The Online Shopping Ecosystem

Online shopping is growing — just look at this infographic to see the steep trend line. The pandemic jumpstarted the rapid growth of e-commerce as those most reluctant to shop online, seniors, faced the most dire consequences from the virus and overcame their reluctance to save their lives. But, are you getting your fair share of this online shopping growth? E-commerce today extends beyond selling on your website to include 3rd party sites like Amazon and social sites such as Facebook. Are you able to evaluate these opportunities to determine whether they offer an additional revenue stream for your business? Do you understand the impact of online shopping sites on even in-store shopping? If you don’t understand the modern online shopping ecosystem surrounding this growth, then the likely answer is likely a resounding NO!

online shopping ecosystemThe extent of online shopping

Statista predicts worldwide online shopping revenue will reach 3,567 billion US dollars by the end of 2024, and that’s a lot of money to go around. Of course, despite huge growth in online spending over the last 10 years (nearly 9% based on Statista’s data), it never reached the potential predicted in the heady days of the 1990s before the dot-com bust in 1998. I remember attending a conference in about 1996-97, where researchers predicted the death of retail stores.

Of course, we now know that reports of retail death were drastically overblown. Today, online shopping accounts for a mere 7% of all consumer shopping. What explains the difference between those optimistic predictions of the 1990s and the reality of today? Failure to understand the complex online shopping ecosystem.

Online shopping ecosystem

What makes up the online shopping ecosystem?

Well, in the past, the online shopping ecosystem was pretty one-sided; it was your website shop. Today, the online shopping ecosystem is much broader and includes the following:

  • Third-party apps. Amazon now offers a wide range of online stores that exchange the broad reach of the platform for a small fee per sale. According to the platform, 60% of sales in 2022 were revenue for small businesses, who pay an average of 15% of the selling price to Amazon for managing their online store. The average revenue per small business was $230,000. Etsy and eBay are also common third-party platforms used by businesses beyond their website.
  • Leverage social media channels. Forecasts predict that social commerce sales will reach $2.9 trillion by 2026. Facebook Shop and Instagram Checkout offer a sales platform businesses can use instead of or supplement their own e-commerce platforms. Other platforms offering e-commerce are TikTok, Pinterest, YouTube, and Twitch, among others.

    social commerce
    Image courtesy of Shopify
  • Landing pages offered by companies can help you sell products without the expense and effort of maintaining your own website.

In addition to these alternatives to shopping on your dedicated e-commerce website, we know that digital marketing efforts like SEM (search engine marketing) impact sales from your physical store because most purchases now start online, as you can see below.
start search online

Challenges in the online shopping ecosystem

Despite the rapid growth of online shopping, it still faces challenges. Below are some of the major challenges and ways you can help overcome these challenges.

Hedonic shopping

One of the biggest reasons online shopping figures are paltry compared with shopping in retail stores is that it’s just not that much fun. Going shopping with your friends is a social event — shopping online is a solitary endeavor involving lots of confusion, overwhelming choices, and not very good tools for asking friends for feedback before making a purchase.

While online shopping is very convenient, it’s easy to get lost roaming from website to website looking for just the right product. Plus, how do you know you’ve got a good deal? Your search involves convoluted movement through a series of links and it may be impossible for you to retrace your steps in search of that perfect item you found 8 websites ago. And, sharing your journey with friends to get their opinion involves cutting and pasting links, then hoping someone responds to your emailed links.

My daughter is currently going through this as she plans her wedding. She’s forever sending links to this or that she found on a website or on a pinboard on Pinterest. The Pinterest ones are the most frustrating because it’s often hard to find an item for purchase once you find it on a pinboard.

We’ve had many fruitless conversations beginning with: “Did you get that email I sent?” In some cases, the email contained so many links, it went to the spam folder, in others, she’s already rejected half the links by the time we talk and I’ve wasted time visiting links for items she’s rejected. Not much fun. Not like going to the store, trying on clothes, then having lunch with the rest of the bridal party.

Current solutions to this problem don’t work very well, except for social commerce solutions.

Privacy

When shopping in a store, I’m pretty anonymous. Of course, I’m exposed to hundreds of advertising messages during my visit, but I decide when I’ve had enough and go home. With online shopping, advertisements follow me wherever I go — showing up as pop-ups after I leave, showing up when I search for something else, determining the ads I see on my social platforms, and even showing up in my email for months (or years) later. I don’t like that, especially when I’ve already made a purchase decision.

Unfortunately, internet marketers forget that visiting their site doesn’t give them unlimited permission to contact you later and consumers are a little shy about visiting sites knowing they’ll be hounded by the e-tailer later. Chrome (by Google) is solving this problem by eliminating 3rd party cookies this year. A brand can still advertise to you after your visit to their website (termed remarketing), but they can’t advertise just because you visited a competitor.

Security

For a long time, folks were afraid to give their credit card information online because they distrusted the e-tailer and feared identity theft or fraudulent charges on their cards. Previous assurances, such as BBBOnline, failed to provide the comfort many sought. Now, of course, PayPal and other 3rd party payment options alleviate much of this insecurity, which probably accounts for the sharp increase in online shopping shown in the infographic below.

Ease of use

Too many websites are challenging to navigate; leading consumers to abandon their online efforts in favor of visiting a store. Face it. The biggest advantage of online shopping is convenience and when that disappears, there’s not much to recommend online versus store shopping. Below, you can see why consumers abandon their shopping carts in droves.

online shopping trends
Image courtesy of Finances Online

Searchability and ranking are the two elements most critical for making websites easy to use. That means creating databases behind the website that support consumers’ search needs. For instance, I likely won’t care about the brand when looking for a wedding dress for my daughter’s wedding. I’m likely more interested in length, color, and price. Yet, most wedding sites only allow search based on items contained in the dress’s description — designer, price, and material. I’d also like to see dresses based on popularity and most sites don’t give me that option. One of Amazon’s early feats was creating a strong recommendation system showing visitors additional options based on things they’d already looked for. Of course, Amazon also has state-of-the-art search capabilities and 1-click shopping that makes their site super easy to use.

Give customers what they want where they want it

Increasingly, consumers are multi-channel shoppers — wanting products and information wherever they are. That means giving consumers the option to get information online and then complete their purchase in-store or the other way around. Or the ability to use your online platform in the store to search for other colors or sizes or even get pricing information without searching for a pricing tool in the store. It also means letting consumers return items wherever it’s most convenient — in-store or through return mail.

Instead, retailers focus attention on providing mobile solutions even when these solutions are relatively unsatisfying. For instance, I tried to buy an HP computer through my mobile only to find I really couldn’t do it. Sure, I could buy standard computers, but if I wanted to change the monitor or peripherals, I couldn’t do it on my mobile device. I had to start over from scratch on the company’s desktop version.

I’m not saying retailers should ignore mobile, I’m just saying there’s much more to multi-channel shopping than just which device the consumer wants to use.

For instance, providing mobile kiosks in the retail store allows me easy access to order items online once I’ve seen the physical product in the store. Also, giving me options such as drive-through stores to pick up items ordered online at the store location. Increasingly, success in online shopping relies on understanding multi-channel shopping. During the pandemic, companies shifted to delivery or pickup from the parking lot. These are great options but often are frustrating for the consumer. as they wait for an employee to bring out their products. I recently waited over 30 minutes for an employee to bring out my mobile order at Red Lobster.

Shipping issues

We all want our products faster, and companies are investing huge sums of money to deliver products to customers fast. Walmart and Amazon are even experimenting with drone delivery in some areas to get products to customers even faster. However, I recently ordered some clothing from Macy’s and the expected delivery date was nearly two weeks from the time I ordered. You can’t compete in the online shopping ecosystem with that delivery schedule. While delivering quickly is a key metric used by consumers in choosing where to shop, delivering on time is even more critical. Chronically late deliveries can cost you business.

Porch pirates are a growing problem, as it costs customers and companies a lot of money when criminals steal products from your porch or apartment lobby. As more consumers purchase Ring doorbells with cameras, the chances of getting caught increase and those willing to commit these crimes decline. There are other ways to deal with the problem, however. For instance, Amazon is experimenting with delivery to a car trunk or garage with the permission of the customer. This isn’t an easy solution, as it opens customers up to other types of risk but it may work in some cities where the problem with porch pirates is especially bad.

Other delivery problems also plague online shopping. It seems every day that I see a post on our community Facebook page where a neighbor either gets a package they didn’t order or is missing a package that was supposedly delivered to the customer.

These problems point to an increased need to manage your logistics effectively. One of the reasons Amazon survived the dot com crisis in the late 1990s and thrives today is its focus on building the infrastructure necessary to quickly deliver products to customers. By spreading distribution warehouses around the country, building partnerships with other companies to take back unwanted products, and investing in new technology such as robots for picking and drones for delivering, the company continues as one of the largest online retailers out there.

Taking advantage of the online shopping ecosystem

Taking advantage of the online shopping ecosystem means a total redesign of your current e-commerce system for most businesses. For instance, Disney is a good example of a firm providing hedonic elements to support and encourage online shopping — and also off-line sales for their parks, movies, and merchandise.

Continuing as if the online shopping ecosystem doesn’t exist isn’t an option in today’s crowded e-commerce reality. Below, you’ll find an infographic outlining elements of the online shopping ecosystem. While this is out of date, many of the factors discussed are still valid and offer some factors that might help you plan for your e-commerce future.

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