E-commerce Trends in 2021: Growth, Challenges, and Innovations

By Adam Freeman, Managing Partner at MediaVision, a digital performance marketing agency

E-commerce was already growing before Covid-19 came along, but stay at home orders helped usher in enormous growth in online shopping. The result saw a host of interesting trends and innovations emerge as consumers and businesses recalibrated their behaviours.

Indeed, by May 2020, as manufacturers were learning to go to consumers directly, bricks and mortar retailers had entered survival mode, and start-ups eyed an opportunity, online sales reached a record high share of all retail spending of around 34%, climbing from 20% in February of that year.

However, although the figures today remain significantly above the pre-pandemic levels, now that the UK has reopened there is a slowdown in e-commerce as shoppers return to the High Street – with the ‘new normal’ for most consumers a mix between the physical and online.

We see plenty of evidence for this, and through our own digital demand tracker, which allows us to look at online search behaviour at a product and brand level, we can also see that High Street businesses have recently become much more interesting to consumers – particularly for their workwear and Christmas party outfits.

Meanwhile, we can see that traffic levels for e-commerce businesses are consistently slowing, and with it a fall in conversion rates – the percentage of online users who perform a particular action, such as make a purchase or sign-up to a subscription.

At the same time, advertising costs are on the rise as a consequence of the market having been flooded with competition throughout the course of the pandemic, with the fight for online audiences going to the highest advertising bidders.

What all this translates into is a market in which the main players – Google and Facebook – are less effective, and the growth e-commerce businesses have enjoyed actually being hampered by society’s return to some level of pre-pandemic normality.

Channel trends

The shift to online during the pandemic has also seen advertising spend move between channels, often at the expense of more traditional media.

For example, e-commerce research from Kantar, the global media measurement business, charts a significant increase in spend towards ‘performance’ media channels (in which an advertiser only pays when there is a measurable result, such as click-through to their website). The study shows that over the last year, online video grew +71%, social media ads +65%, and influencer content +64%.

Another notable trend this year is growth in social-commerce, with platforms such as TikTok and Instagram embracing ‘shoppable’ capabilities.

Although fairly nascent in western markets, social-commerce is set for big things. Indeed, in China, where it is more developed, the market is worth an estimated $352bn.

Supply chain woes could disrupt e-commerce growth

Ignoring Brexit and Covid-19 for now, the steep rise in e-commerce – the world over – was always going to have an impact on supply chains.

Order fulfilment, logistics, and shipping were already a complex and expensive market, and a study from delivery data company Convey last year noted that more than half of retailers found it “significantly” challenging.

Yet further complexity is on the cards, and as businesses continue to embrace the e-commerce model, infrastructure will feel the strain. This will be compounded by challenges around sustainability, green legislation, warehouse capacity, increased traffic, and last-mile logistics.

Not every business, after all, can be Amazon – at least not this rapidly.

All trends point towards a hybrid model

Taking all of these trends together, we believe medium- and large-sized e-commerce businesses will need to shift strategies if they are to break into new growth cycles – and that means looking beyond online.

We know that consumers, in the main, enjoy a mix between physical and online retail. The High Street gives you that sociable experience, while online gives you more choice and is a better place to research and compare products and prices.

There is also, and always will be, an ease to online shopping that physical retail will never replicate. For these reasons, sustained and long-term growth – for all but the rarest of businesses – can only be achieved by taking a hybrid approach that utilises both models.

However, the High Street today remains diminished from yesteryear, and instead of requiring 150 stores to gain a national footprint, it might make more sense to acquire a little as 30 while deploying pop-ups, or making deals – like Pret has recently achieved with Tesco – to find alternative high footfall environments.

This means the balance between the physical and online can be cost-effectively matched to consumer demand and behaviours, but still offer a business the best chance at sustained growth.

Calibrating a business for this balance, especially for legacy retail brands, is hardly ever a pain-free experience, but the effort can pay off.

Currys, for example, is now in a strong position because it reimagined its store experience to focus on brand visibility, product testing, discovery, and the highly-valued expertise of its people assets.

Meanwhile, its e-commerce function helps start and complete the customer journey, while gaining peripheral benefits such as quality CRM (Customer Relationship Management) data.

Larger pure-play e-commerce businesses will need to look at similar models to drive long-term and sustained growth, but it will require a shift in mindset.

E-commerce businesses cannot take growth for granted

Despite the recent slow-down, many e-commerce businesses will happily be turning over healthy profits and will have considerable growth in front of them.

However, the largest of these enterprises, if they aren’t already, will start to struggle with the growth rate they need – and the fact of the matter is, there comes a point when a business must have a USP, and it must be able to explain it, both online and in the real-world.

To do so marks the beginning of a new marketing-led growth strategy – but it costs time and money to get right, and may require funds to be diverted throughout a growth investment period that could last several years.

Consequently, many pure-play e-commerce businesses used to driving performance media channels to sell as much stock as possible will back away and continue to operate as they were before. This is a strategic mistake.

Younger businesses eyeing longer-term growth need to start strategising now, collecting the available evidence about where new and expanded audiences will be found in future, and deciding which media channels are worth investing in to reach them.

What they will uncover is a larger and more nuanced roadmap that encompasses targeted performance channels as a bedrock for acquiring natural and organic visibility online before taking on more traditional ‘brand building’ strategies – TV, radio, print and outdoor advertising – to reach much broader audiences.

The start of this roadmap should begin with consistent investment in SEO (Search Engine Optimisation) to organically build momentum with digital PR links and content that will be rewarded by Google’s search algorithm over the longer term.

Once other performance channels – social media, Facebook ads, search et al – have been fully exploited, further growth will require competing for much larger and generic audiences against well-known brands.

When costs inevitably rise during this phase, having a solid SEO bedrock will pay its dividends and will position a business for the next stage, in which performance marketing should be deployed alongside paid brand-building channels.

This stage really does require a shift in mindset and the will to approach marketing in a more agnostic and long-term manner, and to budget accordingly.

Yet this is what the largest and most successful brands are doing, and is the real growth trend for e-commerce. Utilising short-term performance marketing and e-commerce strategies alongside longer-term brand building, people assets and a physical presence. This approach ensures much broader visibility and, ultimately, the best return on investment.

It is a true hybrid approach between performance and brand, online and the real world, and in a post-lockdown consumer market, the right choice for an ambitious business and the most compelling strategy to unlock new growth.