Are you ready for the E-commerce armageddon?
Before this “party” is over… the dancefloor will be sticky with blood.
I am not going to use the expression ‘silver lining’ but the past few weeks have brought a wave of ‘good’ news for e-commerce. Confinement and social distancing have made every single e-commerce metric in the green. Looking at the data, clearly, people are spending more time online, buying more products, and trying more services. Even prep food companies that were struggling to acquire and retain customers are being flooded with new users to the point that they cannot even keep up with demand.
If and when we return to “normal”… we can safely assume that a non-negligible segment of the market will stick to their newly discovered consumption habits.
Is it all rosy?
Those who think that it’ll all be about building a digital platform and running ads are in for a huge disappointment. Even digitally-born companies cannot rely on their past experience because things are going to be rocky for months more, if not years. Below are some e-commerce challenges to consider in this uncertain and unpredictable time.
We’re entering a new hypercompetitive market where financial resources won’t be enough to compete. Product discovery online is totally different from finding something at a shopping mall. Acquisition channels are growing by the day and with them all the tactics to efficiently tackle them.
The slick frontend of e-commerce websites hides a backend built on sweat, hustle, data, tracking, marketing, remarketing, segmenting… successful e-commerce has grown to be a supremely sophisticated sales channel that you can’t grasp by just opening a store on Shopify. As you’d expect, further increased competition for eyeball time will go hand-in-hand with further sophistication.
So yes it will be harder than ever to compete online.
Don’t get me wrong, we need stimulus packages to relaunch the economy, save jobs, and help companies survive. That said, such packages can also distort the market in a counterproductive way.
Let’s take a look at Ad Metrics such as CPCs: since the beginning of the CoVid crisis, CPCs have been consistently down as businesses were pulling ad dollars. But as stimulus packages inject money into businesses, new sums of money will also flow back into the ad market.
Is this a bad thing? Yes and No…
- No; some of these ads will generate sales and keep businesses afloat
- No; companies will have access to free money to learn how to run paid ad campaigns
- Yes; they will also artificially drive CPCs up, also driving up the costs of acquisition (ex: advertisers will still generate sales but will earn less profit for their effort)
- Yes; humans are inherently more cautious with their own money than that of others, which can cause a lot of waste with poorly-allocated ad revenue
- Yes; newcomers to the ad market just don’t yet have the skills to optimize channels, conversions, etc. …
While the above points to a mixed bag of benefits, we can agree that stimulus packages will distort competition and make it harder to be profitable.
Side note: Sadly, a non-negligible part of the stimulus packages will also end up in the pockets of companies that don’t quite need it (i.e. the Facebook, Google, Amazons of the world).
PPC Now, SEO Later
I have spoken with several large businesses that have switched their current customer acquisition strategies to full PPC mode; businesses that generate most of their sales from brick-and-mortar and desperately need cash flow. Their key common trait? They are bleeding money.
The truth can be a hard pill to swallow and now, more than ever, businesses should focus on building organic traffic and growing their email list rather than spending their last dollars on paid advertising. The urgency to survive a storm can easily win out over sensible long term actions but is a risky proposition. As stimulus packages fade away, higher costs of acquisition will be here to stay due to the increased competition. During this ‘gold rush,’ businesses will struggle to maintain their ad spend and/or profitability to only postpone their fate.
In the end, businesses that invest more into building a steady flow of organic traffic will be better armed to weather future crises, or simply the more competitive landscape in their sectors.
Digital agencies are poised to play a crucial role in the next phase of e-commerce dominance. The special knowledge and skills required to win in this environment is a huge benefit to agencies. But traditional businesses without digitally-savvy teams will be at the mercy of agencies and the packages and platforms they don’t fully understand.
Many businesses will spend thousands unnecessarily and, if they ‘go it alone’ without proper training, never scale enough to have a fully-staffed and qualified digital department, perpetuating a cycle of dependency on bad agencies.
Building is hard but necessary: digital literacy is no longer a luxury but a necessity at every level of a company. From ownership on down, every single member of your team should be digitally literate.
Everything is gonna be all right
I admit that this article is a bit pessimistic but now is not the time to ignore the new challenges ahead of us. There will be huge amounts of profit to be made, as well; the crisis we are all going through has proven to be a catalyst for the digital economy. It is creating countless new opportunities for businesses. Now, more than ever, sound digital strategy, planning, and risk assessment will be the keys to success.
Thoughts, critics, and clever memes (especially clever memes!) are welcome.
Nabil Tayeb Founder at Wild Web