The future of e-commerce is set to be defined by a finely tuned hybrid model, argues Adam Freeman, Managing Partner at digital performance marketing agency MediaVision, as he looks at the latest retail trends…
The pandemic witnessed enormous growth in online shopping as manufacturers learned to go to consumers directly, bricks and mortar retailers entered survival mode, and start-ups capitalised on stay-at-home orders.
However, 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 now a mix between the physical and online.
There is lots of evidence for this. Using a digital demand tracker that can search behaviour at a product and brand level it’s possible to see that high street businesses have recently become much more interesting to consumers – particularly for their workwear and Christmas party outfits.
Meanwhile, traffic levels for e-commerce businesses are consistently slowing, and alongside that is a fall in conversion rates.
At the same time, CPAs [Costs per action] are on the rise as a consequence of the market having been flooded with competition. It is therefore now more expensive for businesses to find new customers, particularly if they keep looking in the same places.
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.
This should be a wake-up call for any ambitious enterprise.
The benefits of a hybrid model
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 Prêt 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 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.
Don't 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 will start to struggle, if they aren’t already, 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 physical 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 channels to sell as much stock as possible will back away and continue to operate as they were before. This is a strategic mistake.
Establishing a nuanced roadmap
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 channels are worth investing in to reach them. What they will uncover is a larger and more nuanced roadmap that encompasses performance channels as a bedrock for acquiring natural and organic visibility before taking on more traditional brand building strategies.
The start of this roadmap should begin with consistent investment in SEO to organically build momentum, with digital PR links and content that will be rewarded by Google 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 CPAs 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. They’re 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.
By Adam Freeman