Exploring the state of ecommerce: 2021 edition

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In 2021, brand owners had to be nimble-footed to survive. Ecommerce paradigms that had been reliable for years suddenly changed—supply chain issues warped expected delivery times, privacy updates from big tech companies like Apple made the old practices of data collection near-impossible, and even Black Friday couldn't be taken as a reliable weekend to make profits.

But these changes also brought opportunities. We outlined a few of 2021's shifts below, along with tips for brand owners to take into 2022.

Offline shopping gets new wings

When new habits develop, they don’t exactly replace old habits; sometimes, the two meld together to become a hybrid. In 2020, COVID-19 led to wide-scale lockdowns, and in-person shopping took a hit. Meanwhile, online shopping jumped. In the U.S., online sales hit 13.1% ($192B) of total retail sales by Q3’20, up from 10.3% in Q3’19, and 9.1% in Q3’18.

But by Q3’21, the barriers that limited offline shopping were removed. Stores opened back up as vaccines were available in abundance in the U.S.; travel, events, and tourism-related brands were able to resume offline services again; and employees that supported in-person supply chain jobs returned to work.

Ecommerce sales dropped down to 12.4% ($204B) of total sales. The amount that consumers spent in 2021 had gone up, but ecommerce’s proportion had reduced.

What it means for brand owners

A lull in digital shopping doesn’t mean that you should invest less in your online presence. However, it is a sign that your offline presence can’t be neglected.

Many ecommerce businesses announced plans to expand offline in 2022. Ear-piercing startup Studs raised $20 million in October to open more offline stores; underwear startup Parade hopes to open a new store in Soho with its latest round of funding; even Amazon has announced plans to increase its physical presence in 2022.

Building your business to be nimble-footed online, while also thinking strategically about your brick-and-mortar presence—where to open a store, how you can track sales online to inform your offline presence, what it means to streamline what happens across all of your stores—will be crucial to navigate what’s to come with shopping.

Shipping backlogs change the way we think about inventory

From lockdowns in China to major blockages at international ports to a surge in at-home orders in the U.S. for gadgets, a medley of supply chain issues piled up in 2021. You might remember one—the Ever Given, a giant container ship that was stuck in the Suez Canal for six days in March 2021. Most estimates clock that it held up around $10B of cargo from moving through the port daily. Cars, laptops, sneakers—maybe even your customers’ orders.

Simultaneously, costs like the cost per container of goods from overseas multiplied. While deep-pocketed brands were able to spend on shipping alternatives like flights and special ships, normal brands were stuck having to decide between raising the price of goods or shutting shop.

What it means for brand owners

Many business owners sold gift cards worth the same amount as out-of-stock items so customers could use them to purchase products once they were back on shelves. Theoretically, this strategy helped save revenues that might have been lost if products were just listed “out of stock.”

But this solution doesn’t last forever. Looking forward, merchants will want to keep a steady (but reasonable) stock of products to avoid selling out too quickly. Brands might also consider financing options that help stock up inventory well in advance, like inventory financing.

Editor’s note: Our Capital guide can help you parse financing options and find the right one for your business.

Don’t ignore social commerce

In early spring, a series of TikTok videos displaying sunset lamps—lamps that cast the red and yellow gradients of a setting sun—went viral, with videos of creators using them to take selfies, light up furniture, and make wall art. Customers took to the brand’s store to buy sunset lamps—and if they wanted a cheaper price, a different shipping time, or access to the product once it was sold out, most likely, they took to Amazon. This pattern repeated itself several times last year with products like a pair of viral checkered leggings and a lip gloss that achieved the same effects as lip filler without the injections.

New social media platforms like TikTok are driving discovery, and the big platforms aren’t ignoring it. In August 2021, Shopify partnered with TikTok to help creators make their videos shoppable, including creating TikTok for Business accounts with shopping tabs and product links that led to Shopify stores when clicked.

And though TikTok is fast-growing, with over a billion active users and more search volume than Google in 2021 according to Cloudfare, it’s not the only social platform driving this discovery. Shopify cited a 76% increase in growth of merchants using their social commerce channels between February 2020 and 2021, listing TikTok, Facebook, Instagram, Pinterest, and Snap as channels. The company made deeper inroads into these social platforms in 2021, including partnering with LinkTree in November to help merchants link their shops on Instagram and expanding its partnership with Pinterest by adding the ability to make Pins shoppable in 27 new countries.

Other big commerce companies are also noticing the potential of combining social with shopping, like Walmart, which partnered with TikTok in April 2021 to host a live-streamed beauty shop-along experience.

And the social media platforms, too, are trying their hand. In August, TikTok tested out in-app shopping with some brands in Europe; Facebook heavily promoted Facebook Shops, which allows merchants to create online storefronts for Facebook and Instagram.

What it means for brand owners

Social media is a difficult game—and virality is not a science. But TikTok is in its early days in the U.S. and there’s lots of room to experiment. You might consider working with creators with big followings; if you’re not ready for a partnership yet, you might even try making your own videos.

Remember: it’s important to go multichannel. Just like the big platforms don’t want to bet on a single platform, it’s important that you don’t either. Post TikToks on Instagram Reels, move conversations to Twitter Spaces, and test and try out as many different tools as you can. When one sticks, double down.

Acquisitions and aggregators scope out small brands

There are more Amazon sellers than ever before, and their valuations have increased. As of August 2021, the number of Amazon sellers who surpassed $1 million in sales grew by nearly 15%. The number that surpassed $10 million grew nearly 40%. Some third-party sellers that started on Amazon, like Pharmapacks, have even gone public.

Simultaneously, aggregators and roll-ups—companies that buy up smaller brands into their portfolio—grew in popularity. Aggregators raised over $12 billion in 2021, and even individual brands started looking to acquisitions, like Harry’s, which purchased deodorant company Lume in 2021. Other aggregators used the strategy for expansion. Markai is starting in China and buying out Chinese brands seeking global consumers; Opontia focus on Eastern Europe and the Middle East. OpenStore has skyrocketed to success, and made it their goal to acquire a new Shopify-based store every single day.

Some rollups have very specific strategies. Thrasio, for instance, is a strictly-Amazon brand aggregator that conducts each deal on different terms but keeps paying out founders after the initial “sale.” That means Thrasio is incentivized to make their acquired businesses thrive.

What it means for brand owners

Theoretically, an aggregator or roll-up can help your brand compete in a difficult environment. As we saw in 2021, handling supply chain issues and steep competition from big brands can require deep pockets—and getting your fulfillment and product sourcing done by Amazon isn’t always going to work. An aggregator with connections, funding, and sophisticated analytics can help take your brand to the next level. Plus, the dream of making an exit doesn’t have to only come from getting big enough to hire a new CEO and stepping down to retire.

But remember: an acquisition can be tempting, especially in a difficult environment. Consider your prospects and growth carefully before considering a rollup. Additionally, don’t get disheartened if you’re competing against a rollup. The trend of big companies buying brands to grow has been happening for decades (think: Unilever).

Apple, Facebook, and Google privacy updates

During the second half of 2021, Apple implemented App Tracking Transparency, which requires users to give apps permissions to track them. The software also disabled tracking of open rates for emails in the Apple Mail app. These decisions sent ripples through the ecommerce industry—the assumption was that most users wouldn’t agree to let apps track them, making it difficult for brand owners to continue their usual marketing strategies.

The other big tech companies have suggested that something similar is coming. Google is working on a similar permission-based tracking system for Android phones; Facebook announced that it’s revamping how its ads will track people.

Cost per acquisition on ad platforms like Facebook jumped across brands. And when Google’s changes roll out, the price of Google advertising will likely suffer a similar fate.

In Q2’21, Facebook stated that it expected decreased growth for the rest of the year, citing Apple’s changes as the primary culprit. And while its revenue growth in Q3’21 wasn’t heavily affected—its advertising revenue actually grew 33% from Q3’20, up from 22% between Q3’19 and Q3’20—the company continued to suggest that there was a future in which their growth would be impacted by these changes.

What it means for brand owners

So you can’t target users as precisely, and you can’t even tell when they opened your email.

The solution? Owned data.

If you can’t target customers through their social platforms or ad personas, use the data you’ve collected yourself. Try product quizzes, parse past purchases, engage your social media followers, and interview your customers. Create precise, complex customer profiles.

Then, deliver value. Use your marketing secret weapon—segmentation—to send them targeted content. You might not know if they open emails, but your targeting will help you know what types of things they might like. If you’ve tailored your content well, your customer will still get value from it.

Black Friday becomes Black November

You may have noticed a distinct shift in how Black Friday happened this year. As in—you probably started getting “Black Friday sales start now!” emails at the beginning of the month. Whether it was to mitigate getting too many orders at once, to avoid losing money on what usually is the season’s shopping spree, or to help gauge what actual Black Friday volumes were going to be like, this year’s Black Friday was actually a Black November.

Amazon says their Black Friday numbers are the highest they’ve ever been. Merchants with Shopify generated $2.9 billion in sales on Black Friday alone—an increase of 21% compared to 2020.

What it means for brand owners

We know it was hard to predict what Black Friday might have been like in 2022. And we know that each brand fared differently. You might still be digging yourself out of shipping fiascos just to get your products in stock—or maybe you’re still deep in emails with package carriers that weren’t able to deliver your goods during the holidays.

It’s time to over perform. Avoid having customers churn because of delays.

Go the extra mile. Send them personal emails if there are shipping delays. Check-in and see how they’re enjoying the product after they receive it. Your Black Friday success stories are only yours to lose.

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