Part 1: How Retailers Can Navigate the eCommerce Economy
How much will eCommerce spending change with current economic projections? The answer is more complicated than you’d think.
There are a lot of mixed signals about the post-peak-pandemic and pre-recession economy. After lockdowns lifted, many expected spending to persistently swing back toward brick-and-mortar retail. In reality, the swing might not be as dramatic as projected, with spending remaining somewhat flat. The increase from Q1 2022 vs. Q1 2021 for in-person shopping was just 3%.
Some say eCommerce demand is cooling from its pandemic peak, in part due to the impacts of inflation. Amazon’s latest earnings provide some evidence of this trend with online sales declining 4% year over year in Q2 2022 vs. Q2 2021. Even so, June’s overall retail numbers showed signs of strength, rising 1% vs. the projected 0.9%.
Post-lockdown, many pundits argue that eCommerce penetration is returning to previous trend lines. Recently, Benedict Evans asked, “which penetration, and which trend line?” Depending on the chart you’re looking at, the dip from pandemic peaks looks far less dramatic.
Regardless of your preferred benchmarks, we’re still far from a party. With mixed signals and a potential recession looming, what can retailers do now to capture digital market share?
Investing in Digital to Future-Proof Your Business
A potential downturn may be a perfect opportunity to rethink or reinvest in your tech stack, according to a recent analysis from McKinsey. These investments can provide the competitive edge you need to reach customers exactly where and when they want to shop. Composable commerce technology can help brands be nimble and adjust to changing consumer preferences, especially in tough or uncertain economic conditions.
Case in point, there’s a reason many retailers can’t reach customers online. The commerce catalog is broken. Unfortunately, dealing with the status quo of legacy catalog technology has cost brands big time when it comes to customer growth and business agility. First, disjointed customer experiences – like “Shop the Look” pages that don’t push customers to the correct item variation – can lead to abandoned carts and customer churn. Second, brands with partner and B2B channel networks might find it difficult to update pricing and other product details. And finally, running promotions or setting a brand up for success in new channels is way harder and slower than it needs to be.
Consider the ROI that would come from rethinking your commerce experience. To start, ask yourself the following questions about your current technology state and your ability to weather economic swings.
- Will you be able to capitalize on the latest channels and platforms?
- Can you change quickly as consumer sentiments change?
- Can you weather a dramatic swing from brick-and-mortar to digital if it were to happen again?
- How long does it take you to run a promotional campaign, change pricing, or offer different pricing for different channels?
- How much would a faster time to market impact your conversions?
If some of these barriers are standing in the way of your customer experience, it might be time to consider a composable commerce approach. In Part 2 of this article series, I’ll break down some of the latest advice from McKinsey on how CPGs can use their digital presence to survive and thrive during a potential downturn.
Can't Wait for Part 2?
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