The past 11 months have seen continued expansion for some, but also very painful contraction for others. Merchants are facing a confluence of complex challenges: People are spending less time online, some shopping habits are reverting to offline channels, supply chains are crippled, and privacy changes are upending lead targeting.
Merchants have also now recognized that traditional media channels have tapped out and there is a real need to start using existing consumers as a channel for awareness or figuring out a way to successfully utilize affiliates. The core investment philosophy for ecommerce has always revolved around customer acquisition compared to a customer’s lifetime value, however there’s been a significant shift throughout this year and great articles have written about why CAC doesn’t matter. Brands will always be price takers when it comes to digital media and cost of acquisition, however it's up to their control to grow the LTV of a customer. In 2021, we are starting to see the early innings of brands focusing on innovative ways to strategically grow customer value and turn the best customers into marketers for their brand.
For everyone selling online, competition and complexity are at all-time highs. Ecommerce enablement startups are building solutions at a rapid pace to help support merchants, however creating breakout successes requires building something so fundamental, so mission-critical, that customers stop being able to function without them.
By far the most common response we saw from merchants was still optimizing existing marketing channels (predominantly email) either through enriching CRM data or improved automation. As leads or customer data flow in from a variety of different sources including email, SMS, loyalty, affiliates, physical retail, and others, it’s been more important than ever for brands to have a central repository and more effectively understand who their customers are in order to efficiently market to them.
“The most powerful driver of a brand’s growth has always been word-of-mouth coming from its community of customers. As traditional paid digital channels have become unsustainably expensive for many brands, we’re seeing marketers invent creative ways to drive this word of mouth online by mobilizing their best consumers as creators. We’ll see more and more brands considering ways to activate their customer community as they would think about investing in a performance media channel.” - Scott Norton (Cofounder of Sir Kensington, Investor at N+1)
"Customer acquisition costs have nearly doubled over the last 6 years. The trend towards user privacy coming from the main digital ad platforms will only increase costs and decrease accuracy of targeting. Brands need to think about new ways to diversify acquisition spend and use their existing customer base to get product in the hands of new customers" - Matt Osman (Treat)
“2021 was the year that we realized just how hard differentiating in ecommerce really is, as a panoply of challenges from supply chain to marketing converged and combined with ever-increasing competition. We saw the beginning of the big switch to first-party (proprietary) data, as iOS 14 killed second party data (and tried-and-true Facebook marketing techniques with it), leaving many companies scrambling to find and understand their own customers. It was also a year that we began to ask ourselves what exactly "Headless Commerce" is, with most of the answers still barely scratching the surface of what headless really can do for merchants, as it relates to personalization and brand-forward commerce.” - Henry Davis (Chord)