E-commerce was already expanding its borders when the COVID-19 pandemic arrived which (by the way) made it even more important for businesses. But what’s behind the e-commerce popularity? Find the answer here.
What is E-commerce?
E-commerce, or electronic commerce, according to an article by Investopedia, can be defined as “a business model that allows companies and individuals to buy and sell goods and services over the Internet. Ecommerce operates in four major market segments and can be conducted over computers, tablets, smartphones, and other smart devices”. These interactions can take place in the form of B2B (Business to Business), B2C (Business to Consumer), C2C (Consumer To Consumer), and C2B (Consumer to Business), as mentioned in another article by Pay Space Magazine.
The foundations of electronic commerce came to light in the 1960s. At that time, Electronic Data Interchange (EDI) allowed the transference of documents between companies from one computer to another. The first electronic transaction took place in 1994 when a CD from Sting was sold online on a website known as NetMarket.
E-commerce and the internet are linked since the first only became possible when the internet arrived in people’s homes. Amazon was one of the first to start selling online and remains one of the most important marketplaces.
The pandemic revolution of E-commerce
As we all know the COVID-19 pandemic worked out as a boost for online businesses. While some businesses already had an e-commerce presence, others went for it to fill the gap brought by consecutive confinements. As of today, the e-commerce industry is still growing quite fiercely. And the numbers are quite astounding. Just take a look at the results displayed in a recent article published by Unctad that state that “show that the significant uptick in consumer e-commerce activity fuelled by the COVID-19 pandemic was sustained in 2021, with online sales increasing markedly in value, despite the easing of restrictions in many countries”.
The same article also says that the “average share of internet users who made purchases online increased from 53% before the pandemic (2019) to 60% following the onset of the pandemic (2020/21), across 66 countries with statistics available”. This goes a bit deeper when considering that the “situation prior to the pandemic and the extent of the boost to online shopping experienced vary between countries. Many developed countries already had relatively high levels of online shopping (above 50% of internet users) before the pandemic while most developing countries had a lower uptake of consumer e-commerce (Figure 1)”.
But if you’re already astonished by the numbers, learn that, according to another article by E-commerce Guide, “online retail sales amounted to 4.9 Trillion U.S dollars worldwide. And it’s forecast to grow over 50% within the next four years”. Plus, “according to companies, retail sales revenue from physical stores are almost equal to their digital sales (Shopify). As a result, brands are investing in omnichannel tools that will help them sell anywhere“.
No wonder businesses are now recurrently looking for new e-commerce solutions and services.
Advantages of E-commerce
If there are doubts about the advantages of e-commerce, the following points are worth considering:
- Easily reachable and convenient: e-commerce is open 24/7 on any mobile or computer, making it easier for users to access the products they need. Furthermore, it eliminates the geographic limits of having to buy in physical shops.
- Technology is here to help: a myriad of apps, platforms, and social media are being updated daily, allowing for better customer services and, ultimately, an increase in sales. Contrary to physical shops that have more limitations in terms of space or employees, e-commerce permits faster changes, therefore adapting better to customers’ reality.
- Personalized experiences: as companies gather more information about users, it becomes vital to put it to its best use. Starbucks, for example, uses algorithms to suggest new products to customers based on store inventory, time of the day, popular choices, and previous orders.
- Better marketing campaigns: it’s undeniable that advertising costs are getting more expensive and having fewer results. To turn this around, it is important to use the information online platforms give us and segment audiences. By doing so, clients will be targeted correctly, bringing in more orders and favouring customers’ retention.
Disadvantages of e-commerce
As with almost everything in life, there are fewer positive aspects of e-commerce that have to be considered:
- Distant customer service: the screen that separates the user and the seller makes it hard to address all questions instantly. When buying on-site, clients immediately see the characteristics and compare them. Sales teams also provide prompt help and create a feeling in the customer of reassurance about the purchase. Online, there is no physical contact. Furthermore, customers might not have time to write e-mails or send messages to get the answers they are looking for.
- Delivery time: In online sales, the delivery process is the most expensive and the most time-consuming. Despite the improvement in the delivery time thanks to new subscriptions that guarantee 48 hours of deliveries, buyers still don’t get the instant gratification they have when the product comes right after payment. In a world with many competitors selling similar articles, being honest about the dispatch times is worth significant points in the run for future sales.
- Unmet expectations: displaying a product online isn’t a piece of cake. More often than not, colours change, fabrics have textures that weren’t correctly shown, or the size is far from what was imagined. When purchasing online, people create an image of the product. When it arrives, if it doesn’t match expectations, the result is a return or, ultimately, losing the client. Therefore, product descriptions and photos are of vital importance for any online shop.
There are ways to minimize the weaknesses mentioned. If we take a closer look, we will see that the advantages are worth the challenges. But, how to be successful in e-commerce? There’s no secret, so we will elaborate on it next.
E-commerce: where to start
Before starting an e-commerce business there are some steps that are compulsory to follow. First, consider the product, or service, as well as the audience, costs, competitors, etc. Secondly, comes the paperwork, such as the name of the online store and tax numbers. Finally, it’s time to choose the right platform for sales. All steps must be carefully prepared to minimize mistakes and time-consuming tasks.
Having the customer in mind when deciding on the colours, themes and copy of the website is one of the best practices. Besides this, the platform must be mobile optimized to provide a user-friendly experience.
One of the best features of e-commerce is its versatility. Innovation flows on the internet and so does it (or should) in your online business. Introducing new products, changing layouts, flash sales and others are easier when done online. Together with the best marketing strategies, they will help boost customers’ interactions and retention.
The road ahead: trends to watch for
When the pandemic arrived, people started seeing e-commerce as an excellent feature to provide them with items that weren’t available in physical shops. However, COVID-19 only accelerated a tendency that was already expanding.
According to Shopify, since 2018, five countries have been at the top of the e-commerce ranking, being China the first, followed by the US, UK, Japan, and South Korea. These positions in the rank are expected to remain unchanged until 2025.
Because buying online is here to stay, there are some trends to take into consideration:
1. Supply chain: the heart of the process
As previously mentioned, the supply chain is one of the most essential processes when selling online. The pandemic brought problems to the logistics departments, making a real impact in the way companies work. Some retailers even bought supply chain companies to better control deliveries and stocks.
2. Personalization and good content: your best friends
With the introduction of specific regulations for the use of peoples’ data, new paths are being exploited to bring to businesses relevant information to boost sales. Several research studies show that customers are willing to share personal information with brands as long as they relate to them. However, it’s important to understand that sending e-mails with the person’s name on them, isn’t enough for the person to connect with the brand.
This is the part where content takes the leading role. Developing strategies to eliminate the one-time buyer is of great importance. Subscriptions, for instance, are an excellent tool to get information from the user and at the same time create a deeper connection with them.
When creating content it is also crucial to think about the product or service. In order to write good descriptions, the use of clients’ language is the perfect ally to eliminate one more barrier.
3. Mobile Commerce and Social Commerce: the step forward
Technological advances are making it easier for people to purchase using a mobile phone or a tablet. According to Shopify, in 2021, 71% of online sales happened via mobile.
Strictly connected with e-commerce, or mobile commerce is social commerce. As indicated by its name, social commerce happens on social media. Videos and live streaming are becoming powerful tools to engage with audiences. Similarly, ads on these platforms are becoming more expensive as there is a clear tendency for brands to use them as powerful marketing tools.
4. BNPL: make way for the new payment method
BNPL stands for Buy Now, Pay Later and is a tool that permits people to buy and pay later, most of the time without charging interest. Klarna and Afterpay are two examples of companies acting in this field. But what makes people so interested in BNPL? The answer is simple: this makes people buy more and also encourages them to come back in the near future to purchase again.
5. Artificial Intelligence, NFTs and Metaverse: welcome to a new reality
Artificial intelligence is evolving rapidly and is the right ally to improve product descriptions, product searches and even customer services. Some tools are already in use to create videos, ads, and landing pages.
Metaverse and 3D virtual worlds are bringing customers and brands closer. With the option to try on products through apps, clients engage more with the seller.
The feeling of belonging is also amplified with non-fungible tokens (NFTs). Companies often offer them to clients as a reward for their commitment to the brand. Another feature is the fact that users can buy NFTs to display online in video games, for example. This shows that they share the brand values.
E-commerce: is it too good to be true?
The fact that companies are shifting online may leave some questions up in the air. Despite the interrogations, it is clear that e-commerce is the way forward. Success is attached to brand identity and the right communication.
In a competitive world such as online, the lesson to be learned is simple: highlight the unique features of the brand and build strong communities. Technology will always be present to facilitate the process, so make sure you don’t miss a thing.