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Internet Retailers Face Post-Covid Challenges as Bankruptcies Rise

bankruptcy internet retailers

By the end of March 2023, nine retailers had filed bankruptcy, compared to two at the same time in 2022. S&P Global Market Intelligence reported the data. Before the filings, S&P Global had identified 11 digital native retailers at risk for bankruptcy.

Why it matters?

The bankruptcies are a symptom of consumers returning to in-store shopping post-Covid, and Internet retailers face inflationary pressures. During Covid, brick-and-mortar store sales plummeted, and internet retailers filled the gap.

Now the gap is gone, and consumers can return to in-store shopping. The bottom line is that consumers want to touch and feel the merchandise. Consumers are back to shopping in-store and online armed with a smartphone. Seventy-nine percent (79%) of shoppers say they check prices online when shopping in-store, according to our March survey of 400 shoppers. The survey also revealed that 40% of consumers shop in-store and online.

Inflation: Inflation has escalated operating and supply chain costs for digitally native retailers. With no storefront, e-tailers have all products shipped. Shipping is a variable cost, unlike rent for brick-and-mortar stores (a predictable cost during the time of a lease agreement).

Now online retailers are expanding to brick-and-mortar. Conversely, some brick-and-mortar retailers are doubling down on their number of stores. Wayfair, the online furniture retailer, announced it is opening stores. At the same time, IKEA is investing $2.2 billion to expand its store footprint in the U.S.

The big picture

With consumers free again to shop anywhere and any way they want, retailers must employ a customer-first strategy in marketing and know where the consumer is at all phases of the shopping experience.

Retailers have undue pressure to manage inflationary costs and, through revenue optimization, improve customer lifetime value.

A customer data platform (CDP) is the brain leading to profitable revenue

Customer lifetime value begins with knowing if the revenue generated by each customer is profitable. Profitable customer acquisition and retention equates to a better customer lifetime value.

As a result, the acquisition and retention teams cannot work in silos but in tandem.

To ensure that the two teams coordinate well, marketers employ an actionable customer data platform (CDP) that includes segmentation and personalization, with artificial intelligence to help understand the best customers to pursue – the ones who will provide the best customer lifetime value (CLV).

A quick analysis can predict acquisition cost as well as expected customer value. Examine the attributes of customers you have acquired, then examine the attributes of the customers who have the highest likelihood of completing not only the first purchase but also of continuing to do business with you – and not just when they get a discount or some other kind of deal – those are the customers that you want to concentrate on attracting.

There’s nothing wrong with offering a discount or some other kind of deal to get the customer “in the door,” as long as your analysis shows that the initial customer acquisition cost will more than pay for itself.

To correctly perform this analysis, marketers must have the right, robust technology – a customer data platform (CDP). The technology has to be able to maintain rich, accurate, and current customer data. This is as well as making the right decisions when using that data.

A CDP provides more than simple segmentation; it also provides pertinent data, insights, and orchestration of marketing messaging. Some CDPs are purpose-built and integrate with existing systems, technologies, and workflows. An insight-driven and actionable CDP allows a retailer to execute the right campaigns with proven analytics – all in one system.

The technology empowers marketers to deliver the right message to the right customer at the right time, via the right channel, rather than bombarding consumers with multiple or non-pertinent messages.

Marketers misfire messaging consumers

According to a survey of Martech leaders with a CDP – sixty-three percent (63%) cite using data to drive digital marketing execution as a significant challenge. Yet, nearly eight-in-10 (79%) have the tools, like a CDP, to aggregate and segregate data to determine the best target customers.

Marketers need a Smart CDP that uses the latest artificial intelligence to decipher and curate pertinent data to drive profitable sales.

As Internet retailers and marketers are in a new battle of runaway costs and lower revenue – a Smart CDP can help address half the battle. Perhaps it can slow down the current spate of internet retailer bankruptcies.

Pini Yakuel is the founder and CEO of Optimove, the first customer-led marketing platform. 

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