The future of commerce is now.

What will the future of commerce look like? Everyone is asking this question in light of the COVID-19 crisis. Commerce is changing rapidly, and major shifts are happening both online and off.

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We’re looking at implications for the future of commerce in three key areas: consumer experience, brand selection, and macroeconomics. Each area has been uniquely impacted

The customer experience of the future is "post-purchase"

The annual Digital Trends report, from Econsultancy and Adobe, asked companies to share what they felt was the single most exciting opportunity for 2020. 

Guess what it was? Customer experience.

Looking forward to the future of commerce, brands will compete to provide the best possible customer experience. The reason? It works. The numbers don’t lie:

  • 73% of companies with above-average customer experience perform better financially than their competitors.

  • Companies with a customer experience mindset drive revenue 4-8% higher than the rest of their industries. 

This shift also presents a whole new paradigm wherein customers move through three distinct infrastructures: Discovery, purchase, and connection.

The infastructure of ecommerce

Implications for the future

We know that the customer experience begins with discovery, moves on to the purchase journey, and then continues post-purchase.

But in our opinion, post-purchase (connection infrastructure) is where the real magic happens: It’s where customer relationships are built. Pre-purchase is all promotion and removing friction, but post-purchase is where trust is built (or diminished.) It’s also when consumers decide if they actually like a brand and want to stick with it for the long haul. As such, post-purchase will be the next frontier in commerce.

“The first sale is easy. It's like a first meal at a new restaurant: You got them through the door, great, but you can't build a business on customers that come to your restaurant once. You need them to come back again and again, and you do that by providing great service and a great experience. In ecommerce, that service and experience happens after the first purchase, and includes things like customer service, shipment tracking, and easy returns. If you want to build a sustainable brand, you can't ignore the experience.” -Jordan Gal, CartHook

The selection of online brands in the future will be different

COVID-19 has caused a dramatic, sudden shift toward ecommerce in 2020, accelerating and expanding its penetration rate by an unprecedented 13% in the span of just eight weeks. 

Projecting this trajectory post-COVID, we could see ecommerce account for ~40% of total retail sales as soon as 2028.

Ecommerce penetration rates through COVID

Looking forward, the ripple effect of this on brand selection will likely produce some re-shuffling, especially in the world of direct-to-consumer (DTC) retail. That could mean brand closures, expansions, and/or acquisitions.

Implications for the future

Like any growth industry, there comes a time when a plateau is reached. Only the strong (and strategic) survive. The same is true within the DTC world, and we may find that the future of commerce looks very different within this commerce ecosystem.

“Over the next 5-7 years, there won't be a ‘DTC’ world; it will slowly morph into general CPG where the two-day shipping standards, customer service practices, lightning-fast internal processes, vendors, technology stacks, and creative production for today's DTC brands will become the new normal. While there will always be a smaller group of startups that will disrupt, there will be a period where brands either get acquired, IPO, or go out of business as the larger incumbent brands start to get their hands deeper in the DTC ecosystem.” -Nik Sharma, Sharma Brands

Over the next 5-7 years, there wont be a 'DTC' world; it will slowly morph into general CPG.

One of the major contributing factors to this future trend is rising customer acquisition costs, which makes for an unsustainable long-term customer acquisition strategy. At the same time, legacy brands are taking note of what has helped DTCs excel in recent years: They’re becoming more agile, optimizing for digital commerce, and utilizing direct shipping methods.

There will be a period where brands either get acquired, IPO, or go out of business as the larger incumbent brands start to get their hands deeper in the DTC ecosystem.

Rather than starting from scratch, some of the bigger retailers are simply buying up successful DTC brands, like how Walmart bought apparel brand Bonobos in 2018 and cosmetic giant Shiseido bought Drunk Elephant in 2019. This isn’t bad news for DTC brands, either: There is often an upside to acquisition.

“A parent company doesn’t just offer an injection of cash, it also has a massive database that enables smaller brands to build their presence and expand their reach. It’s not out of the question to imagine a world where Unilever buys Eaze or LVMH takes a share in Rent the Runway,” said David Wright.

COVID-19 changed commerce forever

One look at the impact of COVID-19 on worldwide supply chains will tell you that in the future, everyone will pay much closer attention to macroeconomics. 

The coronavirus outbreak also put a spotlight on all the flaws to the existing global approaches to logistics and supply chain. Statista data shows that just within the world of electronics manufacturing, delays ranged from two to eight weeks in March of 2020, and many of those were extended even further.

The graph below shows supply chain delays for electronics manufacturing as a result of COVID-19. Results are as of March 20th, 2020.

COVID related delays in ecommerce

Implications for the future

This means a few things for the future of commerce.

First: Supply chain teams will work toward "pandemic-proofing” to avoid similar situations down the road. This will likely include supplier mapping and increased supply chain visibility so that businesses can more fully understand the impact of disruption (and can work to find more proactive workarounds.) They’ll also need to work toward digitizing their records (no more paper trail) to make supply chains more resilient and to mitigate risk. Again, this puts data front and center.

"Of the many lessons the supply chain discipline is learning during the pandemic with a view towards the future of mitigating such widespread disruption -- and looking more broadly to holistically include retail and distribution alongside commerce -- is the critical need to have a global view of inventory enabled by intelligent fulfillment and returns and augmented by inbound on-time/in-full supplier performance insights.” -Jeanette Barlow, VP of Offering Management, IBM Sterling Supply Chain

Second: We can also expect to see last mile delivery heat up and become a bigger focus in the world of commerce. Touchless delivery and automated customer-facing delivery updates will become essential. Customers will no longer want to have to ask the age-old question: “Where is my order?” Instead, brands will have to empower shoppers with data and insights into last mile delivery so they too are in the loop on the delivery aspect of their purchase.

The question will be: Who can deliver on time, as promised, with tech-enabled solutions? These will be the brands who win the trust (and dollars) from consumers.

The future of commerce is now

One thing’s certain about the future of commerce: It’s going to change and evolve--and maybe a little faster than we’re used to. 

From customer experience as a new battleground to changes in the retail landscape and big-picture macroeconomics shifts, retail brands will have to think strategically and prioritize efforts in order to outpace their competition.

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