Are Customer Needs The Key To The Future Of Ecommerce?

Everyone has seen serious Ecommerce growth over the last few years.

But COVID-19 brought an even bigger surge. According to Morgan Stanleyglobal e-commerce rose from 15% of total retail sales in 2019 to 21% in 2021. It now sits at an estimated 22% of sales.”

But since the pandemic, now most of the world has returned to normal, this growth has slowed. 

Growth is still there. In fact, according to forecasts, Ecommerce will grow by 8.9% in 2023. But the gap between Ecommerce and physical retail is shrinking. We got quite used to digital outpacing physical retail since the 2010s. Yet, according to insider intelligence that gap has reduced.

So what is going on? Has Ecommerce “lost a step” and got complacent? Or is the answer more complicated than that? Questions need to be asked as we look to be heading into a recession. When conditions will be tough. So how can we ensure Ecommerce thrives and grows?

Let’s Take A Look.

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Investors Are Twitchy

Ecommerce stocks, even among the very big players, have taken a beating over the last year. 

According to between 09/09/2021 and 09/09/2022 stock prices of the 10 most valuable Ecommerce companies (by market cap) fell. For example, Shopify’s stock price between 09/09/2021 and 09/09/2022 fell by 77%. From March 2022 to March 2023 Shopify’s stock is down by 35.8%.

So there is enough data to suggest that investor enthusiasm for Ecommerce has cooled. There are macroeconomic reasons for this. Interest rates are high, supply chains are in crisis and consumer confidence is low.  

But there are other reasons too. A lot of companies see Ecommerce as a channel that would drive revenue rather than profit.  According to McKinsey, 67% of executives see Ecommerce as a revenue driver rather than a profit engine. If we are heading into a recession, investors could interpret this as a risk.

If stock prices are being battered, how can Ecommerce companies (both B2C and B2B) make better choices? What can they focus on to boost investor confidence?

Well, it should all start with customers.

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Put Customers Needs First

Putting customers first sounds like a no brainer.

Every organization that does anything will say they put customers first. Or that they offer “superb customer service”. In a lot of cases it may be true. But more often than not most organizations do not put customer needs first.

This becomes a bigger problem when you look at new customer acquisition cost trends.

According to SimplicityDX, customer acquisition costs have increased 222% in the last eight years.

So to maintain profitability, you need repeat sales and loyal customers. This is even more crucial in a recession. Ignoring the needs of customers is a business risk with no upside.

But how do Ecommerce companies put customer needs first? While meeting the new challenges these needs represent?

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How To Start Putting Customer Needs First (While Addressing Business Challenges)

When referring to customer needs in this article, we will be referring to specific factors that shift (or have shifted) customer behavior. Things that change the experience that customers want. 

So, what are some of the customer needs that the Ecommerce sector has to address?

Customer Needs – Shifting Customer Behavior

COVID caused digital adoption rates to increase. This led to more active Ecommerce users. It also played a part in the increase of Ecommerce stock prices. Part of the decrease described above is a market reaction to this. The market sentiment seemed to suggest that this surge was unsustainable.

These new users also behave differently. They use more channels across the purchasing funnel. In B2B, according to McKinsey, the average number of channels in use by B2B customers has increased from five in 2016 to ten in 2021.

The Business Challenges Of Shifting Customer Behavior

The increase in the number of channels that customers use presents big problems for businesses.

The primary challenge for businesses is channel strategy. Businesses have to roll out new channels to be where their customers are. But when there are more channels in use, this becomes more challenging. Companies are playing catch-up. The cost is also not small. Each new channel has its own analytics and data analysis needs. 

Acquisition costs also increase across the board. With each new channel needing some element of paid acquisition to build momentum.

But the bigger challenge is creating a consistent, omnichannel customer experience.  

Shifting behavior has pushed many company’s omnichannel and O2O strategies into the spotlight. Presenting a consistent experience is essential. But it also requires a lot of investment into back-end processes. Not putting that investment in leads to companies failing in the next customer need category…

How To Address Shifting Customer Behavior

  • Create an O2O strategy (if you need help contact us!)
  • Create a purchase journey map for every active channel
  • Use Google Data Studio or PowerBI to bring data into one place
  • If that is not possible seek outside help on creating a BI dashboard (contact us for data help!)

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Customer Needs – High Customer Expectations

We have seen a lot of digital innovation over the years. But the problem for companies is that with each innovation, customer expectations go up.

Small, medium and even large businesses may not think this is fair. But they are being compared to companies like Amazon, Google and Apple.

People have a very large number of digital interactions in their daily lives. So they expect the same level of slick experience in every digital product. Those expectations only go up as new innovations hit the market.

The B2B space is not immune to this. B2B customers want more B2C style purchasing experiences. They also want to complete purchases through any channel they want. 

The Business Challenges That Come From High Customer Expectations

Meeting customer expectations means constant innovation. This presents different challenges to businesses.

One challenge is investment and human resources. Constant innovation requires money, time and dedicated staff with a high level of skill. This makes it difficult for smaller companies to bridge the gap with the biggest players. But companies have to make this effort or customers will leave.

Keeping up with customer expectations also cuts into profitability. For example many people in Europe and the U.S. expect rapid delivery times. They deal with companies like Amazon who can fulfill orders faster than anyone else. 

To get even close to that sort of fulfillment time requires a lot of back end and logistical investment. Which is difficult for smaller companies to compete with.

It is possible (technical advances may help…more next) to get closer on fulfillment times. But it is a challenge.

How To Address High Customer Expectations

  • Address operational efficiency by addressing logistics costs
  • Logistics is said to account for 5 to at least 15% of Ecommerce costs
  • Conduct an end-to-end purchase journey audit
  • Working with an outside partner if you do not have in-house staff (contact us!)
  • Match innovation in customer journey with innovation in back end, logistics and fulfillment processing

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Customer Needs – Advances In Technology

Advances in technology present challenges and big opportunities for Ecommerce businesses.

Innovation also powers changing customer behavior and customer expectations. New technology often means new channels to plan for and new back end processes to tie those channels together.

There are three big advances that may have huge implications for customer needs. AI, 5G and virtual reality.

AI will have effects on customers and on businesses. It could even enable another channel for discovery. Which could cut into standard web search. Mass 5G adoption gives many internet users around the world a reliable, high capacity data connection.

Virtual reality is a bigger unknown, but one that Silicon Valley is betting on. This could bring a completely different commerce experience into the digital landscape. It is also another, difficult, channel for businesses to plan for.

The Business Challenge Of Advances In Technology

AI, 5G and VR (Virtual Reality) can all revolutionize Ecommerce operations.

AI and 5G can, in theory, bring huge cost savings to back-end operations. With the right implementation both technologies bring huge benefits. Like real-time logistic analytics and tracking for even small and medium sized companies.

AI could also bring new discovery channels for customers. There is, right now, a rush to launch new AI assistant technology. Google has launched Bard, there is ChatGPT and Microsoft’s Bing. But once this market settles down it could bring another customer discovery/acquisition channel. A new channel that companies will have to have a strategy for.

VR will need a whole new strategy and purchasing experience. But it is difficult to plan for right now. Although user numbers are increasing, VR has not yet achieved full mass market adoption. It will one day, but we are several years away from this judging by the latest estimates

But, as VR will be such a disruptive force to Ecommerce, it is worth planning for VR right now. Look at the experiences that big brands are offering in the metaverse and gaming spaces. This will show companies where to begin when they need to think about metaverse purchase journeys.

How To Address Advances In Technology

  • Consult with specialists to see how AI, 5G and machine learning can optimize back-end optimization (contact us!)
  • Start to assess the potential implications of VR/metaverse commerce for your business
  • Look at big brand activities in the metaverse to get an idea of how to start

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Talk to MAQE

Do you need help adopting to shifting customer needs? Want to build a commerce platform for the future? Talk to MAQE via [email protected]. We can help you prepare for the next stage of Ecommerce.