April 27, 2020

The Race for Sustainable Growth on Ecommerce

By George Hatch / Brand Growth

The phrase “sustainable growth” can feel a bit like a buzzword that is casually thrown around in the business world, but there’s a reason it’s used so often: sustainable growth is key to a business’s success.

Whenever a business that’s one or two years old discusses its rapid growth as a sort of selling point or a point of pride, I can’t help but wonder, but is it sustainable? To me, sustainable growth and long-term business success are traditionally more like the tortoise and the hare—slow and steady wins the race. But do the same rules apply to ecommerce? Read on to better understand sustainable growth, how to sustainably grow ecommerce, and how Pattern can help.

What is sustainable growth?

There are philosophical definitions of sustainable growth and mathematical definitions of sustainable growth, but at its core, sustainable growth is just these two things: making more money then you spend (i.e., growing sales without growing a sales team, or at least growing sales MORE than growing your sales team), and repeatable success—proving that your company’s initial sales aren’t just a one-off or the result of luck.

To help give some insight, the Cleveland Research Company recently conducted a benchmark of 121 manufacturers that sell online to help illuminate the state of ecommerce and provide insight for ecommerce in the year 2020.

What is the state of ecommerce?

This is the first question the CRC report seeks to answer. Key findings from the report can be summed up like this: ecommerce is definitely going to grow in 2020 and beyond.

Specific findings are as follows:

  • Brands are optimistic about ecommerce penetration and believe the rate of penetration, estimated to be 14% in 2019, will double in the next five years.
  • Amazon sales “reaccelerated” last year, growing faster than respondents’ expectations; brands expect this to continue—63% reported Amazon will likely be the top dollar growing account this year.
  • Respondents believe Walmart is the next company to watch when it comes to ecommerce sales, with food and CPG companies in particular expecting to see Walmart as the largest opportunity for them. However, online grocery is a trend to watch because Amazon is taking steps to enhance its own grocery offerings, while Walmart expects slower growth year over year driven by smaller online grocery store expansion, the report states.

As traditional storefronts struggle amidst the COVID-19 pandemic, it is expected ecommerce numbers will actually grow more than originally predicted at the end of 2019, although as the pandemic affects the economy it is unclear if ecommerce will experience a slowing of growth as well.

Amazon and ecommerce

Unsurprisingly, Amazon is still king when it comes to ecommerce—however, CRC reported Amazon’s continued growth is coming at the expense of margins for many manufacturers, and brands are expecting to be less profitable on Amazon this year. To combat this, it appears brands are working to make their Amazon accounts more profitable on the backend through product development, packing, logistics, and greater control over marketplace channels.

The report also stated anecdotal feedback from some manufacturers indicates Amazon is separating out advertising spending from retail profitability, which impacts Amazon’s profit calculations for some brands.

What can Pattern do?

Russ Dieringer, CFA and executive director of the ecommerce council, had this to say about the report’s findings:

“In analyzing these benchmark results, we feel a subtle shift happening in what will separate truly effective ecommerce professionals from mediocre leaders over the coming years. Those that can capture the growth potential online, while deftly managing their retail relationships and creating a sustainably-profitable digital business will position their companies (and themselves!) for greater success compared to those who are only able to accomplish the former.”

Here at Pattern, we’re committed to helping companies grow and manage ecommerce worldwide through a variety of solutions. Not only do we help companies capture their “growth potential,” like Russ says, but we also have the tools to help companies “deftly” manage retail relationships. Our consultants, management tools, services, and more are ready and waiting to help ecommerce companies grow, and grow sustainably, experiencing all the potential of ecommerce this year and in the years to come.

To learn more about how Pattern can help your company ride the ecommerce wave without wiping out, contact Pattern through the form below or explore more of our content.

More Resources
20 No-Brainer Tactics For Growing Amazon Sales in 2021
Amazon 1P, 3P, or E3P: Which Selling Model Is Better?