6 ecommerce trends to watch – IBM

The ecommerce market has grown exponentially over the last decade. The ecosystem has become more complex as business models advance and new ecommerce trends appear. During the Covid-19 pandemic, the rate of digital adoption doubled across the globe. Some forecasts suggest online retail might be responsible for half of all retail revenues by next year.
But, as many companies found out, expanding a business’ digital footprint or placing more emphasis on its online store didn’t guarantee profit. In what McKinsey refers to as “the e-commerce catch-22,” many retailers with significant growth in ecommerce sales through 2020 and 2021 saw their margins decline.
In part, this is because of high saturation in the market: An electronics or home goods retailer now competes globally, not just with its direct competitors, but with small-scale online stores and ecommerce giants like Amazon. This can force businesses to bring down prices to compete.
Shipping and logistics can get complicated in new markets and are subject to global supply chain interruptions. Consumers today, having become accustomed to ecommerce staples like same-day delivery and customized products, expect a seamless and unified digital shopping experience. They also expect the ability to use the payment option of their choice. Increasingly, these customers desire benefits like free shipping or designated loyalty programs. Also, and to successfully market to digitally native demographics like Gen Z, businesses must demonstrate a commitment to sustainability.
In the constantly shifting, rapidly expanding ecommerce ecosystem, businesses must think creatively about their digital strategies and how best to create dynamic, interactive shopping experiences that improve customer relationships. In the midst of a massive shift in how consumers purchase goods and services, here are some ecommerce trends that are projected to impact the global USD 3.3 trillion market and enhance a customer’s digital experience:
It’s often said that AI is ushering in the fourth industrial revolution, and the technology’s impact on digital commerce has been immense. Personalized shopping experiences are no longer an aberration, but something customers expect. Digital optimization and automation tools have made it cheaper and easier for businesses to use customer data or third-party data, creating intelligent ecommerce sites. AI-enabled marketing and product discovery tools help facilitate customer engagement and retention, if deployed correctly.
AI algorithms can analyze vast amounts of customer data, including browsing history, purchasing behavior, and demographic information to deliver personalized product recommendations and tailored shopping experiences. AI-based personalization surfaces goods a consumer is most likely to buy, reminds customers when it’s time to refill an order, and offers shopping experiences tailored to an individual’s preferences. These personalized shopping experiences can be deployed in several touchpoints including product pages, email campaigns, and during the checkout process.
Dynamic pricing, most famously deployed by ride-share companies but increasingly used in other markets, allows retailers to adjust prices in real-time based on factors like demand, inventory levels, and competitor pricing. For some ecommerce businesses, dynamic pricing can help maximize revenue while remaining competitive in the market, though it’s crucial to carefully select the AI’s parameters to avoid unrealistic pricing structures that might deter new customers.
According to Gartner, by 2027 chatbots will become, for as many as a quarter of organizations, the technology providing personalized customer support in natural language, answering questions, and addressing consumer concerns in real-time. As some researchers have cautioned, it’s imperative to find synergy between conversational AI-assisted customer service and the humans that manage it, to ensure customers have a productive online shopping experience from end-to-end.
AI-powered search and recommendation engines use machine learning algorithms to better capture user intent, improve search relevance, and enhance product discovery. For example: Large retailers are engaging third-party AI to make searching for products in natural language simpler, so shoppers can search by pattern or style and find the exact item they’re looking to buy.
The AI revolution has also facilitated the creation of new kinds of ecommerce brands that are built on the technology. In recent years, for instance, ecommerce companies based on a subscription model—like Blue Apron and BarkBox—have grown over 1,000%. Direct-to-consumer subscription brands like these often harness AI and advanced analytics to provide their customers with personalized product selections.
With the advancement of augmented reality (AR) and virtual reality (VR) technologies, brands are increasingly able to enhance digital experiences and weave digital touchpoints into traditional buying channels. For purchases that are heavily dependent on environmental context—e.g., a new living room couch—consumers can reduce uncertainty and the likelihood of returning a product by “trying it out” in their living room. Particularly in markets like travel, hospitality, and consumer retail, AR and VR have the potential to enhance customer experiences by giving them the best possible preview of a product before they buy.
One of the primary benefits of integrating AR and VR into ecommerce is the ability to provide customers with a lifelike and immersive preview of a product. This function can be useful in industries where consumers make large and contextually sensitive purchases. In the real estate industry, several firms have experimented with technologies that allow customers to view properties remotely. In recent years, IKEA has started a successful AR mobile app that allows customers to view the furniture retailer’s goods in their own homes.
Virtual try on experiences, when designed properly, have the potential to transform the fashion and beauty industries. With this technology, customers can use their smartphones or webcams to remotely try on clothing, accessories, or makeup. For example, several optical retailers allow consumers to digitally “try on” a pair of glasses. And Sephora has been massively successful with an app that renders makeup selections on a user’s face in real-time.
Live commerce originated in China. Just six years after it emerged in 2016, the industry was projected to bring in USD 647 billion in the country. In the United States, the market is still emerging, bringing in a forecasted USD 32 billion as of 2023.
During live commerce events, customers can interact with a host over a live-stream as they purchase products—often by using digital wallets—in real-time. The sales tactic, which started with the Chinese social media network Alibaba, has been adopted by businesses like TikTok, Amazon, and the clothing resale platform Poshmark. During shopping events, influencers or celebrities might offer specific products, encouraging consumers to discuss the item and eventual sale over a chat client. Using live commerce, businesses can highlight markdowns or promotions, encouraging a sense of camaraderie around a specific event.
Online-to-offline (O2O) ecommerce refers to a wide variety of ecommerce experiences that seamlessly integrate digital channels with physical retail experiences, thus creating a holistic customer journey spanning both online and offline touchpoints. And while it might initially sound counterintuitive, getting customers back to shopping in-store has become a major imperative for some ecommerce retailers. Offering select experiences in physical locations can engender customer loyalty and uncover new target markets.
In one high-profile example, Amazon purchased Whole Foods and integrated in-store grocery shopping with the ecommerce giant’s digital ecosystem. But a host of other businesses, from the massive social media company Alibaba in China to the small direct-to-consumer furniture brand Magnolia Market, have also opened physical locations based on their ecommerce stores.
Some examples of online-to-offline ecommerce initiatives include:
Social commerce, a form of ecommerce in which a social media platform serves as both a marketing channel and a shopping destination, is expected to grow by more than 50% between 2021 and 2025. Like live commerce, it often takes the form of a mobile shopping experience, and is a leading ecommerce trend that is expected to generate USD 1.2 trillion globally by 2025.
Using this approach, organizations can use social media’s reach to facilitate product discovery, encourage social purchasing decisions, and foster customer engagement. Several platforms, including Facebook, Instagram, and TikTok, have built social commerce into their platforms to facilitate the process.
Seamless shopping experiences through a social media channel capitalize on existing social behaviors and streamline the path to purchase, increasing conversion rates. Using social recommendation and discovery processes, customers can find the most relevant products. Often, brands that use social commerce will partner with influencers or engage with user-generated content to connect with their audience. Brands like Clinique have successfully engaged new and younger markets through a combination of savvy social media marketing and social commerce.
Voice assistants integrate voice-enabled technologies, such as smart speakers, to facilitate the shopping process and streamline interactions between consumers and online retailers. This approach uses AI to enable users to search for products and place orders through various payment methods. Users can track shipments and select to receive custom recommendations using voice commands.
In addition to fostering an inclusive shopping experience for those who might have difficulty navigating traditional interfaces, voice search-assisted ecommerce provides a convenient and hands-free experience for online shoppers who might be multitasking. The intuitive nature of ordering by voice can be useful for businesses selling grocery staples or home goods. Though businesses are increasingly developing voice search-friendly product descriptions and creating their own back-end voice assistant products, the trend has been growing for several years. For example, since 2017 Dominos has operated its own app for mobile devices through which customers can quickly order a pizza.
Given the rate at which ecommerce is expanding globally, new digital commerce forms are appearing at a rapid clip. In leading-edge countries like China, which accounts for more than half of all digital retail sales worldwide, new ecommerce trends like social commerce and live commerce have developed at a shocking rate. Over a period of less than five years, live commerce in China grew from an emerging innovation to a channel through which two-thirds of consumers in the country bought a product in the course of a year.
For most organizations, it’s no longer enough to list items from a brick-and-mortar store on an ecommerce platform or merely allow integrations with PayPal. According to the IBM Institute for Business Value, just 14% of 20,000 consumers recently surveyed across 26 countries were satisfied with online shopping. There’s much room for innovation to provide a delightful ecommerce experience.
Face it: commerce is complicated. Powerful ecommerce and AI-driven omnichannel commerce experiences are growth drivers at the heart of business consulting. IBM iX brings clients end-to-end consulting expertise and world-class ecosystem partnerships, spanning digital strategy, design, implementation, integration, and operations.
By harnessing the power of data and AI, the best ecommerce industry practices, and the innovative IBM iX Experience Orchestrator—an open source framework—IBM Consulting experts help businesses implement market-leading strategies and realize their goals. The result is insight-led, outcomes-driven customer experiences that build trust and expand your business’ reach and relevance.
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