, which saw a remarkable 700-800 basis point conversion rate improvement by addressing missing keywords and relevant descriptions. As part of enhancing organic share of voice and impact, brands have dedicated teams managing content and out-of-stock signals to enable proactive demand planning and retail strategies.
LL: Who gets involved in conversations to make sure that there is cross functionality to be able to execute that approach?
GS: The broader theme I’m noticing is the transformation from ecommerce to just commerce. It’s no longer an ancillary group but an intentional goal to be embedded within the entire organization. This shift is observed throughout various organizations, with VP of ecommerce roles prioritizing operational excellence and seamless integration within the overall structure. Success for functions like ecommerce channel management entails embedding their capabilities throughout the organization, and that encompasses people, processes, and technology.
SB: The traditional notion of staying in one’s lane doesn’t exist anymore. Interdepartmental relationships are vital; marketing, supply, and finance need to collaborate closely. For instance, when a product starts trending on platforms like TikTok, retail media teams should be aware of it alongside real-time stock updates. Organizational structures are rapidly evolving, breaking down silos and enabling data-driven action. Data availability varies by merchant and as a result, the scope of impact may differ based on the specific merchant’s data resources.
PC: If individuals lack clear incentives and recognition for broader business impact, achieving the omnichannel goal and desired behaviors becomes challenging. How is the evolving finance and business connection addressing this issue?
SB: What’s happening is like the concept of “no stone left unturned.” Previously, fees and fines were often dismissed as a standard cost of business. Now, finance organizations are now bringing in technology to address these problems. Traditional manual processes involve Excel and data from multiple sources to dispute fines and fees. Forward-thinking companies are adopting automation to dispute every charge as they aim to recover every penny because they understand that it’s a bottomline dollar. If you can impact half a percent or more, you’re going to be happy come bonus time.
PC: Are you seeing customers actually win some of those battles?
SB: Yes, we see this a lot. It’s a fundamental shift in how things are done. Instead of manual processes, automation takes the lead. It provides accurate information to retailers like Amazon or Walmart, and that facilitates prompt resolution of invalid charges. If it’s valid, then the customer finds out more quickly. The focus is on identifying root causes, such as consistent issues with product packaging or specific fulfillment centers. The ultimate aim is to reduce occurrences by addressing these underlying factors.
PC: As CommerceIQ is driving innovation for customers at this time, would you say that you’re building towards addressing the possibility that introducing technology could drive conversations on existing obstacles?
GS: In some say, we are. The sweet spot is where 1 plus 1 equals 3. I think the brands that are most successful recognize the potential of technology to streamline tasks and empower teams to tackle underlying issues. Inevitably, this is going to be the future, where there are no siloed data sets. Brands that can openly embrace that are going to be the most successful.
PC: I love the idea that 1 plus 1 equals 3, as 3 is the omni channel and total performance that we’re finally getting to. I think people are now seeing the value of putting digital and in-store together, and the focus is turning towards turning those experiments into operational excellence.
GS: Yes, and it’s exciting that the omni channel approach also considers the cost to serve. The shift to omni channel means improved unit economics in some categories. Integrating this mentality with ecommerce best practices is truly exciting. Even retailers are not going to view digital and ecommerce as separate silos anymore. They’re at the core of the future of retail.
Interested to hear the full discussion? Listen to the episode here: