The Future of Retail

Industry Trends
Written By Kevin Eckenrode

Key Insights

  • Post-COVID-19, Marion Street Capital believes the e-commerce industry will undergo permanent change, characterized by a shift in consumer shopping habits and increased emphasis on the online customer experience; this shift will take place through emerging technologies such as augmented reality (AR) and artificial intelligence (AI)

  • E-commerce sales may increase from $1.3T in 2014 to a projected $4.5T in 2021[1]

  • 73% of these purchases will be made on mobile devices by the end of 2021[2]

  • Major trends in e-commerce include the dominance of mobile devices in making purchases, the emergence of voice purchasing, and a shift in social media.

E-commerce Today

The past five years have been transformative for the online retail industry. According to Statista, aggregate e-commerce sales may boom from $1.3T in 2014 to a projected $4.5T in 2021.[3] Comfort and trust is at an all-time high for consumers purchasing items online, and the online shopping experience is more seamless and enjoyable than ever. Furthermore, technology available to connect online retailers and consumers is widely available. Retailers can reach more devices, leverage data, and personalize the customer experience in an impressive, coordinated effort.[4] This provides smaller firms the power and resources to make an impact in the industry, to differentiate themselves from competition, and to compete against behemoths like Amazon.

Prior to the COVID-19 pandemic, several key trends were reshaping the industry of online retail. Adapting to these trends will significantly increase brand exposure and access to the target market.

  • Mobile devices comprise an increasing share of e-commerce purchases. According to Statista, 73% of e-commerce purchases will be made on mobile devices by the end of 2021. Additionally, e-commerce sales on mobile devices increased from 52% in 2016 to 67% in 2019.[5] Firms that desire an online presence must optimize the customer experience both on desktop devices as well as mobile devices.

  • Voice shopping will be an area of significant growth. Based on a 2020 study, 1 in 4 American adults, approximately 60MM people, own a smart speaker (e.g. Amazon Alexa or Google Home).[6] Although only 13% of smart speaker owners made a purchase with their voices in 2017, OC&C Strategy Consultants expects that 55% of owners will make a voice purchase by 2022.[7] Given the current estimate of 60MM smart speaker owners, purchases made through smart speakers will increase from 7.8MM people to 33MM people by 2022. Online retailers should cater to this experience and make purchasing through this medium comfortable for the consumer.

  • Social media became an online retail store. Firms with an online retail presence can now leverage the power of social media to directly convert both their own posts and ads directly into revenue. Through Facebook’s new “Buy” button and Instagram Checkout, consumers can make purchases without navigating away from the app.[8] This specific medium, called “social commerce”, generated $19.4B in sales in the United States in 2019. Growth will continue; however it will likely be at a slower rate as retailers strategize ways to imitate their customer experience and rewards on a different medium. For example, Sephora recently expanded their product line on Instagram Checkout, after a lengthy effort into “still getting the perks of being a Sephora client”.[9]

E-commerce Post-COVID-19

Many experts believe that the COVID-19 pandemic will have long-term implications on online retail, in addition to consumer behavior and preferences.

  • Consumers realized that they can shop for some items exclusively online, without having to go to brick-and-mortar stores. Because of this, MarketWatch expects internet penetration rates to increase from 15% in 2020 to 25% in 2025, as more people shop online. During the next five years, over 100,000 brick-and-mortar locations are expected to close due to this change in consumer behavior. The highest affected product segments will be apparel, furniture, grocery, and consumer electronics, which collectively account for 58,000 store closings.[10]

  • The online customer experience will continue to improve. Artificial intelligence (AI) and augmented reality (AR) are two examples of how many businesses are personalizing and enhancing the online customer experience. BusinessWire expects retailers to invest $7.3B annually on AI by 2022, up from $2B in 2018.[11] Using the power of AI to optimize pricing, assist with customer service, and personalize what each customer sees when they visit a website, decreases the burden on businesses and improves the overall customer experience. According to PRNewswire, over 120,000 retailers are expected to use Augmented Reality by 2022.[12] Using AR, online retailers can show customers products firsthand in completely innovative ways. Customers will gain deeper understandings of how products satisfy their wants and needs, without having to step into physical stores. Furthermore, online retailers are continuing to enhance visual content offerings to help detail the benefits or features of products. As more and more shopping is done online, customers won’t have to physically interact with the product before purchasing it. According to Oberlo, including visual features such as “consumer-generated media, interactive content, engaging videos, or augmented reality” will accomplish this goal, and paint a much fuller picture for a potential customer.[13]

About Marion Street Capital 

Marion Street Capital (MSC) is a business growth consultancy helping innovative growth companies solve their most pressing challenges.  
We collaborate with ambitious leaders to provide time-saving partnership, unparalleled support, and world-class expertise designed to ensure lasting business success — at scale. We work with clients to achieve growth of 10x or more by delivering world-class services in five key areas: FinOps, DataOps, RevOps, HROps, and SpecialOps. 

MSC’s resources include relationships with institutional investors (family office, private equity firms, venture capital firms, hedge funds, and mutual funds), relationships with local and international banks, “expert networks,” relationships with top academic institutions, outsourced software development teams, graphic design services,  
and industry information providers. This robust suite of services enabled MSC to help clients across 16 different industries during the last two years.

Kevin Eckenrode
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