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How Entrepreneurs Are Combining Data and Tech to Compete With Large Retailers Small brands have continued to innovate despite COVID-related challenges.

By Melanie Nuce

Opinions expressed by Entrepreneur contributors are their own.

With people spending more time at home over the past year, it's not surprising that online shopping has increased exponentially. Ecommerce was up an astounding 44% year-over-year in 2020, according to estimates from Digital Commerce 360, while McKinsey reported that 10 years of ecommerce growth occurred in just 90 days in 2020. However, there's a lot more to this story than simply the surge in online shopping habits.

Though major online marketplaces still dominate, sales for some actually declined in 2020. The beneficiaries of this trend were niche brands and small businesses, which embraced technology and saw online sales surge. This "long-tail" growth is one of the most intriguing aspects of the new COVID-influenced economy and has attracted the attention of major companies in the retail ecosystem.

Walmart, for example, has removed rules requiring sellers on its marketplace to be registered in the U.S., a move to court more small brands from around the globe and compete with other retailers. FedEx also announced an alliance with BigCommerce last April to help "small and medium businesses get up and running online fast and affordably." Additionally, GS1 US, the administrator of the UPC barcode system, created a new option for small brands to more easily and affordably get their products set up with legitimate product identification — a necessity to distinguish reputable businesses from fraudulent brands in an increasingly crowded marketplace.

Of course, small retail businesses have experienced major challenges and setbacks over the last 12 months, but their focus on innovation indicates a strong outlook. To fuel growth, retail entrepreneurs are bringing data and technology together to compete against larger retailers online in three areas.

Embracing digital platforms

The pandemic forced an interruption — a "pause" button that caused many people to reevaluate their careers and start their own business. With long-distance commutes and travel essentially eliminated, founders of small brands quickly saw their homes turn from a home/office, to a home/office/factory/warehouse as demand for a wide range of products soared.

With 75% of small business owners saying they intend to spend more on technology in 2021 than in 2020, according to a GGV Capital and Hello Alice study, it's clear that entrepreneurs are applying sound business tactics and innovative solutions to their newfound enterprises. From record direct-to-consumer (DTC) stores popping up on Shopify, to the more than 3 billion products being listed on Amazon, tech-savvy small brands are leveraging e-commerce and social platforms to their advantage.

Aside from investing in new desks, shipping equipment and shelving units, many of today's entrepreneurs are thinking outside of the box — or physical location, in this case — to conduct business in unconventional ways using technology. Virtual burger joints, for example, have started giving large chains a run for their money. Existing only as apps or on third-party marketplaces, virtual restaurants like MrBeast Burger operate out of existing restaurant kitchens, allowing restaurateurs to add a new source of revenue without impacting the operation. They have partnered with these small businesses to reach faraway places they never dreamed imaginable pre-COVID. With so many locations and menu items to keep track of, the onus is on the entrepreneur and their partners to ensure accurate and complete data is exchanged to keep the experience consistent from the app to the final customer delivery.

Related: 4 Key Trends for Retail Entrepreneurs in 2021

Staying competitive on shipping

Shipping options are a moment of truth for any online shopper. Now conditioned to expect fast, free shipping, many consumers abandon online shopping carts because of high rates and long wait times. But small businesses often can't absorb the costs of shipping like big players to deliver products efficiently.

The collaboration between FedEx and BigCommerce mentioned earlier is an example of how the tides are turning. Small businesses are provided with shipping options usually only available to larger retailers, offering competitive rates and expanded pick up options. A platform like BigCommerce, one that powers a major portion of the growing DTC market, recognizes that great ecommerce experiences tend to be linked directly to shipping. Small businesses need to evolve digitally just as much as their competitors to meet the demands of today's environment.

To make a digital experience truly seamless, standardized product identification is one of the critical elements that connects the consumer's order with backend fulfilment processes, ensuring the right product is always in the right place at the right time. Small businesses that are trying to compete with larger retailers by offering an "omnichannel" shopping experience will find that using a standardized U.P.C. in their product listings leads to an accurate, persistent product identity, and ultimately, cost efficiency. Standard identifiers are an investment in a business's future and enable the ability to be accepted by a multitude of retailers and logistics providers.

Related: The Seller's Guide to Ecommerce Success on Amazon, Instacart, Walmart and Target

Rethinking returns management

The battle for customer loyalty often takes place around returns. Many retailers have made returns easy, but cost and inventory management remain big challenges. Large retailers are experimenting with discounts or simply giving products away. For example, after the holidays, many consumers found that retailers like Target and Walmart gave refunds but encouraged shoppers to donate or keep an unwanted item.

Smaller players have to find a different path and are using service-providers like Narvar so they can afford to offer branded order tracking and a network of return locations. This type of service provider helps small businesses take better control of what happens to product management after the purchase. This approach allows for boxless returns (online returns for in-store purchases) and provides an extensive network of return locations. For entrepreneurs with limited resources to devote to returns, tech startups like these offer economies of scale to ensure consumer satisfaction.

When evaluating their returns management processes, entrepreneurs should also ask themselves whether there is any way to reduce the problem from the get-go. Yes, returns are an inevitable part of running a retail business, but a powerful way to reduce returns is to make sure online consumers have high quality product information in the first place so they receive what they are expecting. The product listing — complete with clear images from multiple angles, detailed product features such as hypoallergenic or machine-washable, and specific weights and dimensions — can cut down on exorbitant returns costs and help boost a company's reviews in the process.

The pandemic has left an indelible imprint on the retail industry, ultimately accelerating innovations and trends that had been at play for years. Consumer dependence on ecommerce is now catapulting tech startups and retail entrepreneurs alike into a new era of relevance and popularity. Small businesses that embrace technology, standards and data quality will be the ones most likely to endure and take advantage of the changes at play today and in the future.

Related: Can Robot Shoppers Tell If the Bananas Are Ripe?

Melanie Nuce

Senior Vice President, Innovation and Partnerships, GS1 US

Melanie Nuce leads a team that investigates new technologies such as IoT, blockchain, machine learning and AI for global standards organization GS1 US. GS1 administers the most widely used system of standards in the world, including the universal product code (UPC).

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