How Is E-Commerce Changing?

Laura Ross July 7, 2023

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Image Credit: Blue Planet Studio / Shutterstock.com

Image Credit: Blue Planet Studio / Shutterstock.com

E-commerce is booming. It’s estimated that there are between 12 and 24 million operational e-commerce sites. In May 2023, the Census Bureau of the Department of Commerce revealed that U.S. retail e-commerce sales for Q1 2023 had reached $272.6 billion. This was an increase of 3% from Q4 2022.

COVID-19 bears much of the responsibility for this boost. Stringent social distancing measures rapidly accelerated the rise of e-commerce, since it was sometimes the only way for retailers to sell to their housebound customers. Indeed, by far, the biggest jump in e-commerce sales occurred between 2019 and 2020, when it rose from 13.6% of global retail sales to 18%.

The rate of growth might have slowed since 2020, but it’s certainly not stalled. Indeed, the industry is expected to grow by almost $11 trillion between 2021 and 2025. In the U.S. alone, e-commerce revenue is likely to exceed 1.7 trillion as soon as 2027.

E-commerce growth is a given, but what other trends have emerged?

1. Customer Acquisition Costs Are on the Rise

Between 2013 and 2022, the cost of customer acquisition rose from $9 to $29, representing a 222% increase.

This is driven by a range of factors including:

Rising advertising costs.
Increased competition.
The release of Apple’s iOS 14, which impeded retailers from serving targeted ads and resulted in lower conversion rates.
More stringent data protection laws, including CCPA and GDPR.

To mitigate the impact of sky-high customer acquisition costs on the bottom line, some retailers are focussing on brand development, with the hope that it will enable them to build meaningful and long-term relationships with their customers.

Others are investing in alternative advertising channels, be it a niche marketplace or a smartphone app, in a bid to reach new audiences at a cheaper price.

2. Social Media Marketing Is a Top Priority

Retailers are increasingly leveraging social media platforms to promote their brands, build their audiences, deliver stand-out customer service, and sell their products.

It makes sense, given that social media users spend around 15% of their waking life using social media sites. Plus, the social platforms themselves offer a myriad of features that make it easy for retailers to connect with customers, whether it’s via live chat, video reels, live streaming, or personalized recommendations.

Not surprisingly, many brands plan to increase their investment in social commerce this year, and global e-commerce sales via social media channels are projected to nearly triple by 2026.

3. E-Commerce Brands Are Going Global

E-commerce businesses are more quickly reaching their growth limit in a domestic environment, thanks to tough competition and oversaturated markets.

As a result, more businesses are expanding overseas, which is, incidentally, something that the majority of consumers want. One survey found that 76% of online shoppers have made purchases from an e-commerce business outside their own countries.

Of course, moving into new territories isn’t as simple as gaining immediate access to an entirely new customer base. E-commerce businesses must consider the challenges that come with talent acquisition, cross-border supply chain management, and securing additional funding.

4. A Shift to Alternative Financing

An increasing number of e-commerce businesses are making the switch to alternative financing.

What’s driving this trend? For one thing, bank loans are difficult and time-consuming to apply for, and not everyone is eligible. Smaller businesses, in particular, are unlikely to have a solid credit history or assets (such as property) that can serve as collateral for the loan. In addition, the requirement to repay a loan in fixed installments puts a great deal of pressure on a business’s cash flow.

It’s often quicker and easier for e-commerce businesses to secure funding from an alternative financing institution, be it a venture capitalist, a revenue-based financing platform, an angel investor, or digital lending via fintech apps.

5. A Rise in the NFT Market

Experts predict that Non-Fungible Token (NFT) transactions will be commonplace in e-commerce within less than five years. The popularity of NFTs has skyrocketed in recent months, and the market is predicted to be worth a staggering $231 billion by 2030.

NFTs are one-of-a-kind digital objects that are traded online, usually on the blockchain Ethereum. Ownership of an NFT is verified via a digital signature, which means transactions are extremely secure and easily trackable.

NFTs include music, art, clothing, and even tweets. The sector has enabled football fans to buy a part of their favorite team or gamers to buy NFT versions of in-app items.

E-commerce businesses are using NFTs to monetize their loyalty programs. Rather than collecting something arbitrary like store points, customers will receive NFT-based tokens.

NFTs are also of benefit to e-commerce businesses since they can eliminate fraud, enable real-time trading, and allow for fractional ownership. The latter improves the accessibility of high-cost items.