At Plumb, we focus exclusively on a few industries. This focus allows us to be true experts in both the accounting needs of the industries we support, as well as the industries themselves. In our second installation of Plumb’s Industry Outlooks, we dive into the current and future state of Ecommerce. Our very own outsourced accounting expert, Justin Atneyel, gives you his take on the accounting implications of the trends noted below.
Ecommerce, the Post-Covid Landscape and Emerging Trends
As with so many other industries, e-commerce was dramatically – and potentially irrevocably – impacted by Covid. As quoted from The Shopify Plus Future of Commerce Report 2021:
“At the height of the COVID-19 pandemic, 10 years of e-commerce growth happened in just 90 days.”
This growth was fueled not only by those who were accustomed to shopping online but an entirely new universe of buyers who had not yet made online shopping part of their daily routine. According to Shopify, nearly 150 million new shoppers joined the world of digital shopping during the height of the Covid lockdowns. And these consumers aren’t going anywhere.
- As Millennials and Gen Z are responsible for more and more online purchases, they have certain expectations: ease of shopping, less expensive items, improved and personalized customer service, and exclusive offers.*
- More websites are improving their accessibility, which will allow even more people to shop online. People with disabilities have more than $490 billion in spending power. Those businesses that create fully accessible sites are projected to outperform their competitors by 50% in 2023.*
We’d be remiss if we didn’t also mention the significant developments in e-commerce software and tools to help bolster this momentous growth.
The addition of livestream shopping, shoppable video ads, augmented reality, and voice shopping have all contributed to the significant growth in e-commerce sales.* These tools – as well as whatever is next around the bend - will no doubt continue to fuel the expansion in online sales.
So as businesses large and small rush to sell their goods and services online, what’s an e-commerce business to do?
Competitive Differentiation in the E-Commerce Market
There are a few key trends worth noting that should provide some insight into how they can differentiate themselves and remain competitive and viable in this saturated market.
Omnichannel sales
- Selling through multiple channels is key to staying competitive in the overwhelmed e-commerce market.
- In fact, according to Sellbrite, selling on multiple online channels can have a dramatic impact on both sales and profit. As stated in their E-commerce Sellers report: “For all sellers, merchants using 3 or more channels on average had 143.54% higher revenue than merchants with 1-2 channels.” **
- In addition, wholesalers who typically relied on retailers to sell their products are looking for ways in which they can sell direct-to-consumer (DTC), and there’s no better way to do so than online. Case in point: DTC e-commerce sales in the US are expected to reach $151.2 billion by the end of 2022.
Customer Experience
- CX is becoming increasingly innovative, flexible, and creative. For example, Shopify is providing customers with AR, chatbots, and virtual shopping experiences.
- As noted above, the vast majority of e-commerce purchases will be made by the next generations utilizing these new tools. These buyers are used to anywhere, anytime access – to anything (and everything).
- Providing them with the customer experience they want – and expect – can go a long way towards solidifying their loyalty.
Fulfillment
- According to Shopify, consumers are looking for fast, free, and sustainable fulfillment from the brands to which they give their money.
- They are often looking for free returns as well. The brands who can provide this have a leg up with customers, but is it sustainable for their business? Only time will tell.
Personalization
- Providing a personal experience is another key element of differentiation and success in e-commerce. However, with online marketplaces like Amazon not sharing customer data with sellers, this can be a challenge.
- Online sellers who can lure their customers away from the eBays of the world and onto their own sites will not only be able to develop a long-term relationship with their customers, but they can gain a deeper understanding of who their customer is. Thus, being able to provide that personalized experience people are craving today.
Retention
- We all understand that it is significantly more cost-effective to keep the customers you have than to find new ones.
- The high cost of acquiring new customers, and the somewhat irritating customer experience of dodging digital ads and spam emails have caused those with an e-commerce business to refocus efforts on retention.
Justin’s Take
- We understand the accounting and KPIs involved across the expanse of online channels, and any e-commerce business must understand these as well.
- If you are considering an improvement to your CX, you should first research your options, the development, roll-out, maintenance, and customer support costs involved – and what you hope to achieve.
- When evaluating fulfillment strategies, please don’t lose sight of your profit margins to stay competitive. Do your due diligence on cost-effective ways you can outsource things like packaging and other fulfillment expenses. Also, make sure you understand the impact of not charging for shipping or returns on your bottom line.
- If considering a loyalty or rewards program, please first calculate the costs of creating and managing it on an ongoing basis. Then determine if the increase in sales will be enough to warrant these additional expenses. Once implemented, track changes in consumer behavior and calculate the cost/benefit analysis after data has been formed.
At Plumb, we are dedicated to providing exceptional outsourced accounting services tailored to meet the unique needs of your ecommerce business. With rigorous internal assessments and extensive in-house training in ecommerce bookkeeping, we bring a high level of expertise to the table. Our deep understanding of online business financial KPIs, accounting software, and accounting regulations allows us to offer unparalleled accounting services to help ecommerce business owners streamline their finances and free them up to focus on their core business objectives.
Sources:
*https://financesonline.com/ecommerce-software-trends/
** https://www.sellbrite.com/blog/ecommerce-sellers/
https://www.a2xaccounting.com/ecommerce-accounting-hub/accountants-guide-to-ecommerce-trends/