How big will e-commerce get? Not as big as you think
According to an Adobe report, total global e-commerce sales hit a whopping $4.2 trillion in 2021, marking the sector’s biggest revenues in history.
Consumers abandoned shopping in physical stores, preferring instead to go online in the wake of the Covid-19 pandemic.
But while there was a step change and the figures are impressive, the growth of e-commerce is actually less than many people think.
In the US, for instance, current penetration of the total grocery and consumer durable market is around 13% and will, according to experts, grow to around 17% by the year 2025. In other words, bricks and mortar firms still dominate 83% of the market.
What’s more, the way the trajectory is emerging is interesting. Unlike many other technological revolutions, changes in behavior are occurring linearly.
Consumers aren’t accelerating in their adopting of online shopping habits at all. Instead, it’s more of a straight line trickle which looks like it could take many more decades to play out.
E-commerce, therefore, is probably not going to be as big as you think. Yes, it’s a multi-trillion-dollar opportunity. But compared to the size of the overall retail economy, it is still small. The real action is still going on in bricks and mortar stores.
That’s not to say that there haven’t been wrenching changes in the market over the last couple of years – there have. Following the advent of the pandemic in March 2020 in western countries, online shopping volumes exploded. Commentators liken it to having a Black Friday sale due to the sheer increase in volume of orders online.
Naturally, things calmed down a bit after that, but the momentum of the sector isn’t something that’s likely to last. Already, there are signs that consumers want to go back to stores.
Daate, for instance, suggests that around a third of people now feel more comfortable going to the superstore than they did in the middle of 2020 when the initial waves of the pandemic were hitting their peaks.
In this article, we take a look at some of the implications of these facts for businesses. If e-commerce isn’t going to grow exponentially as many in the sector had hoped, what does that mean for today’s online stores?
Being 100% online might not be the best strategy
Amazon bought the healthy food chain Whole Foods nearly 10 years ago now. It was a smart move. The brand had a cult following and is certainly moving with the times by offering consumers delicious, healthy food that they love.
But there was another motivation. Amazon seemed to know (even back then), that the exponential rate of growth in online shopping probably wouldn’t last. Behavioral analysis suggested that it would probably come to an end around 2013 and continue slowly upwards from then on out.
The need to get into the physical space was, therefore, essential. Amazon saw that while online shopping would grow, it probably wouldn’t be particularly fast, making it different from most technology company experiences.
Being Amazon, though, the brand didn’t stop there. It began creating a store concept called Just Walk Out that would allow consumers to literally pick up items on the shelf and then be charged for them when they walk out of the store, without the need for a cashier.
When the brand first discussed the concept in 2015, it seemed like science fiction. But now in 2022, the technology exists to make it happen and it is operational.
Furthermore, Amazon is now selling the solution to third-party retailers. This means that any store, whether digital or physical, can now implement the same world beating solutions in its enterprise. Amazon has developed something of a holy grail, getting rid of the need for cashiers and replacing them with cameras, sensors and apps instead.
Of course, it offers alternative self-service checkouts and kiosks for people who want to use them, but they are a minor part of the appeal of its Fresh and Whole Food stores. The main benefit for consumers is that they can walk in and out without having to wait in line.
For your business, there's a clear appeal too. By having a physical store, you can diversify your operation and avoid relying on the seemingly slow pace of change in the e-commerce sector.
Waiting for change isn’t an option
While change is happening and more people are shopping online, it is a process that is likely to take place over decades, not the next couple of years.
For that reason, online retailers need to abandon the idea that paradise is just around the corner. It probably isn’t. Instead, they need to find out how to increase online sales via other channels.
The best e-commerce companies find a way to give consumers what they want differently. Etsy is a good example of this. There are millions of people out there who want to buy high-quality craft goods from artisans, particularly clothing and jewelry.
However, finding these options in the traditional marketplace was always a challenge. Unless you knew where to look and who to commission, you were at a loss.
Etsy, though, changes all this. On the consumer side, it provides a site that looks like any other generic ecommerce store, except with a crucial difference: all the products are bespoke.
And because it is Etsy, buyers get a bunch of warranties and protections that they wouldn’t get if they were purchasing from a random seller online.
On the producer side, it’s a good deal too. Instead of artisans trying to find a way to sell their wares independently, they can just use the Etsy platform.
While it charges them fees, they’re often worth it because of the sheer size of the markets they can access. This surety then encourages them to produce more goods, giving consumers more choice and so on.
If you’re struggling to break out, try doing something different. Don’t stay stuck in a rut, doing what other sites are doing. Break the mould in some way.
SEO will become even more important
Naturally, with all the competition in the e-commerce sector, SEO is going to become more important. What’s more, it is becoming harder to eke out an advantage. Many platforms now build SEO into the tools they offer their patrons, levelling the playing field.
How e-commerce firms approach SEO, though, is changing. For instance, the industry is seeing the rise of detailed content on product pages. Firms are realising that they can generate more interest from Google if they essentially place a blog underneath their product listings.
Interestingly, this is only partly for SEO purposes. Much of it is actually content that shoppers want to consume. In many cases, it helps to push them towards purchasing decisions by explaining the benefits and sensations they will get if they go ahead and click the buy button.
Subscriptions will be the best way to make money
Going into 2022, we’re likely to see many other e-commerce stores follow Amazon’s lead on subscriptions.
The reason for this is simple: subscriptions keep customers coming back time and time again. It’s a clever psychological ploy, particularly among those who want to feel like they are getting “good value” from any service that they buy.
Just remember, if you do decide to go down this route, you’ll need to offer consumers additional value. Simply giving them free delivery probably won’t be enough.
Sustainability will be an overriding concern
Amazon recently made moves to ensure that all its packaging is fully recyclable and, in this regard, the brand is doing well. Other companies, though, are a little slower on the uptake, partly because they haven’t had time to switch over their packaging and distribution methods yet.
Consumers care about sustainability more than ever. There’s a growing consciousness that the current mode of operation is not supporting the planet. Individuals want to do their bit to combat this while also consuming the things that they want.
Survey after survey, for instance, finds that respondents want to see evidence that online stores are adopting sustainability measures and using less packaging. Companies that are able to do this will prove themselves in the eyes of consumers and may attract more business.
B2B e-commerce is going to expand
Lastly, there’s significant evidence that businesses are changing their purchasing behaviour, even if consumers are a little slower on the uptake. The global company B2B digital commerce market is now worth an estimated $1.1 trillion and growing at around double the rate of the ordinary consumer market.
The reasons for this are complicated, but it has a lot to do with the desire to cut costs. Firms know that it is cheaper to order what they need online instead of calling up or going to a physical depot.
Moreover, fax and telephone calls just seem hopelessly outdated. Why not just click a button and then essentially automate the ordering task?
Better yet, why not just connect your ERP to your business’s ordering facility and pass orders onto the third party company as and when you require them?
