Ecommerce trends you need to be aware of in 2022
Introduction
2021 was yet another challenging year for all. Just when we thought things were calming down, they continued to pose serious obstacles. For eSellers worldwide, this took the form of disrupted supply chains, last mile logistics, and much more.
To get a better understanding of the past year, to make sense of it and to learn any possible lessons, we spoke with some of our closest European partners to hear their thoughts on today’s trends and what we might expect for the rest of 2022.
Here’s what they had to say.
Looking back on 2021
In 2021, we saw the continuation of the great commerce acceleration, embodied in the rise of the effortless economy. Linnworks research on the effortless economy found that 46% of retailers even prioritize convenience over price when selecting a retailer.
It means that commerce comes to the consumer now, wherever they spend their time. Consumers don’t have to leave the home anymore to purchase goods and services. As a result, brands and retailers have moved into selling in a variety of different environments where customers spend their time in order to maintain revenues. This means reaching them via social media channels, websites, marketplaces, as well as traditional brick-and-mortar stores.
The rise of the effortless economy, though, is only one part of the great commerce acceleration. Brands have to change to stay connected in this new world with a greater, deeper investment in digital channels. We are seeing brands and retailers investing in three areas, brand building, multi-channel distribution and establishing total commerce control through operations as they seek to connect commerce channels seamlessly and simultaneously.
The Influx of Aggregators
This time last year, there were only a mere handful of aggregators and private equity houses actively looking to acquire Amazon FBA businesses. Fast forward 12 months and there are now over 50.
The industry has quickly established itself as an extremely hot space for investment. In those 12 months, an astonishing $10bn has been raised to acquire Amazon FBA brands. Indeed, the influx of aggregators and capital into this space has been excellent news for sellers. Previously the best opportunities to exit were via FBA marketplaces where it wasn’t uncommon to see businesses selling for 2-2.5x of their annual net profit.
Now, with the rise in demand for FBA businesses amongst all the capital flooding into the industry, multiples are being driven up to an average of 4. This has transformed the way that sellers look at their FBA businesses. For where many sellers previously might have seen it as a side project or a source of supplementary income, it is now seen as a life changing exit opportunity.
Supply Chain
While the increasing demand has provided a very exciting prospect for sellers. It is not to say this year has been all fun and games for FBA business owners. Managing supply chain and logistics on Amazon has been as tough as it’s ever been. The introduction of inventory limits, the overdemand on Chinese manufacturers, the suez canal blockage, brexit and the pandemic… to name a few, have all played their part in creating one of the most difficult environments in which to run an Amazon business.
As a result, it has become essential that Amazon sellers have bulletproof supply chain procedures in place, ensuring sophisticated inventory management systems are used, allowing extra time for orders and have third party logistics solutions in place. As a business, we have taken this pressing external stimulus and used the opportunity to develop tailored solutions, to manage the inventory process from manufacture to storage as well as creating complex forecasting software to manage the inventory limits within Amazon effectively.
Cash Flow is King, Now More than Ever
With supply chains and cash flow inextricably linked, cash flow, already a key piece in the puzzle, has elevated itself to arguably the single most important factor on the structural side of an Amazon business.
Over the last 12 months, it has become clear that those who do not plan cash flow ahead meticulously will inevitably fail. The ability to forecast disbursements, advertising spend, cost of reorder, applicable VAT alongside all fixed costs, can be the difference between a multimillion-pound Amazon business and a bankrupt one.
Amazon makes it particularly difficult to know how profitable an FBA business is. It is imperative that we know though. For if a business is scaling rapidly, it could in theory be profitable all year but end up with less money in the bank than when it started. For this reason, it is vital to know how to scale a business sustainably, or at least forecast that more capital may be required, and thus make the necessary arrangements to source the finance.
Tom Bryant, Lead Portfolio Manager at eVenturing
HUBOO
(To help sellers cope with these trends, Huboo are happy to offer 6 months free ‘hub’ storage to Payoneer clients, on any and every inbound delivery).
2021 has been a fantastic year for e-commerce. Online shopping trends show no sign of slowing down, new platforms and marketplaces have risen to prominence, and an estimated 2.1 billion people are expected to purchase goods online by the end of the year.
This year has also been, for many, a double-edged sword. It’s been called the ‘perfect storm’ of economic pressures as various elements of the supply chain have compacted, leading to displaced shipping containers, reduced shipping container production, increased shipping costs, HGV driver shortages, and staff shortages. Both store closures and a rise in online shopping during the pandemic have inevitably led to increased demand for warehouse space, leaving many sellers in a tough situation.
The trick is to stay nimble, and work with nimble partners.
A central issue is that many traditional warehouses and fulfilment centers simply don’t have the flexibility to repurpose their space or staff to cope with peak season demand. However, a new breed of software driven fulfilment providers, like Huboo, are increasingly being utilized by retailers as they offer innovative peak season fulfilment solutions to alleviate such warehousing and staffing pressures. Part-fulfilment through third party logistics providers is also an increasingly attractive proposition for retailers as they can rest in the knowledge that storing, picking, packing, and delivery are all taken care of in a scalable manner.
Simeon Wynn, Partnerships Manager at Hubbo
Global E-Commerce Experts have witnessed 2021 to be a turbulent year for eCommerce with many highs and lows. The ongoing chaos, as a result of the pandemic, was a major issue that caused many industries to grind to a halt. eCommerce, however, was one of the very few sectors to actually benefit.
The closure of many brick-and-mortar stores across the UK and EU for months of lockdown forced everyone to rely on online marketplace platforms for their shopping needs. As such, the industry has boomed and many of our clients have seen tremendous growth.
The pandemic wasn’t the only major hurdle that has greatly affected European eCommerce this year, though. After long negotiations, the UK finally left the European Union on January 1st as a result of Brexit. This too, caused a heap of new rules and regulations for sellers affecting the supply chain, fulfilment process, and more. Because the UK is no longer part of the EU’s single market and customs union, there are now different rules when importing and exporting to and from the EU—and vice versa. You also have additional paperwork and customs checks at borders now, and the EU has restrictions on importing certain items.
With the above in mind, the whole timeline for the year was shifted with sellers needing to prepare way in advance for Q4 to ensure they had stock in time for the busy period. Amazon FBA inventory limit restrictions, shipping delays, and stock getting stuck in customs were just some of the headaches that required this early preparation.
Riki Hooker, General Manager at GEE
EU VAT reboot
2021 saw the EU implement new rules for taxation of e-commerce. The EU VAT reform created new obligations for businesses selling goods to consumers as well as marketplaces facilitating these sales.
Under these changes all imports of goods to the EU are now subject to VAT, and sales within the EU are taxed in the country of customer, leading to new requirements for businesses involved in e-commerce.
The EU also introduced new tax returns for reporting sales to consumers, the One Stop Shop (OSS) and Import One Stop Shop (IOSS).
These changes could mean significant headaches, but not if you use technologies which automate everything for you, no matter where you are or where you trade.
Taxually helps businesses to understand the impact of these changes via practical tutorials and has also introduced new schemes (OSS and IOSS) to our solution.
Stefan Mladenovic, CEO and a Co-Founder at Taxually
Moving into 2022, retailers broadly need to focus on two things:
- How to understand customers.
- Convenience happens throughout the entire customer journey. Retailers need to thoroughly map their customer journey, from discovery to purchase, through to delivery and returns and refunds, to understand where any friction might be. When mapping the customer journey, you must understand who your customers are and where they want to shop — where they are discovering your products and purchasing from you.
- How to set up the back end.
- Retailers should set up their organization with the technology that allows them to scale effectively and quickly. Retailers need to have the connected operations like inventory management and connected shipping services to allocate orders quickly and effectively in one location so you’re not logging into multiple platforms at the same time.
The customer should be getting the most personalized experience possible. There isn’t one way that works for every customer. It’s about what the customer wants at that moment. For example, for some products, a customer might want it the next day, but for other products, they are happy to wait longer. This is true for all the components of the customer journey — it’s about what the customer wants at that moment. It’s about being multichannel not just in terms of how you sell, but in terms of how you serve the customer to give them options on the merchandise side and delivery side. The process should be centered around convenience for the customer.
Andrew Thompson, Head of Partnerships at Linnworks
Predictions for 2022
- The rise of the marketplace will continue into 2022 and beyond. All brands and retailers need to have an approach and understand how to work effectively with marketplaces. There is so much choice and consumers feel empowered on marketplaces by factors like price. For marketplaces, the business model is compounding – the more consumers, the more sellers. DTC should still be at the core of a retailer’s strategy, but retailers also need to incorporate marketplaces into that selling strategy.
- The unbundling of generalist marketplaces. For example, Amazon is a general marketplace and it’s a fantastic proposition, but the competition is coming in two areas:
- Social media channels. Social channels give brands a space to present their full brand proposition and that is very compelling to engage the consumer in a different way than on Amazon.
- Category-specific marketplaces will continue to rise. These marketplaces give the end consumer an even better buying experience for specific shopping categories. The primary goal of the marketplace is to win the consumer. If marketplaces win the consumer, then build the demand, then their belief is that brands and retailers will naturally know what to sell to that audience. Marketplaces will also look at ways that brands and retailers can build their own brand on the marketplace.
Andrew Thompson, Head of Partnerships at Linnworks
The Consolidation of the Exit Ecosystem
As part of any upcoming industry akin to Amazon FBA, the extent to which well capitalized firms start to move in and sweep up the best performing Amazon businesses will only increase.
One thing that we could see over the course of the next year is the “Aggregation of the aggregators”. With more and more traditional private equity firms turning to this sector, a natural progression would be to see these firms look to acquire multiple Amazon aggregators themselves rather than the FBA businesses.
With well-established processes, operational teams, and Amazon brands on their books, Aggregators provide an effective way of entering into the market without a vast array of prior knowledge on the industry. As we see the transition from solopreneurs selling on Amazon to institutional investors with teams of operational expertise, the commercialization of the exit ecosystem will mature drastically in 2022.
Geographical Expansion
Prior to 2020, the ability to sell into Europe was far easier with options such as the European Fulfilment Network (EFN) and Pan EU available from the UK itself. Since Brexit, though, both of these are no longer options, and sellers have had to ship directly to Germany and need to know how to navigate the customs and regulations required.
Therefore, over the last 18 months, most businesses in the FBA space have either receded from overseas markets or have refrained from launching there. With the reopening of EFN in January 2022 and more freight forwarders capable of shipping from the UK to the EU, the opportunity to add value by expanding geographically will have a profound impact on the industry.
Tom Bryant, Lead Portfolio Manager at eVenturing
Order fulfilment is going to be vital next year. The most compelling offer or bargain price points will be wasted if customers can’t get what they’ve purchased in a timely, reliable manner.
Indeed, when it comes to delivery, many retailers make the mistake of believing that speed is the most important factor when it’s actually consistency and quality that really wins the day. Our own research shows that just 14% of shoppers expect the products they order online to arrive within 48 hours – in fact, the majority of people are perfectly content with delivery times of up to three working days, as long as they don’t have to pay the costs of delivery.
For smaller retailers, the focus needs to be on reliability and quality instead of speed. Products need to show up in pristine condition and at the scheduled time a buyer is expecting them. This is particularly true of subscription orders, where customers reserve essential products for regular delivery. A failure to provide consistency for a repeat order is something that will almost certainly result in a lost customer.
The other hot trend we see appearing in 2022 is customer experience, and most importantly the experience not ending with the product purchase. The savviest retailers know that good customer experience is a journey. It lasts all the way from when a potential customer first hears about your business to when they receive their order, beautifully packed (and on time) to their doorstep.
Key to providing a good customer experience once they hit that ‘buy’ button is ensuring a clear and transparent view of where a product is, and when it’s expected to arrive. We’re finding that visibility matters more and more to customers. The ability to track an item throughout the fulfilment process provides reassurance that it’s coming and allows customers to make sure they’re at home when it arrives
Simeon Wynn, Partnerships Manager at Hubbo
Looking ahead to 2022, we are expecting and (hoping) the issues our clients have encountered this year to ease, allowing for a less challenging time for eCommerce sellers.
With that said, it is clear to see that Amazon and other eCommerce marketplace platforms are only going to clamp down harder on certain rules to ensure a safer more regulated space for their consumers. They are trying to remove illegitimate, low effort parties who are engaging in review manipulation, and ranking manipulation via some form of black hat strategies. These methods are all causing third party sellers to really struggle, and we are seeing that only legitimate businesses with strong brands are the ones winning, using all of the Amazon features, like Brand Registry, available to them.
If you’re not using some of these tools, you’re going to be left behind – especially if you’re looking to get bought by an Aggregator, which is another growing trend recently. When aggregators look at scalable partners and profitable eCommerce sellers, they want an attractive looking brand that incorporates all the best practices to ensure success. So, if you’re hoping to sell your business for a big multiplier, these are some of the things you’ll need to consider.
Another big trend we’ve seen emerge and grow in the past year is social commerce (the process of purchasing directly from social media) and we expect this to really take off even further in the new year. Leading this trend are platforms like Instagram, and now TikTok, with others sure to catch up and soon implement their own as they see the opportunity in this rising market.
Riki Hooker, General Manager at GEE
E-commerce is evolving every day. The number of people transacting online is more than 2 Billion. In the United States, Amazon has taken the pole position and led the revolution. We expect at least 100 marketplaces like Amazon across the world doing billions of transactions every day. The competition intensity has grown in most of the categories and third-party sellers need to be really innovative to make their brand out and win the game. By utilising the data driven technologies, deeply analysing the customer behaviors, you can grab the opportunity to become the best seller.
Holiday Season
Q4 2021 is really different. We have already seen the customer buying patterns changing over the past year. Customers were conservative in terms of spending till Q2 2021. The scenario now has changed, as consumer spending is on the rise with a strong base of an incremental $2.5 trillion, thereby, giving them massive spending power for online retail purchases.
Experts predict that the major theme this year is going to be Amazon advertising and we are really looking forward to the CPC rates. Categories like H&H, Toys, Personal care are soon to witness a great escalation in their sales volume with over 70% increase in CPC rates. Therefore, to further boost these sales and improve listing visibility, sellers need to leverage the power of Amazon sponsored ads.
SellerApp recommends focusing on highly-targeted Advertising automation and business monitoring, especially during the holidays.
Priyanka Bohra, Director, Marketing & Business Partnerships at SellerApp
2022 is set to be a year of further changes. These could range from changes to local filing deadlines and thresholds through to more specific regulations relating to cross border trade between specific countries.
It is now clear that keeping up with all of these new requirements has become an onerous if not impossible task for small and medium sized businesses to keep up with and ensure compliance in every territory in which they trade using manual processes.
That’s why it is essential to get your business’ VAT and payments right as even small mistakes can lead to large financial consequences.
We believe the answer to these challenges is technology. As tax authorities become more focused on making tax digital, it is essential that international traders have access to simple to use platforms which can automate compliance and reporting processes which can free time up to focusing on their businesses allowing them to plan, react and adjust their activities to comply.
Stefan Mladenovic, CEO and a Co-Founder at Taxually
What will brands need to offer in 2022 to be successful?
- Discovery and sales. Building trust with consumers through brand consistency and personalization should be key. Retailers will need the technology that helps create great content that is optimized for different selling environments to build a consistent branding experience. After all, what would the brand experience feel like if it’s the same on different channels?
- Buy Now, Pay later. Paying up front for products, especially in today’s climate where money may be tight, can raise the barrier to entry for consumers to access products. They may not want to put up all the money in one go and would prefer to defer some payments.
- Fulfilment operations. It’s important for retailers to get the right technology in place to optimize how they hold inventory. According to Linnworks’ research, 95% of customers expect fulfillment to work around them, be that delivery or click and collect (buy online, pay in-store). Brands will need to operate across many different locations and be able to store inventory as close to the customer as possible. That could be in-store or in a warehouse for direct delivery.
- Sustainability and the environment. There will be a lot of innovation around fulfillment and how it’s done in a way that satisfies consumer expectations of being environmentally aware — like green packaging and delivery services.
The future of the in-store experience
The physical retail store has a place in the future, but it will be different. The store will not be where inventory is held in a traditional sense, where all the stock is in store and where the customer gets the product. Instead, in-store retail will be much more centred around the brand experience, customer engagement, and relationship building.
That’s why DTC brands that grew online are moving toward brick-and-mortar stores in a local town or in a city because they want to be closer to their customers. The opportunity with brick and mortar is for customers to get more experience with the brand and understand the brand’s story. That’s why the in-store experience will be more about the brand as opposed to the access of inventory. The depth and breadth of inventory will live in different warehouse locations and delivery networks, which will mean customers can get products quickly following the in-store experience.
Andrew Thompson, Head of Partnerships at Linnworks
Find out how Linnworks can grow your business. Book a demo.
The growth of online shopping has undoubtedly exploded and is not expected to cease anytime soon. As a result, most retailers today have embraced digitization and are running e-Commerce stores alongside their brick-and-mortar stores. As per the State of Consumer Behaviour 2021 reports, 90% of consumers will return to your store if they have a positive experience.
Hence, retailers will need to rejuvenate their strategies to preserve their ‘raison d’étre’. They need to be innovative and provide customers with exceptional experiences. As a retailer, you can no longer afford to make decisions based on gut instincts – we are living in the era of data-driven decision-making.
Luckily, thanks to the huge volume of data points your customers’ supply on the web every single day, technology can help you know them even better and implement those recommendations into your business plan.
Categories like H&H, toys, and personal care are soon to witness a great escalation in their sales volume with over 70% reduction in churn rates. Therefore, to further boost these sales and secure the future of retail businesses, retailers need to incorporate hyper-personalization in their strategies and implement loyalty programs for customer retention.
Priyanka Bohra, Director, Marketing & Business Partnerships at SellerApp
How Payoneer Can Help You in 2022
As the global pandemic (hopefully!) comes to a close for many around the world, and following all the pent up demand from the last two years, 2022 is poised to be a bumper year for eCommerce. As an online seller looking to seize this opportunity by expanding your business, Payoneer is your go-to partner for managing all your business payments.
From multi-currency receiving accounts that enable you get paid from international marketplaces, to Capital Advance to help you invest in your business and bring it to the next level, to paying your suppliers or VAT requirements directly, Payoneer has a whole suite of tools to help.
Open an account today and see how easy, fast and low-cost managing your business payments can be.