The end of the ecommerce boom or the start of a new era of innovation and digital disruption?

5/12/2022
Insights
Katie Hobbs

Katherine Hobbs, Director at CG Results and Neil Trickett Managing Director of E2X discuss the outlook for ecommerce and why, despite the headlines, they see opportunities for operators and investors across the sector over the next 18-24 months

As Black Friday and Cyber Monday draw to a close, you could be forgiven for concluding that the ecommerce revolution is over.  The administration of high profile brands such as made.com and Joules and swingeing job cuts at Meta, Amazon and Shopify have grabbed the headlines over recent weeks but while operators are undoubtably facing a challenging 2023 we identify five themes which offer a more positive outlook for the sector.

  1. Ecommerce penetration of retail continues to increase

While rates of growth have slowed from heights seen during the COVID-19 pandemic, ecommerce continues to grow as a percentage of retail sales.  Statista estimates that ecommerce will account for close to 25% of global retail sales by 2026 up from 19% last year.   While inflation and the cost of living is undoubtably eating into overall retail performance, ecommerce continues to expand.  The high profile job cuts and administrations owe more to over-investment and poor execution than structural decline in the market.

  1. Myriad software tools and “MACH” architecture driving D2C expansion

Gone are the days when building an ecommerce platform was a risky, time consuming, expensive project.  New technologies have significantly lowered the TCO and speed to market for brands looking to build a D2C offering.  Brands can build a scalable, agile, D2C proposition incorporating best of breed ecommerce solutions, across multiple platforms in a matter of weeks for relatively low cost.  Gartner estimates that by 2023, 50% of new commerce capabilities will be incorporated as API-centric SaaS services. As brands look to internalise margin and connect directly with their customers in a competitive market we expect software and service providers which support the development. maintenance and migration of core D2C platform architecture to continue to outperform. 

  1. Brands need to elevate their propositions in a competitive market where consumer expectations have never been higher

The heady days of using paid marketing to buy market share have long been replaced by a focus on customer engagement, UX and conversion.  In addition to the cost of living and supply chain pressures, retailers have also had to deal with regulatory hits such as the UK SCA changes (which have had a notable impact on conversion rates) and the end of third party cookies. As revenues come under pressure, retailers cannot afford to give consumers a reason to go elsewhere. The retailers of the future need to offer a consistent, frictionless, personalised customer journey across multiple platforms with real-time availability and flexible, fast, convenient fulfilment options. Solutions which facilitate a frictionless, high quality experience for consumers whilst providing a tangible ROI are likely to be in demand.  We also expect renewed focus on loyalty and reward programmes as brands seek to offer value for money and a reason to return without getting sucked into a cycle of discounting. 

  1. “Consumer data will be the biggest differentiator in the next two to three years.  Whoever unlocks reams of data and uses it strategically will win” Angela Ahrendts, Senior VP Retail, Apple

Enterprises have been grappling with how to maximise the value of their data for years.  In a recessionary environment with marketing budgets under pressure it is going to be more important than ever for brands to monetise their existing customer base. Customer data platforms are going to be at the heart of the tech stack, pulling and interpreting data from different systems to enable insight and (importantly) action.   

  1. Recession inspires innovation

The 2008 “Great Recession” bred a generation of entrepreneurs and set the stage for ecommerce boom we’ve seen over the last 15 years. In 2020, the pandemic accelerated things once more, making digital interactions the norm and establishing D2C as the default for many organisations. It seems inevitable that the current economic environment will inspire a new wave of innovation and disruption of the retail landscape. Could this recession be the catalyst that the metaverse / AR / VR has been waiting for? We’re excited to see how the sector evolves and are in no doubt that a new cohort of winners will emerge over the next 2 years.


CG Results has recently advised E2X.COM on its acquisition by Apply Digital.

E2X.COM is an award-winning, specialist commerce strategy and development agency, providing composable commerce, content and operations services to enterprises and other high growth companies. Founded four years ago, E2X.COM focused on pivoting clients to a modern technology stack, moving away from older ‘monolithic’ on premise technology to ‘MACH’ philosophy and technologies, (Microservices, API-first, Cloud Native and Headless) and was one of the founding members of the MACH Alliance.

CG Results supports clients in the following technology sub-sectors:

DIGITAL MEDIA/E-COMMERCE

ENTERPRISE SAAS

TECHNOLOGY SERVICES

CYBER SECURITY

DIGITAL MARKETING

HEALTHCARE IT