There’s no going back to brick and mortar

The pandemic has permanently changed how we shop, bringing e-commerce firmly into the mainstream. Retail behaviours that started as a Covid-19 necessity will continue even after the long-awaited return to “normalcy”.

The simple explanation for this shift is that convenience always wins, and the pandemic awakened shoppers to a world of seamless deliveries and curb side pick-ups from their favourite big-box retailers. Beyond that, the evolution of shopping has also opened the door for consumers to trade traditional brand loyalties in exchange for the best price, the most eco-friendly or the most socially conscious.

“You’re not going to see a full rollback when it comes to e-commerce 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.”

A fierce fight

Given that there’s no going back, let’s look ahead and focus on how e-commerce will continue evolving into a more interactive, virtual and data-driven experience for shoppers, with an emphasis on mobile and social. Driving that innovation in e-commerce is a playing field more competitive than ever. Online customers have quickly flocked to the retailers who could offer a best-in-class user experiences, fluid logistics or frictionless payments. While market leaders such as Amazon continue to shift billions in gross merchandise value (GMV), the fight for a share of the customer wallet remains fierce among the long tail of both old and new players in the online shopping space.

In September 2021, the mobile analytics firm App Annie concluded that the pandemic accelerated e-commerce growth by ten years. Mobile shopping activity spiked worldwide in 2020, and the amount of time spent in shopping apps grew by almost 50 percent. Better mobile experiences have also led to bigger shopping carts, with the average mobile shopping spend rising by 22 percent to 78 USD. Mobile-first retailers are continually rolling out tactics to keep consumers in the app longer, such as games and other interactive elements like chatbots, wish lists and stories.

So, why do we see this defining the next generation of online commerce? Mobile penetration rates are continuing to grow, particularly in previously underdeveloped regions including South America and Southeast Asia. To note: Indonesia experienced an 87 percent rise in mobile shopping activity, the largest of any country in App Annie’s report. Secondly, Gen Z’s rise as an economic engine will continue to power mobile commerce. After all, this is a generation where 95 percent own a smartphone and are willing to pay a premium for uniqueness and sustainability.

A way to convert sales

As e-commerce develops in the 2020s, retailers will figure out a way to better replicate and refine the in-store experience. What started as a necessity often driven by social distancing limitations has now become a way to convert sales of even high touch items like automobiles, as customers can avoid a trip to the shop or showroom. Whether it’s virtual fitting rooms or expanded augmented reality, “try before you buy”-tech is one step towards combining the physical and virtual. Customers want to know how that sofa table looks in their living room, or whether the luxury bag matches the rest of their wardrobe. Part of that is also driven by retailers’ needs to save on expensive returns – which could have a considerable climate impact as well.

Online retailers have also made great strides in providing a more personalised space for shoppers. Search-led shopping is on the way out, as the focus shifts to directing users toward custom product recommendations. Discovery shopping appeals to the customer base who don’t know what they want. Alibaba has perfected the art of qiān rén qiān miàn (千人千面, which translates to “a thousand people, a thousand faces”), which displays personal storefronts and treats retail like content, complete with an infinite-scroll option much like you see on social media. It has the same effect as the “bottomless bowl”, a psychological experiment that led to respondents eating 73 percent more soup from their endless serving. Just like social media feeds, these recommendations are built on huge tranches of data and ever-evolving AI technology to make them more relevant, more compelling and more able to convert to a sale.

A November 2020 survey by Bazaar voice revealed that more than one in three shoppers made a purchase on social media last year. While Facebook is the leader with its established Marketplace, Instagram and TikTok have ramped up the integration of shopping into their user experiences, both through paid ads as well as by highlighting shoppable products in user-generated content. Just as word of mouth or a friend’s recommendation can push you to make a purchase offline, consumers too can be compelled by seeing the products bought by their online social connections. Unsurprisingly, influencers who make their living on social media platforms are among the first to partner with brands for more integrated social shopping content.

With all the competition from mobile-focused and “bricks and clicks”, the one area where retailers can’t afford to slip up is at checkout. Few things are more frustrating for retailers than pulling a customer all the way through the sales funnel, only to lose them due to friction at the point of payment. To reduce hassle, some retailers have even done away with carts and let customers buy directly from the product page.

Remove friction is key

The key is to remove friction. That’s why we’ll see one-tap checkouts become the norm in e-commerce, supported by “buy now, pay later” plans. Those flexible payment plans, popularised by Sweden’s Klarna, have, over the course of the pandemic, reshaped how we pay for purchases. So much so that a recent McKinsey survey revealed that 60 percent of respondents planned to use some sort of financing option at purchase within the next twelve months.

Live commerce has been a staple of online retail in China ever since Alibaba first debuted the technology in 2016 at Taobao Live. Jumping ahead to 2020, McKinsey reported that more than two-thirds of Chinese shoppers had purchased a product via livestream. Even with the country’s signature shopping event – Singles Day – setting records in terms of sales (115 billion USD in 2020), livestreaming remained a mystery to Westerners. The pandemic changed that, as first-movers saw live commerce to be a low-risk bet to differentiate themselves. Bigger players such as Amazon and Walmart weren’t far behind, and social media followed in lockstep, with Facebook launching Instagram Live as part of its strategic pivot to more shoppable content.

Brands have figured out that live commerce helps blur the line between shopping and entertainment, an important factor for success in tomorrow’s marketplace. With influencers performing for their audiences, demonstrating products and fielding questions, buyers can rediscover the human interaction that went missing during the pandemic.

Thanks to their expansive assortments, refined logistics and ability to collect comprehensive customer data, the mega online retailers will have a decided advantage in the online marketplaces of tomorrow. The same goes for those nimbler operations that lean heavily into mobile, social, and niche communities. Yet, as significant as the trend toward e-commerce has been, it’s still relatively early in its evolution, with plenty of market share yet to be claimed across industries.