With a complete halt in foot traffic, brands of all sizes quickly recognized that Direct to Consumer (DTC) e-commerce must be their channel of choice.
Brands that relied on brick and mortar partners like Target, Walmart, Sephora etc., were disappointed to find sales impacted when foot traffic was halted or greatly reduced. Some major distributors stopped accepting new products altogether because of the pandemic.
Amazon wasn’t a great alternative for these companies, because selling through Amazon hurts their sellers’ Average Order Value with their own product recommendation engine: bundling in Amazon Basics or competitor products, and recommending competitor products.
The silver lining? Many of those brands also found their website e-commerce channel completely sold out shortly after the quarantine was implemented. This has fostered an organic re-focus on DTC, with brands coming out of the pandemic with greater investment in their web sales channel.
As Nick Raushenbush, co-founder & COO of Shogun explains, “E-commerce platform software growth has surged during the pandemic, as has periphery software in almost every corner of the e-commerce SaaS industry.”
He continues, “this has been marked by an unprecedented amount of venture capital investments in the space throughout the past year.” In addition to being the co-founder of Shogun, Raushenbush is an angel investor, with investments in e-commerce software companies like Depict.ai and Gorgias, as well as consumer companies like Alto Pharmacy.
An infusion of investments in e-commerce translates into the further development of more advanced technologies for retail, especially AI and Machine Learning.
Up until 2019, the primary use case for AI in e-commerce has been product recommendation engines. Product recommendations are a facet of “personalization”- using user data to automatically create a more personalized shopping experience.
In regards to the acceleration of AI in direct response to the pandemic, Raushenbush explains, “the surge of e-commerce pushed innovation amongst 3PL (3rd Party Logistics) companies and last-mile delivery tech.”
Toward the end of 2019, Shopify bought 6 River Systems for its autonomous warehouse hardware, a major move to support their planned AI-powered fulfillment network.
“Carriers, responsible for shipping, have been leveraging AI to optimize last-mile delivery route planning,” says Raushenbush.
Ac Hampton, Founder and CEO of Supreme E-com, a hands-on dropshipping and ecommerce mentorship program, expands on this point, “We saw a huge negative backlash to online store owners with prolonged shipping times and selling falsified products.”
“This forced the best marketers to have to legitimize themselves to their customers, and dropshippers now are having to establish brands faster to accommodate for the previous lack of transparency.”
“The pandemic has also accelerated e-commerce in another way,” says Braxton Manley, CEO of Braxley Bands, an Apple Watch band manufacturer that plants one tree for every purchase. “It created a massive opportunity for new entrepreneurs to enter the space and sell their goods and services digitally.”
Interestingly, this surge of entrepreneurs had an unexpected effect with regards to AI.
When people began to sell products that exploited needs during the pandemic such as sanitizers, face masks, etc. Facebook cracked down rigorously on ad accounts and began restricting them at an alarming rate.
“This forced many dropshippers to have to close up shop or change their practices in selling,” says Hampton, “Facebook’s AI has been increasingly strict on publishing ads, making the knowledge of how to do so more valuable than ever.”
A surge of online buyers and sellers means a surge of data. “There was definitely more data to collect in a shorter amount of time due to the masses flooding to online markets,” Hampton explains, “This in return speeds up sales and recognition, allowing stores and brands to optimize and build up more rapidly than ever before.”
“Our entire business growth strategy has been entirely based on understanding AI algorithms on social media platforms. Without those platforms and their advanced targeting, we would not exist,” says Manely. “As social media usage went up, so did daily interactions with AI,” he adds.
Product recommendation engine AI is becoming increasingly advanced, with tech companies leveraging neural networks, computer vision and natural language processing to understand collections of product data.
According to Raushenbush, technology like OpenAI’s GPT-3 “could have major implications for generating product descriptions, which can be a tedious process for e-commerce companies that have large product catalogs.”
Grant Andrews, co-founder at Braxley Bands, foresees ecommerce brands leveraging AI in their own online stores to display content more personalized to the customer. Similar to how Netflix leverages AI to know what to recommend to the subscriber or even what poster images are displayed for each show.
“For example, a site like ours could display more images with female models if we knew that the shopper was female,” says Andrews. “Or we could also automatically display the watch band on the exact model that the customer has, without them even needing to input anything. Another example would be to display an entirely different site for repeat buyers. Not every customer is the same, so why is the site the same for every customer?”
“It will be pivotal in knowing how much and how effective you can utilize all the data you have gained,” Hampton explains. “You can have all the data in the world but if you’re not using it to your advantage or using it in the right way, it’s a waste of time, effort & money. The most successful companies are the ones who know how to utilize their data most efficiently.”
Raushenbush believes that eventually e-commerce will traverse into brick and mortar, with some distinct changes.
“Physical stores won’t really carry much, if any, inventory except a full array of product variants for consumers to try out in person. I think transactions will be made in-store via Kiosk or on personal mobile devices, and last-mile delivery will be so optimized that consumers will have the product delivered to their home the same day.”
Raushenbush also predicts we’ll see smart televisions activated as a primary shopping channel/screen. Second screen behaviors are well established (think shopping on your phone while watching Netflix) and the television is a larger, and potentially more powerful screen for shopping.
“I think the smartphone will become more like a remote control in the aforementioned use case,” says Raushenbush.
With regards to the biggest shift in e-commerce in 2021, there is currently a lot of focus on “headless” approaches to e-commerce sites right now including the concept of using specialized software for powering the customer-facing experience. This approach generally still involves an e-commerce platform, but more for the “back office”, behind the scenes aspect of the business.
A major driver for this approach is performance (website speed) gains. More than 50% of e-commerce is now mobile commerce, and consumers tend to have little to no patience for sites that are slow to load.
“Some technologies and approaches to ‘headless e-commerce’ can completely remove the load time from the site,” says Raushenbush.
Hampton believes that the biggest shift we are going to see will be the transfer of information, “More people will be aware of the dropship model, ultimately making it more competitive and harder to convince people to buy. With that being said the ones who can use their data the most effectively and understand their target market in depth will always have a leg up.”
Andrews believes independent brands are going to thrive in 2021.
“There’s a lot of amazing things that ecommerce platforms are developing to make the success of small brands possible.”
“Beyond that,” Andrews adds, “I think the e-comm relationship with AI and social media is going to continue to develop. It’s all about creating content people resonate with. People want a story. They want what they are buying to have meaning, and to last.”