After some bumper years, the growth of global eCommerce revenue has seen a decline in 2022. BlueRock Digital Managing Director and eCommerce expert Simon Brosolo shares insights into what he calls a ‘normalisation’, explains the trends at play, and offers solutions for online retailers looking to boost sales.
There’s no doubt that eCommerce helped many of us navigate the pandemic. How many times did an online shopping delivery send your little heart soaring? How much extra did you spend on food delivery services? (It’s probably best not to look). But as life returns to a slightly more normal state, and lockdowns become a distant yet painful memory, it’s becoming clear that consumer behaviour is also normalising, meaning the bumper years enjoyed by eCommerce retailers have started to taper off over the past year and are unlikely to continue into 2023 and beyond.
How Much Has eCommerce Declined in 2022?
The better question is, how much did it surge during the ‘COVID years’? According to research from the International Monetary Fund (IMF), on average, the online share of total retail spending rose sharply from 10.3% in 2019 to 14.9% at the peak of the pandemic, but then fell to 12.2% in 2021. In Australia, the eCommerce share of total retail spending peaked at closer to 20% during the pandemic. So, any declines need to be seen in the context of what was a mega couple of years of online shopping growth.
Australian eCommerce Spending in 2022
According to ABS data, online retail sales in Australia are down 16.9% YTD . Again, this isn’t a like for like comparison as online sales were boosted significantly in September 2021, due to the impacts of the Delta outbreak lockdown, when online sales reached record levels. Whilst online sales are down through-the-year, they continue to remain above pre-Delta levels. but it shows how much things have changed.
Here’s some interesting online shopping data for both food and non-food. Note the trend lines that highlight the normalisation in eCommerce as we come off the lockdown fuelled boom of the last few years.
Source: ABS, Sept 2022
Source: ABS, Sept 2022
On average, looking at non-lockdown months in 2021, online purchase volume grew 6.4% YOY. This is lower than the previous two years (52.2% YOY in 2020 and 17.8% YOY in 2019), and is indicative of the slower growth we’ve seen in 2022.
While that may be of concern to eCommerce businesses, the IMF research, which analysed global consumer transaction data, and the local ABS data, shows that eCommerce spending in Q3 2022 is now back around the predicted levels we’d expect to see had we not had a pandemic event.
Australia Post produced research on the declining number of new online shoppers entering the eCommerce market in 2022. This number has been declining since the biggest influx was recorded in April 2020. That influx (shown in the graph below) coincided with increased restrictions. No surprises there!
eCommerce Revenues Declining in 2022
Globally, annual eCommerce revenue may shrink for the first time ever. According to Statista, global eCommerce revenue will not hit previously forecasted growth based on the last few years, and if their forecast is correct, it will end the year lower than 2021.
Australian eCommerce Revenues are Normalising
The eCommerce decline can also be seen in our own backyard; just look at the NAB Online Retail Sales Index. In month-on-month terms, the index has contracted for a seventh straight month. As of August 2022, online sales were down 3.5% compared to the prior month and are tracking 19% down year-on-year.
Post-COVID eCommerce Trends
With the COVID-19 shackles off, people are spending less time inside and gravitating back to some pre-pandemic shopping habits. Here’s a couple of trends we’ve noticed that can be backed up with data.
Mobility Matters
Data from Google and Mastercard shows that increases in online sales closely tracked mobility restrictions. In Australia, this would’ve been amplified due to our strict lockdown measures and advanced eCommerce sector.
Research Online, Buy Offline
In the past year, 60% of eCommerce shopper traffic was driven by search engines, representing a 28% year-on-year growth. In July 2022, there was a significant increase in people searching for specific brands and locations compared to the previous month. This suggests that consumers are researching online to find the product they want before heading to a retail store to get it immediately, something we couldn’t do last year because we were stuck in lockdown with no other choice but to shop online.
One way eCommerce brands can combat these lost sales is by offering fast shipping options like guaranteed next day or same day delivery for customers who want the goods ASAP. Omni-channel eCommerce solutions like Brauz enable retailers to provide their customers the ability to find products online and reserve them in-store or click & collect, and provide them with a VIP buying experience when they arrive.
What is Causing the Decline of cCommerce?
We’ve focused on COVID-19 as the major cause for the recent boom in eCommerce sales, but the loosening of restrictions and re-opening of brick and mortar retail aren’t the only reasons for the decline. Supply chain issues are a major weakening factor, with inflation also playing a significant part in the normalisation of eCommerce revenues.
Stretched Supply Chains
As supply chains reached breaking point, eCommerce retailers felt the effects across all sectors. Not only have they caused stock shortages and long wait times on products, especially tech-related goods, it increased costs which are passed onto the customer. These supply chain related factors can result in turning someone off what would’ve previously been a spur of the moment purchase.
Inflationary Pressures on Households
The increased cost of goods is also a result of inflation. Globally, inflation is soaring at a rate not seen in over 40 years. Price rises have become commonplace in all industries, largely due to increased demand and higher input costs. Inflationary pressures also impact the consumer’s spending both psychologically and tangibly. If your mortgage repayments are going up then you’re going to think twice about your next online shopping spree, right? If things are tight, you won’t have the disposable income you might’ve enjoyed a year or two ago.
How Online Retailers Can Boost Growth Despite eCommerce Industry Declines
Earlier in 2022, we wrote an article asking, is eCommerce dying? In case the title has thrown you, the insights in the article reveal that eCommerce isn’t dying, however the industry has been presented with challenges. (BlueRock Digital has some awesome eCommerce clients who are navigating the changing landscape really well). The article provides some helpful advice to online retailers and eCommerce pure plays around how to adapt when consumers are spending less. One major area we’ve had a lot of success in helping clients generate more with less is Conversion Rate Optimisation (CRO). Other areas brands need to explore are replacing outdated websites with a seamless eCommerce experience on an effective solution like Shopify and investing in their customer experience strategy. Then there’s also the power of brand building and investing in content production and amplification via paid online advertising.
What is CRO?
When your website looks great, traffic is healthy, but visitors aren’t converting into paying customers, you need to explore CRO. Our approach includes identifying opportunities and hypotheses on changes that can bring improved conversion, then designing and testing a variation of the website against the existing website - the ‘control’.. Whether it's your homepage, checkout process, or writing new content, we can optimise every aspect of your website to increase your conversion rate.
By testing different strategies – including identifying underperforming parts of your website and improving what's already working – we give you data-driven insights into what’s working and what’s not.
Find out why your business needs CRO and get a full breakdown of our approach to CRO.
Upgrade to a seamless eCommerce solution
To achieve ultimate success in online retail, you need an end-to-end eCommerce solution that integrates with your business systems. When a modern, high-converting website integrates with back-end systems for business freight and inventory management, you not only provide a seamless customer experience and increase sales, you save your team’s precious time, the company’s money and a whole lot of admin headaches.
BlueRock Digital are experts at designing and implementing seamless eCommerce websites and business systems. We created a Shopify eCommerce solution for our client About Space, migrating from a legacy Magento solution, including building a custom API to integrate with their logistics platform and the lighting retailer increased their revenue by 157%.
Invest in Customer Experience
Getting customers to your online or physical store is only half the battle. You need to ensure you’re delighting them at every step to give yourself the best shot at a sale, and repeat business.
A CX strategy is about understanding the motivation, wants, needs and pain points of your customer at every point in their journey with your brand, whether it be using a chatbot on your website, interacting with your social media accounts, completing the online checkout process, or navigating a return.
Investing in your CX strategy is important. It isn’t a quick fix, but it will give your eCommerce sales a boost that will provide long term ROI.
Invest in Brand and Content
People don’t want just a product or service anymore, they want an experience. Strategy and creativity play equal parts when it comes to strengthening your brand, content and visual identity. Producing valuable content that your customers love is one of the most important aspects of your marketing strategy. It helps you connect with your customers, boost brand awareness and drive traffic to your website.
Increase Those Eyeballs
There are plenty of options for eCommerce brands when it comes to paid media advertising online. Paid search, paid social media, display and Google Shopping ads are just a few solid options that can grow your customer base and bring your product or service to the masses. Understandably, it can be a bit overwhelming for smaller businesses to win at paid media advertising, but the experts at BlueRock Digital can help. Learn more about the benefits of a full funnel marketing strategy .
Talk to BlueRock Digital About Growing Your eCommerce Revenue
While eCommerce might be declining, there’s no need to panic. We see it as a normalisation after some hectic years. If you’d like to discuss ways to keep your eCommerce operation humming, talk to our digital experts today.
