After a truly unpredictable year with people largely stuck inside, it’s fair to say that e-commerce has begun to evolve even faster than it has in the past. Ever since it originated, e-commerce has been a rapidly changing and growing marketplace. In the past couple of years, it’s advanced faster than ever. If you’re an e-commerce merchant, it’s vital for you to know where that change might end up taking us. In today’s post, we seek to explain what’s driving e-commerce forward, what the future holds, and how businesses will need to adapt to meet the future challenges and opportunities presented by e-commerce as an industry.
What Forces are Driving the Future of E-commerce?
When we begin to examine any pattern of change, it’s wise to start with the driving force behind the change. It makes sense to look at the future of e-commerce in this same way – what has caused change in e-commerce buying patterns and industry trends in the past? Can we use those patterns to predict what may happen in the future? While there are certainly many factors that influence this broad marketplace, we have isolated two that we think will be the most key factors moving forward.
To determine how shopping will change, we have to know who is shopping and what they want. There are lots of demographic metrics that are, to varying degrees, predictive of shopping behavior. However, arguably the most valuable one in terms of data accuracy and variance (and the one that’s in transition right now) is how different age groups shop. Generation is such a valuable data point in predicting e-commerce because not only is it a great predictor of what people will buy and how they go about their shopping, it also changes over time. While there are interesting differences between men and women when it comes to shopping, the ratio of men to women has stayed largely static. Conversely, while the Silent Generation is disappearing from the consumer space, Gen Z is gradually growing in buying power as they come of age. Therefore, the generational characteristics that accompany this rising generation can help us predict their future shopping behavior, especially with regard to e-commerce.
Probably unsurprisingly, the younger generations (Gen X, Millennials, and Gen Z) do the most online shopping. But there’s lots of nuance within the shopping habits of Millennials and Gen Z that can tell us a lot about what’s to come. For example, Millennials are more impulsive and easily influenced than any other generation when it comes to buying new products. This could create great opportunities for affiliate marketing, flash sales, and pop-up shops.
A New Normal Post-COVID
In addition to generational changes, another primary factor shaping e-commerce right now is the changes that took place during the COVID-19 pandemic. While some of these changes were temporary, many are here to stay, at least partially. Over the past year, customers have gotten used to e-commerce in every area of their lives. Where before many only used online shopping to purchase “hard” goods like furniture, books, and household items, last year marked an important shift. Online grocery shopping alone spiked 54%, with experts suggesting that the industry will surpass $100 billion in 2021 and that more than half the population will be digital grocery buyers by 2022. Other industries that thrived on in-person interactions, like fitness classes and education, moved largely online in 2020. While many people are eager to get back to the in-person iterations of these activities, some have discovered that online classes added ease and convenience to their lives.
Overall, what this indicates is that people are becoming more comfortable with more components of their lives being purchased and lived online. While 2020 did perhaps represent a temporary spike for some areas of e-commerce, we would firmly predict that these changes are indicative of the general direction of the future – even more transactions taking place over e-commerce platforms, and more areas of life being integrated into online spaces.
What Will the Future of E-commerce look like?
We certainly can’t predict everything about the future, but the generational shift and the changes brought about by COVID-19 give us some very helpful insights.
The future of e-commerce is frictionless
The pandemic was devastating, but one thing many people are hoping to hold onto now that we are bouncing back is the convenience of online shopping, deliveries, and more – free of interaction or friction. In the future, this ease will be something consumers continue to seek out. This means that many people may stick with digital purchases for items they bought in-person before, but they will also rely on the convenience of buy-online-return-in-store and similar programs. Additionally, they will seek easier checkout processes both in-person and online, like one-step checkouts or touchless checkouts. Amazon announced recently that they will be selling their checkout-free, “Just Walk Out” system to retailers.
E-commerce will change brick and mortar stores
With the rise of e-commerce, many have predicted the decline of in-person shopping. While some stores will undoubtedly close their doors, this will be largely because they fail to adapt to the new normal. While a global majority of both Gen Z and Millennials could see commerce becoming completely digital, they would prefer to keep some in-person shopping. In fact, 81% of Gen Z says they prefer to shop in-store, and a large majority say they also prefer to discover new products in-store. In order to combat the ease and convenience of e-commerce shopping, brick and mortar stores will need to make shopping an experience – exclusive in-store products, new releases, or personal attention could help keep customers coming in the door.
E-commerce will become increasingly integrated into daily life
Prior to 2020, the consensus was that e-commerce would be hard-pressed to become even more integrated into daily life than it already was. However, as we witnessed in 2020, it was fully possible for online shopping to become even more intricately intertwined with our lives. Moving forward, we’re likely to see this continue, with e-commerce spreading to more areas and functions of our lives – and probably taking up more of each paycheck, to boot.
The future of e-commerce is social
Another meaningful change brought about as buying power shifts toward millennials and Gen Z is the switch to social selling. We’ve already seen major US brands turn toward social selling, with Instagram Shops being introduced in 2020 and quickly becoming a massive platform. We need only look to China’s WeChat and Little Red Book pattern of social selling to see how the impact of social selling could continue to grow. According to study data, Gen Z is the most easily influenced by social media, with 80% of Gen Z purchases influenced at least somewhat by social media. In future, we’ll see this trend grow, perhaps with entire platforms designated solely for social selling.
E-commerce will be personalized
People are sick of generic shopping experiences that are poorly “tailored” by algorithms. In fact, 41% of consumers claim they have switched from companies they previously liked due to poor personalization. This is because, while algorithms can be a great source of data and can do some worthwhile things, they’re not usually well-suited to a personalized customer experience. A great example of this is one-time purchase products. If you buy something like a beanbag chair, a sit-stand desk, or a set of weights, most e-commerce algorithms will recommend similar products. But you don’t need another beanbag chair or sit-stand desk! You just bought one. A much more customer-friendly process would be to send someone a personalized discount code for office accessories (i.e. desk organizers or memo pads) after they purchase a large piece of office furniture. This is what so many companies miss – personalization doesn’t have to be incredibly complex, it just has to be thoughtful. And personalization pays off big time – customers spend 48% more when their shopping experience is appropriately tailored. With advances in technology, we will see significantly more personalization in the e-commerce space. It will be interesting to see how this trend jives with increasing wariness and new laws surrounding data privacy.
How Will Businesses Need to Adapt to Keep Up with the Future of E-commerce?
As e-commerce changes like an ever-spinning whirlwind, the most important traits companies will need to have are awareness and adaptability. If leaders don’t have their eyes wide open, problems will arise. If companies can pivot to create a frictionless, social, and personalized experience, with an eye to the future and what they may need to pivot to next, they will be successful in the coming era of e-commerce.