Global ecommerce rose from 15% of total retail sales in 2019 to 21% in 2021. It now sits at an estimated 22% of all sales, according to a 2022 Morgan Stanley global ecommerce forecast report, which notes that “Over the long term, the ecommerce market has plenty of room to grow and could increase from $3.3 trillion today to $5.4 trillion in 2026.”
Yet despite that rosy forecast, some brand marketers are asking themselves if the immense growth over the last couple of years was only due to a once-in-a-lifetime global pandemic.
Or to put it more directly: Has ecommerce plateaued?
While that may seem odd to say, given the extent that ecommerce now pervades most consumers’ everyday shopping, the current hot take from some industry analysts is that ecom growth has slowed and brick-and-mortar retail is on the rise. Whilst a provocative headline, that’s not exactly what we’re seeing on the ground.
The reality is that ecommerce will continue to grow, and while consumers still want brick-and-mortar shopping, it isn’t nearly enough to change the pre-pandemic trends. Shoppers today are purchasing everyday essentials and groceries both online and in-store.
But if we dig a little deeper into what’s driving these questions around ecommerce, it has a lot to do with data that is siloed within different departments, and therefore not woven together to form a complete picture of the customer journey. If you also account for the data companies possess but don’t fully understand enough to act on, you begin to scratch the surface of the challenges marketers and agencies face today.
Because the cost of retail media networks and retailer platforms has increased, while at the same time marketing or media budgets have remained the same or declined, brands are scrutinizing more closely where to spend, how much and its overall effectiveness.
Of course, the answer to where to spend, how much, who owns it and how it’s quantified differs in every company. There is no standardized organizational structure or solution in place yet to identify where to capture RMN spends the way there is with traditional media investments.
It’s crucial for brands to understand spending on search with retail media networks versus Google or Facebook. No one is shopping for milk on Google — they are on kroger.com or another RMN, but the metrics for each are so different it’s hard for any CMO to compare.
There is one other issue at play: brick-and-mortar stores have existed for centuries and we’ve been analyzing retail data for decades. Ecommerce as we think of it today has existed for only about 10 years, and the data surrounding the latest spike for only about two years. We simply don’t understand the shopper journey in the same way we do brick-and-mortar, especially with shoppers moving back and forth between the channels. We’re getting close, but at this point it isn’t even an apples-to-oranges comparison. More like apples to orange seeds.
The data doesn’t clearly show us that Mom bought this bread online this week, but last week she bought it in-store. Shopping habits aren’t the same week to week, and because the journey isn’t constant it’s difficult to make predictions.
While we have tons of data coming in from ecommerce, what the industry hasn’t fully identified yet is how to follow a shopper and connect the dots about why they’re shopping online versus sometimes in-store. Are online more of a weekly stock-up trip, and the trip to the store more for when they forgot eggs or need some specific ingredient? Some shoppers are stocking up on Instacart and then running into their local supermarket for a fill-in trip.
But those data lapses don’t mean your ecommerce program isn’t working. It probably is, but you’re comparing it to the growth of your brick-and-mortar business. You have to use a different lens.
That lens could include category sales share, unit volume/share, percent of ad sales versus total sales, percentage of ecom sales versus total sales, Total Advertising Cost of Sale (TACoS) and competitor growth/shrinkage, which are all viable KPIs with varying levels of available measurement. The key is finding the measurement most closely related to your brand’s goals at each specific retailer.
So how do you get retailers to share data in a digestible, insightful way that’s actionable? This is where retailer partnerships are so important. But you have to know what to look for. For brand marketers looking to better understand online consumer journeys, here are a few best practices:
• Take a leap of faith: As data availability will continue to vary across platforms in the coming years, brands have to be prepared to take leaps of faith, buying media that may not measurably amount to defined business growth. But with larger data windows and more data sources becoming available, over time you will be able to correlate to success using a look-back model.
• If at first you don’t succeed…try again: Sometimes certain strategies and media buys may not pan out. However, in an era of ad innovation, advertisers have to be prepared to fail upwards. To safety net this philosophy, advertisers should begin by defining their bare minimum, i.e. “with this level of investment, we need to achieve X.” This will help dictate what amount needs to be driven through tried and true activations and what can be invested in test and learning. Also, ask your retailer agency partners for their POV, data and analysis. Do they think it worked, and why? Their perspective is important since they’re in the data analysis trenches.
• Look outside the ad box: As often as we may point to a lack of data availability as a pitfall, we often find ourselves drowning in the data that is available, searching for an answer. This can create some tunnel vision for advertisers that are always convinced the answer is a spreadsheet away — while oftentimes the answer is as simple as searching your brand on your phone versus your PC, or emailing across the organization for an update that hasn’t made its way to the ad team.
• Widen your horizons: Don’t forget that the third-party scrape/API data vendors that provide these in digestible data formats often exist to scale these solutions across thousands of SKUs. Don’t let a lack of an affordable scalable solution prevent you from spending 30 minutes looking for an answer outside of a spreadsheet.
Bottom Line: The largest ad spenders still only have a vague sense of who is purchasing their product. Brands will continue struggling to map out consumer journeys as long as the marketplace requires brands to advertise without providing consumer information. But that doesn’t mean ecommerce has plateaued. It means we still have much to learn.
Katie Giuditta, Senior Director of Strategic Planning at Advantage Unified Commerce (AUC), is an expert in marketing strategy, ecommerce and digital planning and omnicommerce optimization. She is a leader in building unified strategic plans to drive growth across brands’ full commerce practices with fully integrated activations.