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“Ecommerce is not dead.” — Russ Dieringer, Founder and CEO, Stratably
Ecommerce experienced a massive boom during the pandemic, but as stores reopened and life returned to normal, the prevailing wisdom within the retail industry was that ecommerce wouldn’t continue to be a major growth engine for brands.
That notion was way off base, according to Russ Dieringer, CEO and founder of Stratably, a research and analyst firm that provides industry research and data to digital commerce organizations.
Stratably recently released its first-ever eTailer Index, which is filled with rich insights on ecommerce growth trends that will help brands make more informed digital investments and optimize their ecommerce strategy.
Dieringer joined a recent episode of the “Unpacking the Digital Shelf” podcast, "Is Ecommerce Still Where the Growth Is Coming From?" to share critical findings from the eTailer Index and his expert advice for how brands can integrate ecommerce into their business more effectively.
The eTailer Index looks at 14 large publicly traded companies — including Amazon, Shopify, DoorDash, and Uber Eats — as a proxy for digital commerce. Dieringer says Stratably’s goal was to use these companies to understand better the future growth trajectory of ecommerce and how this channel is performing compared to brick-and-mortar retail.
“We created this eTailer Index to provide consumer brands more insight from a bottoms-up perspective on what's driving ecommerce growth in the industry, at least amongst eTailers,” Dieringer says, referring to the industry term for companies that sell online.
The index uncovered several important findings about ecommerce growth.
eTailers are now larger than they were pre-pandemic. The incremental dollar growth each year for eTailers is more than 2.5 times what it was before the pandemic. “We have a slower percentage growth rate, but bigger dollars and [eTailers] continuing to grow faster than brick-and-mortar channels by a wide margin,” Dieringer says.
Absolute ecommerce growth has slowed but is still higher than physical retail growth. Stratably projects an 8.3% compound annual growth rate (CAGR) for ecommerce over the next five years. “That's a compound annual growth rate basis that is approximately four times higher than brick-and-mortar channel growth over that same timeframe,” Dieringer says.
The eTailer Index found that D2C platforms are growing faster and larger from a dollar perspective, as are what Dieringer calls “omni enablers,” or delivery services like DoorDash, Uber Eats, and Instacart. Omni enablers are growing from both a dollar and percentage growth rate perspective.
The eTailer Index forecasts that ecommerce penetration will continue to increase. However, ecommerce and brick-and-mortar will account for an equal share of dollar growth within retail. “The analysis all points towards approximately 50/50 from a dollar growth perspective over the next several years,” Dieringer says.
Despite what the eTailer Index highlights about ecommerce growth, a pervasive return-to-store narrative still affects how brands view ecommerce and its role in their larger business strategy.
The accelerated growth ecommerce experienced during the pandemic has leveled off over the last two years. However, a decline in ecommerce’s absolute growth rate has fed into a pervasive narrative that ecommerce is dead and brick-and-mortar retail is invincible. But tales of ecommerce’s demise have been greatly exaggerated, Dieringer says.
“It's that absolute growth rate, which I think has allowed this return-to-store narrative to continue to fester and be more persistent inside of organizations than I think is otherwise deserved.” — Russ Dieringer, Founder and CEO, Stratably
Dieringer adds that brands must view ecommerce holistically and consider “second-order effects or additional ways to calculate the importance of ecommerce.” To his point, ecommerce drives value for companies in multiple ways — boosting brand awareness, product availability, shopper convenience, or enhancing the overall customer experience.
Brands need to consider all these factors as they make resource investment decisions in the coming years.
No study about ecommerce would be complete without mentioning Amazon and how it’s faring in today’s competitive retail environment. Not surprisingly, the ecommerce behemoth continues to experience upward growth.
“Our estimates suggest Amazon's become the biggest retailer in the U.S., surpassing Walmart,” Dieringer says.
The eTailer Index indicates that Amazon currently does $500 billion in gross market volume in North America alone. Its ecommerce sales are growing at nearly the average rate of the overall index.
“It continues to grow right around that double-digit mark and just is so large that the opportunity on Amazon is really enormous,” Dieringer says.
Dieringer hopes brands see the eTailer Index as a valuable data point they can use to inform some of their resource decisions, though he admits it’s often a slow process for organizations to put the right resources behind the right investments.
As far as the next steps, Dieringer suggests brands assess their own retail customer base and determine which segments represent the best opportunity for ecommerce growth.
“Too often, consumer brands will just look at their sales and say, ‘All right, this customer did 5% of our business last year, so let's commit 5% of our investment to them for this go forward year,’” he says. “But that's backward-looking. It's not thinking about growth. It's not thinking about which of your customer base has real tailwinds.”
Dieringer says in the future he’s interested to see what happens in discretionary spending categories and how lower inflation — and in some categories, deflation — affects online spending. For example, lower discretionary spending could affect growth rates for CPG companies, creating a more competitive environment for these businesses.
Stratably plans to update the eTailer Index every quarter, so brands should be on the lookout for more prescient insights about the future of ecommerce. As the index shows, ecommerce isn’t dead. It’s very much thriving and should be a pivotal part of every brand’s long-term retail strategy.
To hear more of Dieringer’s insights on ecommerce growth trends, listen to the full episode.
