Customers have many shopping options these days: ecommerce storefronts, physical stores, curbside pickup, buy online and pickup in store, mobile apps, and more. The ability for retailers to offer these options didn’t just happen overnight; it’s the result of a successful retail ecosystem.
Retail ecosystems allow retailers to create seamless omnichannel experiences that delight customers and fuel innovation. Here’s what you need to know about retail ecosystems.
Table of Contents
What is a retail ecosystem?
A retail ecosystem is an integrated collection of systems (such as order management and fulfillment) and providers (including suppliers and distributors) that collaborate to sell goods to individuals. Its purpose is to implement systems that attract new customers, strengthen existing customer relationships, and build customer lifetime value that drives profits and revenue.
Each retail ecosystem may include a combination of ecommerce platforms, appointment booking services, and customer relationship management (CRM) platforms. It also includes various providers across the supply chain.
Components of retail ecosystem
A retail ecosystem is comprised of several components:
Suppliers, or vendors, provide retailers with their inventory. Suppliers act as the middle-person between manufacturers and retailers, buying products from a manufacturer and selling them to a distributor or retailer for resale. They can also provide raw materials to manufacturers to create products.
Manufacturers work with retailers and suppliers to design and create products for sale. As producers of the finished goods, they are key supply partners and a vital part of the supply chain, together with retailers, suppliers, and distributors to get products to the end consumer.
A distributor is an intermediary between a manufacturer and a supplier or retailer. Manufacturers work directly with distributors to move products to retailers. There are several types of distribution networks, such as wholesale (getting goods from manufacturers and distributing them to retailers or consumers), direct to consumer (DTC), where brands sell to consumers directly, or traditional retailers.
Retailers, which can be brick-and-mortar or online, sell goods to customers. Retailers function in a variety of ways. They might sell their own products, sell another brand’s products (such as CeraVe sold at Walgreens), use a third-party distribution method (a specialty food shop delivering groceries via Instacart), or partner with a DTC brand to sell their products (Megababe at Target).
Customers are at the receiving end of the retail ecosystem. In most cases, they deal with the retailer directly. A customer, however, might interact with a distributor directly if they purchase from DTC brands like Warby Parker and Casper.
Collaboration in retail ecosystems: a key to success
Collaboration makes it possible for the retailer to maintain a consistent customer experience across multiple channels for its customers. Collaborative retail ecosystems allow businesses to:
Integrate systems and technologies
Different retail ecosystem technologies can integrate with each other via application program interfaces (APIs). APIs allow two or more computer programs to communicate with each other to perform actions. For a retail ecosystem to function flawlessly, different apps and services need to talk to each other to perform the functions a customer expects from a retailer.
For example, an API can enable a retailer’s inventory management software to receive data from both its in-store inventory and distribution center inventory. So, whether a customer purchases the same item from a physical store or online, the retailer has accurate insight into the inventory across channels.
Combine digital conveniences with physical services
Retail ecosystems enable brands and retailers to interweave digital conveniences with physical services, such as the ability to pick up or return orders online or in stores. When your business delivers on an omnichannel strategy—that is, when all shopping channels are aligned to create a unified customer experience—customers enjoy the convenience of every shopping platform. Whether they shop online or in-store, their order history and contact information remain consistent.
Retail ecosystems make it easier for many retailers to scale quickly, add new brands, keep up with customer demand, and create innovative store formats and experiences to attract customers. For instance, new ideas aren’t siloed in a collaborative environment because systems work together instead of operating independently.
Benefits of a well-established retail ecosystem
Retail ecosystems benefit retailers and customers in numerous ways:
An efficient retail ecosystem can be the difference between a product shipping in two days or two weeks. When all the parts of a retail ecosystem integrate with each other—payment processing, order fulfillment, and more—orders are out the door and to customers faster, leaving them more satisfied. All parts of the supply chain operate in lockstep, making the entire ecosystem run more efficiently.
Working individually with each system, tool, and service can be costly for retailers. A retail ecosystem can help retailers reduce overhead costs and save money by removing duplicate or unnecessary costs through using one channel for several different needs. For example, a retailer may communicate with its partners across the supply chain to discover it’s possible to get the same selection of merchandise through one supplier instead of going through two separate ones. The resulting efficiency can be a cost-saver.
Enhanced customer satisfaction
Customers are typically impressed by a retailer when they receive a fast shipping notification or a quick response to an inquiry. A well-established retail ecosystem enables retailers to better serve their customers by offering faster shipping, 24/7 customer service, or better shopping online or through in-store shopping experiences. By meeting customer needs, a retailer can create a better brand-defining experience that adds value for customers. As a result, customers may feel a stronger sense of loyalty and satisfaction toward the retailer.
Stronger sense of community
Successful retail ecosystems make it easier for retailers to build a community and connect with their customers in a meaningful way, taking into consideration how they want to engage and how frequently. For example, brands can leverage Facebook Groups to create brand communities around their products. Or, they can form affiliate marketing groups that are comprised of individuals who share, promote, and sell products or services to a target audience for a company in exchange for a commission on each sale. When brands are authentic in their purpose, it can drive loyalty, which in turn drives sales.
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How to build a successful retail ecosystem
- Understand your customer
- Map your customer journey
- Build an omnichannel infrastructure
- Invest in technology
- Personalize your customer experiences
When you develop a successful retail ecosystem, you build mutually beneficial partnerships that provide value to your customers. Here are the steps to get you there:
1. Understand your customer
Building your retail ecosystem begins with having a deep understanding of your customer. Start by looking at your customer data to assess what they spend their money on, how they prefer to make purchases, and any pain points they face.
2. Map your customer journey
Using customer data, you can map user journeys to give your customers a better and more personalized shopping experience. A user journey map charts how a customer interacts with your brand—from discovering you exist to making a purchase.
The insights you gain from your customers’ user journeys can also help you assess if you are getting the right product support across the retail ecosystem to meet your customers’ needs. Map any possible physical and online options to simulate a shopping experience as if you were the customer. By outlining the flow of your customer journey, you can identify areas for improvement, such as customer retention rates, and optimize accordingly.
3. Build an omnichannel infrastructure
A thriving retail ecosystem supports an omnichannel infrastructure, which includes physical (such as a brick-and-mortar store) and digital channels (including social media and websites). An optimized supply chain helps you support an omnichannel infrastructure by predicting demand, managing inventory levels, and getting products to your customers faster across all shopping channels.
4. Invest in technology
Consider investing in various technologies—such as a CRM system, point-of-sale (POS) system, or chatbots—to streamline your business operations. Integrating these technologies into your retail ecosystem can make it easier for your customers to navigate your customer journey and communicate with the rest of your retail ecosystem. For example, you can set up automations so that when a customer orders from your online store, the distributor is notified to start fulfilling the order.
5. Personalize your customer experiences
The customer data you collect from your tools, systems, and partners can give you insight into consumer behavior and preferences to create more personalized customer shopping experiences. You can see when your customers make purchases and how, where they live, and more. Sharing this granular data between your leadership, sales and marketing, and other teams can provide the most value to the entire organization. If not shared, it becomes siloed, and can lead to more disjointed and inconsistent experiences. This data isn’t just for use at the corporate level; you can use it as part of employee training to ensure employees deliver a positive guest experience.
Retail ecosystems FAQ
What emerging trends and technologies are shaping the retail ecosystem?
Several trends and technologies are shaping the retail industry, such as the rise of omnichannel ecommerce and the use of artificial intelligence (AI) to improve customer service. Additionally, retailers are doubling down on loyalty programs and partnerships to encourage more purchases, scale their operations, and build communities around their brands.
What are some examples of successful retail ecosystems?
Examples of successful retail ecosystems include Walmart, Amazon, Best Buy, and Target. These retailers have a smart system of partners, including suppliers, distributors, and manufacturers that allow them to scale their operations. Through these partnerships, these retailers can also innovate new customer experiences and new services, such as retail media networks (media companies owned by retailers that create compelling branded content that drives audience engagement).
Can small companies have a retail ecosystem?
Yes, smaller companies can have successful retail ecosystems, too. Smaller companies can follow the same process and principles as large retailers to integrate their technological systems and optimize their supply chains to create an omnichannel infrastructure that delivers exceptional customer experiences.
What are some common mistakes when building a retail ecosystem?
Common mistakes when building a retail ecosystem include:
- Not being customer-centric
- Having siloed data, making it difficult for your team to gain insight into business operations
- Focusing solely on one channel instead of working across physical stores and digital channels to provide a seamless omnichannel experience