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COVID-19 transformed eCommerce, but not every change will last beyond lockdown. We explore what's truly here to stay.
One trillion. It’s an unfathomable number, really. One thousand thousand makes a million. One thousand million makes a billion. But it takes one million million to make a trillion. Yet, that’s the milestone that the eCommerce industry is approaching as early as 2022. Fed by the unique circumstances created by COVID-19, eCommerce has seen an unprecedented explosion that has caused top tech companies to reach historic valuations.
Defined by worldwide lockdowns, 2020 turned eCommerce from a convenience into a lifeline, offering safer access to everyday essentials and recreational goods. That wave of new buyers and sellers, seemingly created overnight, led to unprecedented growth. IBM's recent retail index estimated that the pandemic accelerated the transition from brick-and-mortar shopping to online shopping by roughly five years. A McKinsey and Company study found that eCommerce penetration grew by as much during the first half of 2020 as it had in the previous 10 years. No matter which way you cut it, COVID created a watershed moment for more people to interact with eCommerce businesses.
While online consumer behavior evolved quickly, it was due to unique, temporary circumstances. Things may not ever go back to “normal” -- at least not in the pre-pandemic sense -- but the lockdowns of 2020 and 2021 won’t be the “new normal” either. Which begs the question, how much of this change is permanent?
The good news for the eCommerce industry is that the answer appears to be “a lot.” Recent McKinsey and Company consumer sentiment research shows that consumers are overwhelmingly in favor of online shopping -- two-thirds plan to continue purchasing online after the pandemic.
eCommerce was on the rise well before COVID, and while the pandemic accelerated the growth of the industry, the growth of the industry accelerated a change in human behavior. As many eCommerce gains become an indelible part of society, let’s take a look at the trends that will remain part of everyday life.
The growth of eCommerce means more competition, which means more choices for consumers. Being in the right place at the right time for the right customer remains the holy grail of eCommerce, but there are more businesses fighting for that place, time, and customer than ever. Which is why personalization has become a key differentiator in standing out.
It’s been established for several years that customers respond positively to personalized ads. Proper use of analytics provides an effective avenue toward understanding what, where, and when a customer wants a certain product. They’re already being barraged by more irrelevant ads than they can count, so you don’t want to be just one more they’ll overlook.
Once you’ve gotten the right personalization down, it’s important to present your ads in accessible ways. Don’t make the customer work to get what they want. These two factors are critical to increasing retention rates. Fortunately, today’s digitized world generates an immense amount of data that makes personalization possible. It’s just about knowing what to do with it.
As new technologies enter the digital space, those that bridge the gap between consumer and product will shape the future of eCommerce. Online shopping is undoubtedly convenient, but the lack of physical connection between the buyer and product hampers the experience. Even before the pandemic, augmented and virtual reality were beginning to play a role in overcoming this barrier. A 2019 Nielsen global survey showed that 51% of consumers were willing to use AR/VR to assess products, a trend that continued during the pandemic.
With the help of these technologies, eCommerce brings the product closer to consumers, even offering experiences beyond what a physical store can. And AR-powered interactions with products create greater brand awareness and a higher conversion rate.
However, one major advantage that physical stores have is the human connection and the service their employees provide. Nevertheless, technology is changing that as well. The use of ever-improving AI chatbots aims to offer the same white-glove service combined with the convenience and privacy of shopping at home.
The restrictions created by the pandemic also necessitated experimentation with new marketing and sales channels. Social media emerged as a viable channel not only for executing a marketing strategy and building brand awareness, but also for generating revenue. Known as “social commerce,” this convergence of social media and eCommerce provides another means of simplifying the buying process by meeting the customer on the social media platforms where they’re already spending their time. As consumers shift to mobile buying -- US mobile commerce is expected to grow at an annual rate of 14.4% until 2024, according to business consulting firm Forrester -- this impact will likely become more pronounced.
Facebook, Instagram, Pinterest, YouTube, Twitter, and TikTok have all introduced social commerce features designed to make purchasing from the app as easy as possible. With a presence on the largest platforms in the world, and driven by the pandemic, it’s estimated that the social commerce market reached $89.4 billion in 2020 and is expected to grow to more than $600 billion by 2027 -- an expected compound annual growth rate of 31.4%.
In the same way that social platforms have branched out into online selling, eCommerce platforms are leveraging the power of social media to drive traffic and increase sales. For example, Amazon Live features live, interactive video shopping that allows sellers to engage with viewers in a live stream. The practice is already prominent in China, where it drives 9% of the online market. Before long, it could become similarly featured in the US.
This rapid growth means that eCommerce is becoming more crowded, and as businesses continue to build their online selling capacities, they may not go back to brick and mortar stores. As a result, sales success will require a greater digital investment, including targeted content and SEO to earn customers' attention.
The past year has taught us how quickly customer behavior can change. In that shift, eCommerce has come out on top, and a lot of those changes are going to be around for the foreseeable future.
What and how consumers are buying has shifted dramatically as life has changed dramatically. Many habits formed during the pandemic are here to stay, as are associated values, attitudes, and behavior. People now want to shop more locally, mindfully, and cost-consciously. As discretionary spending has gone down, consumers are trading down while showing a preference for trusted brands.
Whatever the “new normal” is, a recent Qualtric study shows that as consumers adjust to a post-pandemic world, they won't go back to the “old normal.” The restrictions imposed by lockdown accelerated another trend: experiences over goods. In fact, 74% of consumers prioritize experiences over products, but the ability to offer experiences remains limited by the uncertainty of the pandemic itself.
Arguably the most important change in eCommerce is where this growth is coming from. It’s not just about an increase in young consumers and early adopters. Constrained by circumstances, consumers over 65 have become the fastest growing category of eCommerce shoppers. Last year, their online spending increased by 49%, with 47% planning to increase their online shopping after the pandemic. Offering more disposable income and higher loyalty than younger consumers, this older generation provides tremendous opportunity for growth.
The last year was a defining moment for eCommerce. With physical stores closed indefinitely, shoppers were forced online, ultimately finding the ease and convenience worth the price of admission. That online migration, driven by a pandemic unlike any seen in more than a century, will have long-lasting implications for the growth of the marketplace.
However, the drivers of the next stage of eCommerce are similar to those pre-pandemic. Consumers still want speed, convenience, immediacy, and personalization, but who those consumers are now includes older generations. This often-overlooked demographic brings new shopping habits, but their presence is not guaranteed. It’s up to brands to deliver the online experience that will keep them coming back.
On the other hand, with the eCommerce industry seeing such unprecedented growth, it might be time to sell high. To learn more about selling your Amazon FBA business, reach out today.
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