E-commerce is big business. In fact, the global e-commerce industry is estimated to be worth about $6.3 trillion in 2023, according to recent research, and is only expected to grow further.
Even without the pandemic, the shift away from in-store spending to the digital sphere was underway. However, COVID-19 supercharged the pace at which the trend was realized.
And just almost as quickly as the shift to digital occurred, post-pandemic shoppers are again changing their habits due to ongoing supply chain issues and macro-economic headwinds.
It’s a lot to sort through. So, to help us get a handle on the state of e-commerce, we sat down with Andrea Vit, CEO & Founder of the e-commerce consulting agency Storeis, a Funnel Solution Partner. He walked us through some of the highlights of their recent report, “The E-commerce Hangover,” and gave us the inside scoop of what’s happening in the post-pandemic retail world.
Andrea Vit, founder of Storeis
The state of digital retail
In short, retailers have been through a lot in the past few years, as the only certain trend is uncertainty.
“The last three years have been very tough,” said Andrea. “Every year seems to be different in terms of demand and shopper trends.”
In fact, while many retailers adjusted their strategies to cater almost exclusively to e-commerce experiences, in-store shopping may be coming back.
According to Stories’ research, 40% of spending for Generation Z and Millennials is done in physical stores.
“The value of these in-store visits is huge,” said Andrea. “Every in-store visit is normally worth about 10 times that of an e-commerce visit, largely due to the higher conversion rate.”
So, with customers returning to analog shopping experiences, successful retailers will again need to redefine how they view their business.
Welcome to omnichannel
When e-commerce capability was first beginning to emerge and take hold several years ago, many established retailers had to set up their digital storefronts almost as separate businesses. They had to suddenly become experts in fulfillment, shipping, dynamic inventory management, and more.
This dynamic created a legacy of large retailers viewing their sales flows in silos - almost as separate entities. On one hand, you had customers browsing and shopping online. On the other hand, you had brick-and-mortar sales. Plus, many brands had a B2B arm (the product they would sell to third-party retailers like department and specialty stores). These sales channels carried their own marketing budgets and campaigns designed to drive sales to the respective entity.
However, retailers are now discovering the power of employing an omnichannel approach to their sales. In an omnichannel strategy, each sales channel (e-commerce, in-store, or third party) is treated as a different window or pathway to the same store. Then, media investments are used to promote the brand and product across all channels.
According to Andrea, this has some tangible benefits for retailers trying to keep up with the wild swings in shopper behavior.
Omnichannel in application
For example, let’s say your e-commerce sales were at $10 million two years ago, but have since dropped to $6 million. With an omnichannel approach, you may see that those sales shifted to in-store sales thanks to an influx of Gen Z shoppers discovering your brand.
On the other hand, the drop in sales may be due to a deep discount from one of your third-party resellers.
“As much as you may try to control pricing, you can’t really control what a third-party retailer does,” said Andrea. “That drop in online sales could very well be caused by a deep discount caused by a distributor slashing prices to make room for new inventory.”
According to Andrea, the trick is to measure everything to see the full picture. That means you need data. Lots of data.
The modern retail data paradox
Any retailer worth their salt knows that high-stakes decisions require high-quality data. After all, the entire industry is built to understand consumer behavior and anticipate new trends.
In order to account for seasonality in their forecasting, many retailers rely on year-over-year data to gain some perspective on what goals to set and where to invest their marketing. The problem is, according to Andrea, last year’s results are almost irrelevant to this year’s market dynamics.
“Year-over-year can’t give you all of the answers,” Andrea said. “It’s just impossible. This year is almost nothing like last year. And the bigger problem is that too much emphasis is being placed on the YoY forecasting. The business goals are then unrealistic due to forecasting that doesn’t adjust for the market dynamics of the moment.”
To combat the inaccuracy of traditional forecasting in a post-pandemic world, Andrea reinforces the value of data — though it needs to be comprehensive and omnichannel.
“You need to gather every last drop of data from every possible channel,” said Andrea. “You need to gather absolutely everything from both online and offline activities, then analyze it as a whole to find the insights.”
You may also need to adjust your measurement periods to account for market shifts. This goes for any business, too. You wouldn’t mindlessly look at 5-year historical data (back to 2018) to inform long-term decisions without considering that the entire world seemed to flip upside-down right in the middle of that time period.
Instead, balancing YoY analysis with trends emerging over the last six months could be beneficial. The trick is to gather as much data as possible so that your analysis is statistically relevant while ensuring the data is relevant to current conditions. Otherwise, your media investment may be misguided.
Today’s retail marketing mix
So, e-commerce sales are still growing, but in-store shopping still carries weight and a higher conversion rate. In order to achieve the best of all worlds, how should a retailer invest their marketing spend?
In Andrea’s view, it’s all about audiences.
“There is still all this talk about channels,” said Andrea, “which is the classic media distribution method. But the analytics tools struggle to accurately attribute per channel thanks to privacy tools, cookie blockers, and more.”
Andrea and his team advise their clients to adopt the strategies built into tools like Google Performance Max: target distinct audiences and analyze performance according to the audience. By applying this to all of your marketing (regardless of channel or platform), you can gain a better view on what is happening in the market.
“Every media provider will give you some sort of analytics tools, but it can only be used within their own walled garden,” said Andrea. “You need something that can merge all of that data. You need something on the outside that can capture all of the data (online and offline) and combine it all.”
The most effective marketing tactics
As within anything marketing-related, the ideal mix of marketing tactics will vary based on your business, product, and target audience. However, Andrea pointed out that some (perhaps) unexpected media investments can drive results for retailers.
“Out-of-home can still be quite effective at delivering a drive-to-store message,” said Andrea, “and with that 10x conversion rate, that can mean serious return. Also, television is still effective at reaching broad audiences for certain segments — for instance, grocery, consumer electronics, and cars.”
One emerging form of television is capturing Andrea’s interest in particular: connected TV. This can be considered advertising on video streaming apps like Netflix or even ads on YouTube. Podcasting is also seeing a huge uptick in ad spend and sales results.
However, digital advertising will continue to be a large portion of the media investment for most brands.
“The effectiveness and ability for digital to penetrate (plus the measurability) is pretty hard to beat,” said Andrea.
Beyond the media spend: a message
Regardless of the media mix you opt for, Andrea says that your ability to tell a cohesive and rich story will help you stand apart.
“Omnichannel and all the tactics are important, sure,” said Andrea. “But, at the end of the day, you need something that will make you stand out and sell. Something different. You need to deliver a strong brand and a story.”
For Andrea’s clients, that means crafting a high-quality brand and story that are delivered seamlessly across your website, media tactics, in-store experience, and beyond.
Just be sure you can track the effect of that brand and story across your e-commerce platform, in-store experience, and third-party retailers with high-quality data.
Disclosure: the featured image for this article was created using generative AI.