The Slowdown of E-Commerce and How Online Brands Can Adapt

The COVID-fueled e-commerce party couldn’t last forever. Businesses knew that it was only a matter of time before consumers reverted to their pre-pandemic shopping habits of mixing online and in-person shopping. That time appears to be upon us.

A recently released Mastercard SpendingPulse report showed a year-over-year (YoY) retail sales increase of 7.2 percent in April. However, within this figure, we see that in-store sales increased 10 percent while e-commerce declined by nearly 2 percent.

Amazon.com, Wayfair, and Target all reported slowdowns in their e-commerce business in Q1. Amazon saw online sales decline by 3 percent, and Wayfair reported fewer active customers. While Target’s digital comps were up 3.2 percent, that was down from the pandemic-driven 50.2 percent increase in 2021.

If the slowdown of e-commerce wasn’t enough, customer acquisition and retargeting costs continue to increase. Business Insider reported YoY ad cost increases for Google, Meta (Facebook), TikTok, and Amazon sponsored products.

While retail is still strong overall, inflation’s impact on consumer spending combined with the return to in-store shopping means e-commerce businesses are left fighting for a bigger piece of a smaller, crowded, and uncertain pie. Throw rising acquisition and retargeting costs into this mix, and you have yourself a not-so-favorable recipe.

Luckily for e-commerce brands, there are ways they can adapt their marketing efforts to these market conditions to increase customer retention, reduce paid media costs, and increase profit.

Focus on Intent-Based Marketing

When it comes to marketing, sending messages that are highly relevant to the current state of a customer’s journey leads to sales, especially with opt-in channels like email and SMS. With an average conversion rate of 1.9 percent (compare this to paid media), behavior-based automated emails accomplish this. They generate nearly 30 percent of all email orders while accounting for only 2 percent of the sends.

The reason: they’re driven by consumer intent.

Acting as if every interaction with your brand is an intent signal toward making a purchase, automating messages that address high-intent behavior, such as sending welcome messages for new subscribers, browse abandonment messages for online window shoppers, and cart abandonment messages for those close to completing their orders, can have a meaningful impact on sales. These low-cost, high-conversion messages can also reduce the reliance on paid media, increasing your overall profit margins.

Adopt SMS Marketing Now

SMS marketing is on fire. In 2021, brands sent 94 percent more messages than in 2020 — a year that was coming off a nearly 400 percent increase in sends. Because SMS is an everyday communication channel for all generational cohorts — and an opt-in marketing channel — brands continue to see high engagement and sales from these messages. In 2021, click rates increased 10 percent, conversion rates for automated SMS increased 20 percent, and SMS generated more than 100 percent incremental orders YoY.

Growing all opt-in channels, like email and SMS, provides businesses a direct line of communication with their audience and are generally less expensive than their marketing counterparts. This means brands can save on paid retargeting efforts and their ever-increasing costs.

Focus on Customer Retention Marketing

If customer acquisition is a bride, customer retention is a bridesmaid — important but often overlooked. With increasing acquisition costs, brands need a renewed focus on keeping the customers they already paid to attract. A simple but underutilized tactic is to implement post-purchase email and SMS marketing campaigns to improve customers’ purchase experiences.

Look beyond traditional product review messages and create an experience that provides engagement and value for purchasers by sending a customer a thank-you message, product care instructions, how-to videos, and helpful tips and tricks for maximizing product usage. While these messages aren't specifically promotional, they're good sources for upselling and cross-selling.

Optimize Transactional Emails

Like post-purchase marketing, order and shipping confirmation messages are often overlooked. But they shouldn’t be. These messages are highly read, giving them the untapped potential to influence repeat sales.

Conversion rates for order confirmation and shipping confirmation emails increased 24 percent and 53 percent YoY, respectively, meaning not only are more people using them to shop, but each order placed marks a repeat purchase. Hello, customer retention!

Optimize these messages to include branding, product recommendations, clickable links, customer service details, and purchaser-only offers. With consumers increasingly on-the-go (maybe shopping in stores), sending a SMS shipping or delivery notification is a great way to communicate with them while enhancing the purchase experience.

E-commerce isn’t dying; it’s just coming back down to Earth. However, with the rise of in-store shopping, inflation, and costs of paid acquisition and retargeting, brands that invest smartly in optimizing their opt-in marketing channels will find themselves enjoying a larger piece of the pie and profits.

Greg Zakowicz is a veteran marketer and the director of content at Omnisend, the all-in-one e-commerce marketing automation platform.