In this article, Tom Williams of Naveo Commerce takes a look at the central trends affecting the eCommerce landscape, and how the shift to D2C (Direct-to-consumer), subscription models and sustainable practices is made possible with technology.
Over the past few years, there has been exponential growth in the eCommerce space, with worldwide sales expected to exceed $5 trillion for the first time in 2022. But the eCommerce landscape is evolving and we’re seeing the rise of new trends, channels and business models. Social commerce is just one of these channels. Many social platforms are scaling their shopping features to give users an in-app, frictionless shopping experience. This new capability is reshaping the sales lifecycle, helping to streamline the buyer journey from click to purchase and improving conversion rates. And we can expect this to continue across 2022 and beyond. The public perception of online shopping has also shifted, with Worldwide Google searches for ‘food delivery’ reaching an all-time high in April 2020. Online grocery shopping became the norm for customers during the pandemic, as they became accustomed to convenience. Looking at the wider industry, there are a number of trends dominating the market, from social commerce and online food orders to subscription services and direct-to-consumer models. In this article, we’ll delve deeper into these current trends, and share how businesses can introduce new methods to secure revenue and gain more control over the customer journey.
Success with the D2C model
The D2C (Direct-to-Consumer) business model is transforming how people shop. The growth in digitization and the temporary closure of businesses has led to an increase in the number of D2C sales, as many turned to the direct source rather than buying from a third party. This trend will not slow down now that re-sellers have reopened; in 2022, eMarketer estimates 103.4 million U.S. consumers will buy from a D2C business.
Unlike traditional retailers, D2C companies aren’t tied to legacy distribution models and can try pioneering innovative distribution methods – like only shipping directly to customers or opening local pop-up shops or even subscriptions. As a result, these disruptive retailers are competing with huge brands by adapting products and the wider retail model. And we’re seeing companies across retail beginning to adopt this model. From grocers to beauty brands, D2C is dominating the landscape. But what are the benefits?
Extracting insights from data – It is important that businesses harness the power of consumer data. By having direct contact with customers, retailers can use the data they collect to make more informed decisions and optimize their products and services.
Reducing costs – Eliminating the number of steps between retailers and their customers will help increase profit margins. Re-seller partnerships are dependent on wholesalers agreeing to a low enough price for them to resell the product. Adopting a D2C model allows brands to sell products at the same price as retailers, which will positively impact their bottom line.
Increasing brand loyalty – By using data-driven insights, brands can ensure they are meeting the needs of their consumers in a meaningful way. Putting customers at the heart of the business will enable retailers to build strong relationships and increase brand loyalty. This could be through
identifying new product opportunities, highlighting areas for improvement or understanding customer preferences.
An opportunity to innovate – D2C players are removing the barriers between producer and consumer, to gain complete control over their brand, marketing, reputation and sales. Taking out the middleman enables these retailers to launch and test new products on a smaller scale, without the pressure of having to follow rigid protocol. This added flexibility creates the perfect environment for innovation and presents further opportunities for brands to differentiate themselves in a crowded market. By using their own platform to innovate and sell unique products directly, which are not sold by retail partners, it removes the competition between manufacturers and retailers and reinforces the trusted and innovative brand message.
A subscription model moving forward
You may have seen subscription services advertised over the past couple of years, or you may have tried one personally. Either way, the subscription box market has grown significantly over the past two years in response to the pandemic and the demand for increased convenience. According to Royal Mail’s recent UK Subscription Box Market report, the UK subscription box market is set to be worth £1.8 billion by 2025. During the pandemic, subscription boxes were the perfect antidote to ‘lockdown blues’, with 55 per cent of subscription box consumers stating that they signed up for a subscription box service because they wanted to treat themselves. However, despite the transition back to ‘normal life’, subscriptions are not a thing of the past. Research by Barclaycard Payments has revealed that the nation’s demand for subscriptions has continued to grow, reaching a value of £395 million – up 23 per cent in the past year.
While this model is seen as trailblazing for the industry, in some sectors (Grocery in particular) this is a largely untapped market. In 2022, retailers should look to capitalize on the benefits of offering subscription services. The additional planning time for retailers that know exactly who their customers are and where to deliver month-on-month, will help to improve convenience, retain revenue and overcome any delivery or replenishment challenges. Brands also have the opportunity to upsell by combining subscription models – with more regular orders or premium packages – to give their customers an end-to-end, convenient shopping experience. There are certainly logistical issues to tackle with this model and so it is crucial that organizations have the technology in place to monitor live stock levels, process all subscription sign-ups and communicate from customer to warehouse.
What does the future look like?
D2C models and subscription boxes have played a big role in revolutionizing the eCommerce landscape. However, convenience is not the only priority – ‘green commerce’ remains a key consideration for both retailers and consumers alike. Sustainability is becoming increasingly important to how and where customers shop. In fact, a survey from Forrester revealed that 57 per cent of consumers intend to purchase from companies that contribute more often to sustainability. Retailers who can demonstrate they are taking sustainability seriously are therefore more likely to stand out, increase loyalty and appeal to conscious consumers. One of these methods is last mile optimization, a process that involves planning routes to maximize deliveries. In fact, some organizations are looking at rolling out net-zero fleets and integrating delivery management systems that can further optimize the entire process from purchase through to fulfilment.
In an increasingly digitized world, reliance on technology means that retailers today have no choice but to adapt. The urgency to digitize stems, from both consumer habits and the opportunities that new business models present. Pioneering these new models will help retailers stay ahead of the curve and embrace the future of eCommerce in 2022