Why eCommerce is thriving despite economic challenges
Ecommerce is maintaining a positive trajectory despite a host of economic challenges, including inflation, volatile stock markets, fragile supply chains, and overall uncertainty in the global economy.
The “2024 State of the Ecommerce Industry” report from Klaviyo, which surveyed over 1,400 medium-to-large eCommerce brands and 800 consumers, shows a generally optimistic outlook for the sector. Both brands and consumers forecast growth in the near term, with consumers particularly anticipating an increase in their online spending.
While economic conditions such as inflation and rising interest rates might suggest a pullback in consumer spending, eCommerce continues to prove resilient. Resilience here can be attributed to several factors, including increased comfort with online shopping, convenience, and the availability of diverse products.
Consumers are looking for value in their purchases, driving a demand for competitive pricing, loyalty programs, and personalized shopping experiences. Despite economic headwinds, brands are prepared to invest in growth strategies, and consumers signal their willingness to maintain or even increase their spending when presented with the right products and experiences.
Where brands are missing the mark with consumers
What brands get right and wrong about consumer expectations
Both eCommerce brands and consumers align in their optimism about the sector’s future. Both groups recognize the continued growth potential of eCommerce, indicating a shared understanding of the sector’s strength.
A deeper look at consumer expectations and brand strategies, however, highlights notable gaps. Brands focus heavily on using discounts and sales to drive conversions, a tactic that does align with consumer desires to some extent but misses other elements that shape a positive shopping experience.
For example, 86% of consumers actively use loyalty programs when available, and 84% engage with mobile apps. But, only 50% of brands offer loyalty programs, and only 48% provide mobile apps, indicating that brands might not be fully leveraging tools that could improve consumer engagement and build up long-term loyalty.
Adding to this, 79% of consumers regularly read product reviews before making a purchase decision, but just 60% of brands post reviews, suggesting a missed opportunity to build trust and transparency with potential buyers.
Brands may need to rethink their strategies and offer a more diverse range of experiences that align better with consumer expectations, such as expanding the use of loyalty programs, improving mobile app functionality, and making sure product reviews are readily available and easy to find.
Shoppers don’t care about livestreams and AR
While brands invest in newer technologies and experiences like livestream shopping and augmented/virtual reality (AR/VR), consumer interest in these areas remains limited.
Data shows that 51% of brands offer livestream shopping, but only 18% of consumers actually use it. On a similar note, 36% of brands provide AR/VR-augmented shopping experiences, yet just 15% of consumers care about them. These figures suggest that brands are investing in features that don’t resonate with a major portion of their audience.
Livestream shopping, although a growing trend in some markets, particularly in Asia, does not yet appeal broadly to Western consumers.
Many shoppers still prefer more traditional, asynchronous shopping methods that fit into their personal schedules. The complexity and cost of AR/VR-enhanced experiences might not justify the investment for brands, given the limited consumer interest.
The marketing channels brands overlook but consumers love
The costly disconnect between consumer behavior and brand spend
A large gap exists between the marketing channels where brands allocate resources and those that influence consumer purchase decisions.
For instance, only 31% of brands prioritize paid and organic search strategies, yet 58% of consumers say these channels impact their buying choices—revealing a 27% “influence gap” that suggests brands are not maximizing the potential of search engine marketing.
Similarly, broadcast advertising and event marketing, which hold major sway over consumer behavior, receive relatively low investment from brands. This disconnect may mean that brands are missing out on opportunities to reach potential customers where they are most receptive.
Brands may need to re-evaluate their media mix and consider investing more in high-impact channels that align with consumer behavior and preferences.
How meeting consumer demands boosts profits
Brands that adapt to consumer preferences by offering discounts, enhancing loyalty programs, and improving transparency in product reviews are seeing positive financial results.
The survey shows that 59% of brands increased discount offerings over the past year. At the same time, 57% raised prices, and 54% faced higher operational costs. Despite these challenges, 67% of brands reported higher profits, and 64% achieved higher margins.
Data highlights that aligning with consumer expectations, such as providing valued discounts and clear information, can be a profitable strategy even in a challenging economic environment.
Through understanding and catering to consumer preferences, brands can maintain their customer base and even improve their bottom line, showcasing that customer-centric approaches can yield strong financial returns.
Ecommerce isn’t growing like it used to but it’s still winning
While eCommerce growth has slowed compared to the rapid expansion seen during the pandemic, the sector remains robust. Projections for 2024 suggest slower growth rates than in previous years, but the industry still shows a net positive trend.
Consumers continue to face economic pressures, such as inflation and higher living costs, but they remain open to spending on products that meet their needs and offer good value.
Willingness to spend underlines a key point: the right pricing strategies, combined with effective engagement tools like loyalty programs and product reviews, can keep consumers buying even in uncertain times. Brands that focus on these areas can position themselves well to capture consumer interest and sustain growth, even as the broader economic environment fluctuates.
Final thoughts
As the eCommerce market continues to evolve, brands must ask themselves: Are we investing in what truly matters to our customers, or are we chasing trends that don’t move the needle?
To thrive, consider where your resources are going—are they aligned with genuine consumer needs and behaviors, or are they missing the mark? Now is the time to refocus on what your customers value most. Are you ready and eqipped to meet them where they are and grow in ways that truly count?
