What’s Next for E-Commerce?
Published in Jan-Feb 2023
Even by Pakistan’s standards, 2022 was an extraordinarily challenging year and businesses had to deal with a lot, both on the tactical and strategic levels. The economic crises and political chaos within the country directed a lot of businesses to either shut down or opt for severe cost-cutting measures. The cherry on top was the global crisis arising from the war in Ukraine, with massive trade sanctions that delayed or even halted trade. The national YoY CPI inflation decreased to 23.8% in November 2022 from 26.6% in the previous month – it stood at 11.5% in the corresponding month of the previous year.
But you know what they say. Amidst chaos, there is also opportunity. The e-commerce market in Pakistan saw similar trends. Here is a summary of some key learnings to help businesses plan for 2023 and beyond.
1. Don’t be carried away by the e-commerce growth trend courtesy of the pandemic: Although online shopping registered an increase of over 100% after the pandemic hit (the entire nation was shopping, working and socialising online), could it be that the growth of e-commerce expected of the next 10 years has already taken place in the last two years? With Covid-19 restrictions lifted, people crave meaningful connections and they prefer to shop in physical spaces. The result is that consumers are now juggling again between online and offline. The volume of e-commerce transactions in Q3 2022 decreased by 33% compared to the last quarter. Furthermore, digital transactions remained stagnant at Rs 500.8 million in Q2 2022 compared to 508.5 million in Q3; a mere increase of two percent.
Solution: Think agile instead of online versus offline. Firstly, maintain an online presence in case there is another lockdown. Online versus offline is now ‘online x offline’. Secondly, diversify – in products, markets and platforms. Daraz, Amazon or private applications – for example – will help sustain businesses in 2023.
2. Don’t think the recession is here to stay! Assuming that the next year will not be as bad as we expect it to be, fear itself will drive a lot of decisions, be they for venture capitalists, business owners or consumers. Impromptu purchases registered a major decrease in Q3 2022 and more and more consumers went online to look for better deals (source: Returning and New Users Survey, bSecure Checkout, 2022). Consumers are likely to continue to look elsewhere and brand loyalists will shift as soon as they find better deals or better customer service – even if the product quality is the same or even slightly lower. Although this is determined by the category of the item (high value and high involvement), it will generally hold true for the majority of the online product categories.
Solution: Build the brand around experiences. Shoppers are not just aware of prices and deals; social, environmental and governance issues also shape their decision. And although they are excited to return to the physical mall, the post-pandemic customer wants everything right away!
3. Don’t be paralysed by the supply chain crisis: Supply chain issues hit an all-time high in 2022. Import-led businesses were the worst affected. In Pakistan, McDonald’s ‘sacri-fries’ fiasco was a good example of this. When the supply chain crisis hit them they discontinued the large fries option from their deals and this ended up with consumer backlash, with some questioning why McDonald’s had not invested in a supply chain in Pakistan.
Solution: Plan and look for local partners; investing in a supply chain is expensive but worth the effort. This may increase short-term costs, but it will help create a robust system for the future. Another important strategy is to inform customers about how you will respond to potential supply chain issues, so they can feel empowered in the relationship. If you change delivery timelines, then communicate the possible impact of the supply change to your consumers. Communication is the best way forward.
4. Cost cutting or price increases will not manage inflation: As monthly bills increase in terms of total costs and decrease in terms of the number of items bought, people will start looking for cheaper options. Some brands either offered better deals in terms of costs and services or introduced the same product at a lower quality level. Yet, regardless of the tactic, people switched.
Solution: Invest in subscriptions and memberships. Brands and customers are both looking for ways to reduce costs (they will continue to do so in 2023). This means that customers will most likely switch to a cheaper brand. Therefore, brands need to establish a way to keep their value the same or higher to win them back. They can do this by introducing new products at lower prices (Cornetto Mini) or new products at a higher price to establish a high value (Grand Spicy McCrispy).
5. Don’t think local only. Social commerce is growing at a much faster rate in developing markets. Local brands are competing with international brands because everyone is socially engaged with each other and brands rely heavily on social commerce to engage, convert and retain consumers.
Solution: Ensure consistency in quality and availability. Get personal with customers by chatting with them in real-time. This trend will grow in 2023 and brands will have to be socially engaged and find ways to streamline and automate their social presence. People look at an Instagram reel, engage with a brand on TikTok and then ultimately make an in-store purchase. In other words, people interact with the same brand on various platforms; sometimes at the same time.
6. Don’t underestimate the awareness of a post-pandemic conscious consumer!
Shoppers want to research and evaluate all their options and then make their purchases seamlessly. They also want to ensure that the brands they buy are environmentally sustainable and respect their personal data because consumers are now very conscious of how their personal information is used. Apple, for example, introduced data protection policies.
Solution: Collaborate to overcome data issues. It helps find new audiences while ensuring the existing ones are not diluted. Collaborate with influencers and brands, and create loyalty programmes. Inform customers that their data is stored safely. To manage increasing advertising costs, brands must source their own data. Although they have access to first-party data through their social platforms and websites, they should expand into apps. There is no real benefit in expanding into existing marketplaces that did not share their data. Expansion into the app platform is expensive and requires consistent tech support. However, marketing costs will almost be zero once customers are acquired.
To conclude, an IPSOS e-commerce trend study (October 2022), noted that social channels are the key drivers of growth for this year along with product availability and access across various platforms. Brands need to work on customisation, offering more options in SKUs, deliveries and even payment methods. These factors will be key drivers of e-commerce success in 2023.
Mehwish Aslam is a founding member and Head of bSecure Checkout. email@example.com