They say change is the law of life. One thing is for certain; after this year, nothing will ever be the same.
The e-commerce industry has been a long-standing beneficiary of the economic tides of change, as consumers steadily increase demand for digital applications and experiences. Unlike previous years, 2020 ushered in a crashing wave of changes.
With little time to prepare, the upsurge propelled many brands to the big leagues while dealing fatal blows to those ill-prepared. Retailers today must pose the question, where does consumer sentiment stand going into the 4th quarter, and how they can adequately prepare for the New Year.
How did we get here?
Since 2009, in tandem with the global financial recovery, US e-commerce consistently grew at an average rate of 15%, according to the US Dept of Commerce. Experts have widely attributed the growth rate to a combination of personal device technology advancement, increased internet access, and retail's adoption of innovative digital consumer experiences primarily driven by SaaS & cloud technology.
Consumers have increasingly embraced e-commerce to get their products faster and cheaper. Unfortunately, industry-wide growth has not exactly translated to increased sales for individual merchants. With the advent of more cost-effective software and record market performances, more competitors foray into increasingly crowded verticals. That allows consumers to benchmark competitors and discover alternative purchase options, resulting in higher advertising costs and shrinking margins for most retailers.
This year, economic forces have pushed the accelerator through the floorboard onto the road. According to the Census Bureau, the US was on track to grow e-commerce sales YOY by 40% in 2019. The global shutdown of retail forced many shoppers online. Retailers invested in e-commerce leveraged their website as a financial ark, while others quickly pivoted to align with demand. Few brands remain in business today that maintained the status quo.
The question remains, what are successful contemporary tactics and what strategic solutions will retailers need in place to capitalize on continued market penetration for 2021.
Successful initiatives & strategies of 2020
AI is a hot buzz word/acronym and is flippantly used in marketing materials but not widely practiced across the industry. Many e-commerce executives still don't quite understand how to leverage AI effectively or how AI will continue to shape digital retail experiences.
However, authoritative voices will point out that Data Science is an increasingly important investment opportunity for e-commerce merchants. Many merchants have successfully employed data science and machine learning to improve their on-site user experience, create predictive marketing campaigns, and increase productivity & efficiency on the back-end.
SaaS solutions like Adobe Sensei and Nosto are technology platforms built on machine learning and data science to power intelligent product recommendations to shoppers, personalized content, and split-testing. Successful implementation of point-solutions like these has proven to increase conversion rates on web traffic dramatically.
Email platforms like Klaviyo leverage machine learning to predict customer behavior like purchases and churn. Effectively leveraging these insights by developing personalized marketing campaigns has proven to increase customer lifetime value and increase repeat purchases from shoppers.
Larger retailers have also leveraged machine learning and data science to reduce fulfillment resources and costs. Merchants can use machine learning to manage inventory, re-route packages, dynamically change delivery & arrival times, and make other cross-functional adjustments for accuracy and efficiency. Soon, drone delivery will start delivering to your doorstep - and that will be a "new normal" too!
Even with the current environment, more than 80% of purchases are made offline (Google). In a 2019 survey conducted by Forrester Analytics, 30% of respondents said they prefer buying offline, so they "want to see or feel the products in person." Overcoming this objection is no easy hurdle. However, the recent advancement of augmented reality enables shoppers to see and feel products virtually.
Perhaps the best example of successful adaptation through A/R implementation is Ikea. For years Ikea's in-store experience was their differentiator. As consumer sentiments rapidly shifted, Ikea rolled out an app with functionality that enables shoppers to see how an Ikea product would fit into a room. In 2019, just 11% of Ikea's total sales were reported through digital channels (Bussiness Insider). Ikea now survives on its digital innovation to keep afloat with decreased offline sales.
Sephora has been an industry leader in the field of A/R. As an early adopter, Sephora launched its Visual Artist app to enable users to upload a selfie and apply varying brands and shades of makeup. To further their disruption, Sephora has recently partnered with ModiFace to deliver a 3-D A/R experience to shoppers by enabling users to virtually try on makeup through a live feed in real-time.
Modern branding paradigm
While data science and augmented reality initiatives are powerful disruptors, these initiatives carry C-level approval price tags. They can often take months or, in some cases, years to fully implement. As we noted earlier, one of the major challenges retailers face, in-tandem with growing demand, is increasingly competitive market segments.
According to public reports, Shopify boasts nearly 500,000 live stores. Most of these businesses did not exist five or ten years ago. E-commerce veterans can remember a time when SEO meant including a few key-words on a website. With so many players in the space often selling comparable products at similar price-points, it's becoming increasingly difficult for brands to pique interest and convert traffic.
However, smaller direct-to-consumer brands have proven themselves capable of gaining ground on major retailers like Amazon or Macy's. A great example of a D2C brand gracefully growing its market-share is Away Travel.
Away is a luggage company that has positioned its brand as a travel company. Away shares a variety of travel-related content and media for its community across its social and marketing channels. By developing a cross-channel marketing strategy that involves producing content purely to entertain shoppers, consumers become emotionally tied to the brand and often, in turn, become advocates. Brands like Away can successfully create emotional connections by understanding their target customer and what the customer cares about. Although Away technically sells durable boxes where you can put your stuff, the customer feels as if they are buying much more than a suitcase. The goal is to get the shopper to feel like they are buying into a lifestyle, more than just your product.
When brands create emotional connections with their shopper, they can charge higher premiums, enjoy broader customer loyalty, and generate greater advocacy with their customers. Crafting a cross-channel marketing and branding strategy may be difficult and time-consuming to conquer while solely relying on internal resources. That's why some retailers partner with agencies like Imagination Media to leverage an outside voice to audit brand positioning and improve cross-channel marketing strategies and techniques.
What's in store after Q4?
As a result of growing demand throughout the year, we can expect continued online competition and investment from long-standing and fresh retailers. While it is easier than ever before to set up and start selling products online, getting to the top of the market is, perhaps, more challenging than ever.
Retailers who will survive in 2020 and thrive in 2021 will most certainly need to embrace innovative technologies and strategies to counteract changing consumer sentiments and hard-charging competitors.
Luckily, Imagination Media is here to help merchants develop successful strategies, implement appropriate technology, and employ state-of-the-art techniques to drive online growth for their clients. With our combined centuries of experience across the team, we are strongly positioned to advise retailers on what the next step is for their business.