Ecommerce, the industry that has exploded in recent years is currently experiencing a slowdown in growth. This phenomenon is broader, after the post-covid euphoria, reality has taken over, resulting in a wave of sudden changes that requires players to reinvent themselves (again).
Facts:
- +15% increase in cost per click across all industries in search over the past year.
- For some brands, advertising costs (CPM) are five times higher than before to generate the same traffic volume.
- Supply is under pressure, with delivery times strongly impacted by the situation in China.
- Increasingly tough competition from pure players willing to lower prices even if it means losing money on new customer acquisitions.
- The behavior of consumers who go more into physical distribution.
- Shopify, one of the main eCommerce platforms, has been making drastic losses for the past few months, and its share price is falling.
- All major e-commerce stocks have been falling since January 2022: BABA, SHOP, AMZ…
New Consumer Expectations:
- Transparency on the origin of the product
- Very short delivery times
- Free delivery option
Belief 1 Website Technology is unreachable for inexperienced people
Expectation 1:
A website that utilizes a CMS is quite pricey and needs to have a perfect design before it can be launched.
Reality:
You can create an e-commerce website on WooCommerce (WordPress) almost for free and without a line of code. Or use a free 14-day trial on Shopify with a customizable theme in 3 hours.
Expectation 2:
After the website has been launched, you will no longer need to make any changes to it.
Reality:
Getting your e-commerce website up and running is simply the first step on a long road. Every day, you will need to work on improving it, optimizing it, and analyzing it to make minor or major adjustments. The goal is to improve the user experience and the conversion rate.
Belief 2: After a customer makes a purchase on my eCommerce store, it’s the end of the business relationship
Expectation: Your work is finished after successfully turning your prospect into a paying customer.
Reality: When a customer makes their first purchase, it marks the beginning of a new business relationship. At this point, you have the opportunity to upsell, cross-sell, and build recurring orders for the customer. The most difficult step has already been completed: he placed his trust in you by giving you his money.
Belief 3: Social media makes it easy to sell for free
Expectation: When you have finished developing your e-commerce website, you can begin to post organically on social media and wait for customers to visit your website and purchase your products.
Reality: Because the organic reach of posts on Facebook and Instagram without an audience is now nearly nonexistent, users probably won’t rush to your products after you post on social media.
Belief 4: Your idea is the best; no one has ever had it before
Expectation: You feel that your idea will be successful without researching the market, determining who your competitors are, or determining if there is a potential market for the things you want to sell.
Reality: The idea is not worth much. Execution and positioning are the most important aspects. You are not alone. It is beneficial to have competitors who have had the same concept since it demonstrates there is a market for the product or service. The goal here is to determine whether or not this market is expanding, and if it is, how to best position yourself to take advantage of it.
Four eCommerce Macro Trends in 2022
Brands are spending more to earn less.
Because of the low barriers to entry, there has been a dramatic increase in competition, and as a result, there has been a rise in the cost of advertising on the major advertising platforms.
Brand performance
High funnel campaigns (reach and awareness) are increasingly exploited, combining them with a conversion strategy in the retargeting phase. This allows for a reduction in overall CPMs and CPAs.
Phase 1: Awareness (low CPMs and no clicks)
Phase 2: Consideration (clicks)
Phase 3: Acquisition/Conversion (purchase intent)
You may cut down on this cost per acquisition and expand your access to new audiences by diversifying the channels through which you acquire customers.
Short-term performance is no longer enough; you have to stay in mind.
Because there were few obstacles to overcome, a large number of new competitors appeared in a short period of time.
Your customers need to keep you in their minds in order for your company to stand out from the competition.
Invest in both the short-term performance as well as the long-term building and recognition of your brand. The balance can be 60/40, 60% on long-term brand building, and 40% on performance marketing.
Demand capture vs. demand generation
This concept seems confusing to most businesses, yet it is crucial.
Both Google and Amazon are platforms that capture demand due to their roles as search engines. The user initiates the request, he is the one creating demand, and the purpose of these platforms is to satisfy that need.
The purpose of a user’s visit to a social media platform such as Facebook, TikTok, or Instagram is not to make a purchase. Therefore, it is up to the advertiser to create demand for their product.
Different marketing strategies require different techniques, and we must become familiar with the workings of each platform in order to properly adapt to it.
Strategies vs. content
According to Nielson, 47% of sales contribution is related to creativity (advertising).
You can use models like AIDA (attention interest desire action) to analyze the relevance of your creativity.
For example, we will take an ad in the format of a 15 sec. Facebook video.
- Attention rate: number of video views with +3 seconds/number of impressions of that same video.
- This equals the percentage of people who engaged with your video.
- The benchmark is around 20% to 30%.
The content must stop the prospect.
Interest in the video content is calculated by the average view of the ad. Above 3 seconds is a success.
The content must retain and intrigue the prospect.
To animate the desire, it is interesting to observe the average unique outbound CTRs. If it is above 2% it means that the ad with its call to action is coherent for the targeted audience.
The content must make the prospect want to go further, to explore.
- The action is the expected result of the advertising campaign. On an eCommerce model, it will be the cost per purchase or the number of purchases. This determines the Return On Advertising Investment (ROAS).
- A ROAS above 2 is usually required to make a profit.
The content must be able to achieve the end result efficiently.
What are your expectations, beliefs, and findings so far for 2022?
Sources:
https://www.shopify.com/research/future-of-commerce/future-of-ecommerce
https://commonthreadco.com/blogs/coachs-corner/ecommerce-trends-future
