By the end of 2022, 20.4% of global retail sales are forecast to be in the eCommerce space, a more than 100% growth compared to the 10% of the market held by eCommerce in 2017. The acceleration of this digital transformation during the pandemic has shifted the eCommerce landscape dramatically over the past two years, creating a much more crowded market than what existed at the start of 2020.
For retailers and those in eCommerce recruiting, staying current on industry trends is crucial to keep their competitive edge. With that in mind, here are some of the major moves happening in eCommerce today that are likely to influence its development moving forward.
Online Advertising Costs Are Rising
The CPM of core Facebook ads increased by 47% between the third quarter of 2020 and 2021, while CPMs of fellow Meta company Instagram rose by 32%. Google Ads, meanwhile, saw a 15-25% cost increase in 2021, and is predicted to rise an additional 20-40% in 2022.
For online retailers, maximizing the ROI of ad spending, despite these rising costs, means optimizing their advertising strategy. This means putting in the time to craft effective ad copy and introduce new ads more regularly than in the past, as well as targeting ad placement and keywords to reach the customers most likely to buy. Others are expanding their ad presence to less saturated social media platforms like TikTok and Snapchat.
More Companies Exploring Alternative Financing
In the not-too-distant past, a business loan from a bank or other financial institution was the default financing option for businesses when they needed more capital. This presents an issue for eCommerce-only shops that lack physical assets to put up as collateral, and the lengthy loan application process can be a problem in today’s fast-paced landscape.
Today, eCommerce companies are turning to alternative financing sources when they need a boost of capital. Revenue-Based Financing is a new favorite, growing at an estimated CAGR of 61.8%, and allows companies to get faster access to capital and more repayment flexibility than traditional loans. Use of inventory financing also increased in 2021, especially among online-only retailers, a trend that is likely to continue through 2022.
Augmented Reality Is Reshaping the Online Shopping Experience
According to consumer polls, 35% of consumers would purchase more products online if they had the option to virtually try products, and augmented reality gives eCommerce shoppers this option. Apparel retailers were among the first to jump on this trend, such as glasses retailer Warby Parker’s virtual try-on feature or Saks Fifth Ave’s virtual clothing configurator, but it’s not limited to that sector. From makeup brands like Sephora to home furnishings sellers like IKEA and Wayfair, companies across retail sectors are taking advantage of this new way to meet customer needs.
The ABI Augmented Reality in Retail report predicts more than 120,000 stores will utilize augmented reality by the end of 2022. While larger companies were the first to develop and leverage the technology, smaller businesses have as much to gain by integrating this technology into their eCommerce strategy.
Offering More Ways to Pay Increases Conversions
March 2020 was the first time card-not-present transactions surpassed card-present transactions in volume, and that balance hasn’t reverted to pre-pandemic patterns. In response, 53% of merchants plan to expand their payment method options in 2022, adding digital wallets, QR code payments, pay-by-link, and digital invoicing all gaining popularity.
Along with adding more ways to pay using traditional currency, an increasing number of eCommerce retailers are embracing cryptocurrency as a payment option. In a survey by Visa, a quarter of small businesses across 9 countries said they plan to accept digital currencies in 2022, while 13% of consumers surveyed expect retail stores to accept crypto payments. This trend is especially strong outside of North America, with the highest digital currency adoption rates among small businesses in Hong Kong, Singapore, Brazil, and the U.A.E.
The Bottom Line on eCommerce in 2022
Today’s consumers value convenience and flexibility, and the companies that can meet these needs will be best positioned to attract customers in an increasingly crowded eCommerce landscape. Taking advantage of alternate financing options can give smaller businesses the capital they need to implement new payment options and enhance the shopping experience. For others, expanding their team, or introducing upskilling for current team members, will be necessary to gain the technological proficiency to keep up in this changing market.