Trends in the E-commerce World Today
We’re definitely living in strange times.
A deadly pandemic has placed most of the world under lockdown for the last 2 years, Russia declared war with Ukraine — setting inflation at an all time high since 1982, and North Korea decides to play Oprah with its neighboring countries. ("You get a missile! And you get a missile!")
In the midst of the chaos, online e-commerce businesses are struggling to stay open. Expenses continue to rise, paid ads aren’t returning what they used to, and competition grows increasingly fierce.
All the while, the news keeps hinting that the economy will continue to get worse.
But it’s still a bit early to throw in the towel. Being aware is half the battle, and staying up-to-date on new trends, and making sure that your company stays ahead of the curve, can really make all the difference in surviving the recession.
To provide visibility on what's happening in the market, we’ve put together a list of prominent trends in e-commerce that might be able to provide some insight, and help businesses come up with contingency plans for the future.
1. Rising Acquisition Costs
Online advertising has been a tough deal for e-commerce businesses over the passing year.
With the introduction of app tracking transparency (ATT) in Apple’s recent iOS 14.5 update, advertising costs have jumped — 47% on Facebook and 32% on Instagram — forcing business owners to look towards other options such as Tiktok and influencer marketing as more affordable means of acquiring potential customers.
To make things worse, Google recently announced it’s plans to stop supporting third party cookies near the end of 2023, further casting a dark cloud over the future of e-commerce businesses everywhere.
Because of this, many e-commerce businesses have begun to shift their focus from acquisition to retention — looking at customer life-time value and loyalty — while ramping up efforts on blogs and content creation to increase organic traffic.
2. Increase in Competition and Customer Expectation
There are fewer barriers to entry into the e-commerce market today, than there ever was in recent history. The e-commerce market grew from 15% in 2019 to 21% in 2021, and continues to grow everyday.
New innovations have made it possible to speed up every aspect of online shopping from ordering and delivery, to even payment — in some cases, it’s even faster to purchase an item online than it is to go out to physically get it.
Sites like Alibaba and Shopify have helped launch the dropshipping business model over the last few years, and merchants with offline stores are increasingly flocking towards online marketplaces to digitize their inventory — not be left behind by other online competitors. The market size for dropshipping alone has already jumped from $128.60 billion in 2020 to $196.78 billion in 2022, and is expected to hit $476.10 billion in 2026.
As a result of the heavy competition, many e-commerce owners are now desperately looking for ways to stand out.
The ones that are successfully doing this, are focusing on offering unique and personalized shopping experiences through customizable customer support tools and CRM platforms. Online shoppers are beginning to show that they’re willing to pay more for better customer experience, and online businesses have begun to capitalize on this fact.
3. Desires for Global Expansion
As competition intensifies, growing a business is becoming a real challenge. For some, this means low growth potential in the future, and for many — no growth at all.
But e-commerce businesses are feeling this a lot less than their “physical location” counterparts, mainly due to the fact that they have the ability to expand their customer base to anywhere in the world.
Global trajectories are estimated to hit $6.388 trillion in 2026, making e-commerce one of the fastest growing markets across the globe, and many business owners are looking towards this market with hopes of growing their own e-commerce brands. But as many of them enter the global stage, just as many end up experiencing failure — due to poor preparation and understanding.
Businesses that are finding success in their global expansion, are investing a significant amount of time studying the new markets, and preparing their products for each country they enter into — long before they even begin their actual expansion.
These businesses are building strong understanding of the local cultures, languages, and their product market fit.
Starbucks is a perfect example. When Starbucks first entered into the Australian market — a market where coffee culture was already well developed — they failed to differentiate their product from other coffee shops that offered what Starbucks had. They also failed to adapt to the tastes preferences of Australian customers, which forced them to give up on the Australian coffee scene.
4. "Lean and Mean" is the New Strategy
The war in Ukraine has made everything more expensive over the past year. Not only are individual consumers feeling the burden of rising inflation, but businesses are also beginning to notice the impact on their finances.
With the US Federal Reserve’s latest move on interest rate hikes, banks, venture capitals and even private investors are becoming more conservative on their outlook on potential investments, making it more difficult to raise operating funds for businesses.
Even Fortune 500 companies are beginning to lean down on their expenses for the time being, making layoffs, cutting back unnecessary expenses and doing their best to stretch their runway, so they can survive to fight another day.
Many e-commerce businesses are also following suit. They’re cutting down to the bare minimum, to ensure they can manage their funds, and some are even looking towards alternative financing to supplement their operations.
Businesses all over the world are beginning to look for lighter, cheaper alternatives to their current software, staff, and manufacturing.
5. Decreasing Attention Spans and Customer Patience
Grabbing a customer’s attention has always been a challenge, but one thing we’ve noticed is that it’s becoming more difficult as time passes. A recent study has shown that customer attention spans are continuously decreasing, as people are getting used to the faster speeds of technology. Customer attention spans have decreased to 8 seconds in 2022.
We’ve come a long way from when ink-written messages were passed by week long journeys on horseback. Messages are now sent with a touch of a screen, stories are told in real-time on TVs, and food can be ordered and delivered to our doorsteps with a few clicks of a button.
People just don’t have the patience to wait anymore.
This is why e-commerce businesses are gradually adopting customer experience and marketing tools that emphasize live service, engagement and relevance.
Businesses are adopting customer service platforms, like live chat, chatbots, or even marketing tools that utilize real-time communication, video contents, and even AI to create an engaging and interactive experience — anything they can to grab the ever shrinking attention spans of their customers.
Knowledge Being Power
It’s definitely not easy keeping up so many changes and challenges in the current market, but it also doesn’t hurt to stay in-the-loop on what’s happening with the rest of the e-commerce world. We hope that this list provides you with some useful information that can help you prepare for some of the challenges you’ll be facing, if you haven’t already faced them.
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