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Huge Growth in Ecommerce Reveals New Opportunities

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Though nearly half of 2014 has passed, it’s still too early for most retailers to start worrying about revenue numbers. Positive trends, of course, are important every quarter but the crucial season—starting with back-to-school, spanning Black Friday and Cyber Monday, and concluding with the end of holiday shopping around New Year—that represents the greatest potential for earnings is still a few months away. That’s why recent reports about the early strength of ecommerce sales are encouraging.

In the first quarter of 2014, ecommerce and mobile sales increased, breaking year-over-year records by 12 percent. Total sales, according to a report by comScore, pushed past $63 billion, generating the 18th consecutive quarter in which desktop sales increased year over year.

Considering the likely surge in sales near the end of the year, the Q1 numbers appear to be in line with a recent forecast from Forrester projecting $294 billion in ecommerce sales in 2014. Beyond this year, however, Forrester projects growth in ecommerce sales to reach $414 billion by 2018—fueled by the increasing popularity of online stores, their suitability for high growth verticals like media products and electronics, and the expanding role of mobile devices for shopping.

Indeed, ecommerce—especially when combined with mobile commerce—represents a bigger market than ever, one that is growing consistently every quarter. But in her discussion of recent industry trend data, Sucharita Mulpuru, VP and principal analyst at Forrester, makes an important point: In total, retail is a $3 trillion market in the United States. Though ecommerce continues to grow, it still represents a small fraction of total retail sales.

Certainly, ecommerce businesses must continue to incrementally improve the online shopping experience and expand product offerings to maintain the impressive growth of the last four or five years. But bridging the gap between a $200 to $400 billion market and a multi-trillion dollar market will require a more dramatic approach.

How Ecommerce Retailers can Close the Gap

It’s time for ecommerce retailers to close this gap—and doing so will require two strategic shifts. First, businesses must focus on serving their customers above all else. Using data, analytics, testing, and optimization, retailers can create usable, tailored online shopping experiences that adapt to fit customer needs. The technology that will enable true one-to-one personalization is still a few years away, but almost every business can get started today by focusing on developing long-term relationships with customers built on a foundation of trust and powered by data that has been responsibly collected and respectfully applied.

Some retailers leading the ecommerce industry are already doing this. “Whenever a customer buys something from Amazon or logs in without buying something, Amazon is collecting all kinds of information about that person,” says Greg Girard, an analyst for IDC Retail Insights. “There’s a lot of data that can be mined about how they peruse the website, what they put in the cart, what they abandon and how the customer actually goes about searching for a product.”

But outside of Amazon and rising competitor Walmart, few businesses have been able to capitalize on this data in a truly significant way. “At Click Summit this year,” Brooks Bell, founder and CEO of Brooks Bell Inc. explained, “we heard that everyone recognizes the importance of omnichannel targeting and personalization, but few companies are actually doing it at this time.”

Technology, certainly, plays a role in slowing the rate of adoption of advanced data and analytics, but there’s a hurdle caused by scale, too. “Companies with the most to gain from strategies like personalization,” Brooks says, “also have the greatest organizational complexity—and the cost of implementation for these companies is also higher.” Even with the most powerful tools, strategies like testing, omnichannel targeting, and personalization require a cultural shift as well.

This is why ecommerce teams must take the initiative to combine efforts with in-store marketing and merchandising groups. Of all the silos that slow companies striving to improve customer experience, the digital-physical divide may be the biggest. “Digital first ecommerce companies have an advantage,” Brooks explains, pointing to examples like Warby Parker and Etsy. “These companies already have systems designed to address the needs of online shoppers and their physical stores work with these platforms as a natural extension.” Such initiatives—whether based on Warby Parker’s retail stores or Etsy’s wholesale and retail partnerships—can serve as models for established retailers hoping to combine companywide efforts.

By pooling knowledge, skills, and resources, such integrated teams can begin to create the future of retail: A deep shopping experience that allows a customer to transition seamless between mobile apps, desktop sites, and in-store browsing to find the perfect answer to his or her individual, immediate need. It’s a future that combines the benefits of data and analytics, the ubiquity of online and mobile access, and the irreplaceable allure of a personal, social in-store experience.