During the height of the pandemic, consumer behaviour changed at an unprecedented rate, resulting in the consolidation of ten years’ worth of e-commerce growth into just ninety days. Shoppers of all ages including millennials, generation Z and older shoppers turned to their devices to purchase groceries, clothing, and home furnishings. The result is that there are now more than two billion global digital buyers, and by 2040, nearly 95% of all purchases will be conducted online or through digital channels.
Although many could argue that 2020 was an exceptional year, the numbers show that much of this behaviour is here to stay. In fact, the retail e-commerce industry continued to grow by 16 per cent in 2021, generating around 4.9 trillion dollars in sales worldwide. By 2025, this number should reach 7.4 trillion dollars, a 50 per cent increase (Statistica). Frankly, it would take a brave soul to think that this growth and this shift in consumer behaviour will slow down soon.
When your market is growing quickly, you must grow at least as rapidly as the market itself. Therefore, founders, managers and product owners of eCommerce businesses, must seek to grow revenues by more than 12% in 2022. As we have seen in the past, failure to do so will have severe repercussions. For the past 30 years, companies whose top-line growth hasn’t kept pace with the market have disappeared shortly afterwards. Whilst there are exceptions, most eCommerce companies today will face the same issue. If they do not focus on growth, they have very little chance of survival.
The message to eCommerce owners is clear, grow or die, unfortunately, it has become increasingly challenging to grow due to market forces such as rapidly increasing competition and rising acquisition costs.
Increasing competition
The pandemic has transformed eCommerce into a strategic objective for every business. Large brands, incumbents who missed the first wave of eCommerce, and new entrants are investing heavily in establishing eCommerce as a revenue-generating channel, and these changes are happening globally.
Cross-border sales saw an increase of 21% last year due to consumers being more open to shop on eCommerce sites based in other countries. Research suggests that 57% of online shoppers worldwide have made at least one online purchase from a company in another country over the last 12 months – while a further 22% have considered doing so.
A decade ago, there weren’t many online stores, but today there are an estimated 24 million eCommerce sites across the globe. Tools like Shopify and Woo-commerce play a large part in this growth since they make the process of setting up an eCommerce store easier and cheaper than it has ever been. They have opened the door to thousands of new competitors. In 2020, Shopify saw an increase of nearly 800 thousand new merchants, and the Woo-commerce plugin is downloaded over 30,000 times a day. Whichever way you look at it, the competition in eCommerce is getting fierce.
Ecommerce owners find themselves in a situation where competition is increasing faster than the market is expanding, forcing brands to focus on growth to maintain their market share, but they also have to fight harder for that growth. It is not just competitive pressures that they face but the perfect storm of increased competition and higher acquisition costs.
Increased acquisition costs
It has become increasingly difficult for brands to stand out and appeal to their audiences as customer acquisition costs, cost per mille, and cost per click has increased. One of the reasons for this increase is the intensifying level of competition. Other factors such as the Apple IOS changes to ad targeting and privacy policies also add to the challenge by making it increasingly complex (and expensive) to reach audiences on social platforms such as Facebook.
According to business insider, each major social media platform saw double-digit growth in costs year on year.
- Google’s CPM went up the most by 75%
- TikTok’s CPM had a 185% increase
- Meta ad costs went up by 61%,
- Amazons CPC growth for sponsored products had a 14% increase
This presents a significant threat to the growth of eCommerce brands, as everybody in the world wants to reduce the acquisition cost and get cheaper clicks and lower prices per thousand impressions. Unfortunately, the availability of super affordable, highly targeted traffic is limited no matter what your target market is. After that, traffic gets more expensive as you cast a wider net. Ecommerce owners and marketers are inevitably concerned about the rising costs of acquisition. A recent survey showed that 47% believe they will be “priced out” if the ads continue to become more expensive.
In light of rising acquisition costs and competition, many eCommerce entrepreneurs are wondering where they can find additional hidden exponential growth.
Where is the growth opportunity?
The transformational growth that most eCommerce companies are looking for is quite simply hidden in their data. Only a tiny percentage of companies analyze their data. Some will generate reports on how much they made each month or how many goods they have sold. However, such data uses are somewhat limited and often poorly engaged with. Most surveys will show that less than 25% of people pay any attention to the data in most organizations. Yet, such a valuable asset should not be neglected. If analyzed correctly, it will offer millions of pounds worth of growth opportunities.
In most organizations, there is a gold mine of information or a literal treasure map hidden in the data that can point directly to the areas you are leaving money on the table or that need improvement. Such powerful insights will help you understand where to make smart double-digit improvements to your eCommerce site and marketing campaigns. Companies that implement such improvements report an additional 50% revenue increase. To get to that next level of growth, you have to start analyzing your data.
This is the start of a series of articles that explore how eCommerce companies can look to grow through their data. Stay tuned for the next one.
Source: https://www.forbes.com/sites/mikebugembe/2022/05/06/grow-or-die-the-new-reality-of-ecommerce/