Ecommerce: How do companies hold on to 2021’s growth?
According to McKinsey research, at the height of the pandemic, the ecommerce industry saw 10 years’ growth in just 90 days. Since then, the shift to online shopping has continued, with Digital Commerce 360 estimating total 2021 U.S. online retail sales to top $886.2 billion, a 16% increase from 2020 and a massive 53% jump from 2019.
Additional growth is expected in online sales. To look at the broader landscape, Chargebee talked with industry leaders about what they expect. Those leaders included George Trantas, senior director of Global Marketplaces at tax software company Avalara, and Kelly Knutson, head of Ecommerce Sales for subscription management platform Chargebee.
What do you see as the top trends in ecommerce in 2022?
Trantas: In 2022, the tax compliance burden will take center stage for ecommerce sellers.
Because ecommerce accelerated rapidly over the past two years, more sellers have likely increased their economic nexus obligations — laws that require remote sellers to collect and pay sales tax based on the location of the customer. These laws exist in 45 states, parts of Alaska, and the District of Columbia, and each state has varying rules for triggering nexus.
Enforcement is likely to increase moving forward, so ecommerce sellers should take the necessary steps to ensure they have been and continue to be compliant.
Knutson: Merchants have experienced tremendous growth in the last year, but that also amplified some pain points around scale and flexibility. This is why I see “headless” commerce gaining more traction.
Headless commerce separates the front end and the back end so that merchants retain flexibility, agility, and ownership of the buying experience. By using APIs (application programming interfaces), merchants can work with more than one payment gateway, serve customers globally, run both subscription and one-time sale models, and instantly make changes on the front end, without long development lags on the back end.
As ecommerce continues to grow, I can see merchants looking to scale quickly outgrowing packaged commerce solutions and moving more toward headless in the next year and beyond.
What will be the top factors driving ecommerce growth?
Trantas: The growth of ecommerce over the past two years has been record-breaking, so it’s likely that we’ll see some normalization in the ecommerce growth rate in 2022. However, ecommerce will continue to grow at impressive rates.
The top factor that will drive continued growth is the shift in consumer and retailer preference toward omnichannel shopping. Consumers demand convenience and retailers are looking for new channels to reach new and existing customers more effectively.
Expect more businesses to expand their existing ecommerce footprint and move into new channels, like marketplaces.
Knutson: Many factors play a critical role in driving growth, but ultimately, it’s having a wonderful experience on the company’s website and mobile platforms, so the consumer is enticed to return.
That sounds very commonsensical. But offering multiple ways to purchase — like digital wallets — plays into that. Companies offering perks like rewards and free shipping, or pricing incentives to subscribe will also contribute to growth in 2022.
To George’s point, meeting customers where they are is going to be super critical to drive growth. This means designing for multi-touch and being available across channels: mobile, web, wearable, kiosk, etc.
What challenges must be overcome to continue and sustain growth in ecommerce?
Trantas: One major challenge impacting ecommerce sellers today is the strain on the global supply chain.
The supply chain woes will place added pressure on ecommerce-only sellers to embrace and partner with other channels to leverage more robust distribution channels if they want to keep shipments on time and costs down.
If ecommerce sellers are unable to find alternative distribution and delivery methods to offset shipping delays and added costs, we could see a slowdown in growth for many sellers.
Knutson: We witnessed a lot of growth in the last year with our merchants, but a challenge that they now face is retention. Providing merchants with the ability to change the frequency of delivery, pause subscriptions, even downgrade will improve retention rates and sustain growth.
Related to this is the ability to leverage “smart dunning” tools so merchants don’t lose customers due to involuntary churn. Merchants I speak to always have the answer as to how many new subscribers are signing up each month, but they are not always aware of how many are churning each month and the reasons why. Having access to that type of information is the key to successful and sustained growth.
What industries do you anticipate will ramp up ecommerce offerings in the next year and why?
Trantas: We will see an increase in ecommerce offerings from B2B companies, like manufacturers, in 2022.
When the pandemic began, many B2B sellers had to shift their operations online for the first time. Since then, they’ve seen the value of ecommerce offerings in their core business, as well as in their ability to offer new services, like direct-to-consumer (D2C) sales. The B2B world has only started to scratch the surface on ecommerce, so expect new offerings and services to pop up from this industry moving forward.
Knutson: We are also seeing merchants in the health and wellness space offer more discounts, bundles, free shipping, and membership plan offerings.
The pandemic affected many industries, but this industry saw a huge spike in growth. However, with this growth, they experienced pains with inventory and shipping, but those bottlenecks have seemed to solve themselves now.
What types of technology may experience a surge in the next year to support planned growth?
Trantas: If you look at an ecommerce transaction, there are almost always four key components at checkout — inventory, pricing, shipping, and tax. As ecommerce continues to grow, expect to see continued adoption of technology to support these transactional components.
While rapid ecommerce growth has been sustained for nearly two years, governments have continued to make changes to their tax rules, which creates a perfect storm for the adoption of tax technology to help ecommerce sellers get and remain compliant.
Knutson: We see a surge in subscription management technology as consumers are looking for the best way to grow and support their subscriber base.
I alluded to the headless commerce model. By adopting this strategy, merchants can take advantage of whichever technology is best at any given time. It could be video, chat, SMS, mobile, AI, eWallets — any of those things. By running headless, a merchant has the freedom and flexibility to incorporate any or all of these technologies.
The industry focus seems to be on driving brand awareness, but should it be more about building deeper customer relationships?
Trantas: There’s a lot of discussion around D2C sales. Brands that do decide to enter a D2C model need to quickly adapt to the need for direct customer contacts around all areas of the sales cycle. Brands like Warby Parker and Dollar Shave Club made it easier, cheaper, and more convenient to buy everyday products, but they did this in a way that engaged the customer throughout the full sales cycle. Large brands have even started to move to where younger consumers are by establishing themselves on Roblox, the gaming platform.
Setting the website up is easy. It’s engaging and supporting the customers that are the hardest parts, so the retailers that do best in these areas will win in the end.
Knutson: I agree that customer service and personalization is an ongoing work in progress.
Companies are doing a great job getting new subscribers and driving brand awareness, but when they become a subscriber, they fail to see what comes next. Subscription fatigue is a real thing and it’s important to remind the customer (via email or SMS) why the product is important and find new ways of rewarding them for being a customer with future discounts or recommending other products based on previous purchases
The other thing, which to me is the elephant in the room that’s hardly talked about, is as a subscription business scales, it's hard to stay B2C and “subscription-only.” Exploring B2B sales motions, one-time sales, and multichannel (online and offline) are essential to grow revenue. I think there needs to be more discussion around how we think of the stack for such sophisticated operations.
About our experts
George Trantas is senior director of global marketplaces at Avalara. In this role, he oversees the business development operations strategy for Avalara’s global online marketplace business.
Kelly Knutson leads U.S. subscription ecommerce sales at Chargebee, a global leader in subscription management and payments. Previously, he worked as regional sales manager at 2Checkout.
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