What’s Next for Ecommerce?

ecommerce website open shop sign feature

We’ve seen that not only is ecommerce here to stay, but it’s more firmly entrenched than ever in terms of consumer behavior and overall growth. While retailers had long-term multichannel plans, the pandemic forced everyone to accelerate and prioritize ecommerce investments.

Even as consumers return to physical stores and by all accounts discover newfound enthusiasm for in-person shopping, ecommerce will continue to grow. But several major aspects of doing business have changed for ecommerce brands – customer, competition and operations. If brands want to stay competitive, they’ll have to be attuned to what these mean in the short to medium term.

Customers continue to be extremely demanding, looking to brands to differentiate themselves and provide easy, fast access to their products. This is not always simple in a virtual store setting; the endless aisle has its advantages. But of course, it doesn’t replace seeing, touching, or trying on, as evidenced by the huge spike in returns.

Additionally, the types of ecommerce customers have changed. The pandemic transformed skeptics into regular digital shoppers, even after staying home and safe was the only way to get what they needed. This has radically changed the scope and landscape of access for digital brands. Combining the new customer and the differentiated customers, brands must rethink their approach to the customer.

Second, competition in ecommerce has become far fiercer, in lockstep with the rise in online revenue. Brands used to be able to gain traction through social channels and targeted ads. But with changing privacy laws and heightened competition from a steady flow of new entrants, brands are seeing customer acquisition costs increase as differentiation becomes more challenging. Digitally native brands must rethink their initial proposition to remain ecommerce pure plays vs. establishing some brick-and-mortar presence, given the challenges of online-only marketing and the high cost of customer acquisition.

Lastly, operations are changing and need to change even more. Brands are being challenged to drive more automation and improve their supply chain infrastructure in order to make their operations financially sustainable. As we’ve watched digitally native brands go public, there has been an expectation of profitability which has lately proven more challenging.

The darling brands have changed the trajectory of the long-term exit strategy. Moving forward, brands will not only need to seek growth targets, but also establish sound financials in case they themselves become acquisition targets. The most effective strategy for finding access to profitability is an efficient, cost-effective organization.

The Answer: Innovate, Innovate, Innovate

To address these challenges, ecommerce brands will need to innovate across three emerging channels: Augmented reality, payment and checkout, and automated supply chains. Always striving for more differentiation, brands that find the most bang for the buck will harness new technologies.

Augmented reality helping brands differentiate themselves and their products by building an improved experiential environment. The personalization this technology offers gives them a unique way to engage customers with their offerings. With AR, customers expecting to touch, feel, and try on products no longer have to mentally visualize it. A customer experience that allows for real-time product visualization in day-to-day environments will lead to gains.

Amazon has long held the lead in seamless, one-touch checkout, and innovative brands must follow suit if they want to avoid the pitfall of cart abandonment. Leveraging blockchain technology and a seamless user interface will help enhance the customer experience and create loyalty and transparency for customers. As technology continues to improve upon instant, seamless checkout, brands must maintain an advantage through investment and upgrades.

No ecommerce transaction can be seen in isolation. Supply chain, logistics and delivery extend far beyond the buy button. Brands must continue to leverage technology and innovation to deliver needed operational efficiency and meet customer demands. Robotics and automation support innovative supply chain strategies by tirelessly working beyond the limits of human performance and endurance.

Looking Ahead

Ecommerce brands will continue to open more brick-and-mortar locations, supporting customer acquisition and financial stability. Brands that continue to develop innovative strategies to differentiate their offerings will remain leaders. A simple, but great example is using QR codes to explain product use, assembly, placement, etc.

As major retailers continue to open their ecommerce marketplaces to third-party sellers, digitally native brands will leverage them for going DTC. Brands that elect to change their customer acquisition strategy will continue to respond to changing privacy laws. In some cases, we’ve even seen a shift back to traditional marketing tactics, which can be more predictable and data driven. The future of ecommerce comes down to the core three: Technology, innovation and the customer.

Tyler Higgins is a managing director and retail practice leader at AArete