It’s difficult to generate two hit albums in a row, as any rock musician knows. Unless you’re the Beatles or Led Zeppelin, most follow-up albums fall short of the first’s lofty expectations. The “sophomore jinx” is a term used to describe this phenomenon. E-commerce had its sophomore jinx moment in 2021. The tremendous e-commerce growth rates of 2020 naturally dropped back to Earth as more people were vaccinated and physical stores reopened. However, e-commerce is not a “one-hit wonder,” and the prize for any firm in 2022 is just too large to overlook.
According to Statista, e-commerce in the United States will reach $469.2 billion in 2021, up from $431.6 billion in 2020. In the third quarter of 2021, e-percentage commerce’s of total retail sales in the United States was 13 percent, down from a peak of 15.7 percent in the second quarter of 2020 but still higher than the pre-recessionary level of 11.3 percent in the fourth quarter of 2019. Furthermore, shopper behaviour has permanently changed, with a preference for internet shopping. According to Earnest Research, the internet share of grocery shopping in the United States increased to 15% in early 2020 and has remained at that level as of November 2021. According to Dan Frommer’s annual Consumer Trends research, 60 percent of buyers prefer online grocery shopping to traditional supermarket shopping in November 2020, compared to only 45 percent in November 2020.
Let’s evaluate the key factors that shaped this growth (both favourably and badly) and lessons to take into 2022 as another strong year of e-commerce growth draws to a conclusion.
Inflationary pressures and supply chain issues
If you had to sum up the year 2021 in one image, it would be an empty grocery shelf. Supply limitations were caused by unprecedented consumer demand, raw-material shortages, port congestion, and a lack of qualified labour. As a result of the shortages, prices have risen at their quickest rate since 1982. Brands and retailers faced new hurdles as a result of the disruptions, with many having to drop discounts and promotions or reduce the size of their packages in order to provide smaller quantities at the same price. Many brands have discovered the hard way that out of stock not only hurts sales but also has significant marketing costs – for example, according to a Profitero study, it takes three to four days for a brand to regain its position in Amazon search results after being out of stock for just one day, and five days for a brand to regain its position on Walmart.
Supply chain issues and high inflation are expected to persist well beyond 2022, according to economists. There is no quick fix, and companies must be both agile and flexible in order to adapt to this new normal. They must be prepared to divert available supply to different locations and even different stores if needed. They need to be better at promoting products based on supply rather than demand, and they need to be able to quickly pivot away from out-of-stock items. The profitability of products sold online, as well as efforts made in developing e-commerce-specific assortments and packaging with better margins, must be scrutinised more closely. Silos must be broken down, and the marketing, supply chain, and finance teams must sing kumbaya together.
Embracing new business models
For the most part, 2020 was about surviving and establishing the foundations of their e-commerce enterprises. They finally got a chance to catch their breath in 2021 and push the envelope into new areas, embracing innovative types of commerce at higher rates and investing in up-and-coming platforms to ensure their position in 2022.
It was the Home Shopping Network and QVC thirty years ago, but now it’s Amazon, Facebook, Twitter, and YouTube. Livestream shopping lets businesses and retailers to deliver a more engaging experience for their customers. The concept is gaining traction, and businesses are betting big on it. Amazon uses live broadcasts for its Prime Day and Black Friday events, Walmart has held livestream events on TikTok and Twitter, and even Albertsons has tried with live, shoppable cookery videos on its website and mobile app.
Brands are continuing to devote more resources to platforms such as Instagram, Snapchat, TikTok, and Twitch, and are incorporating them into their commerce plans. It’s not just about buying ads; it’s about interacting with customers directly. Sour Patch Kids collaborated on a limited-edition package with a popular Twitch celebrity. Within the first day, the firm sold out of all of its stock. During a panel discussion at Commerce Live in October, Jennifer Brain-Mennes, Mondelez’s Global Director of Media Strategy & Planning, said, “It was an enormous performance for the business.” “It not only resonated with our customers in terms of equality, but it also drove actual commerce and net revenue.”
It used to be two-day shipping, then next-day delivery, and today it’s 30 minutes or less delivery. Customers no longer want to wait for an item to arrive for several days. Startups like GoPuff and Instacart made rapid commerce accessible to the general public, and the epidemic boosted their growth. Larger retailers are now vying for a piece of the action. Target’s Shipt service has been a hit, while Walmart’s GoLocal service is growing thanks to a new relationship with Home Depot. In 2022, you may expect even more competition.