Analysis: Is the E-commerce Slowdown Here to Stay?

The e-commerce explosion we saw at the beginning of the pandemic is beginning to wane. The August Mastercard SpendingPulse report showed that while Q2 saw a rise of 11.7% in YoY sales growth in 2022 this growth is marginal compared to the 98.5% e-commerce YoY sales growth between 2019 and 2022.  

E-commerce retailers are faced with the question of whether this slowdown will continue as shoppers return to in-store shopping or if the Q2 slowdown was a result of other factors such as inflation or economic uncertainty which would be more likely to pass with time. Understanding the push and pull factors impacting consumer preferences can help your business prepare for Q4 and beyond. In this article we’ll discuss some of these factors and give some practical advice for helping your business stand out in the e-commerce marketplace.  

The push and pull in e-commerce

Consumer behavior is driven by a multitude of factors. Understanding what these factors are and how they may influence e-commerce consumer behavior can help businesses make more accurate predictions and avoid pitfalls like understaffing within warehouses or overstocking of products.  

This year, factors that encourage consumers to slow their spending include rising inflation and uncertainty about the economic outlook. Economic indicators can prevent consumers from spending on non-essential items. This could impact holiday spending on items such as gifts, decorations, and social events. In addition to economic factors, the return of in-person shopping has likely slowed e-commerce spending. Some consumers will prefer in-person shopping and now they are largely able to return to shops.  

In contrast, there are several indicators that e-commerce growth may continue to stay strong well past the recovery from the pandemic. One of the best indicators is the adoption of e-commerce on a global scale. A report from Morgan Stanley Research indicates that e-commerce has been steadily growing across the globe. For example, in South Korea online sales already account for 37% of all retail sales within the country and e-commerce sales are projected to account for 45% of all retail sales within the next five years. This trend indicates that consumer preference for e-commerce will likely continue to grow and is more likely to be permanent.  

How to stand out in the e-commerce market

Regardless of the broader e-commerce trends, all retailers must compete to stand out in the marketplace. Our biggest recommendations for businesses looking to sharpen their competitive edge is to offer affordable shipping options and to simplify the returns process.  

According to a consumer trend report from Attest, four-fifths of respondents (79%) said they would not pay over eight dollars for shipping and the average price point where Americans will start to be deterred from ordering is just $5.13. Finding a price point that works for you, your business and potential customers is vital in the e-commerce market.  

In addition to affordable shipping, simplifying the returns process is a great way to nurture existing e-commerce relationships. 80% of consumers who return a product spend their refund in the same store reported in Shopify’s Future of Commerce report. Streamlining the returns process will encourage customers to do this and help build long-term relationships.

Understanding and keeping up with market trends will help you and your business understand if the e-commerce slowdown seen in Q2 is here to stay or was just a passing occurrence. Key factors to consider are consumer preferences, economic realities, and global market shifts. In addition to understanding e-commerce movements, a business can cut through the woes of the market by optimizing the customer’s experience through offering affordable shipping and streamlining the returns process.  

If you would like to learn more about how iDrive can help you achieve your business goals, contact us!