The State of Merchandising

Alec:                                                  
Good morning, good afternoon, and welcome to today's CMSWire webinar. My name is Alec, and as always, I'm here today to help answer any of your general or technical questions. But before we get started, I'd like to take some time and welcome you to the State of Merchandising. Thank you all for taking time out of your busy schedules and joining us. Here's a loose overview of the timings of things. These can change as the presentation moves along, so do not hold me to these. At any point during the presentation, if you have a question, do not hesitate to submit that. Click on the ask question tab below our webcams right now. Type your question in and click submit. Content related questions will be saved for some Q&A time at the end, but if it's technical question, I'm going to knock on some wood here, hopefully we don't need any tech assistance, but if you do run into any issues, let me know the issue you're facing in the ask question tab. That way I can work with you directly there. Not to be confused with the ask question tab because it's right next to it is the audience chat. You can chat with your fellow attendees in there and just start things off by letting us know where you're joining in from. I am joining you all from the far southwest suburbs of Chicago. It looks like I have a couple people in here, a couple people from Vancouver, New York, Wisconsin, my neighbor up there. I love the state of Wisconsin. So welcome. Thank you all for joining us. Again, you can chat with your fellow attendees, get some content discussions rolling in there too as the presentation rolls along. I know our presenters have a lot of great statistical information for you today.

So here's a little bit about CMSWire. If you're here, you probably do know who we are, but if you're new, welcome. We were founded in 2003 covering three primary topic areas of digital customer experience, digital workplace, information management, and more. You can read some of our great editorial content from our slew of editors and contributors, all at cmswire.com. There you can also register for more upcoming webinars, our conference coming up and speaking of that conference, we would love to see you at Connect down in Austin, Texas next week. Wow, it has been a long journey as we prepared and put a lot of work into this conference, making it the best that we can for you all. So if you're interested in attending, you can click on the resources tab and right there it'll take you to the landing page. We have a great lineup of speakers from Scott Galloway all the way to Ice T.

I'd love to see you all there and if you do go, let me know. Come up and say hi. I'm sure I'll be running around. And if another thing, if you are planning to join us, let us know in the chat. I'd love to see some of you there. Very happy to be joined by today's sponsors over at Elastic Path. Elastic Path powers mission-critical digital commerce for the world's leading brands such as Intuit, Pella, Deckers Brands, T-Mobile, and over 250 other leading enterprises.

As relentless Innovators, Elastic Path pioneered the headless commerce space in 2011 and spearheaded composable commerce in 2020. So very happy to be joined by Elastic Path and thank you to Elastic Path for making today's webinar possible. You can find out more at elasticpath.com. All right, you're probably thinking, Alec, that's enough from you. Let's get to the actual content today, and we're going to get into that now. And first things first, I'm going to pass things over to Brian Leblanc, director of Solutions Consulting over at Elastic Path to get us started. Brian, over to you.

Brian LeBlanc:                                        
Alright, thanks Alec. Just briefly a little bit about myself. My name is Brian LeBlanc. I'm the Director of Solution Consulting for North America here at Elastic Path. And a little bit about me. I've been in the e-commerce space for about 10 years, and as you can see from the photos behind me, I love to travel the world and ski with my family. A little bit more about Elastic Path. We are a headless composable commerce solution. We've seen growth of about 200% year over year. We have about 200 plus employees globally that you see here represented around the globe. And you'll see a list of all the brands, or not all the brands, but many of the brands that we work with on this slide.

Now, a little bit more about composable commerce. Composable commerce means that Elastic Path is the core commerce engine. We deliver many of the capabilities that you see here in the dark blue hexagons. What's different between this approach and the monolith, and we'll get into more details in this throughout our discussion today, is that they can be easily swapped in and out to create a truly composable solution made up of best of breed applications. So now I'd like to send it back over to Sarah briefly.

Sarah Kimmel:                                          
Thank you, Brian. I'm very excited to be here today. I am Sarah Kimmel. I'm the VP of Research for CMSWire. I have been studying employee experience and customer experience topics for the past 20 years, and I've spent the past three leading research for CMSWire and Reworked, where I produce the annual State of the Digital Customer Experience and the State of the Digital workplace reports. And a little known fact about me is that I'm a pretty good blues singer. I was one of those kids that was volunteered to sing in public a lot, and while I was in college, I fell in love with the blues and ended up singing in public for much of my 20s. My other passion is using data to tell a story that helps people understand what's going on, and that's what I'm going to do today.

I'm very excited to share with you data from a survey that we partnered with Elastic Path to do just in the last couple of months. And I want to tell you a little bit about the data that I'll be sharing with you today. We knew from the State of the Digital Customer Experience data that we've seen really big changes in customer behavior and the use of new platforms and tools to improve customer experience. So we wanted to take a closer look at the trends and opportunities impacting merchandising today, and to see how the changing preferences of customers and the adoption of new technologies might be changing the landscape of merchandising. So the State of Merchandising Survey was delivered online in February and March of 2023, just a couple of months ago. All of the respondents are manager level and above in organizations with 500 or more employees with an annual revenue of 10 million or more.

Almost all of them are in manufacturing, retail, or consumer products, and they all work on or lead the teams responsible for merchandising at their organization. The survey had a total number of respondents of 475, and if you want to take a closer look at the demographics for the study, they're all going to be available in the appendix to the research report, which will be sent to you by early next week, I think by Monday. So let's get into some of the data.

All right, so the first thing that I think that we should look at is the changes in customer behavior or preferences that merchandisers say are having an impact on their merchandising strategy. Now, it's one thing to say that changes are happening, changes are always happening, but which of those changes necessitate a response in how merchandisers are communicating with customers? What do they think they need to respond to? And what merchandisers say is that customers are more sensitive to data privacy, that customers expect more sales and deals, not a big surprise, and that they expect quicker response times from customer support agents. Nearly half of merchandisers say that these changes are impacting their strategy and a little more than one in three also say that they are seeing customers more willing to switch brands, expecting a more personalized shopping experience and also more likely to shop on mobile devices.

So let's look at personalization. The expectation of increased personalization is really interesting, because most merchandisers don't have extensive personalization in place. They're likely to be using customer purchase history or browsing history to personalize the customer experience, but they're much less likely to be personalizing the experience by other demographic variables like gender, job title, age, income. Now, this lines up with what we've seen in the annual Digital Customer Experience Survey as well. A lot of the personalization that's happening out there tends to be pretty basic. And there are also some other issues at play here, with a lot of merchandisers and customer experience professionals playing it safe with data privacy and not extending personalization in ways that would need to leverage a lot of demographic data.

So how are they responding to meet customer expectations? One of the ways is in the tools that they use for their marketing approach. These are the tools that are most commonly used at the moment, and there shouldn't be any huge surprises for you here. We can see that many of these tools and approaches address customer expectations for sales and for deals, which we know that customers are expecting more of. What's especially interesting, though, is when we look at the tools that merchandisers say they are planning to adopt in the near future. And the data shows that organizations are generally in the process of adoption when it comes to merchandising strategies and merchandising tools in a really big way. More than a third of merchandisers are planning on adopting most of the strategies that we asked about in the near future. So amid the dynamic change going on in the world, there's this kind of frenzy to update the toolbox.

The most common tools that they're planning to adopt include complex product configurations, shop the room, pop-up shops, and heat maps. In fact, projected adoption will almost double the use of some of these tools in the near future. Just pretty exciting. That's a lot of change coming. Now, underlying this push is a similar trend in merchandisers use of technologies and platforms that support these strategies. Organizations already have many core parts of their technology toolboxes in place, such as payment processing systems, data analytics tools, customer data platforms. Here we can see that two thirds or more of the merchandisers that we surveyed are using these technologies.

And merchandisers are also expecting growth in a whole new wave of technologies that will help them address new and future trends. Nearly half of merchandisers say that they will be adopting machine learning, virtual reality and augmented reality in their near future. Experiences powered by virtual reality, like virtual dressing rooms and virtual tours, give potential customers a more immersive brand experience. And additionally, chatbots are becoming more important in a time when customers expect quicker response times. So there's a lot happening here. Now, I want to talk for a second about composable commerce. One of the things that we were very curious about was the rate of adoption of composable commerce among merchandisers. A composable solution lets teams create digital commerce experiences that leverage multiple best of breed solutions at the same time. While traditional commerce platforms require organizations to use kind of the same rigid architecture no matter what complex changing needs they have, composable commerce allows for more flexibility by leveraging the best functions of multiple tools together.

So by combining multiple best of breed solutions, companies can create experiences that fit their specific needs a little bit better. And as it turns out, most merchandisers, 72% are using a composable commerce approach already, and another 21% are planning to adopt an approach that's composable within the next year. So this high adoption rate among merchandisers shows the increasing awareness of the benefits that composable commerce offers, including flexibility to respond quickly to changing customer preferences. Every company has specific needs depending on its industry, company size and other factors. And the ability to pick the best of breed vendors instead of relying on a rigid set of predetermined solutions is ultimately much more effective.

Then the other situation in which composable becomes more useful is when you need to connect your merchandising technologies together with other systems used by the business that you may not be able to change. So we're also seeing channels seeing a change in the channels that merchandisers use to reach customers. You can see here that the most common channels currently used are those that you would probably expect; web, apps, online marketplaces, in-store, and Facebook. And the story changes quite a lot, though, when we look at the channels that merchandisers are planning to adopt in the near future.

And what we see here is that texting is becoming increasingly more significant and is the fastest growing channel for sales. In addition, we're seeing a trend toward branching out into social media media channels beyond Facebook. So 41% are planning to adopt Instagram and 40% are planning to adopt TikTok. As more consumers use social media platforms to follow and engage with brands and influencers, merchandisers are using this to their advantage by investing in social commerce. One important thing to think of with the social media channels is that these are all add-ons. So it's not a switch from one to the other, it's all Facebook and TikTok and Instagram. So what's actually happening here is just a proliferation of social media channels in use by merchandisers.

Merchandisers are also interested in personalizing the experience based on the channel. This is pretty interesting. 62% of merchandisers say that they create unique buying experiences for all the channels that they currently use. And another 37% say that they create unique buying experiences for most or for several of the channels that they use. So what's kind of amazing here is that creating unique buying experiences by channel is already pretty much the norm for merchandisers.

We were also interested in the relationship between merchandisers and IT. So how reliant is merchandising on IT? If you think about with the adoption of new digital channels, the adoption of new technologies and platforms, are merchandisers relying heavily on IT? Do they have the agility that they need? And what we found is that currently, very few merchandisers feel that they are able to do their job without the help of IT. Only 9% of merchandisers currently have the freedom, agility, and technical capabilities to do their job on their own. Half say they are somewhat reliant and 41% say that they want more freedom, but they are very reliant on the schedule and bandwidth of IT to get things done. Now, it gets really interesting when we compare the very reliant merchandisers to everyone else to see what sets them apart. And the interesting part about this is that the organizations trying to adopt the most innovative strategies and technologies are the ones most likely to rely on IT for more assistance.

So merchandisers who are very reliant on IT are more likely to use a composable commerce approach, are more likely to create unique buying experiences by channel as well. So this suggests that while implementing a composable approach, they actually become more reliant on IT. One of the largest challenges here is that organizations trying to adopt forward-thinking solutions and strategies end up extremely reliant on their IT department. And as we saw above, this does not mean that those very reliant groups are falling behind. Rather, they're especially interested in being innovative and in trying the latest technologies, but they are held back from experimenting even more because they have already hit a limit on the bandwidth of their IT team. So they want more freedom and agility, but they don't currently have IT. Meanwhile, half of merchandisers say that their manual workload is either a little bit too heavy or much too heavy, and only 50% say that it's about right.

So half of merchandisers are still doing more manual work than they need to. You'll notice that nobody says that they don't do enough, because nobody wants to do more manual work than they absolutely have to. Since merchandisers say that a third of their customers are increasingly choosing to shop via mobile, it's interesting to take a look at the current state of the mobile shopping experience. While more than half of merchandisers, 56%, are most satisfied with their mobile shopping experience, 40% are only somewhat satisfied and 4% are mostly dissatisfied. So what these results tell us is that there's still room for some improvement in the mobile shopping experience. Almost half of merchandisers are pretty lukewarm on the shopping experience that they deliver through mobile. So it's functional, but it's not great. Lots of room to get better there.
 

And finally, we also wanted to know if merchandisers were concerned about the impact of new privacy laws. So new laws for third party data on their ability to execute their merchandising strategy. So what we found here is that most merchandisers, 86%, are very or moderately concerned about laws for third party data. So data security is a big issue for customers and building customer trust when it comes to personal data is imperative for merchandisers to ensure satisfaction and retention. And retailers need certain customer data to build a personalized customer experience for them, which is also something that customers are saying that they want more of.

So there's kind of a tension here between customer expectations on data privacy and their expectations for a more personalized experience. And this tension really kind of demands a solution. And I think the fallout at the moment is that many merchandisers may be defaulting to more basic kinds of personalization in order to avoid this conundrum, but in the process, they end up not increasing personalization for the customers, which is something that customers are looking for. So now I'm going to turn this over to Brian to help put some of this data into context for you and to talk about some possible solutions to these issues. Brian?

Brian LeBlanc:                                        
All right, thank you, Sarah. So talking a little bit about composable commerce adoption, most merchandisers are using a composable commerce approach or are planning to within the next year. This is a very high adoption rate for composable commerce, which really speaks to the prevalence of composable and digital commerce and how outdated all-in-one platforms are becoming. So why are merchandisers embracing a composable commerce approach? Well, mock architecture gives developers the flexibility to make changes on the backend without impacting the front end. Brands are able to choose the best of breed technologies to customize and curate their tech stack. Flexible architecture means that business users are empowered to launch new experiences quickly. TCO is reduced because there's less development time and resources needed to make changes. In Elastic Path's no code, instant on library of integrations helps brands get to market in weeks versus months and reduces TCO by up to 60% for implementation costs. And lastly, agile architecture allows for adaptability to meet customer and market needs.

Almost all merchandisers create unique buying experiences for all channels or most or several channels. Creating unique buying experiences by channel is really the norm nowadays. So why are merchandisers creating unique buying experiences? Well, customer expectations are growing and brands feel that they need unique, personalized experiences that cater to the channel they're purchasing from because of these customer expectations. As you see here, more than a third of merchandisers said that customers want more personalization. Comprehensive data collection and data security practices are vital to make sure that merchandisers can store and strategically use the customer data they collect. The survey found that the most common types of data used to personalize the customer experience are customer purchase history and customer browsing history. While they use demographic data as well, it's much less common.

So now building on the how of personalization through Elastic Path, our product experience manager supports loyalty programs for your best customers. You can very easily spin up loyalty catalogs in just minutes. You can test out pricing based on geo. For example, charging more for customers in California or in Canada, without promotions. Just use a price list. You can't do this in platforms with coupled products and prices. Instead, you have to run a regionalized promotion. And third, you can create unique pricing per variation channel, et cetera, without having to hack it with a promotion.

Now, a little bit more about Unstack. Elastic Path not only supports critical core commerce, such as catalogs, pricing cart, and checkout, we also help merchandisers embrace a composable commerce approach through our front end solution, Unstack. Unstack empowers merchants and accelerates time to market by bringing together commerce, content, and customer data for business users to quickly orchestrate unique front-end experiences that drive business growth without reliance on IT. Business teams are able to wow shoppers with a merchandiser-friendly, no code visual editor that powers personalized data-driven experiences, resulting in higher conversion rates and lower customer acquisition costs. With Unstack, you can de-risk composable by reducing the complexity of building composable commerce solutions with one-click integrations that eliminate custom development work for key friction areas like tracking and analytics, hosted checkout and onsite personalization.

The survey also revealed information on the tools that merchandisers are planning to adopt, to keep up with these customer expectations. The most common tools they're planning to adopt include complex product configuration, shop the room, pop-up stores, and heat maps. In fact, the growth of some of these is almost doubling, signifying that these tools are becoming especially important for teams. With Elastic Path Product Experience Manager or PXM, you can now power every complex merchandising strategy without complex workarounds or hacks. Some examples of this are catalog hot swaps, where you can quickly power new experiences or test new ideas such as product launches, pop-up stores, or flash sales.

You can power unique pricing strategies without hacks. You're able to test out pricing based on geo, as I discussed earlier, without having to hack together promotions. Just use a price list. You can't do this in platforms with coupled products and prices. You can create unique product pricing per variation or channel without having to hack it together with a promotion. You can support businesses where each country has their own tax model. You can also create dynamic or complex bundles that your business requires. You have the ability to discount only one item within the bundle if you want to. You can also discount an item only when an item is in a bundle.

You can merchandise products at the child variation level without custom workarounds. You're able to merchandise different colors separately. For example, put all your pink products within one catalog for breast cancer awareness. You could power shop the look or room experiences by enabling a shopper to click right into the exact product. And you can power e-commerce scenarios where there's an inventory of one, each product details to each product, for each unique product, for serialized products. And lastly, you can make realtime changes to category based navigation using hot swaps, which means that you can move and adjust categories as your business strategy changes without having to ping IT.

Now, according to the survey, only 9% of merchandisers are completely independent of their IT team. Most of them are reliant to some extent on the schedule and bandwidth of IT to get things done. And so by redesigning underlying data structures, including separating product data from pricing data and rethinking catalog management and merchandising capabilities, we give brands complete freedom to design the product experiences their customers expect from loyalty program pricing to shop the room experiences to complex dynamic bundling, without custom hacks and expensive development projects. That's exactly why we built EP Product Experience Management or EPPXM. EPPXM centralizes commerce PIM, product merchandising and catalog composing capabilities into one place for merchandisers to unleash their creativity and launch the unique product experiences their business requires.

With these reimagined capabilities, business teams finally have the control to design and launch the differentiated experiences across every route to market without heavy reliance on IT for custom hacks and expensive workarounds. By redesigning underlying data structures, including separating product data from pricing data, and rethinking catalog management and merchandising capabilities, we give brands complete freedom to design the product experiences their customers expect, from loyalty program pricing to shop the room experiences to complex, dynamic bundling without custom hacks. So you can start with your products, merchandise without limits, and then compose your catalogs.

Now, in conclusion, Elastic Path simplifies the lives of merchandisers by giving them the necessary tools to create new experiences and strategies without elaborate development work or excessive IT assistance. When merchandisers finally have the control and freedom they need, they can innovate much more quickly and create the experiences customers want. So with that, I think we'd like to kick it back over to Sarah for some Q&A.

Sarah Kimmel:                                          
Hi, Alex, do you have some questions for us?

Alec:                                                  
I do. I have a couple in here right now, and I'll start with you on this first one, Brian. But everybody, we have plenty of time. If you have any questions, please do not be shy. Submit those in the Ask Questions tab. But the first question that I'm going to send to you, Brian, is what are some unique merchandising strategies that Elastic Path's customers are currently utilizing?

Brian LeBlanc:                                        
Oh, great question. So one that comes to mind is Serena and Lily. They're a luxury home interior brand that wasn't able to support their multiple skew variations with their monolithic platform. With Elastic Path, their merchandisers are able to power complex product configurations and shop the room experiences without reliance on IT. Our customers are also able to create dynamic bundles, where shoppers are able to choose the products they would like to select in a bundle in minutes without custom workarounds or hacks. Just as an example, upselling and cross selling via bundles can increase revenue by up to 30%.

Alec:                                                  
All right, great. We are going to move along to the next question here, and I'm going to stick with you on it, Brian. What is the biggest challenge when implementing a composable commerce solution?

Brian LeBlanc:                                        
I would say it has to be the complexity of managing a multi-vendor solution. So many brands want embrace composability, but the reality is that managing multiple vendors, the hosting and operational process can be very overwhelming and expensive. So thankfully, elastic Path supports brands through this process with solutions like Integration Sub, which is the library of no code, instant integrations that reduce the time and cost of implementations. We host, manage and monitor the integrations, so brands can focus on mission-critical commerce. We also have a solution called Composable Commerce Experience Assurance, which serves as a one-step solution for multivendor support, so brands don't have to reach out to multiple vendors to solve issues.

Alec:                                                  
All right, great. All right, everybody, that is what seems to be all the questions that we have in the queue. So what we're going to do is we're going to end things a little bit early, but I want to thank you Brian and Sarah, and thank Elastic Path one more time for making today's webinar possible. It's been an absolute pleasure working with the team there. Keep an eye out on your inbox for some follow-ups that will come, but today's webinar has been recorded. You're going to receive a link to that recording in a follow-up email. So again, keep an eye open on your inbox for that information.
                                                       

Again, we'd love to see you down in Austin, Texas next week for our Connect Conference. In the post event survey today, you will have an opportunity to throw your name in the hat to possibly win a free ticket. So thank you once more everybody, for attending, and we will see you on the next one.