E-Commerce Boom? Check! Now what? – We Look at the Knock-On Effect

An existing shift towards online shopping has been significantly accelerated by the pandemic and resulted in an e-commerce boom. That part is now by and large old news – along with the vast increase of delivery services. But what other knock-on effects can we expect to see from a business perspective? 

With global e-commerce revenue set to reach a record $6.5 trillion by 2022 – up from just $3.5 trillion in 2019 – we dive into the wider impact of this seismic shift.

Safeguarding sales

43% of US shoppers say they will continue using online grocery services even when the pandemic is over. But will they remain loyal to the brand that came to the rescue during times of lockdowns? A string of funding announcements in recent months suggests the number of competitors will be rising steadily: the race is on to carve out a sustainable piece of the pie! So, how can e-commerce businesses solidify their customer relationships to ensure customers keep coming back for more, regardless of the shifting commercial landscape? 

In addition to availability, price, and rapid delivery options, e-commerce companies across all industries will need to focus on offering user-friendly digital customer experiences if they are to safeguard their new business. To make sure businesses go beyond mere digital replication of their physical offering, expect to see e-commerce brands focusing on these key aspects into 2022 and beyond:

  • Delivering more personalized digital experiences
  • Providing exemplary customer service before, during, and after a sale
  • Ensuring fulfillment strategies can cope with delivery demand

With 93% of customers now saying they would completely abandon a company after two or more negative interactions, e-commerce retailers must make buyer satisfaction a top priority in order to establish – and then retain – brand loyalty as they drive well-managed sales.

The returns challenge

Returns processes were already a significant pain point for many online businesses before the e-commerce boom of 2020. Pre-pandemic in the U.S, a shocking 2.3 billion kilograms worth of returns were being thrown into landfills every year. A shocking testament to the lacking cost-effectiveness of the returns process — shipping, repackaging, and restocking items. 

Now, as returns boom alongside sales — with 30% of online purchases being sent back — throwing away unwanted products is no longer a sufficiently cost-efficient option (not to mention the environmental impact). UPS alone recorded 1.9 million holiday returns before January 2nd, a 26% increase over last year. And that’s not taking into account that the vast majority of retailers significantly extended their returns period due to the pandemic — or issues such as returns fraud and ambivalent or pre-emptive buying behavior (e.g. buying multiple sizes and colors with the intention of returning all but one). 

Now more than ever, brands need to rethink their returns processes if they are to ensure the solvency of their e-commerce operations and scale their returns processes efficiently. To do so, more companies will turn to increased automation to handle returns with fewer resources as well as to digital solutions to leverage data intelligence and analytics to better understand the susceptibility rate of return of their inventory. Machine learning, AI tech, and even AR will also play their part, especially in the retail industry. Fashion tech companies, like ShoeSize.me, enable retailers to reduce size-based returns by using AI & ML algorithms to help consumers pick the right size. A number of online opticians, meanwhile, are turning to virtual try-on methods to reduce the return rate of eyewear. 

One of the main challenges posed by the boom is that e-commerce companies must manage erratic demand and situational scaling as opposed to planning for structural and organic growth. In fact, recent projections by Statista suggest that the e-commerce growth patterns will begin to normalize over the course of the current year and continue to do so. Online pharmaceutical and grocery companies are set to see revenue growth rates plummet significantly as consumers are expected to head back into their local supermarkets and pharmacies when the pandemic subsides.

Structural Shifts

So what can e-commerce brands do to manage erratic demand and ensure their businesses are not expanding today, in line with a growth trajectory that will be gone tomorrow? Centralizing inventory management is key to ensuring transparency across entire supply chains — improving operational efficiency, reducing costs, and simplifying multichannel management — so we can expect to see increased spending on logistics management tech and smart warehouses going forward. We also look toward more companies using data-sharing and AI — for example, in predictive capacity planning — to maintain optimal inventory levels and forecast demand. 98% of third-party logistics providers and 93% of shippers say data-driven decision-making is now essential to supply chain activities. And by ‘essential’, they mean ‘indispensable’.