Challenges Facing Growing Ecommerce Businesses in 2021

Every new year brings new opportunities, trends, and technologies for eCommerce. With this comes new challenges for eCommerce startups. Learn more here.

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eCommerce Strategy

Ecommerce has been one of the most vibrant segments of the retail sector in recent years. Research suggests that it accounts for 75% of the retail growth in 2020 and is expected to expand further in the short-term. The growth is favorable in North America as well as parts of Asia. Growing eCommerce firms need to understand the nature of this segment and adjust to the new trends for continued success in 2021.

Expanding Global Market

Ecommerce experienced tremendous growth in 2019 with global sales exceeding $3.5 trillion. This figure was an 18% increase from the previous year. Experts project that the figure will hit $6.5 trillion by the year 2023. These trends make it one of the most promising segments of retail business.

The Challenges Facing Ecommerce

Economic Challenges

Ecommerce firms must be ready to shoulder the high logistic costs of running a successful online business. The costs include efficient warehouse management, order processing, and delivery of goods to end customers. Currently, it is firms with superior logistical capabilities that dominate the market. Fledging businesses must invest in logistical infrastructure if their ventures are to succeed in the long-term.

Technology Challenges

The online sales method poses a challenge for eCommerce firms because customers do not make orders in-person. The use of addresses and other personal details to make purchases expose eCommerce firms to fraudsters. Such scammers may make cash-on-delivery orders using fictitious identification details and cause massive losses to emerging firms.

Another technological challenge is the poor quality of broadband networks and the high costs of the available networks. These challenges make it hard to start viable eCommerce businesses in some developing countries.

Social Challenges

Ecommerce businesses continue to face significant challenges in convincing consumers in the developing world to embrace online sales. Indeed, their share of the global retail market was only 14.1% in 2019. Most eCommerce firms struggle to make sales to the middleclass in large parts of Asia, Middle East, Africa, and Latin America. Without access to this segment, eCommerce businesses will remain in the fridges of the retail sector.

Legal Challenges

Most countries require eCommerce firms to be formally registered and compliant with several regulations. For instance, a 2018 US court ruling stated that firms are liable for issues emanating from products sold on their sites. The ruling places extra responsibility on firms to vet their vendors for conformity to the highest industry standards. Similarly, firms operating in the EU must comply with the General Data Protection Regulation.

Looking into The Future: Growth Opportunities Amid Mounting Challenges

Online to Offline Trend

The online-to-offline trend continues to pick steam with many eCommerce firms setting up luxury shops that showcase the best of their products. Some firms collaborate with hotels and casinos to set up pop-up stores where customers can interact with the brand. Others create exhibition stores where products are made in real-time.  

Multi-Channel Operations

Innovative eCommerce companies are experimenting with cutting-edge digital technologies such as voice commerce, smart mirrors, augmented reality, and live streams. These channels offer an opportunity to reach more customers but also increase operational costs.

Automation

Many eCommerce firms have automated a majority of their operations. Automation is partly responsible for the emerging trend where over 65% of online retailers deliver goods on the same day. It helps businesses expand their brand footprint in international markets by streamlining operations. Automation also helps firms improve inventory management and streamline product tracking for easy traceability. For startups, automation helps track and segment customers for improved engagement and retention.

Mobile Ecommerce

Analysts estimate that mobile sales will account for 54% of all the global eCommerce sales made in 2021. Dealing with customers who buy with mobile devices is tricky because the conversion rates are less than 50% of the rate for desktops. Further, over half of all visitors using mobile browsers leave if the site takes too long to load. Mobile devices also have a higher bounce rate than desktop computers. Ecommerce firms need to develop mobile-friendly websites if they are to benefit from mobile sales.

International Markets

Experts expect global eCommerce sales volume to exceed $4.2 trillion in 2020. The number of people shopping online will hit 2.1 billion by 2021. Meanwhile, the global middleclass will increase to 1.4 billion in 2020 with over 85% of them coming from the Asia Pacific Region. The region is a hotbed of eCommerce having experienced a 25% growth in 2019. This means that majority of the new customers live outside the US.

Firms that want to venture into the global market must take advantage of localization, which delivers a return of $25 for every dollar spent. Localization strategies include using local currencies, offering familiar payment methods, and translating marketing content to native languages.

Conclusion

Ecommerce businesses will continue to grow in 2021, despite challenges. However, with obstacles ranging from logistical infrastructure to navigating complex legal systems, businesses must adapt to emerging trends for long-term success. These trends indicate that most of the growth will occur in emerging markets. Overall, the eCommerce landscape presents compelling opportunities for innovative firms in 2021.

To learn how Rakuten Super Logistics can help your business overcome logistical challenges to shorten delivery time and lower costs, contact us today.

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Rakuten Super Logistics is a leading eCommerce order fulfillment company that provides the scalability, flexibility, and cost savings retailers demand.

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