Globally, online’s share of total retail sales was 16.4% in 2020, with e-commerce accounting for more than three-quarters of overall retail growth, and 57% of global shoppers’ spend is now online, and this momentum will only continue to drive the retail industry forward.
With this growth, three trends are shaping the industry and will continue to do so over the next five years.
Democratization of e-commerce: E-commerce platforms are making advanced capabilities accessible to everyone. Fewer barriers for professional e-commerce, coupled with the increased popularity of social media, lead to the rise of micro brands, and as a result, the number of online merchants will grow exponentially and will lead to increased competition and higher customer acquisition costs.
Hyper personalization: Merchants’ critical necessity to increase conversion and customer repeat rate, combined with higher customer expectations, and improvements in AI will lead to shopping experiences that are tailored specifically to each customer, exposing them to the right product at the right time.
Hybrid shopping: While online shopping has continued to explode in popularity, in-store shopping is here to stay, and a new hybrid retail model is emerging.
E-commerce has proven to be a force to be reckoned with and will only drive more change within the retail industry. It’s important to keep in mind the three drivers in retail: the democratization of e-commerce and domination of social media leading to increased competition and higher buyer expectations; improvements in technologies such as AI, data processing, and mixed reality will lead to immersive and personalized shopping experiences; and advancements in logistics, supported by cloud computing connectivity, which will reduce friction between customer intent and product delivery to a minimum. These three drivers work together to create shopping experiences, both online and in-store, that will be more immersive and instantaneous than ever.
Retail competition will continue to grow and drive perfection. Nowadays, advanced e-commerce capabilities are no longer exclusive to corporate retail. Anyone who wants to build a retail brand can do so by utilizing e-commerce platforms to create a professional-looking branded online store, and establish brand recognition and awareness via social media. With the ongoing domination of social networks and democratization of online shopping, led by e-commerce platforms removing barriers for newcomers, online creators, and micro brands, the number of online merchants will continue to grow exponentially and with it competition and customer acquisition costs.
With the increased competition, customer retention and repeat buyers are becoming more important than ever. Existing customers are 50% more likely to buy from a seller again and existing customers spend an average of 31% more than new customers. The same study shows that, at the same time, it costs 6-7 times more to acquire a new customer than to retain an existing one. This cost gap between new customer acquisitions and returning buyers will also continue to grow as competition rises, and with it the need to provide personalized and seamless shopping experiences. Advancements in technologies such as machine learning and augmented reality coupled with superb logistics are key components of this zero-friction, personalized shopping experience. The critical necessity to increase conversion and buyer repeat rate along with improvements in AI and data processing technologies will drive hyper-personalized shopping experiences. Online merchants will use datification and machine learning to adapt their products and services in real-time to generate personalized shopping experiences, catalogues, and even promotions for each customer to increase the likelihood of a purchase. Utilizing cloud computing connectivity and advanced logistics, content publishers, e-commerce platforms, device manufacturers, retailers, and logistics companies will collaborate to shorten the time and reduce friction between customer intent and product delivery to a minimum.
AI and AR, coupled with image and voice recognition, along with higher customer expectations for seamless shopping experiences, will continue to evolve retail. Soon, everything will be shoppable anytime, anywhere, whether it is on a screen or out there in the real world. Shoppable videos, visual search, and voice assistants will make shopping even more instantaneous. Buyers will soon be able to watch a TV scene with a character whose outfit they like or simply look at a stylish person walking down the street, and in real-time, be able to purchase the entire look – including the clothes, shoes, accessories, and even the makeup – on any of their connected screens or wearable devices after ensuring it looks perfect on them via a virtual AR fitting room, and receive it to their doorstep within a couple of hours.
Even though online shopping surged in popularity throughout the pandemic, brick-and-mortar shopping isn’t going away. Hybrid retail means combining both online and offline shopping possibilities and experiences while adding extra convenient options for shoppers. One in four consumers chooses hybrid shopping as their preferred method, and the current growing trend of shopping online and picking up in-store, or browsing in-store and completing the purchase online will continue; however, in the future, we should expect more digitalized and personalized in-store experiences. For example, shoppers will be able to walk into a local department store and enjoy virtual styling services tailored specifically for them via their AR glasses. The glasses would guide them on which shoes to match with the pants they just picked and to which aisle to go and try them on. Their glasses and voice assistants would even offer them special promotions crafted specifically for their needs.
The overall shopping experience is becoming more immersive and instantaneous than ever. The zero-friction purchase flow of seeing a piece of desired clothing, or any other good, virtually trying it out, buying it, and receiving it in real-time is just around the corner. These e-commerce trends are driving the retail industry forward into new unforeseen spaces that bring shoppers new and seamless personalised experiences both online and in-store. It’s safe to say that e-commerce has become, and will continue to be, a disruptive force in the retail industry.