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6 Trends That Are Driving E-Commerce Growth

image for Rido/Shutterstock
Rido/Shutterstock

Nearly 50 years after the first e-commerce transaction – in which some Stanford students purchased marijuana from some MIT students via their universities' ARPANET accounts – the barriers to entry are lower than ever.

"Major shopping cart platforms offer beautiful, mobile-optimized sites," said Jake Stein, senior vice president of Stitch. "Facebook has made it easier than ever for very new companies to do brand advertising. SaaS [software as a service] products make it easy for brand-new retailers to send great emails, run A/B tests and make sense of the data they have at their fingertips. All of these products make it easier for new retailers to grow quickly from day one."

As a result, with so little overhead, it's not uncommon to see rapid growth within the first few months. To assume that growth will continue, however, is fallacious. According to Stein, nascent e-commerce businesses tend to follow an S-shaped growth pattern, in which rapid exponential growth while the company is still small will eventually level off.

One contributing factor is that successful e-commerce companies tend to target a specific customer niche, Stein said. "This hyperfocus allows them to acquire customers quickly and grow incredibly fast in the early days. But [as] they start to max out customers in that target niche ... growth often starts to slow."

Companies can combat this by expanding their product lines or distribution networks, however, they must also strike a balance. "To maintain that rapid growth, a company needs to continue to excel at customer acquisition but still retain that core market," Stein said.

One way to break that S-curve ceiling is to keep up with the latest trends in e-commerce.

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E-commerce sales have continued to grow against brick-and-mortar sales in every country recorded, with the fastest growth taking place in emerging markets, where increasing mobile phone ownership is redirecting consumers online. Meanwhile, consumers worldwide are turning away from cash – the global share of transactions carried out in cash has fallen from 89% to 77%in the past five years, according to a 2018 McKinsey report. Investment in e-commerce is a pretty safe bet.

That's not to say that e-commerce businesses should remain complacent. "Being on top of e-commerce trends is pretty key," said Alberto Gil, co-founder of both Hockerty and Sumissura, two online made-to-measure clothing retailers. 

This also means staying on top of old developments, like implementing a mobile website. "You need to develop one version, test it and keep iterating it," Gil said. "These developments are not static projects. They change along with users and technology."

We've identified six developments to keep an eye on:

There's no point in investing in e-commerce if you can't get anyone to your site. Advertising and social media can bring traffic, but at the end of the day, most sellers are still beholden to the search engine algorithm.

"Search continues to be the biggest driver of e-commerce sales," said Bryan Osima, CEO of Uvietech Software Solutions.  "All businesses cannot be Amazon, that is universally known by online shoppers. And there's always going to be a ceiling, in terms of reach, that your marketing efforts – online and offline – will hit."

Successful e-commerce companies will strategize by staying on top of Google's algorithm updates, which most recently have been tweaked to prioritize trust and authority. First Mats, for example, invested by improving their customer reviews display. "A large number of positive reviews could tell Google that our e-commerce business is one that provides great products and excellent service for our customers, and [it] helped us to get a boost in the search engine rankings," said Richard O'Connor, marketing and strategy director.

According to a 2019 Pew Research Center report, 1 in 5 adults in the U.S. rely on smartphones to access the internet, while nearly three-quarters of the world are forecasted to be smartphone-dependent by 2025. With so many consumers ditching the personal computer, Google has responded with "mobile-first" indexing, decreasing the rankings of sites not optimized for mobile.

As a result, online sellers are doubly incentivized to improve their mobile interface, which, according to Gustavo Carvalho, founder of Copahost, can be a "big pain."

Part of the issue is the constant treadmill of new devices being released, all with different screen sizes and resolutions, "And Google demands you be constantly updated on it," Carvalho said. "Say you optimized your site for mobile in 2018, but in 2019 Apple released a new version of iPad Pro, with a bigger resolution. Your site will be automatically outdated and will need updates to fit this new gadget."

With 62% of Copahost's sales made through mobile devices, however, mobile optimization has been well worth the effort. For that reason, Carvalho suggests running your URL through Google's mobile test and working from there.

So far, online shopping has favored nonroutine purchases, like clothing or electronics, in which consumers can more easily research and compare prices than in a brick-and-mortar store. Credit Suisse has since forecasted in a 2018 trend report, however, that future e-commerce growth will instead center around what they call "fast-moving consumer goods," such as groceries and toiletries.

If it seems unlikely to you that consumers are going to wait even one day for their much-needed toilet paper to arrive, you're probably right – hence the rapid growth of subscription-based retail, which does all the thinking for the consumer.

Chances are, you've probably heard of some these companies in podcast ads, Dollar Shave Club and Hello Fresh being notable examples. In short, the subscription model capitalizes on the well-known marketing rule of thumb that it's cheaper to retain an existing customer than acquire a new one.

Video marketing is hardly new, but it's growing. Cisco's Visual Networking Index forecasts that by 2021, 80% of internet traffic will be video. 

Clothing retailers such as ASOS and H&M are now pairing product photos with short videos of models wearing the garment, which not only drives sales but leaves customers feeling more confident in their purchases and less surprised by the result.

For now, anyone can take advantage of the free marketing opportunities offered by Facebook Live, Instagram Live and Snapchat. The next stage, however, may be AI-engineered video marketing.

Omnichannel retail, in which products are sold both in-store, online, and sometimes even in between (e.g., click-and-collect), offers more than just a way to transition from brick-and-mortar to e-commerce.

"Omnichannel commerce is here to stay," said Abhi Lokesh, CEO and co-founder of photo decor brand Fracture. "Given just how many ways people can shop, it's critical that businesses think through how to provide a frictionless experience to a customer who might start online on their couch on their laptop, wander into the business's store a few days later and check the status of their order on their smartphone."

One difficulty that must be addressed in omnichannel retail, however, is tracking how sales are made – for example, whether a visit to a brick-and-mortar store drives online sales down the line – which may create the need to invest in consumer research. "What we're focused on is building the analytics and business intelligence infrastructure that is capable of tracking a customer's interaction with us, no matter how long or convoluted their buying journey is," Lokesh said. 

Thanks to personal assistant technology like Alexa, ultra-optimized consumers are now making purchases with voice dictation. So far, such purchases tend to be low stakes – the platform is not necessarily optimized for in-depth consumer research – meaning it may be better suited for repeat purchases than Christmas presents.   

Voice command still has yet to reach mainstream adoption. According to both Gil and Osima, however, it's on the list of trend forecasts to keep in mind. 

Additional reporting by Nicole Fallon.

Siri Hedreen

Siri Hedreen is a graduate of King’s College London, where she wrote for Roar News, London Student and Edinburgh Festivals Magazine. Find her on Twitter @sirihedreen.