What Is the Future of Ecommerce

“No industry,” wrote Harvard Business Review at the close of 2018, “is failing faster than retail.” At risk of contradicting the Crimson: bullshit. Sweeping proclamations make for great sound bites and (scholarly) clickbait. But the truth? Not so much.

At the opposite extreme lay headlines trumpeting “voice-search buying,” “Instagram-worthy pop-ups,” and “VR-enabled O2O experiences.”

What the data shows — and what the leaders we spoke to from brands at the forefront said — isn’t that retail is failing nor that success is tied to innovation for innovation’s sake. Instead, it points to the now unignorable center of commerce: customer choice. What is the future of ecommerce for 2019 and beyond? 10 insights offer the answer:

  1. Ecommerce v Retail: The Dichotomy Ends
  2. DTC Emerges as Commerce’s Future
  3. More than “Digitally Native” Tactics
  4. Content Becomes the Holy Grail of Growth
  5. Physical and Digital Solidify Their Relationship

1. Ecommerce v Retail: The Dichotomy Ends

For all its enduring hype — physical versus digital, offline versus on — the old war is over. In fact, it’s always been a lie. Choice, not location, is commerce’s greatest opportunity and its most-looming threat.

In defense of retail’s “apocalypse,” brick-and-mortar losses are mounting; the four-year bankruptcy count now sits at 57 once-landmark chains. Manufacturing market share and in-store sales for consumer packaged goodsare flat or declining. Born-online “microbrands” have devoured the lion’s share of growth. And ecommerce’s gains continue to trounce retail as a whole.

Here’s the uncomfortable twist: brick-and-mortar still dominates online sales by over $20 trillion. And the gap will widen. After a quarter century, ecommerce’s spread is slowing, 80% of 2018’s gains belonged to Amazon, and (in the U.S.) the top five online retailers own 64.7% of sales:

Retail ecommerce sales growth worldwide and brick-and-mortar versus ecommerce share of retail (2021)

The future belongs neither to legacy giants nor pure-play ecommerce. Instead, it belongs to direct-to-consumer (DTC) models, often referred to as digitally native vertical brands (DNVB). Just don’t let the name fool you.

2. DTC Emerges as Commerce’s Future

Vogue’s late 2018 feature, “These Are the 50 Digitally Native Brands You’ll See Everywhere in 2019,” blew the mainstream doors off what many in the industry already knew: the worlds of technology and commerce are undergoing a revolution. At the forefront are brands like Outdoor Voices, Warby Parker, Allbirds, Glossier, Hims, and home-goods companies like Casper, Brooklinen, Purple, and Leesa.

What unites these verticals is a focus on “brand equity” and “brand purpose.”Both terms describe the value of a brand. Owning their customer relationships, DNVBs run on value — elevating people and products over price and place. The centrality of selling something worth buying isn’t replaced but augmented. As a microcosm in 2018, numerous DTC leaders offered either no holiday discounts, minimal discounts, or charity-based incentives:

DTC leaders offered either no holiday discounts, minimal discounts, or charity-based incentives

3. More than “Digitally Native” Tactics

People have always bought with their hearts and justified with their heads. The difference now is that choice means brands can scale by profitably serving smaller niches than legacy competitors and expand from a mission-centric foundation.

There was perhaps no better signpost of the future than lingerie-incumbent Victoria’s Secret against Savage x Fenty and ThirdLove. Juxtaposed fashion shows set the stage. In Sept., Savage x Fenty — where women, in the words of founder Rihanna, were “celebrated in all forms and all body types and all races and all cultures.” In Nov., Victoria’s Secret — whose CMO, Ed Razek, answered the question of whether plus-size or transgender models would be included with, “No. No, I don’t think we should. Well, why not? Because the show is a fantasy.”

Though Razek apologized for his remarks, the drama culminated in Victoria’s Secret CEO resigning and an open letter by ThirdLove’s CEO Heidi Zak published in The New York Times:

Open letter by ThirdLove’s CEO Heidi Zak published in The New York Times

4. Content Becomes the Holy Grail of Growth

Often misunderstood, the power of content resides not in its direct ability to sell (although it can). Content’s true power comes from galvanizing an audience, entering its heart and mind through a consistent story well told — full of drama, with people at its core.

“In paid social, it doesn’t matter how good your strategies are,” says David Herrmann, Dir. Advertising at Social Outlier. “Your audience needs to connect with your content first. It’s the kindling. It’s what drives inspiration. I can’t make people money unless they keep feeding me content. If sales are down, if traffic is more expensive, blame content.”

Of course, not all content is created equal. Recent data shows that never before have so many companies produced so much content with so little attention to results.

State of B2C ecommerce content online

5. Physical and Digital Solidify Their Relationship

For online businesses flirting with offline retail, the time to commit has come; pop-up shop “experiences” staged for social media have worn out their welcome.

“I’ve been hearing more and more complaints about this trend,” says Paul Munford, CEO of Lean Luxe, “and I’m worried that some brands — those same brands who preach an obsession over knowing their customer, understanding how today’s shopper wants to shop, and of course owning that relationship — are losing their way a bit as they focus considerable time, energy, and money to launch ‘Instagram-worthy’ spaces.”

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