Nowhere else was the old adage of living in “interesting times” more prevalent than in eCommerce during 2021. From the emergence of new business models to the global crisis facing supply chain management, 2021 should have been the year eCommerce finally came of age.
At least, in theory.
2022 may be just as unpredictable for eCommerce as 2021 was. But just how unpredictable was the market last year?
Between Two Worlds? Online Shopping vs. Brick and Mortar
While we all faced uncertainty around the globe as we entered into the second year of the pandemic, the availability of breakthrough vaccines in addition to loosened restrictions should have signaled the return of brick-and-mortar retail with a vengeance.
Yet the ongoing supply chain crisis affected both physical retail as well as eCommerce. Amazon may dominate the latter. But an unexpected turn of events soon proved that they could easily change the very face of retail as a whole when it was announced they exceeded the sales of Walmart in the US by some $40 billion in August.
Yet Walmart's continuing investment in its eCommerce infrastructure inevitably paid off in 2021, when it was announced that online sales grew by an estimated 70% based on a two-year comparison.
While exclusively online retailers may have a greater share in the wider retail market among digitally native consumers, there are two advantages retailers like Walmart have over the likes of Amazon: price and reputation. And as analysts predict the supply chain crisis could eventually foster inflation, more consumers are likely to consider both as guiding factors in their purchases.
How Much Did the Pandemic Affect eCommerce in 2021?
It's not just the US that saw a surge in eCommerce as a result of the pandemic.
As early as July, global retail eCommerce sales were estimated to account for some $4.9 trillion. And at $1.3 trillion in sales, the market share of online retail in China surpasses that of brick and mortar by an estimated 52%.
But how well did eCommerce fare domestically compared to the 10-year growth reported during the first three months of 2020?
The reality is that eCommerce was already on the upswing before the pandemic. Amazon sales were $88.9 billion in 2014 — an enviable number by any standards. Within two years, that figure stood at close to $136 billion.
But by the end of 2020? That number stood at a staggering $386.1 billion. For just one marketplace. And with third-party sellers being responsible for over 3.8 billion products sold on Amazon between August 2020 and August 2021, the continued scrutiny from federal regulators may have little effect on Amazon's marketplace sales success.
There's no question that pandemic-related lockdowns were the predominant factor behind the $791.7 billion in sales reported for the US eCommerce market in 2020. And with Q3 sales of $214.6 billion in 2021, it would only be fair to state that total sales for 2021 would exceed 2020's figures considerably.
But Q3 sales decreased by 3.3% compared to the previous quarter — in a market, that's still only 13% of retail.
Yet as consumers have begun to adjust to what analysts are referring to as the new normal, one thing is for certain: digital commerce will continue to shape the retail landscape in ways few of us could have predicted just five years ago.
The Supply Chain Crisis of 2021
While eCommerce may have seen an overall boost in 2021, the resulting success also strained an already fragile global supply chain that consumers were unprepared for.
By the end of 2021, Drewry's composite World Container Index placed the average cost of a 40-foot shipping container at $9,481 — a figure 80% higher than the previous year. But the 5.4% consumer price increase reported in June wasn't simply the result of shipping container costs.
The cost of raw materials also surged to an increase of 10% in 2021 even as China, one of the largest global exporters of raw materials, reported profits of over 92 percent for manufacturing profits in March.
Fears of the effects of the supply chain crisis on the 2021 holiday season may have been palpable, despite President Biden's announcement that he would be working in conjunction with transportation leaders and retailers to help relieve the anticipated burden on shoppers. Yet retail sales exceeded the holiday season of 2020 by 8.5%, with eCommerce accounting for close to 21% of that figure.
Yet the threat of further bottlenecks continues to loom into 2021, with recent estimates indicating that supply chain disruption could be responsible for revenue losses of up to $4 trillion.
As vendors move forward, the assurance of stability in their chain of logistics remains one of the more unexpected dilemmas in business growth.
2021: The Year of the Amazon Aggregator
If 2020 was the year of the third-party brand on Amazon, then 2021 was the year of the Amazon aggregator.
Recent estimates placed the amount of capital being poured into the Amazon aggregator market at $13 billion, with leading giant Thrasio attracting $3.4 billion alone in 2021. And with almost 90 aggregators vying for new sellers, bidding wars have already been reported in what some agencies have predicted as being a bloodbath.
Yet if there's a threat of oversaturation in eCommerce, it's amplified for the Amazon aggregator market as both the strains on resources and lack of experience in managing an Amazon brand can frequently lead to underestimating the challenges of navigating the marketplace.
“One thing we always encourage brands to consider when making an exit is the background of an aggregator,” said Josh Levine, Managing Partner at Color More Lines.
“They may be tech-oriented. They may even have basic knowledge of how eCommerce works. But how well do they understand the Amazon ecosystem?”
Not every private equity investor is suited for Amazon. And not every seller is suited for an Amazon aggregator.
Sellers who are only concerned with short-term sales at a high volume may not realize that successful aggregators are concerned with brands capable of maintaining long-term interest. And equity partners used to traditional tech rollups need to realize that if eCommerce is an entirely different beast, Amazon operates on an entirely different playing field; one in which the rules are subject to change without any notice whatsoever.
Will 2021's Trends Continue into 2022?
As increased scrutiny in the form of antitrust acts continues to be a legitimate concern for even non-Amazon sellers, there's no way of predicting the eCommerce landscape in 2022. New restrictions may emerge. But so will new solutions. And new trends.
It may make sense to develop your own online store alongside a traditional eCommerce platform like Amazon. And it's certainly more viable in 2022 to maintain a unique identity both on and off of Amazon. But have you considered the viability of your brand first?
The digital marketplace is only as strong as the strength of its brands. Unexpected factors will affect any brand, whether it's the result of a global health crisis or a logistical nightmare. If there's one thing 2021 has taught us, it's that collateral effects can and will be unpredictable by nature.
Adaptation is critical to a brand's success. That includes that brand's online business because it's the longevity that matters in eCommerce — not quick sales.
Color More Lines helps businesses online adapt to both the changing world of eCommerce platforms as well as the changing retail landscape. Find out more at Color More Lines.