Fossil Group CEO Kosta Kartsotis has revealed how the company’s spendig on its digital transformation initiatives have resulted into business growth in the third quarter of 2020.
Jorgen Scheuer-Larsen is the CIO of Fossil Group. Fossil Group said sales rose 66 percent on its own e-commerce sites globally. Third-party e-commerce increased 44 percent in the quarter. Digital growth rates tempered from Q2 when brick-and-mortar locations were essentially closed across the globe.
Core digital sales through own e-commerce sites and third-party marketplaces represented nearly 30 percent of sales mix in the quarter, demonstrating the importance of this channel and ability to meet increasing consumer demand.
Mainland China represented over 40 percent of Asia region sales and increased 55 percent due to online growth in both our own and third-party e-commerce sites.
Its performance in China was offset by COVID-related impacts felt most significantly in Korea and India. Globally, traffic and conversion trends in stores were fairly similar to last quarter, with traffic down approximately 54 percent and conversion up about 16 percent.
In the U.S., conversion rates are being helped by ship from store and buy online, pickup in the store. Wholesale partners in the Americas and Europe are indicating similar traffic and conversion trends in stores, partly mitigated by the strength in their e-commerce businesses.
Indirect sales channel revenue fell 19 percent globally, primarily driven by contraction in the wholesale segment, partly offset by growth of 44 percent in third-party e-commerce channel.
“We are navigating the uncertain global environment by remaining agile and planning conservatively as we execute against the four strategic priorities we laid out at the beginning of 2020,” Fossil chairman and chief executive officer Kosta Kartsotis said during an analyst call.
Fossil, as part of its second strategic priority, accelerated investments in digital capabilities. Fossil built a robust e-commerce platform and strong fulfillment capabilities, including BOPIS and ship from store that are serving us well during this period of heightened online consumer demand.
Fossil is implementing sophisticated digital marketing capabilities for driving efficiency and yielding strong ROIs on digital marketing programs. “An important distinction within our particular business model is the profit profile on our own e-commerce channel, which is margin accretive,” Greg McKelvey, executive vice president and chief commercial officer of Fossil, said.
Fossil said it expects to expand overall gross margin and drive increased segment profitability as digital becomes a larger percentage of our overall business. Fossil expects a significant long-term opportunity in digital, and it will invest in additional capabilities and markets around the world. Its strategic priority is expanding Fossil’s opportunity in China and India.
Digital growth strategy
Fossil has developed three pillars to digital growth strategy. The first is the near complete e-commerce migration to global cloud-based platform and partnership with Salesforce.com.
Fossil has achieved improvement in efficiency and customer experience. Fossil is seeing a 60 percent increase in conversion rate versus prior year and meaningful increases in average order value.
Fossil’s technology teams have implemented artificial intelligence driven cross-sell and up-sell, which serves up targeted and personalized content and recommendations throughout the online customer journey. They have also developed a digital wallet suite that gives customers an easy and flexible transaction.
In addition, Fossil’s technology teams have developed an augmented reality (AR) tool that allows customers to virtually try on a watch on their own risk using the camera on their mobile device; a virtual selling pilot, where at the click of a button our customers can enjoy the advice and personalization of an in-store sales associate who can not only offer advice, but also fulfill the order right there using our ship from store capability.
Fossil’s e-commerce, IT and logistics teams have partnered to implement and scale fulfillment capabilities, including buy online pickup in store, ship from store and curbside pickup, but also to significantly expand our e-commerce capacity in warehouses to near flawlessly handle unforecasted and sustained peaks in online demand throughout the year.
Fossil has partnered with major third-party e-commerce marketplaces such as Amazon, Tmall, JD.com, Zalando, Myntra and Flipkart to name a few.
Fossil’s third digital strategy pillar is to be the leader in its category, generating online sales by applying advanced digital marketing and analytics capabilities to create high ROI strategies and tactics, and then aggressively increase marketing investment on a dynamic and daily basis.
Fossil aims to an emphasis on customer data acquisition and delivering sustained increases in customer lifetime value.
“Given the accretive economics of our e-commerce channel and relatively high average order value, we have a significant opportunity to profitably accelerate our rate of customer data acquisition and then use automated post-purchase journeys in Salesforce to increase repeat purchase,” Greg McKelvey said.