August 2020 Ecommerce Trend Analysis for Decision Makers

Newel Cobb

August 5, 2020

What a month it's been for ecommerce. In the ever-changing landscape of the "new normal" since COVID-19, our monthly blog is designed to help ecommerce decision makers stay in the know of the most important and impactful ecommerce trends.

Ecommerce market penetration jumped forward 10 years

In our last post, we made it clear that, “in a matter of months, COVID-19 has leapt ecommerce forward by a couple of years.” Though everyone knew the market had moved forward by about 3-5 years, the actual numbers have come out and are remarkable. According to McKinsey, ecommerce market penetration jumped forward 10 years in Q1 alone!

US Ecommerce Leap Forward 10 Years | Pattern, McKinsey Analysis
Image by McKinsey

The truth is, nearly everyone in ecommerce is growing. Amazon posted second quarter earnings that blew out Wall Street estimates. Walmart marketplace has surpassed 50,000 sellers, doubling in size from July 2019. eBay reported a 26% GMV growth for the second quarter—the highest quarterly growth rate in 15 years. Shopify’s GMV outpaced eBay.

CNN put it best when they said, “Our pandemic shopping habits are here to stay.” For years, many companies have lacked the necessary focus on ecommerce because of its P&L share. That will change. The companies that invest in ecommerce will likely gain the greatest market growth.

More people are shopping online, and how they shop is evolving

As more people shop online, the old playbooks are changing. More and more customers are looking for consumables (products you buy more than once like hand sanitizer) over durables (one-time purchases like Apple Airpods). Below you can see how these search trends have changed on Amazon by rank over the course of a year.

Pattern Graph of Ecommerce Trends | Pattern
Image and data by Pattern

Amazon is not the only place where shopping habits are evolving. Though Amazon is growing in sales, they are losing search traffic market share to other ecommerce platforms. Amazon share is down from 52% in January to 47% in June.

Amazon Marketshare Down | Pattern Trends
Image by MarketplacePulse

We are seeing dotcom traffic share spikes for sites like Home Depot, Lowe’s, Macy’s, and others. This does not mean you need to hit the brakes on your Amazon account. It is common for industry leaders to lose market share as the market grows. We suggest you simply hit the gas on every other market by diversifying across ecommerce. More people are shopping online, and how they shop is evolving.

Habit changes are not only changing how we shop or where we shop, but also what we shop for. Some of these increases can be expected, like cleaning tools or masks, but others are a little less intuitive. For example, Kellogg raised its annual sales and profit forecast Thursday, anticipating higher profits from people eating more cereal at home during the pandemic and related shutdowns.

Ask yourself, “How has my shopping habits changed during the pandemic?” Look through your assortment; if you see any positive changes, lean into them.

Brick and mortar is getting hit hard, including Amazon, but many are adapting

Brick and mortar locations may forever be changed. Mall owners across the country are filing for bankruptcy, rent costs are free falling in some of America’s glitziest shopping districts, and over 6,000 brick and mortar stores will be closing/closed in 2020. The list of casualties include the following:

  • Tailored Brands (Men's Wearhouse, Jos. A. Bank): 500 stores
  • Tailored Brands (Men's Wearhouse, Jos. A. Bank): 500 stores
  • Pier 1 Imports: 450 stores
  • GameStop: 320 stores
  • Signet Jewelers (Kay Jewelers & others): 300 stores
  • GNC: 248 stores
  • Victoria's Secret: 238 stores
  • Gap: 230 stores
  • Tuesday Morning: 230 stores
  • Walgreens: 200 stores
  • Forever 21: 178 stores
  • PVH Corp (Calvin Klein): 162 stores
  • JCPenney: 155 stores
  • A.C. Moore: 145 stores
  • Macy's: 125 stores
  • Microsoft: 83 stores
  • Sears: 51 stores
  • Brooks Brothers: 51 stores
  • Bath & Body Works: 50 stores
  • Kmart: 45 stores
  • Bed, Bath & Beyond: 44 stores
  • Neiman Marcus: 20 stores
  • Nordstrom: 19 stores
  • Hallmark: 16 stores

Brick and mortar is getting hit hard, but many, including Amazon, are adapting. There has been a major omni-channel play by Amazon. Amazon recently announced that they would be commercializing their “just walk out” Amazon Go technology. This technology uses phone-location, cameras, and RFID technology to allow a customer to simply walk in, put an item in their cart, and walk out without checking out physically. Amazon has also developed similar shopping cart-based technology that is able to be used in existing stores without the camera installations necessary for Amazon Go.

In the UK, Amazon is looking at opening 20+ convenience stores. In Philadelphia, they are looking at piloting a brick and mortar expansion. Amazon is getting serious about the brick and mortar omnichannel play.

Amazon is not the only retailer looking at expanding their omnichannel. Kroger is building a DC Metro distribution center despite not having any nearby physical stores. Bill Bennet, the head of ecommerce at Kroger, recently stated that “[Kroger is] building some amazing, industry-leading stuff, including our Ocado sheds opening soon, Nuro delivery tests in flight, and our incredible grocery pickup/delivery capabilities bringing Fresh for Everyone.”

Look at your ecommerce sales through the lens of the total market. As your brick and mortar partners close their doors, those customers do not disappear. Ecommerce is the likeliest place for you to make up in terms of growth.

Walmart is changing their game for the omnichannel experience.

Walmart is also optimizing their omnichannel play. After a move early this year to have ecommerce buyers report through the store organization, Walmart brought hundreds of ecommerce jobs back to their corporate HQ in Bentonville, Arkansas. Many of these associates were dotcom buyers who will now be managing as omnichannel associate buyers.

In addition to these omnichannel changes, Walmart seemed to officially launched Walmart+. For under a hundred dollars a year, Walmart will offer same day delivery on a wide assortment, including grocery. Walmart has delayed the launch more than once, and further tested the program across a number of specific regions. Some report that the actual implementation may still be delayed.

To further improve their omnichannel coordination with vendors, Walmart has created a one stop advertising dashboard said to rival Amazon. The tool should allow vendors to see if their online advertising leads to instore purchases. Walmart is changing their game for the omnichannel experience.

Walmart dotcom has largely been ignored because of its size compared to Amazon and Walmart stores. By viewing Walmart as an omnichannel, you will be able to experience the most YoY growth.

Amazon is making changes in prep for holiday 2020, some good, and some hard to work with

Like Walmart, Amazon has also improved their advertising dashboard, adding ROAS to its metrics. This will allow advertisers to move away from the Amazon favored ACoS to better measure return on ad spend.

Amazon now measuring ROAS | Pattern

This may be some of the only good news coming out of Amazon. To prevent a second wave of shipping restrictions, Amazon has created SKU level shipping restrictions across several categories. Starting at 200 per seller per unit, Amazon is limiting assortment in prep for holiday. Limitations are based on forecasted demand. Amazon says they will open up the restrictions come holiday. We recommend being ready to send in most of your inventory once the doors open. These will not be the last inventory restrictions we see this year.

Jeff Bezos digitally appears before congress to address antitrust allegations

Much can be said about Bezos’ testimony to congress. Jeff Bezos put out an 8 page written statement where he shared some of the following insights.

“Who do Americans trust more than Amazon ‘to do the right thing?’ Only their primary physicians and the military, according to a January 2020 Morning Consult survey,” he said.

“Amazon accounts for less than 1% of the $25 trillion global retail market and less than 4% of retail in the U.S. Unlike industries that are winner-take-all, there’s room in retail for many winners. For example, more than 80 retailers in the U.S. alone earn over $1 billion in sales.”

“There are now 1.7 million small and medium-sized businesses around the world selling in Amazon’s stores. More than 200,000 entrepreneurs worldwide surpassed $100,000 in sales in our stores in 2019. On top of that, we estimate that third-party businesses selling in Amazon’s stores have created over 2.2 million new jobs around the world.”

Despite the statement, Bezos was grilled on how they use their sellers’ data. Days later, states like New York announce they are looking at investigating Amazon.

This will likely not be the last time we hear about Amazon being questioned by law makers. We will keep an ear to the ground if there are changes that could affect selling on Amazon.

All in all, retail is changing daily, especially in the new climate since a global pandemic. Come here the first Wednesday of each month to keep up with our Pattern Forecast and stay in the loop. To learn more about what Pattern does, contact us below or subscribe to our biweekly Insights newsletter.

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Amazon's Sponsored Product ads
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What Are Amazon’s Advertising Products? Sponsored Product, Brand, & Display Ads

What Are Amazon’s Advertising Products? Sponsored Product, Brand, & Display Ads

Utilizing Amazon sponsored ads can be a smart way for a brand to drive greater traffic to a product listing and start increasing sales. While many brands still struggle to manage their advertising strategies, 30% of Amazon brand sellers increased their advertising budgets in 2022. As ecommerce executives (or even on the nose with VPs of ecommerce?)  approve their 2023 advertising budgets, it may be worth it to take a look at Amazon’s advertising products and the benefit they may have on increasing conversions. 

​​Pattern is the premier ecommerce accelerator with all of the expertise, data-driven insights, and technology brands need to gain control on Amazon and maintain their competitive niche. We know the high value of and how to utilize Amazon’s advertising products to drive the most traffic and conversions to benefit and accelerate your brand.

Here are Amazon’s three main advertising products you should know about in order to drive listing traffic to your products and increase conversions: 

For a brand executive who is selling their product on Amazon, you may not already know the differences between campaign type, so we will walk you through the differences and uses for each of these three ad campaigns.

Sponsored Product Ads

Sponsored Products are a mid-funnel advertising strategy that gives visibility to products above the top organic listings (see example below). This strategy uses custom keywords to get products in front of the consumers who are searching for them, however it can be used to capture new audiences as well.These cost-per-click (CPC) ads require no additional copy or images, but usually receive the most interaction of the campaigns and need to be monitored closely.

As you can see, these ads look just like an organic listing, however they say, “Sponsored,” on them. These types of ads can be especially effective forms of advertising because they tend to blend in with the organic results around them. With Sponsored Products, you can get your products in front of qualified customers who are searching for your product in such a way that doesn’t make them feel like they are being served an advertisement.

Sponsored Brand Ads

Sponsored Brand Ads are a top-of-funnel brand awareness tool and function on keywords. This ad format helps show a customer what they may be in need of and where to get it.  Commonly used to promote product lines or best sellers, a Sponsored Brand ad shows up as a banner above the search results (see example below). This type of ad requires that the brand showcase at least three separate products.

Unlike other campaigns used on the Amazon platform, Sponsored Brand ads require ad copy and a unique logo. These ads also can take customers to a custom landing page, or a page on the brand store, that way they get a clear and overall picture about who your brand is, what other products you sell, and why they can trust your brand

Sponsored Display Ads

Sponsored Display ads can be a tactic for top, middle, or bottom of the advertising funnel due to its varying targeting abilities. Although most commonly found under the bullet points of a detail page, these ads can also show in emails, newsletters, and even more locations off platform.

Unlike the previous ad campaigns discussed, sponsored display ads can target shopping behaviors, like repeat purchasers, similar product purchasers, and even people who viewed the detail page but did not buy. Sponsored Display ads help customers discover your brand, drive awareness, and create loyalty. 

The example above shows just one of the many placements Sponsored Display has.

Accelerate Your Sponsored Products With Pattern 

Rather than competing with each other, each of the three sponsored ad products focus on a different section of the sales funnel, allowing you to target your customers and hit your sales numbers, all while edging out possible competitors. When brands use these advertising campaigns, they can better optimize their ad budget to improve ROAS and build revenue. 

At Pattern, we have all the resources to help your brand build successful advertising and digital marketing campaigns on Amazon so you can increase traffic and conversions, which will in turn increase your revenue

Global Ecommerce Weekly News: 27th September 2022
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Global Ecommerce Weekly News: 27th September 2022

Get up to date with this week's ecommerce headlines from around the globe. --- Amazon News --- Amazon drives renewable energy push with 71 new projects Amazon is planning to add 2.7 gigawatts of clean energy capacity through a couple of new projects as the company attempts to use 100% renewable energy by 2025. The ecommerce business will soon have a total of 329 renewable energy projects, generating 50,000 gigawatt hours of clean energy, which is equivalent to powering 4.6 million US homes every year. [Read more on Reuters](https://www.reuters.com/business/sustainable-business/amazon-drives-renewable-energy-push-with-71-new-projects-2022-09-21/) Amazon launches Prime Early Access Sale Amazon is launching a new 2-day shopping event for its Prime members only, beginning on the 11th of October. Across 15 countries, Prime customers will have access to the shopping event, with thousands of deals on offer globall, ranging from fashion to electronics to essentials. The event has the purpose of giving Prime users the chance to spread the cost of items over the winter months, 6 weeks ahead of Black Friday. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/26/prime-early-access-sale/) --- Other Marketplace News --- Shopify unveils new localisation tool Shopify is launching a new localisation tool, called Translate & Adapt, which works with Shopify Markets to offer localisation for sellers who are looking to expand into new markets. The tool translates a user’s online store into different languages, including product pages and information pages. Merchants are also able to create different shipping terms for each market using the new tool, which allows international expansion and offers a more localised consumer experience, unveiling new potential. [Read more on Ecommerce News](https://ecommercenews.eu/shopify-launches-new-localisation-tool/) Etsy is set to invest hundreds of millions into its marketing platform Etsy CEO claims that the company is on route to spend more than $570 million USD on marketing this year. Even during a time of macroeconomic pressure, inflation and rising interest rates, the company is preparing itself and its sellers for the upcoming holiday season and is focused on retaining interest from buyers. [Read more on Yahoo News](https://uk.news.yahoo.com/etsy-600-million-on-marketing-ceo-154054219.html) --- Other Ecommerce News --- Meta looks to cut costs by 10% in the coming months Meta employees are facing job redundancies as the company plans to cut its costs by 10% over the next few months. Meta reported a 22% YoY increase in costs and expenses, totalling over $20 billion USD. The cuts are expected to come in the form of job redundancies as a result of department reorganisations rather than formal layoffs. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/22/meta-to-slash-costs-by-10-over-coming-months/) DHL teams up with Quadient to offer smart locker deliveries in the UK DHL and tech company, Quadient, have partnered to offer smart lockers parcel pick-up throughout the UK. The new contactless, secure locker stations will give recipients more choice and flexibility to receive their parcels at a time and location best suited to them. The partnership plans to install 500 locker stations across the country by the end of 2022. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/21/dhl-partners-with-quadient-to-offer-smart-locker-delivery/) The online fashion market is set to be worth nearly $170 billion USD in 2025 The European online fashion retail market is set to grow 50% by 2025, with an online turnover of $170 billion USD, which is 33% of the retail branch’s total. Cross-border marketplaces prove to be the largest drivers of this growth, with online websites and apps like Vinted largely pushing the market’s online growth. Zalando recently became the largest cross-border fashion retailer/marketplace, responsible for 11.7% of the online market’s share. [Read more on Ecommerce News](https://ecommercenews.eu/online-fashion-market-worth-e175-billion-in-2025/)

Top 5 Ways to Prepare for Peak with Google Ads
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Top 5 Ways to Prepare for Peak with Google Ads

Peak season is almost upon us and with all signs pointing to it starting earlier than ever, with Christmas gifting searches now ramping up in August and September, it’s time to start preparing for peak. In this article, we’re sharing our top five tips for planning and preparing for peak season with Google Ads and the strategies required to get your Paid Search ready so you can drive success over this crucial period.

1. Go Early

In 2021, gifting search terms started increasing in popularity in August. The general trend is that people are looking, researching and weighing their options early, so it’s best to start your Paid activity early to ensure that you’re capturing that early research traffic. This will help drive revenue alongside aiding those consumers who are in their research phase.

From 2020 to 2021, spend during Cyber Week actually only rose 2% but in the weeks leading up to it, it increased by 16%. However, Cyber Week is still the biggest period during the latter half of the year, accounting for 23% of all online spend by consumers over peak. Being prepared and starting early will help you to maximise your time during this period.

2. Get Ready for Privacy Changes

 According to Google, 48% of global consumers have stopped buying or using a service due to privacy concerns. Privacy is front of mind when consumers are shopping online and we know that Google is phasing out 3rd party cookies in 2023. This is going to make it much harder to track users online and it’s something that brands need to think about this now – waiting isn’t an option.

From a Google Ads point of view, you want to ensure you have set up the Google Ads tag across your site and have enabled ‘Enhanced Conversions’, which ensures all conversions are tracked and allows you to monitor other actions such as ‘Add to Cart.’ This is relatively easy to set up, especially if you use ‘Google Tag Manager’.

It’s also vitally important that you build up your first-party data during this time as this is data you own and it can be used when targeting consumers that have provided your brand with their email address. Pattern’s own experience shows that by segmenting and using first-party data, you can see a 10% improvement in revenue and ROI.

3. Ensure Consumers Can Discover your Brand

A full-funnel approach is now more important than ever as consumers become more discerning and have more choices than ever of where to shop.

Pattern has seen success with Google Ads’ ‘Discovery Campaigns’ (image-based ads that appear on Google platforms such as Gmail and the Google app), which have driven success both from a traffic and revenue perspective.

The performance of these campaigns is significantly enhanced by adopting a segmented and nuanced approach to first-party data and incorporating these into your campaigns. Other options for a full-funnel approach include YouTube and testing bidding on keywords that are more representative of the research phase. (e.g. ‘best baby clothes’ for a baby clothes brand)

4. Get Moving with Performance Max

Earlier this year, Google announced that they were moving away from Smart Shopping and launched Performance Max. This is a new campaign type that incorporates features and placements from Smart Shopping but expands them onto other platforms such as Gmail but also alternative creative options, such as images and videos.

Since Google has already started automatically upgrading Smart Shopping campaigns to Performance Max, expect to see some fluctuations in the first 2 weeks following the switch over but results generally seem positive. We recommend upgrading sooner rather than later to limit any potential impact to peak period.

5. Flight Budgets Accordingly

Peak period will be even more competitive than in 2021 and you’ll need your budgets to support this period, we recommend boosting budgets in October to start capturing that early peak traffic. As we enter November and the Cyber Period, start early and make sure you are capturing those consumers looking for early bargains, ensuring you are being nimble in your optimisations and reacting to the data that you are seeing.

Overall, peak period is vital to help drive your sales and by preparing early, you will see strong results and drive success for your brand. If you want to discuss how your brand can navigate this next peak period, contact us to discuss your options with our performance team now.