E-commerce expert Alexander Graf predicts what will change—and what will remain the same—in the year ahead
Brands have traditionally relied on selling to the likes of Walmart, Amazon or Sears. Yet, at the same time, they are learning that they can only thrive when they control access to consumers—and they cannot gain this access through third-party vendors.
This is something we have not seen in the past five years because most businesses were focused on migrating their traditional wholesale business model to the online world. As a result, the main story for 2022 and probably beyond is the fight for direct access to consumers. From food to FMCG, expect heavy investment in direct-to-consumer business models.
Record failures for B2C marketplaces
2022 will also be a record year for B2C marketplace investments—and most of them will fail.
In the US, 57% of B2C e-commerce sales flow through marketplaces so every big manufacturer wants a slice of that pie. Macy’s has announced a marketplace initiative to expand its business model in the US, for example, while Decathlon, a European leader in sports goods, has announced plans to expand its business model and offer a platform with more choice for customers.
The internal view at such corporations is that this move will save money on marketing, as more products means bigger basket sizes and higher buying frequency. And it’s an approach that mirrors the ineffective late entry e-commerce strategies of companies like Macy’s, which started its webshop rather late, focusing for too long on its bricks and mortar experience. Now it is starting its marketplace initiative rather late, too, and making the mistake of assuming it is a plug-and-play solution.
Businesses across the globe are failing to understand that becoming a marketplace company and changing the business model from owning the inventory to owning the customer access, is a big shift. Moving from a retail 1.0 model, where you own the inventory, to owning the customer access is a complete transformation. As a result, vendors will see very little revenue out of new marketplaces and their customers will experience a mediocre fulfillment practice where they will receive a box from one seller and then, separately, a box from another merchant—similar to the early days of Amazon.
The problem is that this is an outdated marketplace philosophy that fails to consider the e-commerce journey from a customer perspective. New consumer marketplaces will fail quickly, because they are planned from an internal perspective, only optimizing the retailer’s view, not optimizing the customer’s experience.
Focus on employees
In 2022, most of the competition in many sectors will not be about winning new customers— it will be about attracting and retaining the best talent. Brands will struggle to attract great talent in the e-commerce industry and only the companies with the best employer branding initiatives and well-designed business models will have a chance of enticing the best.
This is a global trend that is not only true for e-commerce. The companies that successfully attract and retain the brightest and best people will be the winners in their sector because, with great talent, they have a real opportunity to bring innovative initiatives to life. Companies that stick with traditional business models will lose because they won’t have the people resources they need.
So, next year must see an openness to changing employment models, focusing on rewarding outcomes rather than output, accompanied by a high degree of trust. It is time for radical flexibility, offering unlimited vacation and supporting fully remote working all the time. In practice, this means people can live and work wherever in the world they want to, potentially saving money on housing costs and boosting living standards. Working from the beach should no longer be a dream.
Customers will continue to buy anything, anywhere
The trend of customers who are not loyal to one business was accelerated by the pandemic and the supply chain issues that came with it. At the beginning of the pandemic, McKinsey research found that consumers embraced change in the uncertainty with 40 percent of consumers trying new brands or retailers.
That won’t change in 2022 and the companies that can serve this demand—and most companies cannot—will eventually win. Customers usually don’t wait for a company to adapt. They buy from wherever a product is available, via multiple, changing platforms. Leaders in the retail space will be companies that value investments in technology more than businesses that see investment as a cost center.
Adobe is predicting that 2022 will become the first trillion-dollar year in e-commerce in the US and with old-school “buy now, pay later” payment methods expected to thrive. Adobe research found that this payment method is seeing a boom, with 215 percent year-over-year growth in the first two months of 2021. Consumers using this service also place orders that are 18 percent larger.
A lot more payment methods, and payment providers such as the Klarna shopping app may try to make a play in e-commerce. There is lots of revenue to earn but it is best earned from a platform perspective selling customer access. The reality is that the player handling the merchandise is the biggest loser in e-commerce.
One big change on the horizon, though, is that Alibaba will buy eBay. Alibaba is changing its shareholding structure and it is trying to get a better base in the US and Europe. eBay is so cheap now and still has a strong brand so it is an obvious target.
It looks likely that Alibaba will change the whole eBay infrastructure to focus more on Asian merchants and on using the brand as a consumer-facing portal. Currently, Alibaba is paid by Asian merchants to get access to consumers. eBay would deliver access to 90 million consumers, and 90 million data points to sell to merchants.
That’s just one of the many seismic changes I see coming in 2022—a year I think will be pivotal for businesses to reassess traditional models of digital commerce and ways of working.