What does present buying behavior mean for the future of e-commerce?

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Would you believe that in 2020, a turbulent year almost completely consumed by the Covid-19 global pandemic, overall US retail sales haven’t lost that much ground?

After all, unemployment is up, and people are still awaiting another round of federal Covid relief to hit their bank accounts. Department stores and brick-and-mortar chains are either struggling or closing for good. Doorbuster Q4 sales are few and far between (who wants to encourage a crowd and get cited as the point of an outbreak?). People have less disposable income and fewer places to go to spend it.

So what’s the saving grace of US retail right now? In a word: e-commerce.

About the author

Derrick Chen is CEO and co-founder of Cenports

As eMarketer reports, the COVID-19 pandemic has accelerated e-commerce growth by more than two years, with 2020 projecting year-over-year growth of more than 32%.

So what does that mean for the future of retail in general, and the future of e-commerce specifically? Let’s take a look.

Customers have discovered the ease of e-commerce – and they’re hooked

As McKinsey reported in August, the wave of online shopping sparked by Covid-19 will continue for the foreseeable future, with many categories (including home furnishings and supplies and household products) projected to experience double-digit e-commerce growth after the pandemic subsides. The trend is highest among Millennials and high-income shoppers, which is even better news for e-commerce brands relying on more discretionary money to spend. 

While the Boomer generation is generally less digitally fluent than their younger counterparts, they’ve been forced to adopt new online-shopping skills and behaviors in the age of COVID. Overall, McKinsey found that 80% of consumers who have adopted online shopping behavior plan to continue, which means there’s a bigger online audience of older shoppers than ever before.

Covid created a physical void that e-commerce will continue to fill

Many of the brick-and-mortar chains (think J.C. Penney, Neiman Marcus, and others) that have filed for bankruptcy or closed tons of locations will never again have a robust physical presence. This creates a big consumer void that e-commerce can rush to fill, whether from traditional brick-and-mortar brands like supermarket chain Kroger reinventing their digital experience or new digital-first brands stepping up to seize the opportunity. 

Some of the hallmarks of successful digitization that e-commerce brands should try to replicate: an abundance of product images; videos of the product in use/in context; lots of user reviews and testimonials; a highly interactive user experience, whether through live chat, digital assistants, or otherwise; clear and generous return policies that reassure new online shoppers of minimized risk; fast shipping options; and relevant, reward-rich loyalty clubs that prioritize customer retention and community. (Remember: it’s a lot more expensive to acquire new customers than to keep existing customers.)

E-commerce will have to double down on privacy

That said, Covid-19 is running headlong into intensifying customer expectations for privacy. From Europe’s GDPR to California’s CCPA (and new CPRA), legislation and regulations are reflecting user needs to know and control how their personal data is being collected and used, and brands on the wrong side of the legislation will face prohibitively steep fines.

With this change, of course, comes opportunity to lead. E-commerce brands that can provide great, personalized customer experiences while being clear about how they’re protecting customer privacy will have a big edge over competitors slower to adapt to a privacy-focused world. This means that any customer data e-commerce companies can collect by offering promotions, coupons, and loyalty programs with great benefits should be highly valued and faithfully used to create timely, personalized offers and increase user engagement. On the back end, this means that e-commerce companies need to invest in CRM (customer relationship management) tools like Salesforce, HubSpot, or a host of cheaper, upstart options to capture and segment user data and buying behavior.

E-commerce will become more democratized

While e-commerce giants like Amazon and Walmart are gobbling up the lion’s share of the Covid-accelerated growth, tons of opportunity is emerging for suppliers and brands of all sizes. This will happen on a couple of levels. 

First, as evidenced by build-your-own-website company Shopify’s swelling stock price, many new suppliers will break into the industry by building their own e-commerce sites and making a go of it on their own (which will require finding/growing their own audiences).

Second, quality suppliers from around the world will rush to find homes for their products on huge retail platforms including Amazon, Wayfair, Home Depot, Lowe’s, Overstock, and more, to leverage powerful brand affinity and plug into networks with millions of existing customers. In this model, supplier margins take a hit in exchange for immediate opportunities to scale revenue. Remember, though, that it’s not a given that suppliers can simply access any and all major retail platforms; without an experienced partner that can tap into a network of relationships and help suppliers with red tape like insurance and customs paperwork, many start-ups struggle to achieve liftoff with big sales channels.

Entrepreneurs must consider hidden e-commerce costs

In either scenario, there are many obstacles preventing e-commerce scale for smaller, start-up suppliers; these include warehousing, customer service investments, and time-consuming order and inventory management across disparate platforms. These companies looking to get a foothold without financial resources to build full-time teams and invest in software and real estate solutions should look to experienced e-commerce ops partners to handle A-to-Z operations and get their products online - and in customer homes - with minimal friction and overhead. Ops partners, including 3PL (third-party logistics) companies, also offer benefits including streamlined drop-shipping functionality, volume-based shipping discounts with small-parcel and big-package carriers, recommendations for improved packaging to cut down on costly returns, flexible storage solutions, and more.

In a word, the future of e-commerce is...competitive

With brick-and-mortar companies pivoting to provide digital shopping options and a wave of entrepreneurs around the world trying to gain a foothold in the e-commerce market, the online shopping landscape is getting more competitive by the day. Along with the basis of any retail success (great, well-built products at fair prices), brands who have merchandising, logistics, pricing, packaging, and promotions (as well as systems to capture, analyze, and react to data) dialled in and reassessed on a frequent basis will be in a good position to capture long-term growth opportunity.

Derrick Chen is CEO and co-founder of Cenports, a retail operations company that helps global suppliers and entrepreneurs achieve frictionless e-commerce scale. He has over two decades' worth of experience in the IT and e-commerce verticals and has co-founded Stufurhome, Pangea Mobile, and App Ant Studios. Derrick's years of e-commerce experience helped him understand the barriers to entry and scale for eCommerce SMBs; he founded Cenports with the mission of giving start-up brands with great products the ability to access the biggest markets in the world.