The overall global economy might be struggling right now, but if you need some relief from the doom and gloom, look no further than the eCommerce sector. It is expected to generate something around $5 trillion this year. That’s approaching a quarter of all retail sales.
Of course, the eCommerce world is very different today compared with when Amazon launched almost 30 years ago. New B2C businesses are launching every week. Plus, supply chains are growing increasingly complex and customer loyalty is something to work for.
For sure, there is profitability in the eCommerce landscape, but there are also more challenges than ever. Experts in the industry from businesses like McKinsey and Gartner came together to discuss the biggest challenges facing eCommerce businesses.
Competition is the single biggest challenge to eCommerce businesses. But it goes beyond platforms like Amazon and Alibaba duking it out with one another. Direct to Consumer brands are quietly eating away at their market share. Thus, questioning whether these bulk retailers are even relevant in today’s world.
Those particular retail giants won’t be panicking too much just yet. But, the rise of DTC brands like Billie and Hims is transforming the men’s personal care market, to give just one industry example. Going direct helps them to keep costs down, but that is only part of it. They can also build a far closer relationship with customers. Thus, are setting new benchmarks when it comes to personalization and speed.
There is an old trope that while customers want high quality, fast service, and low prices, businesses can only focus on two of those at the expense of the third. DTC businesses are rewriting the MBA textbooks before our eyes. Therefore, traditional retailers need to rethink their strategies to remain competitive.
Part of the reason that DTC brands are able to gain a foothold comes from a broader change in customer attitudes. A generation ago, people needed little encouragement to remain loyal to a brand. Humans are creatures of habit and will use a particular store because they know the layout. Furthermore, they would watch a particular news network through habit. They would even buy a particular brand of car for no better reason than they had always done so and so had their parents.
Unfortunately for long-established brands, that sort of loyalty is on the wane. Research by McKinsey reveals that three-quarters of American consumers changed their shopping habits to a greater or lesser degree during the events of 2020.
Researchers conclude that businesses need to home in on user experience at every step of the customer journey. This is to ensure it is seamless and to add value wherever possible. This might include intelligent product suggestions based on past buying patterns and other data. Done well, it’s a little like having a friendly and interested shop assistant by your side providing support and suggestions. Having said that, the impression will be the opposite if it is done badly. Thus, can be as likely to frighten customers away for good.
When a market involves trillions of dollars changing hands every year, you can confidently say that it will attract its share of fraudsters and scammers. Just like criminals in the physical world, their methods become ever more sophisticated. Thus, the task of remaining one step ahead is never-ending.
Ensuring that customers can share their payment details and other personal data with confidence is paramount. Credit and debit card payments are the most common. Depending on the type of business, a high risk payment gateway might be necessary. This is certainly the case in sectors like crypto, iGaming, and financial services.
eCommerce businesses are dependent on their supply chains to meet customer expectations. Therefore, one bad experience can have severe consequences. When a logistics company fails to deliver on time, the seller gets tarred with the same brush. As above, customers can be quick to go elsewhere. But late deliveries can be the least of their worries.
In recent years we have seen numerous eCommerce businesses forced onto a charm offensive after blunders by their supply chain partners led to reputational damage. They range from high-profile logistics issues such as the Ever Given incident to manufacturing disasters like the Rana Plaza collapse. Eliminating risks like these is not entirely possible. After all, you can never have complete control and oversight of the whole supply chain. But this kind of risk can be mitigated by solid due diligence and audit processes. Also, ensure you have an emergency response plan close to hand to allow quick and professional reactions before incidents have a chance to escalate.
Finally, the eCommerce world is built on technology, but for many businesses, that technology is reaching its limits. We said earlier that the landscape is different from 30 years ago, but even more to the point, it is different from five years ago. Sephora’s Sree Sreedhararaj observes that many eCommerce businesses are relying on a tech stack that does not have the agility to meet customer needs in 2023.
His contention is echoed by a report by Gartner. This predicts that by the end of this year, organizations with composable architecture will be able to implement new features 80% faster than their competitors.
