E-Commerce Growth Spells Headwinds, Tailwinds for Many Brands: Shopify

Ten years of e-commerce growth happened in 90 days at the peak of the COVID-19 pandemic, said a Shopify report. E-commerce globally reached an all-time high of 16.4% of total retail sales, driven by older shoppers plus Gen Z and millennial consumers. About 84% of consumers shopped online during the pandemic, it said.

E-commerce growth this year will be “uneven,” Shopify said, decelerating in the U.S. to 7.8% “as retail brick-and-mortar sales rebound from their pandemic plunge.” Growth will be faster in Asia Pacific, Europe and the Middle East through the first half of the decade, it said.

E-commerce as a percentage of total global retail sales will continue to grow over the next five years, creating both a tailwind and headwind for brands as the space becomes “more crowded and competitive than ever.” With well-funded retailers prioritizing e-commerce, the shift from TV to digital advertising is picking up speed, driving up ad costs and making it more expensive to acquire new customers, Shopify said. On Facebook, customer acquisition costs spiked during the pandemic, it noted. Worldwide, branded commerce and marketplace apps can cost companies over $30 to acquire a new customer, it said, citing Statista figures.

Retail merchants with an omnichannel strategy replaced 94% of point-of-sale (POS) purchases lost in the first month of the pandemic with online sales, Shopify said, saying a “gulf has opened up” between digital-first direct-to-consumer (D2C) brands and businesses new to e-commerce. Only 38% of the largest companies are capable of competing on customer experience, it said, citing Adobe. D2C brands with strong e-commerce experiences were able to pivot quickly without having to rethink their business model, said Hana Abaza, Shopify Plus’ global marketing director.

Half of e-commerce sales happen on mobile devices; before the pandemic, mobile commerce accounted for 92% of e-commerce growth. There’s growing pressure to streamline the mobile shopping experience, said the report. Some 53% of consumers will abandon a site that takes longer than 3 seconds to load on a mobile device, it said, and mobile bounce rates of consumers who leave a site before looking at additional pages are consistently higher than those on a PC.

Shoppers who choose local pickup are 13% more likely to complete their online purchase, and they spend 23% more than customers who use regular shipping, Shopify said. Local pickup options are faster and cheaper than shipping and offer another opportunity to bring customers back to a store and experience a brand “in real life.”

Suggestions for accelerating the checkout process include automating discounts and promotions; offering buy one, get one free deals, gifts or discounts; and tiered pricing for bulk buys, said the company. Other ways to accelerate checkout are to precalculate shipping costs, offer local delivery and curbside pickup and have free shipping for loyalty program customers, Shopify said.

Augmented reality can simulate in-person shopping experiences online by allowing customers to see how a product might look on them or in their home. Customers can use AR to click on a product and see it overlaid wherever they point their mobile device to get a sense of size and scale, said the report. 3D modeling shows product shape and texture from any angle. Augmented reality for larger items will become more relevant in the future, said Jordan Knapp, Shopify Plus head of new markets.

Livestreaming events are popular in China as sales platforms, said the report. Levi’s and Tommy Hilfiger are among brands livestreaming shopping events similar in format to QVC, it said. Viewers can chat with hosts and stylists, then click on items for purchase.

Fast fulfillment continues to drive sales, with 67% of U.S. consumers expecting either same-, next-, or two-day delivery, it said. Fulfillment must be smarter, closer to the consumer and automated, it said. Most consumers in the U.S., U.K., China, Germany, France and Japan say free shipping "greatly impacts" whether they buy from a brand. Four in 10 U.S. shoppers expect two-day shipping to be free, while the same-day shipping market in the U.S. is forecast to top $9.6 billion in 2022, it said.