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“The fact that COVID was so disruptive caused us both to change some of our shopping habits in ways that I think are going to stick around.” — Rob Gonzalez, Co-Founder of the Digital Self Institute and Co-Host of Unpacking the Digital Shelf Podcast
The pandemic has completely upended how we live, work, and play — it’s also changed how we shop. According to the U.S. Census Bureau, ecommerce sales accounted for 13% of total retail sales in the third quarter of 2021. Ecommerce sales also increased by approximately 6.8% from the third quarter of 2020.
Yes, that means brick-and-mortar still accounts for 87% of retail, but the pandemic has accelerated several ecommerce trends that just may stick for the long term.
To explore them, “Unpacking the Digital Shelf” podcast hosts Peter Crosby, VP of corporate marketing at Salsify, and Rob Gonzalez, Salsify’s CMO and co-founder, and sat down for a recent episode, “Deep Dive: Post Pandemic Shopping Reflections and DTC Trends.”
Crosby and Gonzalez reflect on what they’ve experienced the last two years as consumers, what the industry has learned, and what it may signal for the future of ecommerce. Here are some of their musings.
The cookie apocalypse is now upon us, as Apple has limited third-party cookies within Safari and now requires apps to request users’ permission before tracking their activity, according to Bloomberg. Google also has moved in this direction and will end support for third-party cookies beginning in 2022.
“With the cookie apocalypse, it drives up the cost of customer acquisition in a lot of different ways,” Crosby says.
What this means is that brands must look for more cost-effective ways to target consumers and drive traffic to their products and services. The shift to a cookie-less world is also setting up a battle between two ecommerce behemoths: Facebook and Shopify.
Global ecommerce sales are expected to hit $4.2 trillion this year, according to Adobe’s latest Digital Economy Index, “so everyone's looking at what the piece of the pie is or can be,” Crosby says.
This is setting up an ecommerce rivalry between Shopify and Facebook, which is beginning to grow its ecommerce presence with Facebook Marketplace and other tools within its platform to diversify its revenue beyond digital advertising.
“Facebook is looking at what's happening because of Apple's move and they're looking for their next meaningful, big source of revenue,” Crosby says.
Meanwhile, Shopify posted 57% revenue year-over-year growth in the second quarter of this year, according to Retail Dive, further cementing its status as an ecommerce leader.
Though Facebook’s growing focus on ecommerce might take away market share from Shopify in the future, Gonzalez says Shopify’s unique value proposition will continue to propel its future growth.
“Shopify is trying to be the commerce infrastructure for selling to a shopper,” Gonzalez says. “The fact that Facebook might own the shopper relationship from an experience perspective — the shopper goes to the Facebook-owned website and transacts there — if Shopify is on the backend, powering the transaction, powering the price management, powering the promotion management and things like that, the fact that it's happening through Facebook, maybe that eats marginally a little bit of Shopify’s business, but Shopify also gains by having a potentially larger addressable market with better unit economics.”
Gonzalez and Crobsy both say that in this evolving digital advertising and ecommerce landscape, brands will win by focusing on the post-purchase experience.
“One of the things we'll see in 2022 is a lot more focus on the post-purchase experience to drive loyalty and drive more juice out of each consumer over time, rather than focusing so much on acquisition,” Crosby says.
“I completely agree with you,” Gonzalez adds. “One way to make the math work here is if the one-time customer acquisition costs can turn into a repeat buyer, a subscription, or selling of additional product lines and assortment, so you're amortizing the cost of customer acquisition and traffic over many transactions, instead of one.”
David Morin, senior director of retail and client strategy at post-purchase platform Narvar, shared some insights for how brands can develop a better post-purchase experience on an earlier “Unpacking the Digital Shelf” podcast episode, “Driving Loyalty and Growth through the Post-Purchase Consumer Journey.”
Among his tips? Focus on reverse logistics, improve outbound and delivery communications to increase transparency with consumers, provide different pick-up options, and make the returns process as seamless as possible using digital labels and QR codes.
Though post-purchase represents another touchpoint brands can use to engage consumers, DTC channels and subscription services may provide another valuable pathway they can harness to strengthen their relationships with consumers.
In addition to a brand’s own DTC site, Gonzalez says he considers Facebook Marketplace, eBay, and even Amazon as extensions of a company’s direct relationship with consumers because “you [the brand] own the listing, you own the price, you own the promotion strategy, you own the fulfillment and you own the return. There's a degree of control that you've got,” he says.
Gonzalez adds that there’s another avenue brands can use to directly engage consumers — subscription services. Gonzalez has personally added several boutique subscription services during the pandemic, including ones for sustainable seafood and wines.
“I wasn't subscribed to anything before COVID, and now I’m closing in on a dozen subscriptions that really drive a lot of what happens in my house,” he says. “I’ve found categories where the subscription works, where the velocity of consumption is not very volatile, and where the subscription is convenient versus annoying to manage.”
Gonzalez may be onto something. Subscriptions actually boomed during the pandemic as millions of people sheltered in place. This may be a lasting trend, as the subscription economy is set to grow to $1.5 trillion by 2025, according to a forecast from UBS Global, a leading financial services firm.
So, what do all of these post-pandemic shifts mean for brands in the digital age? For one, the definition of branding is changing.
“When I was in tech in the early days, your brand was what you said it was because that was the only direction. It wasn't a conversation. It was a statement. People either bought it or they didn't,” Crosby says. “Now it is a conversation.”
“The flip is that number one, your brand is what your customer says it is. Number two, it's what influencers and analysts say, but customers are your best influencers and then people who have audiences are your next best influencers. And finally, it's what you say,” Crosby adds. “Maybe that's kind of the flip we all really need to come to terms with, and that's where budgets are going to go and where expertise is going to go. And I think it's a super exciting time.”
For more insight into how direct-to-consumer (DTC) and consumer shopping experiences evolved during the pandemic, and how those shifts impact acquisition, loyalty, and who decides what your brand is, listen to the full episode of “Post Pandemic Shopping Reflections and DTC Trends.”
