Key Challenges ahead of E-commerce in 2022
Air conditioners, Televisions, Washing Machines, and whatnot! Buying stuff today is only a few clicks away. Not long ago, we were sceptical of e-commerce, but today, the perception has changed. Shopping online has become second nature to us. All these developments tell us how far e-commerce has come.
In the past decade, E-commerce has enjoyed a healthy growth of 21% each year. Last year alone, the industry enjoyed a US $611 billion increase in worldwide sales and in 2025, the sales are predicted to touch the US $10 trillion mark. Looking at such astounding numbers, one might lose sight of the challenges the industry might face. Hence, I want to highlight those.
With today’s tools and technology, any business can quickly set up its online store. Therefore, we see an exponential increase in the number of e-stores of direct-to-consumer companies that are typically digitally native brands. This increase in competition is the root cause of 2 key challenges: Differentiation and Advertising costs.
Differentiate from Competition
E-commerce enables customers to explore and compare products from various brands from the comfort of their homes. Therefore, one might think that brands need to compete on product prices only. However, through various interactions and experiences, I have observed that today’s generation prefers brands that share their values. In India, you must have observed that people choose products based on factors such as country of origin, brand values, and more. For example, you might prefer a brand that manufactures products in India even though the product is a bit more expensive than others. Therefore, brands need to showcase their core values and follow them diligently. In time, these measures will help them build strong communities with shared values and differentiate from the competition.
Increasing Advertising Costs
Direct-to-consumer (DTC) brands are typically digitally native brands and so is their advertising a.k.a. Digital Advertising. Digital advertising refers to marketing through online channels, such as websites, streaming content, and more. To market their products, most companies rely on Google Ads, Facebook Ads and others where they bid to display advertisements. Bidding, coupled with increased competition, results in higher advertisement costs. Furthermore, the targeting of 3rd party cookies by Apple and the strengthening of privacy laws have reduced the return on advertisements. Therefore, brands should focus on reducing advertisement costs. Furthermore, when a customer searches for a product, they already have a brand in mind. Therefore, companies should invest in brand awareness to reap long term gains.
This is my first article on e-commerce and I would like to know your thoughts on the Key challenges ahead of E-commerce in 2022. Please share them through the responses section. If you liked this article, please give it a clap (You can clap more than once 😊). Apologies in advance for any mistakes I might have made.