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“So much of the shopper journey has become digitally oriented or even digital-first, with anywhere between 50 and 85% of shoppers reporting that they're engaging with brands digitally before they make a purchase.
That digital-first mindset is working its way through a lot of the consumer brand organizations. It's affecting how they're hiring, how they're organizing teams, and how they're allocating their budgets to different channels. — Andrea Leigh, CEO and Founder, Allume Group
Quarterly earnings calls are a veritable gold mine of information not only about a particular company’s performance but also about more significant trends in the market and across industries.
Andrea Leigh, formerly of IdeoClick and now founder and CEO of ecommerce education consultancy Allume Group, has a keen understanding of the impact of ecommerce on business strategy. Her firm recently released its “Q1 2022 eCommerce Insider Quarterly (EIQ) Report,” which covers the biggest shifts and up-and-coming trends in the ecommerce landscape.
Leigh joined a recent episode of the “Unpacking the Digital Shelf” podcast, “Reading the 1H 2022 Ecommerce Tea Leaves,” to share her perspective on six key ecommerce and digital trends that have surfaced during the recent earnings reports and shareholder meetings.
Here’s her take on where ecommerce may be headed the rest of the year — and beyond.
Inflation, which has reached 8.5%, according to the U.S. Bureau of Labor Statistics, is changing shopper behavior.
For example, consumers are consolidating store trips, and they have “a sustained focus on some of the retailers that provide more of a value message and some cost-saving initiatives,” Leigh says.
It’s become clear that the spike in prices across many categories isn’t transitory, and there will be sustained price increases going forward — especially given a booming job market with rapid wage growth, as calculated by the Federal Reserve Bank of Atlanta.
Brands are also contending with inflation and will need to figure out how to do more with less, as interest rates climb and their costs to borrow increase.
Leigh says brands aren’t just competing for consumers’ money — they’re also competing for their attention.
“Another shopper trend is this concept of the attention economy, where advertisers, retailers, and social media — all of the ways that we've increased our digital engagement over the pandemic — are competing for our minutes,” she says.
People are spending more time doing everything digitally, whether it’s work meetings, consuming media and entertainment, or engaging with their peers. They’re also shopping more online, with different ecommerce websites, marketplaces, and social media platforms all vying for their attention.
Consumers have so many places they can engage with online, so brands will need to really hone in on strategies that allow them to deliver more timely, relevant omnichannel messaging and increase their overall marketing efficiency.
Brands that want to better understand the impact of ecommerce on business strategy and successfully compete in today’s attention economy need to think digital first.
“So much of the shopper journey has become digitally oriented or even digital-first, with anywhere between 50 and 85% of shoppers reporting that they're engaging with brands digitally before they make a purchase,” Leigh says. “That digital-first mindset is working its way through a lot of the consumer brand organizations. It's affecting how they're hiring, how they're organizing teams, and how they're allocating their budgets to different channels.”
Leigh says it’s critical for brands to understand how consumers are spending their time online. Once they have a better understanding, brands can then create an integrated strategy — and not just a retailer-specific promotion or media plan — that focuses on driving consumer engagement and conversions across every touch point.
Brands also need to focus on putting digital talent in senior leadership roles and upskilling their current team to infuse a digital-first mindset throughout their organization.
“We have to be thinking digital-first, rather than creating a supply chain, marketing plan, or product innovation for brick and mortar and then retrofitting it for the online world,” Leigh says. “That means everything from having great PDPs to having really succinct, efficient, and nuanced retail media advertising strategies — going back to some of those basics around content. You have to give the shopper all the information they need to make a purchase decision, so images and bullets and all that. Both traffic and conversion-driving content is so critical to win that shopper's time.”
Many brands experienced an ecommerce boom during the pandemic, but this is beginning to subside. Across the big three retailers — Amazon, Walmart, and Target — ecommerce growth has declined.
The Allume Group’s “Q12022 eCommerce Insider Quarterly (EIQ) Report” states that Amazon’s revenue grew about 9.4% in quarter four (Q4) 2021, while Walmart and Target grew 0.5% and 9%, respectively.
Compared to 2021, all three companies have experienced lower year-over-year growth, with Amazon’s dropping from 21.7% year-over-year growth during the pandemic, according to Seeking Alpha. COVID-related headwinds have contributed to this shift, but this overall trend means many brands must find new sources of revenue to offset slower growth.
“Most of them are looking to open new revenue streams or increase the ones that they already have to help offset some of the cost of ecommerce delivery,” Leigh says.
“A lot of the ultra-fast delivery providers are now focused on ways to do it more economically.” — Andrea Leigh, CEO and Founder, Allume Group
Amazon has set the standard for ultra-fast delivery, and companies like Instacart, Target, and Walmart have tried to follow suit. However, the pendulum may be shifting the other way, as there’s more of “a reckoning and more governance happening in that space,” Leigh says.
Leigh says she’s particularly focused on how Instacart is balancing ultra-fast delivery with profitability. “Instacart's really interesting because they create some value in the delivery experience, but everyone pays more. The shopper pays more, the retailer pays more, and then the brand even pays more because they have another ad platform that they need to participate in. I have never really seen that as a super sustainable model,” she says.
Leigh adds that research has shown consumers aren’t as focused on expedience as much as brands think they are. They prioritize price, selection, and availability more than delivery speed. They’re even turned off by delivery fees, which indicates there’s only so much consumers are willing to pay for convenience.
“I think we just got on the ultra-fast bandwagon a little too quickly,” Leigh says.
Leigh says she’s also starting to see brands focus on diversifying their business and not pin all their ecommerce hopes on Amazon.
She says brands are starting to adopt a more strategic and nuanced approach to their keyword strategy and budget allocations. Her firm is also seeing more clients ask for general ecommerce training, rather than Amazon-specific training.
“Amazon is, for a lot of our clients, no longer the big growth channel. We're starting to see them really shift their focus to other retailers. If there are brands that are still doing the lion's share of their ecommerce business on Amazon, it's not to say that's a bad thing, but we may want to think about how to start investing in some of the other retailers to gain some leverage as a consumer brand,” Leigh says.
From brands reducing their reliance on Amazon to inflation reshaping consumer behavior, the tea leaves are showing a much different environment for brands headed into quarter four (Q4) and 2023 than they did just a year ago.
Reading these tea leaves and paying close attention to these indicators can help brands create a more effective ecommerce strategy.
Listen to the full podcast episode to learn more about the trends reshaping ecommerce.
