- Though global ecommerce growth will slow before picking up in 2022, ecommerce sales are at an all-time high after the pandemic accelerated years of growth in just weeks
- Record ecommerce competition—fueled by legacy wholesalers, global retail giants, and product categories not traditionally purchased online—is driving up customer acquisition costs
- Many new competitors are not equipped to compete on customer experience, a top differentiator online, giving an edge to brands with immersive omnichannel experiences
Shoppers worldwide fuel ecommerce supercycle
At the height of the COVID-19 pandemic, 10 years of ecommerce growth happened in just 90 days.
As countries locked down and retailers were forced to close, ecommerce reached an all-time high of 16.4% of total global retail sales. It’s not just Gen Z and millennials driving this trend—older shoppers have also moved online. According to a global survey across 11 markets by Shopify, 84% of consumers shopped online during the pandemic.
If you’re waiting for this to end, you say we’re gonna be back to normal in two months, that we’re just biding our time and getting through it, then you’re gonna be screwed.Jill ManoffEditor in Chief, Glossy
While a post-COVID-19 world is expected to recover more slowly than it did after the 2008–2009 global financial crisis, ecommerce is the economic sweet spot as brands and consumers rush online. Nearly 150 million people shopped online for the first time in the pandemic, and the number of ecommerce buyers will only continue to rise.
Ecommerce as a percentage of total global retail sales will also continue to grow over the next five years. This trend is not only a tailwind for digital brands, but also a headwind as the world of ecommerce becomes more crowded and competitive than ever.
We’re seeing this rapid shift and it’s not just ecommerce. It’s everything. Our consumers are demanding speed and efficiency, no matter what you’re doing.Margo HaysPrincipal of Digital Strategy, TSG
Ad costs spike due to record online competition
As legacy wholesalers go online and global retail giants like Walmart expand their ecommerce initiatives, digital competition is heating up. Likewise, competitors in product categories not traditionally in demand online are also competing for ecommerce shoppers. The shift is led by household essentials, health, and personal care.
Competition is also coming from abroad. As COVID-19 spread, consumers began shopping outside their home countries. Cross-border ecommerce spiked 21% year over year from January to June 2020, with online sales of luxury goods increasing by 39%.
According to proprietary data from Shopify, the U.S. leads cross-border ecommerce. But the pandemic has also accelerated this behavior in China.
Shopify data reveals that translation apps spiked 3,309% worldwide during the pandemic. Dropshipping and currency conversion apps have also seen significant increased usage since the pandemic. These types of investments in cross-border commerce suggest overseas and regional competition isn’t likely to subside.
With international competition and deep-pocketed retailers prioritizing ecommerce, the shift from television to digital advertising is picking up speed. This has driven up ad costs and made it more expensive to acquire new customers. On Facebook, customer acquisition costs spiked following the pandemic, with costs now higher than pre-pandemic levels.
Customer experience becomes an imperative
The global pandemic has transformed the role and importance of digital experiences in customers’ lives. Today’s consumer expects easy-to-use, intuitive digital experiences across channels and devices. Brands that can deliver on those expectations are seeing the greatest returns. According to proprietary data from Shopify, retail merchants with an omnichannel strategy in place replaced 94% of point-of-sale (POS) purchases lost in the first month of the pandemic with online sales.
“During the pandemic, direct-to-consumer brands with thriving ecommerce experiences were able to very quickly and easily pivot their marketing and messaging, their energy,” says Hana Abaza, Shopify Plus’ global director of marketing. “They didn’t have to fundamentally rethink their business model. They could focus on very different things because they were at a significant advantage.”
The opportunity for DTC brands is to build on their ecommerce expertise. The challenge for everyone else is keeping up.
What you should do in 2021:
Scale your omnichannel strategy
To capitalize on the ecommerce boom and overcome fierce competition, you need to optimize commerce across channels like online marketplaces, social media, retail, and wholesale. That also means building—or buying—a technological foundation that frees your team to create immersive, unified experiences wherever your customers are. The business benefit is resilience, allowing your business to quickly shift efforts and resources from offline to online, and back again, based on customer demand.
This is not just a pandemic disruption. This is an evolution of brand and online purchasing, which is why we’re going back to an omnichannel strategy.Nisha DuaCo-founder and General Partner, BBG Ventures
Unify your customer and product data
Having a unified view of your product and customer data is the first step toward providing a consistent experience to customers across channels. Build your business on a single platform that connects workflows and data sources, allows you to manage all your sales channels in one place, and integrates with third-party solutions.
Synchronize product information and inventory
To ensure your brand’s product data and inventory levels are accurate and updated in real time across channels, your platform should automatically sync product information like price, description, and images with SKU counts.
Integrate your sales and supply data
Brands without a single source of truth for sales data and reporting will find it difficult to efficiently track performance across channels. Your commerce platform must integrate with both the sales and supply sides of your business. Use a POS system to connect your digital storefront with retail locations in a central reporting hub.
Prioritize mobile shopping experiences
Competing on customer experience also requires a lightning-fast mobile experience, with 50% of global ecommerce sales happening on mobile devices. Even prior to COVID-19, mobile commerce accounted for 92% of ecommerce growth. Research indicates 53% of consumers will abandon a site that takes longer than three seconds to load on mobile. Worse yet, mobile bounce rates are consistently higher than desktop.
Make your site responsive
Responsive online stores allow your brand to provide consistent experiences across all devices, from desktop to tablet to mobile. They do this by identifying the type of device being used and configuring the website to match the device’s display as closely as possible. Responsive themes also help improve SEO, site speed, and overall user experience.
The greatest threat—and one of the greatest threats for the past two or three years—is still this user experience baseline. The foundation for a user experience that is truly aligned with actual end-user behavior.Christian HolstCo-founder, Baymard Institute
Convert your site to a progressive web app
Progressive web apps offer an optimal mobile experience across channels and can live on a user’s home screen. They’re designed to load instantly, even if the user is offline.
Combine your progressive web app with an accelerated mobile page
Some brands are also combining progressive web apps with an accelerated mobile page, or a mobile-first, stripped-down HTML copy of a web page that loads instantly. Accelerated mobile pages are the foundation of Google’s mobile-first index, which prioritizes mobile optimization in search results. The combination can lead to better search results, more top-of-funnel traffic, and improved site conversion rates.
Consider a headless architecture
- Integration: Building custom enterprise architecture with APIs enables deep integration with tools or services of choice (like a separate content management system)
- Flexibility: By separating the back end from the front end, you have full ownership and control of the front-end experience and the tech stack used for building it
- Omnichannel: This flexibility allows you to extend shopping into any customer experience, on any device or platform
Despite the cost and development complexity associated with going headless, many merchants are still willing to adopt a headless architecture in an effort to improve conversion rates. Expect the adoption of headless and lean microservice tech stacks to accelerate in 2021.
Trend in action: Koala
Koala, an Australian furniture brand, adopted a headless architecture from the start.
Koala built a headless progressive web app, which allows it the flexibility to offer the right experience at the right time to different customer segments across any device. This is the customer-facing portion of its web presence, allowing for new web pages, products, and content to be deployed faster. Although decoupled, the progressive web app integrates with the content management system, shopping cart, and other mission-critical systems.
“Traditionally, frequently changing content is gated behind software engineers who need to edit HTML, commit code, test, and perform website releases to ship copy changes,” says Richard Bremner, Koala’s head of technology. “By decoupling the content from the code, we have been able to free the content from the engineers so they can focus on code while writers focus on content.”
How Shopify Plus can help
With 100+ sales and marketing channels that integrate directly with Shopify—including social channels and online marketplaces—you can expand your audience while seamlessly managing everything from a single location. But the real power is in Shopify POS, which unifies your online and retail sales on one platform so you can offer a blended omnichannel customer experience with:
- Buy online, pick up in store
- Browse in store, buy online
- Buy in store, ship to customer
- Online returns and exchange
Let’s talk about how you can reach more customers across marketplaces, mobile, social, and in real life.
- Consumers worldwide are buying items rarely purchased online before the pandemic, like groceries, health and hygiene, and home essentials.
- The pandemic has amplified the consumer’s desire for convenience and immediacy. The permanency of these shifts will be determined by how satisfied consumers are with online experiences.
- Unlocking the future of retail means offline-online innovation that allows consumers to buy anywhere they shop, try on your products with augmented reality (AR) before buying, and engineering virtual versions of retail shopping experiences.
New online product category winners emerge
Though dynamics vary across countries, health, hygiene, home essentials, and food and beverage are now the new top online product categories. The pandemic has also amplified the consumer’s increasing desire for convenience, immediacy, and simplicity.
We did a survey of about 70 brands right after the pandemic hit. And we were surprised that beauty was thriving, even though people were working from home and on Zoom.Nisha DuaCo-founder and General Partner, BBG Ventures
Brands must adapt or risk becoming irrelevant
Never has the consumer expected more of businesses. Not only do shoppers want to buy online, they also expect it to be fast and convenient.
Consumer surveys indicate that these shifts will be sticky. Of the 75% of consumers who say they tried different online brands during the pandemic, 60% expect to integrate the new brands and stores into their post-COVID lives. Other shifts that took hold during stay-at-home orders are also expected to persist, including shopping online, using mobile payments, and video calling and conferencing.
It’s also possible these behaviors will persist, but not to the same degree as during and immediately after the pandemic. Stickiness will depend on how satisfied consumers are with their new digital experiences. This varies by country. In Italy 60% shopped online during the pandemic, but fewer than 10% were satisfied with the experience, while consumers in Finland will continue shopping online after the pandemic, suggesting the shift will last.
The changes you must make to your business won’t be temporary though. Chief executives around the globe say digital is here to stay, the shift to ecommerce is structural, and behavioral changes are permanent.
“You’re not going to see a full rollback when it comes to ecommerce penetration,” says Hana Abaza, Shopify Plus’ global director of marketing. “Some people will actually shift into buying certain things online, and they’ll keep doing it.”
What you should do in 2021:
Unlock the future of retail with new digital experiences
Focus on creating innovative digital experiences that make life easier for your customers, reinventing traditional shopping experiences for the post-pandemic world, and bringing your brand to life in new ways.
“It’s the consumer who is in control,” says Robert Hein, Shopify Plus’ merchant service experience manager. “Their demand is shifting needs and expectations. Relevant to COVID, there’s probably more interest in safety and security and a combination of experiences: Part of it is digital, part of it is real life. There’s maybe a tangible product and then a digital experience that complements the product.”
Make it fast and easy to buy from you anywhere
Start by making sure your customers can do business with you wherever they like. Connecting the online and offline worlds allows the customer to choose where they buy. It also allows you to capitalize on their desire for speed and convenience.
Connect your online checkout to POS
Connect your online checkout with a POS system that enables popular fulfillment options like local delivery, “ship to customer,” or local pickup. Proprietary Shopify data shows that shoppers who choose local pickup are 13% more likely to complete their online purchase and spend 23% more than customers using regular shipping. Local pickup options are faster and cheaper than shipping, and another opportunity to bring customers back to your store and experience your brand in real life.
Upgrade your checkout experience
The checkout is your store’s most critical moment. The faster and easier you make it to check out, the more money you can make.
- Allow customers to save their payment and shipping information by enabling one-tap checkouts for a 60% faster checkout experience
- Eliminate the add-to-cart step by allowing customers to buy directly from product pages
- Capitalize on your customer’s desire for instant gratification by letting them pay for products in installments through “buy now, pay later” solutions
Automate promotions and shipping costs
You can further accelerate the checkout by automating promotions and shipping costs.
- Automate discounts and promotions: Offer buy-one-get-one-free (BOGOF), free gifts or discounts, and tiered pricing for bulk purchases
- Precalculate shipping costs: Offer local delivery, “click and collect” or curbside pickup, or free shipping for VIP loyalty program customers
Help customers bring your brand to life
The next opportunity is being able to pivot between the digital and physical worlds and provide a truly blended shopping experience.
Experiment with AR
Augmented reality simulates in-person shopping experiences online by allowing customers to see how a product might look on them or in their home. With AR, customers click on a product and instantly see it overlaid wherever they point their mobile device. Helping customers better see the size, scale, and detail of your products drives conversions.
Use 3D modeling or 3D versions of your products to show product shape and texture from any angle. Combined with AR functionality, 3D modeling creates intimacy with your products by allowing consumers to try before they buy in 360-degree realistic experiences.
“Augmented reality for larger items, especially home goods, becomes increasingly more relevant in the future,” says Jordan Knapp, Shopify Plus’ head of new markets. “Retailers need to get creative to reduce returns because returns can destroy a business.”
Offer livestream shopping events
While more popular in China, livestream shopping events in the U.S. are expected to generate $25 billion by 2023, as Amazon and Facebook test live sales platforms. Levi’s and Tommy Hilfiger are livestreaming shopping events similar to QVC. Viewers can chat with hosts and stylists, then click on items for purchase.
Convert physical experiences into virtual ones
During the pandemic, 14% of buyers purchased a digital version of an experience that would normally be done in person. Drive sales by converting traditional shopping or marketing experiences into virtual ones:
- Satisfy the consumer’s desire to simplify their lives by offering step-by-step or how-to content that shows customers how your product makes life easier.
- Unpackage your products and sell parts, pieces, or ingredients that consumers can assemble themselves to capitalize on the do-it-yourself (DIY) trend.
- Take your customers behind the scenes to better understand your brand or product. Give your audience a virtual tour of your lab, factory, office, or test kitchen.
Trend in action: Knix
Intimate apparel brand Knix pivoted from its international growth plans when COVID-19 hit and launched digital versions of traditional physical experiences, most notably, a virtual fitting room.
Once customers book a 20-minute consultation, they receive a message introducing them to their “Knixpert,” one of the company’s in-store associates who has been redeployed to help shoppers. Customers learn how to take their measurements accurately, and find the right size and fit.
Knix also hosted a virtual warehouse sale that achieved:
- 35,000 people shopping at once within 10 minutes of the sale going live
- Handling 5,000 customers in checkout simultaneously
- The successful launch of virtual fittings
“Retail is being disrupted, and brands need to find new ways to deliver experiences with trust and care,” says Joanna Griffiths, Knix founder and CEO. “The world’s next legacy brands are being built in real time, and I believe Knix will be one.”
How Shopify Plus can help
Power your entire online and offline experience on today’s most agile commerce platform. No more workarounds, patches, or hacks: With Shopify Plus, you can run your online store and retail locations with hardware, software, and payments that were made for each other. And unlike marketplaces, you own your brand and customer experience across every touchpoint, synced right in Shopify.
With analytics at your fingertips, stay on top of growing trends in your business across in-store and online sales. And manage your orders, products, inventory, and customer data in one place, so you’re always up to date. Powered by Shopify POS, you have all the tools you need to manage your business, market to customers, and sell everywhere.
Learn how to create a seamless brand experience, no matter where your customers are.
- Today’s brand has a four-pronged fulfillment mandate: fast, free, sustainable, and branded shipping
- Establish free-shipping thresholds to protect profit margins as consumers worldwide expect quick delivery for ecommerce orders
- Turn fulfillment into a competitive advantage by placing inventory closer to customers, automating returns, and offering flexible options like curbside pickup
Consumer fulfillment demands multiply
Today’s brand has a four-pronged fulfillment mandate: fast, free, sustainable, and branded shipping. Globally, 64% of consumers want their orders shipped for free, while peak-level ecommerce and strict same-day shipping cutoff times have made it difficult to meet rising customer demands. And 67% of U.S. consumers expect either same-, next-, or two-day delivery, while 72% of global consumers want brands to use sustainable packaging. With the cost to fulfill orders soaring, brands must turn fulfillment into a strategic asset. Fulfillment must be smarter, closer to the consumer, and automated.
The majority of consumers in the U.S., U.K., China, Germany, France, and Japan say free shipping greatly impacts whether or not they buy from a brand. Proprietary data from Shopify shows the number of brands offering free shipping has increased 5.3% since the pandemic began. To answer consumer demand while maintaining profitability, brands are setting free-shipping thresholds. A full 65% of consumers check free-shipping thresholds before adding something to their cart.
And free shipping is just the tip of the iceberg: 39% of 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.
Today’s shopper wants shipping to be not only fast and free, but also environmentally conscious. Three-quarters of U.S. consumers are more likely to buy a product packaged sustainably. Many will also pay a premium. The focus is on zero-waste packaging, where all materials are used, reused, or recycled. Minimalist packaging, reduced package sizes, and redesigned shipping cases are also high priorities.
This global trend is strongest in developing and rapidly developing markets, led by China, where 67% of respondents say they’d be more likely to purchase products or services from a company with a good reputation for environmental responsibility.
But demand for green packaging must also be balanced with the consumer’s desire for custom or branded packaging. The unboxing video era almost guarantees your packaging will be seen by shoppers researching your brand and products. Packaging influences purchasing decisions, inspires customers to recommend your product, and can increase customer retention. It must simultaneously impress consumers and meet their desire for sustainability.
Rising costs and increased complexity pressure brands
Complex consumer demands have coincided with rising shipping costs. The shift to ecommerce has resulted in shippers operating at peak levels for the majority of 2020. In response, they’re charging more. Worldwide, FedEx announced an average 4.9% rate increase for 2021. FedEx also plans to hike rates during peak holiday season, and charge late fees for merchants who don’t pay on time. UPS is also charging more: Its new chief executive has prioritized aligning pricing with the value the company provides.
Ecommerce is also making order profiles more complex: Distribution centers are fulfilling smaller DTC orders faster to meet aggressive cutoff times and shipping deadlines.
The global nature of trade, though strained by U.S.-China relations and Brexit, is also adding complexity. Purchasing power is shifting from the U.S. and Europe to China and Southeast Asia. With China dominant in ecommerce, more than 62% of digital sales were expected to take place in Asia Pacific in 2020. With Asia Pacific as ground zero for ecommerce, fulfillment complexity is compounding for brands selling cross border.
Even more challenging, consumers increasingly expect free returns. The total cost of returns worldwide recently topped $1 trillion, and ecommerce returns in the U.S. are forecasted to surge.
Due to COVID-19, 40% of retailers adjusted return policies. Returns are also rising as more online shoppers "bracket" their purchases, buying multiple versions of a product with the intention of returning some items.
What you should do in 2021:
Improve your fulfillment capabilities
In 2021 protect your margins from rising costs and give customers everything they want—fast, free, sustainable, and branded shipping—by improving your fulfillment capabilities.
Outsource your fulfillment operations
Choose a 3PL with a vast network of strategically located fulfillment centers in the regions you want to ship to. This allows you to stock the right merchandise at the right location so orders can be shipped faster and routed more efficiently. A fulfillment partner should be able to:
- Recommend which inventory should be stored in which warehouse so it’s closer to customers
- Fulfill orders with branded packaging that turns the unboxing experience into a retention tactic
- Offer late cutoff times that allow you to ship more same-day orders
Automate inventory management
Inventory management is key to building an efficient fulfillment network. Your inventory management system should accurately forecast demand so that inventory can be purchased, replenished, and managed effectively. If you’re managing inventory in multiple locations, your inventory management system should also use automated rule-based order routing to match orders with stock in warehouses closest to the customer. This saves time, expedites fulfillment, and reduces shipping costs.
Streamline the return process
Automate returns to instantly give customers store credit, pre-fill return labels, and support self-serve returns. The investment makes business sense when 96% of consumers will shop with a retailer again based on an “easy” or “very easy” return experience. You can also use an automated returns solution to segment and track serial returners, then modify the promotions they receive to protect margins. Put returns on autopilot with:
Instead of returns, consider incentivizing customers to exchange products or accept store credit. This saves on restocking fees, retains customers, and reduces shipping expenses in cases where customers keep damaged or used items that can’t be resold.
Convert dark stores into mini-fulfillment locations
Turning unused retail space, also known as “dark stores,” into fulfillment centres can be a smart way to offer click-and-collect pickup, while slashing online fulfillment costs by up to 30%. Click-and-collect commerce in the U.S., including curbside pickup, is forecast to top $64 billion in 2021. When you convert dark stores, you’re also equipped to ship orders placed in store or online.
Offer local delivery
Some brands are taking fulfillment into their own hands by offering local delivery. Local delivery is faster than traditional shipping, provides more work to your retail workers, and gives you full control over the customer experience.
Trend in action: Molson Coors
Molson Coors Beverage Company equipped its Toronto DTC initiative with both local pickup and local delivery. Customers can choose to pick up their orders or have them delivered from their nearest retail location.
Since using its retail location to fulfill online orders, Molson Coors has:
- Launched an online store in 10 days, with local delivery in Toronto
- Grown sales 188% month over month
- Increased orders 152% and conversions by 109% month over month
“By building our direct-to-consumer service, we’re able to grow sales of our iconic brands,” says Joy Ghosh, Molson Coors’ brand director for North America. “But it’s a lot more about the direct relationship that we now have with our customers and being able to adapt to their needs as we learn.”
How Shopify Plus can help
Scale your business with shipping and fulfillment services that put your brand and customer experience front and center. Deliver world-class shipping with preferred rates from trusted carriers, or take advantage of Shopify Fulfillment Network, the most advanced, robotics-driven fulfillment centers in the world to help high-volume businesses fulfill quickly and affordably.
And you can deliver your best service close to home with local delivery and pickup. Cut the uncertainty of third-party services with hands-on delivery to nearby customers. Or let online customers skip the shipping rates and checkout lines to pick up orders in store, curbside, or at other convenient locations.
Learn how you can exceed expectations with every order, not just fulfill them.
- Half of all global ecommerce sales occur on marketplaces, where consumers search for solutions rather than brands.
- Building a brand has never been more important—or more difficult. The good news is that socially conscious consumers are willing to pay a premium for brands with a purpose.
- Brands should turn their marketplace product pages into rich, immersive experiences, while offering unique customized products through their own channels.
Marketplaces dominate brands
In a world where marketplaces dominate, and search is often unbranded, brand building has never been more important—or more difficult. Half of all global ecommerce sales occur on marketplaces, and the sheer volume compels brands to participate.
Nearly $2 trillion are spent annually on the top 100 marketplaces, and the world’s biggest retailers are entering the ring. Target has launched a new marketplace, Walmart is scaling its marketplace, and Google is aggressively luring Amazon’s merchants.
When measured by gross merchandise volume (GMV), China is home to the world’s largest marketplaces, including Taobao, Tmall, and JD.com.
Virtual marketplaces are one of the fastest ways to scale globally. They also help smaller businesses fulfill orders more efficiently. But brands often perceive marketplaces as a necessary evil: driving sales, but pressuring margins.
Brands have long been concerned about ceding customer relationships and data to marketplaces. And those fears might become reality. Earlier this year Amazon was accused of using its own sellers’ data to launch competing products.
Despite these concerns, transaction volume compels brands to have a marketplace presence. But people aren’t searching for the brands that are trying to reach them.
Consumers search for solutions, not brands
While marketplaces are gateways for brand discovery, consumers don’t come to marketplaces to seek out brands. Observers have quipped that “consumers can find anything on digital marketplaces except your brand.”
With the purchase journey increasingly beginning on Amazon, consumers search by categories, benefits, and reviews. Search, according to analysts, has become the new brand:
- 70% of Amazon searches do not include a brand name
- Nearly 90% of Amazon product views result from search, not branded ads or merchandising
Marketplace dominance and search behavior aside, today’s consumer also wants to buy from brands with a higher purpose. Worldwide, shoppers are increasingly spending with their values. Purpose-driven consumers—approximately 40% of all consumers—want products and brands that align with their beliefs, and are willing to pay a premium. Gen Z, now the largest consumer group, leads the trend. They’re also willing to change their shopping habits to reduce environmental impact, and care about issues like sustainability and recycling. The highest concentrations of purpose-driven consumers are in Europe, Southeast Asia, and Latin America.
The demand for purpose-driven brands also aligns with a desire to shop with independently owned businesses. Proprietary data from Shopify shows that 65% of consumers say they support independent brands.
Consumers’ main reasons for shopping at a large, corporately owned business include:
- Good product selection (57%)
- Lowest prices (51%)
- Reliable (34%)
Consumers’ top reasons for shopping at an independently owned business (online or in store) include:
- Supporting entrepreneurship (33%)
- Buying unique products (33%)
- Experiencing good customer service (31%)
Sourced from Shopify
But satisfying this audience segment is increasingly difficult. With so many customer journeys beginning on marketplaces, brands often lack the data necessary to offer the personalized experiences that purpose-driven consumers desire.
Brand discovery might often begin with brandless marketplace searches, but purchase decisions are influenced by the research that consumers do elsewhere online. Reaching the purpose-driven consumer means re-evaluating your marketplace presence and offering rich non-marketplace experiences.
Offer experiences not available on marketplaces
Human connection is the new luxury. Technology fatigue has resulted from tech’s intersection in every aspect of human existence, including transit, work, entertainment, and hobbies. This has left many feeling wary about the role tech plays in their lives, and craving human interaction.
What’s clear is that consumers are increasingly rewarding organizations that humanize the buying journey. In response, brands are prioritizing personalized experiences that can’t be found on marketplaces. From dynamic website content powered by real-time behavioral analytics to helping people customize their purchase journey, offering personalized experiences with a human touch is the antidote to marketplaces.
Strong brands recognize they have to get customers from a marketplace to their own properties so they can create a relationship with them that will last over time.Loren PadelfordGeneral Manager, Shopify Plus
Personalization, whether it’s delivered by a human or an algorithm, is too lucrative to ignore. Retailers estimate personalization can unlock $2.95 trillion this decade. Delivering on personalization means a combination of new technology solutions, and old-fashioned customer service that delivers unique branded experiences.
A full 74% of U.K. and U.S. businesses say they have a website personalization strategy in place, with significant growth expected in all channels by the end of 2021, including mobile, email, conversational marketing, loyalty programs, and in-store POS.
Each of these channels offers opportunities to add the human touch. Improved collaboration between humans and artificial intelligence helps brands personalize storefronts with real-time publication of dynamic copy and creative. User-generated content promises personal online experiences through tailored microsites, responsive promotional videos, and livestreams with real-time interaction.
New brand-building opportunities are starting to emerge on marketplaces too. Walmart is changing the marketplace experience by enabling more branding opportunities like lifestyle photography. The goal is to make the marketplace local and personal, instead of a massive product dump. As traditional retailers attempt to disrupt the marketplace experience, expect incumbents like Amazon to follow suit.
There needs to be somebody dedicated to marketplaces because I don’t think it can be something you put out there and pray for the best. It’s very much having somebody dedicated to making your brand presence beautiful.Jill ManoffEditor in Chief, Glossy
What you should do in 2021:
Invest in the human touch
In 2021 capitalize on the consumer’s desire to support brands that align with their values by injecting life into your marketplace product pages, personalizing experiences, and inviting consumers to co-create products and experiences with you.
Reevaluate branding potential on marketplaces
Product pages are the front door to your brand on marketplaces, yet they’re often treated as an afterthought. Transform your marketplace product pages by replacing soulless images and forgettable copy with content that differentiates your brand.
Automatically sync product creative
Creative assets should automatically sync across channels and pages. You can’t do this at scale if you manually upload images and graphics from spreadsheets to individual marketplaces. Become an API-first brand, and build or buy marketplace experience dashboards that sync inventory, product information, and digital marketing resources. This allows you to update everything simultaneously with the click of a button.
Gather insights to optimize your product pages
Treat every product page as its own profit-and-loss statement. While customer data might be harder to come by on marketplaces, you can combine marketplace and other channel data to discover themes across collections and categories. Instead of guessing, use the insight to better tailor product pages and optimize performance.
Make time for human to human connection
Automate repetitive, mundane tasks so your employees can spend more time with customers.
- Workflow automation puts complex business processes on autopilot, allowing employees to focus on growth rather than repetitive, time-consuming tasks
- Event automation allows you to schedule and automatically execute on major sales events, product drops, and flash sales
- Marketing automation offloads data analysis and repetitive campaign building and execution tasks
- Inventory management automation updates stock quantity and location in real time, automates replenishment, and informs predictive demand forecasting
- Warehouse automation offers rule-based order routing that matches stock with orders in warehouses closest to the customer
Empower co-created products and experiences
Give customers the freedom to personalize products, design custom packaging, or mix and match custom assortments.
- Gorjana, a boho jewelry brand popular with celebrities, built an app that lets users customize their jewelry
- Oreo offered custom-order packaging, and personalized messages to play a role in major life events
- Build-your-own customization can offer one-of-a-kind experiences, and tell brands which products to recommend with one-time purchases
Trend in action: Gymshark
Gymshark, an aspirational fitness apparel brand, has built a community that connects customers with their fitness idols. These enduring human connections are built on and offline. From trainer-led streaming workouts to in-person expos, Gymshark empowers customers to choose where and how they interact with its influencer network.
Letting customers choose their own adventure—virtually, in person, or a combination of the two—has helped Gymshark become the fastest growing private company in the U.K.
“We are nothing without our community, so we will use this new investment partnership to get even closer to them on a truly global scale,” says Ben Francis, Gymshark’s founder. “I’m incredibly proud of what Gymshark has achieved to date from our roots in Birmingham, but it’s all about looking forward. I firmly believe Gymshark has the potential to be to the U.K. what Nike is to the U.S. and Adidas is to Germany.”
How Shopify Plus can help
Optimize your day-to-day workflows and customize your checkout experience with built-in ecommerce automation tools, only in Shopify Plus. Save time and get more done by automating manual tasks and processes with Shopify Flow and by scheduling sales events with Launchpad. And boost revenue with a personalized checkout experience that meets your business needs through Shopify Scripts.
- Shopify Flow is the only built-in ecommerce automation platform that can use events from your store to kick off complex, automated workflows across Shopify and dozens of third-party apps.
- Unlike third-party apps that offer standard discounts, Shopify Scripts gives you the power to completely customize your checkout experience. Because Scripts are native to Shopify, they can handle traffic spikes and won’t fail you during your biggest sales events.
- Launchpad is a powerful, user-friendly solution that allows you to schedule sales events and product drops ahead of time, and automatically roll back pricing and theme changes after the event.
Let’s talk about how automation can fast-track your growth and save you time and money.
- Customer acquisition costs are increasing worldwide across channels, with rates on Facebook rebounding to pre-pandemic highs.
- Globally, consumers and regulators are wary of big tech, prompting Google and Apple to consider making it harder to target ads across channels.
- To combat rising acquisition costs and advertising uncertainty, brands are experimenting with new channels like voice-powered shopping. They’re also prioritizing retention, rewarding and incentivizing existing customers to spend more.
The cost to acquire new customers surges
Ad dollars are following the consumer online. Even though overall ad spend is forecast to decline 20% in 2020, digital ad spend is estimated to increase 13%. The pandemic-induced plunge in customer acquisition costs was short-lived. Costs on Facebook have rebounded and are at or near pre-pandemic highs. In late 2020 paid search spiked 17% and paid social advertising increased 24%.
Competition—fueled by the move to ecommerce—is accelerating digital ad growth. Industry data reveals increased spend in paid search, social, and connected TV.
Rising costs compounded by advertising uncertainty
Lawmakers and regulators in the U.S. and Europe are scrutinizing big technology companies, creating uncertainty around the future of digital advertising. Trust has fallen among consumers too: One-third of consumers think digital ads are too intrusive, and users in the U.S., U.K., China, Brazil, and Germany are annoyed when advertisers use their online search history to target ads.
Though people continue to use Facebook and other platforms in record numbers, the erosion of trust has serious implications for brands. Ground zero is the advertising industry’s reliance on third-party cookies. The third-party cookie is a lynchpin for digital marketers: 62% of brands rely on cookies to recognize and target users across channels. But advertisers warn that brands must prepare for third-party cookies to die.
Google announced plans to phase out cookies for its Chrome browser by 2022. Apple is also poised to make it tougher for Facebook advertisers. Facebook warns that planned iOS 14 updates could result in more than a 50% decline in its audience network advertising business. The U.S. antitrust case against Google could also impact advertisers’ ability to target consumers using iPhones.
If you rely heavily on third-party data, the potential changes could make it harder to target users with ads and result in a temporarily depressed return on ad spend until marketers adapt to whatever comes next.
The full impact won’t be known until Google reveals what will take the cookie’s place. The announcement gives Google two years to prevent the destruction of the online advertising business. While threats to the advertising status quo are real, relevant advertising isn’t going away. Industry observers expect that even if Google kills the cookie, it will preserve the ability of advertisers to target users.
“In dollars and cents, I don’t think the risk [of removing cookies and forcing advertisers to rely on proprietary logins] is worth it to them,” says Jeff Green, The Trade Desk’s CEO. “I expect they will find a way to preserve relevant advertising for all of the reputable advertisers and advertising platforms in Chrome. Regardless, we have to prepare for a world without third-party cookies.”
Brands explore new channels, focus on existing customers
Naturally, advertisers follow the consumer. But experimenting with relatively new channels like voice shopping, connected TV, and messaging apps can also act as a hedge against digital advertising uncertainty.
Voice commerce will top $40 billion in the U.S. by 2022. Though the global smart speaker market is growing rapidly, the majority of voice activity occurs on mobile devices through virtual assistants. Even if your customers use voice-powered devices more as search tools than as shopping assistants, consider optimizing your site.
By 2024 more than 110 million, or nearly 84%, of all U.S. households will own a connected TV. Spending on connected TV ads is expected to grow by double digits for the first half of the decade.
Video commerce is also growing on other screens. Instagram is building new ecommerce functionality into Reels, its TikTok rival, which is a clear signal that Facebook sees video as key to the future of social commerce. Facebook is also exploring chat as a shopping channel, with plans for in-app purchasing capabilities in WhatsApp.
The question for brands is: As Instagram and Facebook get more competitive, can we own that customer relationship on multiple channels so we’re known as an individual brand, not just something on a third-party marketplace? And that means TikTok, Pinterest, and new channels like Discord, Fortnite, and Animal Farm.Nisha DuaCo-founder and General Partner, BBG Ventures
Facebook is always changing. Google is always changing. TikTok is always going to be changing influencers. But email—that's the one consistent that has not changed. And you own your audience in that world. Email is still hands-down the most important channel for any business to have.Dave GerhardtChief Marketing Officer, Privy
What you should do in 2021: Prioritize your existing customers
In 2021 prepare for advertising uncertainty by prioritizing retention and making your best customers even more valuable.
Identify and target your best customers
Ultimately, the goal is to increase the lifetime value of a customer. Start by identifying your most valuable customers, and the conversion paths they took. This allows you to focus on journeys that lead to a higher quality customer base.
Map your customers’ lifecycle journey. Find out how long it takes them to make a second, third, or fourth purchase, and the typical order in which items are bought. This offers you an opportunity to accelerate those purchases with tailored upsell and cross-sell calls to action.
Earn loyalty to boost repeat business
Launch a rewards program to earn customer loyalty. Customers who enroll are 47% more likely to make a second purchase.
- Integrate rewards so they’re easily redeemable at checkout
- Create loyalty tiers that offer increasingly valuable rewards for additional purchases
- Make rewards points immediately redeemable
- Offer VIP access, exclusivity, or early access to new products
- Offer enrollees automatic entry in sweepstakes
- Invite members to earn points by joining your customer advisory board and telling you what they like or don’t like about your product and brand
- Inject urgency with limited-time points, discount codes, or even a countdown clock to illustrate how soon an offer expires
- Turn brand loyalists into a sales force through referral programs
Adopt a recurring revenue business model
Consider whether your products would suit being sold as a subscription. There are three typical subscription models:
- Replenishment: Help customers save time and money, while never running out of something
- Curation: Surprise customers with distinctive products or differentiated collections
- VIP access: Offer exclusive access to something that can’t be purchased elsewhere
Once you have subscribers, retain them by:
- Streamlining the billing process
- Creating subscription tiers at different price points to provide choice
- Personalizing marketing to each segment through individualized cross-sell and upsell offers
My philosophical view is that subscription is for must haves and naturally replenishable items. You inevitably see churn and challenged business models, particularly if the subscription is discovery. I don’t think you can force subscription on a consumer.Nisha DuaCo-founder and General Partner, BBG Ventures
Trend in action: ThirdLove
ThirdLove, a bra and nightwear brand, prioritizes segmenting customers based on lifetime value. Instead of one-size-fits-all promotions, ThirdLove uses rewards program tiers to offer increasingly valuable incentives designed to get top spenders to spend even more.
To receive additional perks, customers must spend enough to move into the second ($250 lifetime spend) and third ($450 lifetime spend) tiers.
ThirdLove uses proprietary data to map the customer lifecycle and offer the right incentives at the right time. One example is ThirdLove’s Fit Finder, a data platform that helps the 10 million women who have submitted their dimensions find their perfect fit.
The approach has resulted in impressive sales and retention:
- Revenue up 347% year over year
- Returning customer rate up 62% year over year
“No one can replicate the data that we have,” says Heidi Zak, ThirdLove’s co-founder. “Victoria’s Secret can’t. No other startup can. There is no way they can do it.”
How Shopify Plus can help
Customize the look and feel of your checkout for an experience that converts customers and keeps them coming back. Make your checkout a powerful sales engine by adding trust badges, shipping information, countdown timers, customer reviews, and live chat through access to the code.
You can also boost your average order value with personalized promotions like bundles, free gifts, advanced discounts, and free shipping with automation tools and additional loyalty apps to reward—and retain—your customer:
- Tag and segment customers based on buying behavior
- Track and reward customers based on lifetime spend
- Create advanced, enterprise-level custom discounts
- Collect more customer data for marketing and retargeting