Econsultancy recently carried an article exploring in detail the 7 factors they believe will affect ecommerce success for the second half of 2020. It’s a very long article, so in this post we’ve summarised it and added our commentary on each factor.
As we’ve touched on numerous times in this blog, coronavirus was the overwhelming change agent of the first half of 2020, and not just in ecommerce, and not just in the UK. In a normal year the launch of a Shopify marketplace, Facebook shops and the relaunch of Google organic product listings would have made for huge news, but they pale by comparison. We agree with Econsultancy that ecommerce levels are not at all likely to go back to the pre-March 2020 levels. That said, let’s take a look at the 7 ecommerce growth trends they’ve identified.
1. Data and AI
This one’s hardly a surprise, since data has always been important. The ecommerce channel also tends to capture more data than the physical channels as well, so there’s more of it to interrogate and act on. That data reflects the fact that in the current climate consumers, suppliers and competitors are all behaving differently, and if you’re relying on historical patterns to plan your retail strategy it’s very difficult to do that in a turbulent, changing time. The article talks about how the world’s leading tech and social media platforms are using AI and machine learning to present the products based on buying patterns and propensity to buy, but in reality this is within reach of sellers who have good reporting and analytics into their own businesses.
2. Digital Skills
As with Data and AI, digital skills are front and centre for ecommerce businesses and have been for some time. Ecommerce has always relied heavily on digital skills, in the form of web and marketplace savviness and being comfortable with social media and digital marketing. As we continue with more of our working lives being governed by remote working and social distancing, the digital paradigm and digital skills will only increase in importance. What’s more, we’ll need to extend those skills to reap the benefits of automation to speed up and improve those manual processes and exchange information more effectively between our business partners, in the form of feeds and API connectivity.
As we saw with factor 1, if you’re selling on marketplaces then the marketplace algorithms will be doing the bulk of the personalisation heavy lifting for you. But what about your webstore channel, arguably a much more profitable channel? While the article talk about personalisation tools, many retailers can use reporting and analytics to identify customers that have bought on eBay, for example, and tempting them over to the webstore. That could apply both to repeat purchase items and products that tend to sell together – so if a customer buys product A on eBay, offer a discount for product B on the website. Volo customers can already do this using a facet of the Vision reporting suite called ‘subsets’, which are essentially collections used for comparison purposes.
4. Competing with Amazon
Amazon built up an advertising business of nearly $5bn in Q4 of 2019 by more aggressively pushing sponsored products and was a major beneficiary of the huge online surge during global lockdown. The article suggests 7 ways of competing with Amazon: brand, mission, content, customer experience, habit, product exclusivity and convenience/locality. It misses one other competitive factor: being present on other online channels. We’ve often talked about the resilience and insurance of multichannel selling, and perhaps at no time is this more important than when one specific dominant marketplace – at least in the western world – increases its stranglehold on ecommerce.
5. Responding to changing customer behaviour
Econsultancy highlighted a number of areas of changing customer behaviour: category shifts that reflect increased time at home; openness to new brands in the online domain; increased sensitivity around returns terms and conditions; ecommerce as the default channel where before it was physical; price sensitivity due to choice, from the abundance of stock that retailers are now carrying. You could argue that these were all predictable once the retail avenue was effectively closed, but again speed of response is the key, and the direction of your response comes from having a good handle on your data and what it’s telling you.
6. Protecting from recession
Ecommerce has some natural advantages in a recession. It has lower retail and warehousing cost bases, it can automate more of its business, it’s more agile, it has more data (as we’ve covered) and it’s generally more focused on customer loyalty and repeat buyers. A common Volo theme, and one we’ve already touched on in this post, is around being more resilient and having more options, and that comes from being present in more channels. The cost of adding a new online channel is a small fraction of the cost of adding a physical channel or new store, and you can react way more quickly to sales performance. You don’t want to spread yourself too thinly over too many channels, of course. You need to be on the right channels for your business and picking them requires research and taking soundings from other multichannel experts.
7. Understanding the implications for your own customer experience strategy
This factor is really a collection of the previous 6 factors, in that it involves pulling everything together into a business approach which has a focus on improving the experience for your customers. The consumer drives everything for marketplaces, who rely on delighted buyers returning time and time again, and all retailers can learn from these platforms’ fixation on making the consumer’s interaction with them as good as it can be. The stakes are likely to be dangerously high for ecommerce companies, with a Q4 populated by Amazon Prime Day, Halloween, Cyber November and Christmas. It will also be littered with the debris from Brexit fallout and rearguard actions. On the positive side, ecommerce channels are in better shape and can adapt more quickly than their physical counterparts.
How do you see H2 2020 shaping up? What does the future hold for the Christmas lead-in? What about 2021? To discuss your own requirements to capitalise on your ecommerce growth plans, please get in touch with us here.