Shopify’s new The Future of eCommerce report looks at some of the challenges facing retailers and what needs to be done in order to succeed. One thing is clear – online retail has never been quite so challenging, with retailers facing higher costs and seeing diminishing returns.
We’ve selected some of the most important findings from the report to give you the lowdown on everything you need to know to help your eCommerce business thrive in 2022 and beyond.
Changes in spending habits
A bricks and mortar local presence, strong brand values and environmental impact are all key factors influencing shopper behaviour. Customers are welcoming Click & Collect options which provide extra flexibility and a local shop or showroom means that customers can see products in the flesh which reassures them before going on to complete their purchase online, often taking advantage of new customer discounts and voucher codes in the process.
Studies have shown a 71% rise in searches for sustainable products since 2016 meaning brands with a clear commitment to sustainability are able to differentiate themselves, helping to position them ahead of competitors.
Crucially what this also means is less price sensitivity – customers may be willing to pay a premium for more ethical, sustainable products, so if your previous strategy was to focus on discounting, taking a more sustainable approach could boost your bottom line.
Rising customer acquisition costs
With increases in everything from raw materials, shipping costs and online advertising, maintaining a healthy margin has never been more of a challenge.
Whilst success with Google Ads and social media advertising is still possible, the sheer volume of competition continues to push prices up. Gone are the days when a modest £20 daily budget would suffice and a click through cost just a few pence.
Increased competition in online retail means that click through costs have risen rapidly and even with a strong conversion rate, the cost per acquisition can be too high in proportion to sales generated to make it viable.
Understanding customer lifetime value has never been more necessary. New businesses will of course only be able to estimate what this might be, but for established businesses, it’s a worthwhile figure to calculate and means working out the average number of purchases a customer is likely to make over an average period of time.
This figure can help you better determine exactly how much you can afford to pay to acquire new business through online ads.
Your Brand Has Never Been More Important
1. Do things differently
Don’t rely on what’s worked for you in the past. With high advertising costs that are increasing all the time, analysis of your figures is crucial. Whilst continually upping your budgets might keep those sales coming, that’s probably not sustainable and there will come a point when those ever-shrinking margins disappear completely.
You might want to start thinking more creatively and exploring different channels and if you don’t already, begin leveraging the power of display remarketing to run alongside your existing Shopping or text ads.
Whilst marketplaces often have high associated costs and the ability to complete on price can determine success, consider using well-known marketplaces for a handful of hero products or even loss-leaders simply to generate awareness of your brand. Then you can offer incentives for shoppers to switch over to your site by creating special offers only redeemable on your website.
2. Focus on customer retention
If online ads often proving too costly for your business, focus instead on leveraging sales from existing customers.
Powerful Shopify apps like Klaviyo can provide myriad ways to help you increase average order values and encourage repeat purchasing.
Retaining customers also means engaging with them on social media too and ensuring you ditch the ‘new customer only’ offer, offering VIP clubs and other incentives for customers to spread the word and keep shopping with you.
Regular email marketing is surprisingly powerful, especially when you’re segmenting your list and are creative in your outreach, whilst activity on social media helps keep you top of mind. Seasonal collections, exclusive previews, discounts and limited edition products or bundles are all ways to keep existing customers engaged.
3. Build and strengthen your brand
Brands like Lucy & Yak have built a positively evangelical customer base of people who love their products and are encouraged to interact with and shout about the brand at every turn.
The brand is relatable and has strong eco credentials, making shoppers feel it’s for people just like them which helps to keep them engaged, stimulates repeat purchases and encourages positive word of mouth.
With changing attitudes towards spending, businesses need to ensure they remain appealing to shoppers who are increasingly thinking about the ethics of their buying decisions and purchasing from more sustainable brands as a direct result.
It goes so much further than just what you’re selling; it’s what you’re saying and what you stand for too.
For new businesses in particular, building a brand is crucial. You might think that all your customers want is a certain type of product at the right price, but with a huge increase in competition and barriers to entry lower than ever, establishing/growing your brand could prove vital to your success.
According to the Shopify Future of eCommerce report, a massive 70% of marketers who are cutting their budgets in 2022 will sacrifice investment in brand building.
With many of your competitors cutting back on brand building activities then, this presents a clear opportunity for sustainable growth.
Customers are looking for authentic brands with personality who resonate with them – it goes so much further than just what you’re selling; it’s what you’re saying and what you stand for too.
Customers want to know your brand story and they want to understand what makes you tick, only then will they decide whether they’ll choose to shop with you, or a brand they like more.
Competition in online retail has never been tougher, so understanding what customers want and expect is crucial. With changing attitudes towards spending, businesses need to keep up to ensure they remain appealing to shoppers who are increasingly thinking about the ethics of their buying habits and seeking to buy from brands that engage and resonate with them.
You can see the fully Shopify Future of eCommerce Report here.