Scaling Your Ecommerce Business In 2021: 5 Market Forces You Can’t Afford To Ignore
Imagine it’s January 2020.
You’re preparing to scale your eCommerce business, and we sit down to discuss what the retail landscape will look like in just over a year’s time.
Social distancing and quarantine are vaguely familiar concepts from that disaster movie you watched over Christmas.
The last time you saw a mask was at Halloween.
And then things get interesting.
We tell you that in just over a year’s time:
- Ecommerce will account for 30% of the UK’s total retail sales
- 10 years’ worth of growth will have been achieved in eight weeks
- UK consumers will be forecasted to spend £141.33 billion online in 2020 alone
So eCommerce is booming, but competition is fierce. It’s adapt or die.
What do you say?
Most importantly... What do you do?
The pandemic has radically changed the global retail landscape, with millions of potential new customers flooding the marketplace.
But growth is projected to slow throughout the rest of 2021, and online retailers are facing a perfect storm of increased competition and higher acquisition costs.
As businesses turn their focus towards recovery, growth and a return to pre-Covid levels of profit and stability, we’re here to help you - with our simple guide to 5 of the biggest market forces affecting your eCommerce growth prospects in 2021.
1. iOS 14.5 - The Return of the Cookie Apocalypse!
The crumble continues.
If you thought 2020 brought enough disruption to last the rest of the decade, then 2021 looks set to further alter the eCommerce and marketing landscapes forever.
The big tech war on third-party cookies is nothing new:
- Firefox and Safari began restricting their use across mobile and desktop browsers back in 2019, and Chrome will have followed suit by 2023.
- Apple’s launch of iOS 14.5 in April this year drew a significant line in the sand - one which advertisers and eCommerce companies looking to scale will have to rapidly accommodate.
Put simply, iOS 14.5 places in-app tracking directly in its sights and pulls the trigger.
The changes focus around Apple’s IDFA (“Identifier for Advertisers”), a persistent ID allocated to mobile devices running an Apple OS. It’s used by app developers, advertisers and mobile measurement providers (MMPs) to track users, target them with personalised ads, run attribution and measure ad performance.
All App developers must now give users the option to explicitly opt out of IDFA tracking for advertising purposes, via Apple’s App Tracking Transparency (ATT) framework.
And even for those users who do choose to opt in to cookies, Apple is strictly limiting the events that can be tracked - as well as introducing data aggregation and time delays. Whereas advertisers previously had access to the IDFAs of most mobile users, the number is expected to drop considerably as more and more people choose not to permit tracking.
For eCommerce companies running ad campaigns, this means:
- Less accurate reporting data
- Diminishing ad personalisation capabilities over time
- Less user data overall - so reduced targeting and optimisation of your online offering
Previously you could allocate a unique identifier and tracking pixel to every visitor to your web store, or to anyone who clicked on an ad while browsing.
iOS 14.5 breaks the link between user action and intent.
Marketers will still have access to information on how many times an ad has been viewed, and what actions were taken, but connecting the two data points is now much harder.
And it gets worse.
Web analytics metrics like “Returning Visitors” will become increasingly unreliable, with restrictions on the ability to track users between visits and attribution windows limited to 7-day lookback periods.
Opinion is divided about Apple’s motivation here. For some this feels like a war on targeted advertising - waged by a company looking to further dominate the market.
That’s certainly Facebook’s line on the issue, with the company predicting a widespread negative impact primarily for smaller businesses.
Facebook claims the changes signal Apple’s intent to funnel its commercial users into more in-app payments and subscription arrangements - with all the resulting commission for Apple that entails.
The truth is likely more nuanced.
For one, consumers are increasingly citing data privacy concerns and irrelevant personalisation of targeted ads as key negative factors impacting their online experience. Apple needs to protect its users’ privacy and is staking out its claim to being the go-to privacy protector among the big tech companies - including taking out billboard ads in Toronto:
A 2019 Harris Poll survey spells out the difficult position marketers find themselves in:
“.. [M]any respondents indicated (54 per cent) a willingness to share personal information with companies on the condition it will be used to create a truly personalised experience.. The trade-off is that in exchange for sharing personal information, consumers appear to expect transparency, with 74 percent saying it’s very important or absolutely essential brands tell them what information is being collected”.
Nail these now
Here are the main, easy-to-achieve adjustments that eCommerce brands should already be making in the face of iOS 14.5:
- Carry out a full review of current IDFA use
- Make sure your Domain is fully verified
- Identify and prioritise the conversion events you want to track
- Recalibrate performance KPIs based on the new 7-day window
- Get creative with your lead generation strategy to achieve first-party data ownership
- Model your Facebook spend data against conversion in revenue data from online commerce across the previous year. This will help truly understand the impact of the ATT prompt.
- Set up server-side tracking via CAPI
Many companies will see this as an opportunity to pivot towards Google Analytics 4 (Google’s new platform built on the App + Web property released last year) as the single source of truth since Facebook data now can’t be trusted. Here's what GA4 has to offer:
- A new data modelling feature, which uses machine learning to fill in the gaps in user behaviour data caused by third-party cookie opt outs.
- Better cross-device tracking compared to GA-U (GA-3), but it's more complex to install on your site.
Striking the right balance between a flawless CX and user privacy will also be a key battleground for eCommerce companies looking to scale in 2021.
Achieving that balance has been made a lot harder thanks to iOS 14.5.
Because of all this...
- Content will be key!
- Nailing flawless, eye-catching creative will give you the upper hand in the fight to get eyes on your product pages and items in the shopping cart.
- Direct engagement will be very important, and first-party data is going to play a huge part in giving eCommerce companies the ability to target their customers with valid offers and accurate personalisation.
But with behavioural targeting made harder, contextual targeting (the practice of displaying ads based on a site’s content: think protein drink campaigns on a gym website, or ads for ring lights adjacent to a guide on how to become an influencer) will become more important as eCommerce companies look to optimise their ad reach without the help of third-party cookies.
You should also expect a move away from in-house marketing and analytic functions.
Companies will outsource to agencies better placed to apply their expertise to a complicated and fluid situation.
And lastly, there’s an upside for the consumer: developers and companies now find themselves under real pressure to:
- Create apps that add tangible value to the user experience.
- Put customers at ease with sharing their personal data with brands.
2. Covid the Catalyst
The seismic impact of the Covid-19 pandemic on global eCommerce is self-evident.
Consumer habits and expectations have been changed forever by the challenges of the past 16 months.
But as vaccine roll-outs gain pace, and customers and businesses alike turn their minds to what a post-Covid world looks like, it’s crucial that eCommerce companies looking to scale continue to consolidate the gains of this period and adapt to the emerging trends brought about by Covid-19.
Age is just a number (in your customer database)
In the UK, the pandemic has accelerated the normalisation of online shopping across generations. Older demographics who were typically wary of shopping online before have now got used to it organically. According to a 2021 report by Retail Economics and NatWest:
- Nearly half (46%) of UK consumers bought a product online that they’d previously only ever purchased in store.
- 32% anticipated continuing their online shopping habits in the future - increasing to 40% among 44-54 year-olds.
Some studies have also shown a clear link between a household’s expectations that they’ll continue to use eCommerce sites, and the amount of money they’re willing to spend on purchases.
Wealthier (and therefore typically older) households are much more likely to stick with their newly-acquired online shopping habits.
This will have direct implications for customer acquisition and retention strategies as eCommerce companies look to achieve manageable growth into 2022 and beyond.
Innovate to accumulate
Scaling a business has always relied on building upwards from strong foundations, but achieving lasting growth in a sector as competitive as online retail requires one thing above all else: innovation.
As the parameters of normal life were being re-drawn throughout 2020, many of the world’s best-known brands were forced to sell direct-to-consumer for the first time.
Uncertainties around customer behaviour, as well as the UK’s highly restrictive lockdown measures, led to retailers finding genuinely innovative solutions to unprecedented problems.
- Expect to see a continuation of the growth in popularity of Augmented Reality (AR). ASOS started using the technology to offer its customers a virtual clothes fitting service; while AO, Currys PC World and Pull & Bear have all introduced virtual spaces that allow customers to visualise and interact with products.
- Creating unique eCommerce experiences will increasingly be seen as a tool for improving the customer journey through the sales funnel. Think Simply Chocolate’s interactive page flow that asks the user to tear off a chocolate bar wrapper to scroll down the page.
- As the UK’s consumers look to permanently retain the conveniences of buying online post-Covid, even introducing more basic structural solutions like click-and-collect, free delivery and contactless payment options will help secure your customer base and drive acquisition.
With consumer and economic patterns continuing to change and develop over time (and remember, given the severe disparities in global vaccine distribution and accessibility we may only be halfway through the Covid-19 pandemic) one thing is certain: eCommerce innovators will be the big winners.
The move to mobile
Mobile eCommerce was already experiencing extraordinary growth in the four years to 2020, with global sales tripling from just under $1 trillion in 2016 to almost $3 trillion in 2020.
And the UK saw unprecedented levels of eCommerce via mobile during the pandemic: over £2 billion was spent in 2020 alone - the highest in Europe.
Ecommerce companies looking to scale their business will need to adapt to this new model and rapidly optimise their omnichannel strategy.
Centralising your selling channels not only creates a frictionless customer experience, but also allows you to invest in future-proof ways of selling across multiple platforms.
Mobile phones are increasingly the window through which many of us see the world.
Retailers who can capitalise on this fundamental change in human behaviour - whether that’s with dedicated shopping apps; creating great social media stories formats to drive sales; embracing express checkouts and Apple Pay/Google Pay; or by unifying their online offering across devices and platforms - will be best placed to achieve scalable growth in the post-Covid eCommerce landscape.
3. It’s The Economy, Stupid
Let’s face it: trying to scale your business during a mid-pandemic economic downturn is never going to be at the top of anyone’s bucket list.
Add to that the ongoing uncertainty currently defining the UK’s post-Brexit relationship with Europe, and the picture initially appears grim. Your ability to expand capacity, hire new staff, develop new product ranges, optimise the order fulfilment process or reinvest profits back into the business are all dependent on current market conditions.
But as the UK emerges out of lockdown and the vaccination programme progresses, there are glimmers of hope on the economic horizon for eCommerce companies trying to scale.
If your company relies heavily on goods imported from the EU, or if much of your business is directed towards selling in Europe, you’ll need to adapt your growth strategy to offset the ongoing impact of Brexit.
Efficiency and compliance is key, and there’s little room for error in a new and uncertain marketplace.
These are just some of the ways that Brexit has already impacted eCommerce businesses:
- Increased costs
- A more complicated order fulfilment process that affects margins
- Potential impact on your ability to scale
- The need to adapt to two different sets of shipping regulations
New regulations agreed in the UK’s trade deal continue to have wide-ranging consequences for UK companies trying to do business with Europe.
The value of UK goods exported to the EU fell by 40% between December 2020 and January 2021 - the lowest on comparable record since January 1997 - and the overall value of the UK’s goods exports fell by 18% in the same period.
Supply chains have been disrupted, consumers are facing both longer shipping times and the introduction of custom duties on products above a certain value - as well as additional VAT charges and handling fees.
Workforces have also been disrupted, and eCommerce companies with warehousing infrastructure could easily face staffing problems.
A BBC study recently found that 19% of EU migrants in the UK work in warehousing, and with the end of the freedom of movement policy, companies will be forced to confront the possibility of fewer available employees.
An additional consideration will be the outcome of the ongoing discussions to establish the European Union’s new ePrivacy Regulation.
In tandem with the existing GDPR laws, the ePrivacy Regulation will enshrine a comprehensive set of rules for electronic communications and end-user privacy protections. It covers personal data, metadata and confidentiality requirements, and UK businesses trading in Europe will naturally have to keep a close eye on developments, and in time make adjustments to their own data policies.
What this all means for eCommerce in the UK:
- New VAT thresholds based on the value of goods
- Additional paperwork and customs checks at borders
- New import restrictions on certain products
- Potential disruption to supply chains, delivery times and shipping
- European domain names potentially no longer available
- The end of the Ecommerce Directive & new rules for operation within EEA countries
- Raised website costs
- Increased business costs overall
- Many businesses will need to register for an EORI number
Scaling your business relies on a complete understanding of the post-Brexit landscape, and on your ability to adapt your approach accordingly.
There’s no value in developing a new marketing strategy that will drive more sales than your (pre-Brexit) infrastructure can handle.
Likewise, very few companies will achieve scalable growth without building efficiency, longevity and flexibility into their processes. Brexit has certainly made that task more difficult, but eCommerce companies who maximise their omnichannel, cross-border capabilities and move quickly to adapt to the changes are best placed to achieve scalable growth.
Unsurprisingly we return (briefly) to the biggest current global issue: the pandemic. Lockdown restrictions and global uncertainty had a dampening effect on the UK economy throughout 2020, with headline GDP declining 9.9% in 2020. The final economic impact could eventually be more severe than the global financial crisis of 2008. According to the ONS:
“The total volume of retail sales in Great Britain fell by 1.9% in 2020 compared with 2019, the largest fall since records began. The impact has been particularly severe for non-essential retail.”
But online commerce proved the saving grace of the retail sector overall, enjoying rapid growth from the start of the pandemic. Online sales were 60% higher in May 2020 compared with February, helping the sector as a whole to achieve total sales volume exceeding pre-pandemic levels since July 2020.
Statista predicts that the UK eCommerce market will reach US$103,916m in 2021, with the following projections for certain industry verticals:
Revenue in the UK Apparel segment is projected to reach US$24,005m in 2021.
Revenue is expected to show an annual growth rate of 3.52%, with a projected market volume of US$27,565m by 2025.
28% of total market revenue will be generated through online sales by 2023.
Revenue is projected to reach US$6,233m in 2021.
The average revenue per user (ARPU) is expected to amount to US$176.94.
39% of total market revenue will be generated through online sales by 2023.
Revenue is projected to reach US$13,023m in 2021.
The number of users is expected to amount to 40.9m users by 2025.
43% of total market revenue will be generated through online sales by 2023.
Food & Beverages
Revenue in the Food & Beverages segment is projected to reach US$9,268m in 2021.
Revenue is expected to show an annual growth rate (CAGR 2021-2025) of 4.24%, resulting in a projected market volume of US$10,941m by 2025.
7% of total market revenue will be generated through online sales by 2023.
Homeware & Furniture
Revenue is projected to reach US$11,286m in 2021.
The number of users is expected to amount to 24.1m users by 2025.
13% of total market revenue will be generated through online sales by 2023.
The future health of the overall retail sector will rely partly on the success of the UK’s vaccination programme and the need for further lockdowns, which historically caused retail sales volumes to contract. For many eCommerce companies, however, the economic impact of the pandemic has largely been one of increased opportunity and trend-defying sales, and 2021 is the perfect year to start planning for scalable growth.
4. You Can’t Sell Flip-Flops in December: Seasonality and Scaling
(Well, actually you can. If you’re in Australia. So, seasonality Rule #1: know your market).
For UK eCommerce companies, having a deep understanding of the impact of seasonal trends on your business is vital.
Especially in planning scalable growth strategies.
To achieve a steady ROI, businesses need to accurately predict the timing and volume of customer demand throughout the year.
Getting ahead of the curve by mapping out KPIs against your business’s historical and projected performance levels will let you ride the highs and lows of seasonality effectively.
These performance metrics may include:
- Traffic source
- Conversion rate
- Average order value
- Number of repeat customers
- Cart abandonment rate
- Customer acquisition cost
- New subscribers
Think micro (and macro)
‘Seasonality’ doesn't just mean the impact of the four seasons, or even annual holiday dates like Halloween, Christmas or Valentine’s Day.
Companies and advertisers need to understand and measure the recurring activities of their customers - and prospective customers - on a micro level.
For instance, Google found that there are 34% more shopping searches on Christmas Day than on Black Friday. And according to Statista, 63% of consumers began their search for products on Amazon in 2020.
The best marketing campaigns will accommodate the smallest predictable variations in customers behaviour - and the impact of external factors - and use them to their advantage.
Use the data
Retailers need to dig deep into current and historical data to fully understand where to position their marketing strategies.
Google data is a good start, but companies have access to huge amounts of customer information that can prove the difference between steady sales growth and high rates of shopping cart abandonment.
This data should all be fed back into your analytics on the following:
- conversion rate optimisation
Buying and traffic patterns will fluctuate throughout the day, and what is a strong sales day for one online store will be a slow day another.
Just as the pandemic has changed our daily patterns of behaviour, so too our patterns of consumption have changed.
Online product searches have shifted earlier in the day with the advent of mass home working, and building that type of knowledge into your planning is key to reaching the largest audience possible.
You can also use seemingly negative data points to your advantage.
Identifying recurring periods of stagnation (perhaps sales of your high-end shaving products really nosedive around Movember, for instance) allows you to plan ahead and accommodate the natural ebbs and flows of the retail cycle.
You can manage stock better, or change the tone and approach of your marketing efforts accordingly.
Preparation is key to navigating the choppy waters of seasonality, and clever use of the data will give you the edge in that process.
Peak seasons are naturally associated with higher demand, and therefore increased levels of competition among advertisers and higher baseline ad costs.
Knowing where your money is best spent gives you the maximum return on your marketing investment.
The cost of running PPC and social ads varies wildly according to the bid volume and activity volume.
A/B testing across recurring seasonal events allows you to determine which combination of keywords is best suited to your specific requirements.
Again, building up the data insights and knowledge base is key.
Finally... Exploit off-seasons - and lower site traffic - by:
- taking advantage of cheaper advertising costs
- optimising SEO across your online presence
- making necessary improvements in customer journey optimisation
The Take Home
Preparation is key.
Seasonality is not so much a problem to be solved, rather, it’s an opportunity for eCommerce companies to completely understand their customer base.
No business can expect to scale successfully without this fundamental knowledge, and each year you are gifted a brand new set of data as each significant point in the calendar comes and goes.
Navigating seasonality means knowing exactly what niche your company sits in, and learning when to expect periods of high and low demand.
It is a nuanced, intuitive process. It goes beyond New Year Sales offers or Black Friday email campaigns, geo-location targeting, audience segmentation or personalisation.
It goes to the heart of your business: can you connect with your audience?
In a heavily saturated eCommerce market, retailers are competing for an ever-narrowing bandwidth of customer attention - regardless of seasonality.
Being able to grow, adapt and evolve your business means using your data (and your intuition) wisely to develop the perfect marketing strategy.
Plan, plan, plan!
In the key 5-month sales period from Halloween to Valentine’s Day, expect ad costs to go up due to bidding competition for Black Friday, Cyber Monday and Christmas sales.
- Create holiday gift guides, free gifts, discounts and other incentives (like taking advantage of Free Shipping Day).
- Reward loyal customers and subscribers with unique offers, and re-engage former customers by targeting them with undeniably great discounts.
- Prepare at least a quarter in advance for the post-Christmas sales period. While not reaching the same dizzy heights of potential revenue as Black Friday, this period gives retailers the chance to bring in further orders and shift winter stock.
- Maximise your customer service offering: automate support using chatbots, introduce targeted live chat at different stages of the funnel and give customer support agents the tools they need to provide a rapid, unified and on-brand response to enquiries.
With Valentine’s Day still one of the major retailing events of the year, this season offers you the chance to implement campaigns using the infrastructure still in place from the busy winter sales period.
Willingness to spend greater amounts of money increases when it comes to Valentine’s Day gifts.
Valentine’s Day’s average order value (AOV) eclipses even that of Black Friday: between 2009 and 2019 the average amount consumers planned to spend increased by $60.
Cross-sell related products, and prepare offers that appeal to the inevitable last-minute shopper.
- Experiment with audience segmentation and run A/B tests on CTAs; identify the changes that increase clicks and conversions.
- Make the most of the increased traffic to test and optimise your messaging, content and product offering.
Traditionally a quieter period for retailers, the summer and autumn are still full of key seasonal events around which sellers can base campaigns and target new customers.
Sporting events tend to take place throughout this period, including Wimbledon, football and rugby World Championships, the Olympics, Tour de France and more.
Mass events like these are the perfect target for brands looking to build an emotional connection with their customers and create a sense of community.
Now is also the time to learn the lessons of the peak sales period.
- Use your analytics and reporting tools to dissect the successes and possible failures of the winter/spring.
- Gather data on best-performing campaigns, channels and promotions to prepare a new set of KPIs. Segment your audience by behaviour and run retargeting campaigns.
- Re-optimize your SEO strategy to improve conversion rate and search ranking, using Google Trends to identify the most popular search terms.
- Review your product offering ahead of time to ensure you can reorder popular items and identify under-performing products. Make sure you have sufficient stock to meet your new sales projections for the coming peak season.
- Prepare new budgets to plan for the updated set of promotions, offers and discounts.
- Run stress tests on your infrastructure. This includes: load testing your website to prepare for the next period of increased traffic; auditing your online store for faceted navigation SEO issues; evaluating customer support team performance and making improvements to databases, support software and any live chat or chat bot functionality that may be running on the site.
5. Performance Marketing 🚀 📈
Perhaps we’re biased, but a perfectly optimised performance marketing strategy is the beating heart of every great growth plan.
It allows you to scale..
- market share,
- audience engagement,
- ad reach and conversion rates
.. with a laser-focused eye on efficient ad spend and the bottom line.
Risk is inherently lower and having trackable, measurable performance metrics means you can see which parts of the sales funnel are giving you the best results, and which channels could use additional fine-tuning.
Customer journey mapping is a crucial part of the process.
It also sets you up for success in your performance marketing strategy.
From knowing how your customers first hear about your brand, to their last click at the Checkout, mapping allows you to optimise the numerous touch points and conversions that each visitor to your online store engages with along the way.
Understanding the journey your customers go on allows you to manage customer expectations and create personalised experiences tailored to individual preferences.
Performance marketing gives you the confidence to create a realistic marketing budget based on tangible results achieved.
But with high competition and even higher levels of volatility thanks to the pandemic, entrepreneurs and marketers alike are facing real challenges as they try to cut through the noise and remain competitive.
As always, a combination of tried and tested approaches and cutting-edge innovation will likely give eCommerce companies the edge they need to achieve profitable scaling in 2021 and beyond - so here are three of the key trends we think you should know about.
Third-Party Cookies (see Section 1 ⬆️)
This looks set to remain the defining issue of 2021 and beyond, as the industry innovates and adapts to increasingly restrictive online privacy measures.
Despite Google’s surprise recent announcement that it’s delaying the discontinuation of third-party cookies until 2023, the end result is likely still to be the same.
Old is the new New, so look out for the resurgence of first-party, privacy friendly datasets and keyword-based contextual advertising.
Artificial Intelligence (AI)
Segmentation is the key to offering your customers a unique, personalised online experience, and AI has the capability to crunch huge amounts of data on each of your users.
2021 could be the year that AI and machine learning goes mainstream, as eCommerce companies seek to reach ambitious revenue goals on the back of unprecedented growth last year.
Progressive Web Apps (PWAs)
A relatively new trend that started in 2018, but which is now gaining real traction across multiple industries.
In 2021 the ability to present a reliable and unified cross-platform browsing experience looks set to become a lucrative option for smaller businesses.
With performance central to your ability to scale, PWAs could be a useful tool for boosting profitability and user engagement in a highly competitive market.
UK eCommerce companies seeking to scale and achieve profitable growth in 2021 are currently faced with a unique, once-in-a-generation set of challenges.
In an already saturated and competitive marketplace, the double impact of the Covid-19 pandemic and Brexit have changed the parameters of UK online retail forever.
The race is on to adapt, innovate and thrive in the new environment.
Companies who are able to create meaningful connections with their customer base through..
- stunning creative content,
- better focused ad personalisation,
- seamless commerce, more granular audience segmentation,
- and more efficient marketing strategies,
..will add value to their offering and find themselves better placed to scale in a turbulent market.
Performance marketing is the definitive marketing approach for companies looking to achieve scalable and profitable growth with lower risk, lower cost and a significantly higher impact on ROI than traditional marketing methods.
Want to scale your eCommerce revenue profitably? Learn more about Leaf's end-to-end performance marketing services here.
We leverage your deep product knowledge and combine it with our technology and expertise in optimising customer journeys, to drive mass brand exposure, engagement and profitable sales growth.