Ecommerce has been through a bit of a whirlwind over the last two years, and will probably continue to do so for the next couple of years.
If we switch off from the news that’s surrounding the market, the volatile stock prices, and talks of a recession, it’s suddenly easier to focus on the bigger picture. We’ve just had an extraordinary acceleration in the growth and adoption of ecommerce, by every demographic, including former skeptics who thought they never had to lean on online retailers to literally survive. So what now? Has ecommerce peaked?
Ecommerce still has so much room to grow
Shopify’s shares have dropped below their pre-pandemic level. This seems to be a pattern for Etsy, Amazon, and eBay. Each of these companies has seen a Covid-fuelled surge in their growth, which has since been normalised by slower growth. Despite a slow down, there still has been growth! The drop in valuations is not a reflection of the growth of ecommerce. There is still massive opportunity in this space.
Ecommerce is going to continue taking market share from physical retail. The online shopping experience is fundamentally getting closer and closer to resembling the in-person shopping experience. You buy an item, it arrives the same day, and you can return it for free and get your cash back instantaneously.
Innovation in commerce continues to be driven by digital experiences — even in-store with the rise of ‘phygital’ as a new buzzword for traditional bricks-and-mortar retailers looking to capitalise on this continuing trend. Innovation breeds growth, and ecommerce remains at the forefront in pushing the boundaries for commerce.
Instead of a maturing ecommerce industry losing steam, the Covid-fuelled boom has expanded the number of merchants and shoppers with needs to be solved. There is now room for new players to step in and disrupt ecommerce at every stage from product discovery to post purchase. One example of a golden opportunity is in the logistics space, where everything from warehousing to fulfillment and order tracking remains fragmented from merchant to merchant.
Opportunity in ecommerce logistics
Shopify’s acquisition of Deliverr has signalled a significant opportunity in the logistics space. We’ve seen ten minute delivery happen this year with new grocery apps Milkrun, Voly, AmazonFresh, Beelivery, as well Carrefour investing in Cajoo, and also Woolworth’s announcement of their new Metro60 app. Not to mention Uber and Doordash’s quest to make same day delivery a reality for retail. While it has been really difficult to turn this into a profitable business model, with more customer education, there will be more demand, and we’ll see economies of scale boosting this industry as a whole.
Does the consumer still care about physical retail?
People still shop in-store so they can physically see and touch products, and avoid buyer’s guilt. They want to be sure before they swipe their credit card on the machine, and feel the instant gratification of having it now rather than waiting a couple of weeks for the postman to arrive.
With logistics companies promising same-day delivery, companies outsourcing returns processes and instant refunds, and new technologies like 3D models in augmented reality, the experience of buying products online will continue to close the gap for those who are still choosing to buy in-store.
On the other hand, consumers also want selection, and easier discovery — physical retail will never be able to give them that as efficiently as ecommerce.
There are still challenges that need to be solved for retailers to ‘move online’. Merchants need to be able to firstly get all their SKUs online, and secondly, have accurate inventory information. We’re bound to see new startups coming out of this that fill these gaps, including for large, enterprise customers that feel under-served by tools aimed at younger, more agile direct-to-consumer brands.
The lipstick effect
I can’t help but think that the fear of a recession accelerates the rate of an actual recession. Consumers save more and spend less, which means businesses lose sales and cut staff, which gives consumers less to spend.
During our last major recession with the Global Financial Crisis in 2008, physical retail fell 35% more than online retail. This time, with greater consumer education of online shopping, I predict that number to be even higher.
This is also where the lipstick effect comes into play. We’ll see a trend away from big-ticket purchases (which often happen in-store), and consumers will be much more price-sensitive and on the hunt for ‘affordable luxury’ (like a premium lipstick), and discounts and where possible.
Ecommerce’s natural strength in discovery and comparison will shine — as it did in the years after 2008 — as once again prove an invaluable tool for brands to find customers and stay afloat.
Perhaps I should be building an online discount store using Carted’s API… 😏