Exclusive Q&A: McKinsey reveals digital commerce success strategies

Retailers need to digitally engage customers at every touchpoint.

Tatiana Sivaeva, partner, McKinsey & Company, recently sat down with Chain Store Age to share insight into why digital commerce will continue to grow, how retailers can best digitally engage shoppers, and the importance of headless commerce.

What does McKinsey see as driving growth in digital commerce?
While McKinsey certainly sees ‘return to store’ in the post-COVID-19 environment, we believe growth in e-commerce channels will continue, albeit at rates different than during the pandemic. There are a few factors we see driving digital commerce growth, including businesses’ desire to get closer to the customer.

In many cases, this desire will push for digitally led route-to-market, such as digital direct-to-consumer for manufacturers or a stronger omnichannel presence for retailers, with retail media networks attached to further capitalize on customer connections.

In addition, customers’ increasing demand for ubiquitous omnichannel connectivity will continue pushing companies to find more ways to connect with them across channels and touchpoints. This will mean more touchpoints across a variety of channels, including digital channels, that will need to be seamlessly connected.

And further expansion of route-to-markets and business models for e-commerce solutions, such as investment in social and live commerce, will give customers even more options to buy online, further boosting digital commerce.

Of course, all of these factors need to be balanced against increasing pressure to deliver sustainable margins.

How can retailers better digitally engage customers?
First, the best engagement strategy is fundamentally about meeting consumers where they are and tapping into their existing underserved needs. The primarily failure we typically see is rooted in the expectation that consumers need an alternative for something that is already available to them.

Second, retailers need to stay on top of changes in consumer behaviors, and build systems and capabilities that allow for changes to their engagement strategy. The winners are always on the lookout for new trends, carefully testing their way in, and then scaling rapidly when needed.

How can retailers better market to and serve customer issues, rather than just sell products?
Retailers can learn from some of the leading specialty manufactures who have recently transformed themselves from ‘product makers’ to ‘lifestyle solutions providers.’

Many of those transformations have a few things in common. They are grounded in a deep holistic understanding of customer needs, and dramatically expand the definition of solutions from products to include actions – whether that means advice, services, or customization. In addition, these transformations should ensure that the full suite of solutions available to the customer are seamlessly connected and easy to access. 

One of the executives McKinsey surveyed in our recent NeXT Commerce report described the digital ecosystem they built for customers as an ‘access port’ that gives customers an easy, single point of access for all solutions available, which is highly customizable given the level of customer connectivity it allows for.

How does McKinsey define ‘headless commerce’ and what advantages does this model offer retailers?
Headless commerce is an approach where no single channel is favored over another. Retailers are typically thinking through how to balance selling in store versus selling through digital channels. As retailers work to maximize customer retention and lifetime value, a key priority should be meeting customers where they are.

Of course, this comes with implications for systems, operating models, and technology, and needs to be balanced with profit and loss choices. But if you think about consumer behaviors, they want to be served – whether it’s with product, content, or services – where it’s most convenient for them.

More likely than not, customers will have multiple other options available elsewhere who can meet these needs, so retailers need to be able to provide this type of headless commerce experience.