As any rock musician knows, it’s hard to produce two hit albums back-to-back. Unless you are the Beatles or Led Zeppelin, most second albums fail to live up to the high expectations of the first effort. This is often referred to as the “sophomore jinx.” In 2021, e-commerce had its sophomore jinx moment. As more people become vaccinated and physical stores reopened, the explosive e-commerce growth rates of 2020 naturally fell back down to Earth. But e-commerce is no “one-hit wonder” and the size of the prize for any brand is too big to dismiss heading into 2022.
According to data from Statista, e-commerce in the U.S. will amount to $469.2 billion in 2021, an increase from $431.6 billion in 2020. In the third quarter of 2021, the share of e-commerce of total retail sales in the U.S. was 13 percent, down from a high of 15.7 percent in the second quarter of 2020, but still up from prepandmic levels of 11.3 percent in the fourth quarter of 2019. What’s more, shopper habits have permanently changed with a bias toward online shopping. Earnest Research found the online share of grocery shopping rose to become 15% of U.S. grocery spending during early 2020 and has remained at that level as of November 2021. According to Dan Frommer’s annual Consumer Trends report, 60% of shoppers said they prefer online grocery shopping to their old way of shopping, compared to just 45% in November 2020.
With another strong year of e-commerce growth coming to close, let’s review the biggest trends that shaped this growth (both positively and negatively) and lessons to take into 2022.
Supply chain challenges and rising inflation
If you could summarize 2021 in a single image it would an empty supermarket shelf. Unprecedented consumer demand combined with raw-material shortages, port congestion, and a lack of adequate workers resulted in supply shortages. In turn, these shortages contributed to prices increasing at their fastest rate since 1982. These disruptions caused new challenges for brands and retailers, many of which had to cut back on discounts and promotions or reduce the size of their packages and offer smaller quantities at the same price. Many brands learned the hard way that out of stocks not only hurt their sales but can have severe marketing costs as well – for example, a study from Profitero showed it took three to four days to recover their position in Amazon search results when they are out of stock for just one day, and five days to recover on Walmart.
Economists expect supply chain problems and elevated inflation to continue deep into 2022. There is no quick fix and brands must prepare for this new normal by being both agile and flexible. They must be ready to shift available supply to different regions and even different stores. They must be better at marketing products based on supply rather than demand, as well as having the ability to quickly pivot away from products that are out of stock. More scrutiny must be paid to the profitability of products sold online and investments made in creating e-commerce-specialized assortments and packaging offering higher margins. Silos need to be broken down and marketing, supply chain, and finance teams need to be holding hands and singing kumbaya.
Embracing news types of commerce
For most …….