With an expected growth rate of 30% this year, e-commerce in Egypt is outpacing almost all other economic activity. “E-commerce is the future of trade activity, and it is expected to expand in conjunction with opening more markets around the world,” Sherif Makhlouf, CEO of BOOST for Consultations, a local think tank, told Al Ahram in January. “Ready-made garments, food and electronic devices are the most prominent sectors likely to achieve a boom by the end of 2022.”
According to a report by Shopify, a major e-commerce platform, that growth trend is everywhere. “There have never been as many opportunities,” said the report. “There has never been as much competition.” That makes standing out from the crowd to attract loyal buyers increasingly difficult. In addition, unique ideas have an ever shorter lifespan as competitors copy and improve on promising ones.
Meanwhile, social media, where the Shopify report says “online consumers spend most of their time,” is another dimension sellers must manage. And online companies find it more challenging to target their ideal customers as data protection laws increase and become stricter.
Such challenges seem unlikely to slow ad spending on e-commerce platforms. Statistica, a data aggregation portal, forecasts advertising spending will more than triple from $12.5 billion in 2019 to $38.4 billion in 2024. However, competition and regulations can affect profitability, said the Shopify report, “particularly plummeting returns” on ad dollars spent.
Accordingly, the report highlights several factors that could make or break online sellers whose goal is “prioritizing customer lifetime value and promoting brand loyalty.”
Despite almost all governments lifting Covid-19 restrictions imposed in 2020 and early 2021, more consumers still prefer online shopping. “As businesses came online during the … pandemic, the global trend toward digitization surged … at lightning speed,” noted the Shopify report. “Even as regions begin to reopen, e-commerce sales are still climbing.”
Insider Intelligence’s January 2022 forecast predicted e-commerce sales will reach $5 trillion this year and $6 trillion in 2024. Meanwhile, the Global E-Commerce Market 2021-2025 report estimates growth of $11 trillion over the five-year period.
That means an increasing number of online e-commerce platforms will open yearly, with most catering to a global audience. “Online stores are popping up daily,” said the Shopify report, with 12 million to 24 million e-commerce sites” currently operating.
“As more businesses are online, it’s harder and harder to be found by new customers,” said Mei Ho, senior product marketing lead at Shopify, in September 2021. “Because it’s so easy to start online now, there are definitely rising costs of customer acquisition. Digital advertising is more costly and less lucrative than ever before.” Ben Jabbawy, founder and CEO of Privy, noted that in 2021, “some brands saw ad costs go five times higher … to drive the same amount of traffic.”
Meanwhile, individual ads reach fewer customers in target markets. Simon Kemp, founder and CEO of Kepios, a think tank, said the company’s “July 2021 report showed a 15%-20% drop in the advertising reach of Instagram in Europe. This is huge. Tens of millions of impressions disappeared.”
Question of privacy
Further complicating marketing are data privacy laws and tech companies enforcing their own policies and technologies that prevent access to personal data, regardless of the local laws.
That comes as more users express concern over how third parties use their data amid fast-rising cyber threats fueled by rapid digital transformation across almost all economies and sectors. “Privacy is gaining more visibility,” Olga Andrienko, VP of brand marketing at Semrush, an online services company, wrote on Tech Radar in October 2021. “Users are starting to increase their number of inquiries regarding laws regulating the exchange of personal information and its protection.”
Egypt’s data privacy law, published in October 2020, imposes penalties ranging from fines to prison time. Others with data protection regulations include China, Brazil, the U.S. state of California, and the EU. Unfortunately, those laws don’t align on many aspects and definitions. That forces e-commerce platforms to adjust their operations to comply with various requirements and procedures.
Additionally, some private sector tech firms have taken the initiative to make it harder for e-commerce and data aggregator companies to harvest users’ information. A prominent example was Apple’s 2020 operating system updates, which prevented third-party apps from collecting any of its users without explicit consent. Firefox and Brave, two independent search-engine providers, followed in Apple’s footsteps. Meanwhile, Google’s Chrome will do the same next year.
That affected the results from the 2021 Shopify e-commerce Market Credibility Study, which reported “at least 28% of technology decision-makers around the world expect changes to customer data and privacy regulations to hinder their 2022 growth goals.”
Further complicating the data privacy situation for e-commerce firms is their customers still expect personalized and relevant services. That forces online companies to ask explicitly for their data in a transparent, non-threatening way without breaking national laws and bypassing the technological barriers that tech companies erected to attract customers with their data protection promises.
However, companies that want to customize products or services must be careful how much information they gather and how it is used. “Consumers are over three times more likely to abandon brands that over-personalize,” said Alex de Fursac Gash, a senior director at Gartner’s Marketing, in an October 2021 blog.
The rise of social media platforms has proved lucrative for purveyors of goods and services. According to eMarketer, a market research firm, half of the Chinese who shop online do so through social media platforms rather than dedicated e-commerce portals. In the United States, 30% used social media websites to purchase goods in 2021. Jasmine Enberg, a principal analyst at eMarketer, a research firm, predicts sales on social media platforms will triple by 2025.
However, there is no “one-size-fits-all” or blueprint for companies who want to integrate social media into their online presence. “Businesses that try to take China’s social commerce blueprint and translate it directly to other regions will struggle,” the Shopify report noted.
Vanhishikha Bhargava, the founder of Contensify, a business-to-business content creation company, stressed companies that want to sell successfully on social media platforms should invest. That includes spending on social media, whether static content, such as the “About” section, or developing and updating videos and posts about products and services. Such companies also must link their business contacts and e-commerce databases with their social media platforms and employ “user-generated content as social proof” of the quality of their offerings.
Another challenge is integrating real-world operations with dedicated e-commerce portals and social media platforms. Bhargava’s April blog on Shopify noted, “Business owners and marketers are not able to sync the efforts they make on their online stores and social media accounts.” Bhargava likened it to working in “silos and not being able to add value to the other.”
Investing in a brand image is essential to successful selling in the digital space. If potential customers trust a brand, they are more likely to buy because they are less worried about scams, fraud, or cyber threats, compared with obscure platforms. According to a Forrester Consulting survey, “consumers are [four times] more likely to purchase from a company with strong brand values.” The Shopify report said such trust would significantly reduce retention and loyalty costs.
The report also noted “44% of consumers say they’re OK with brands they like using their personal information to deliver relevant content and offers.” That is essential as more countries and companies clamp down on data harvesting in the name of privacy. “Brands are turning to first-party data to fill the void,” the Shopify report said. “In 2022, 42% of [surveyed] brands plan to offer customers personalized product recommendations through … quizzes, custom mobile apps, and … behavioral data.”
The Shopify report stresses the need for companies to invest in creating an online community to rise above the “noise” in the digital realm. “Strong communities don’t emerge by accident. They are a significant commitment of time and resources.”
Companies that want to create such communities must start with defining a purpose, creating and maintaining “community rituals and traditions,” creating a feeling of exclusivity and finding ways to make customers own a “piece of the brand.”
Such activities need to accommodate the company’s sales and marketing targets. For example, the Shopify report says companies can use a “hero product to reach new customers, then incentivize shoppers to move to your site by creating store-only offers.”
Lastly, companies that want e-commerce to be a growing part of their sales need to balance long-term marketing for brand building with short-term marketing that directly fuels sales. The Shopify report stresses companies need to “experiment with the exact [budget] split based on industry and current level of brand awareness.”