Digital commerce mergers and acquisitions activity grew at an all-time high last year. And as for the vendor growth, look no further than Shopify, netting more than a $109 billion this week.
In fact, this week Hampleton Partners released its Digital Commerce M&A report and found that sector mergers and acquisitions growth is at all-time high with 2,317 deals in 2021, a 34% increase on the 1,725 deals closed in 2020, and a 65% increase on 2019 figures. “We predict a white-hot first half of 2022 in digital commerce M&A, as many transactions have been in preparation since last year,” Ralph Hübner, sector principal for Hampleton Partners, said. “M&A and fundraising activity across all segments of the digital commerce space continues to be propelled by the great shift online, with increased appetite from financial sponsors, be it from the VC or the PE/growth space. Investors are eager to back digital commerce software and infrastructure and help fund the mammoth business of e-commerce brands.”
Impact on Marketers and Brands
What does this mean for marketing leaders and those charged with powering their digital commerce channels? Where do marketers stand accelerating toward digital commerce? About 86% of marketing leaders say digital commerce will be the most important route to market for their organizations in the next two years, according to Gartner. But they’ll also face a challenging outlook to meet or exceed the expectations of senior leaders heightened by the past year’s rapid digital commerce acceleration, according to Gartner.
“One of the things that we found... was the sheer scale of not just what happened with the breadth of maturity of organizations, but the scale of organizations that needed to expedite and pivot quickly into digital commerce,” said Ant Duffin, senior director analyst in the Gartner for Marketers practice.
Organizations' readiness for digital commerce include those with developing maturity and those in the more advanced area that had capabilities in place so the "pivot was quite straightforward," according to Duffin. Further, some organizations made an exponential expedited shift into digital commerce channels to overcome revenue shortfalls when traditional status quo routes to market started to shut down.
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An Inflection Point for Brands
Marketers and brands have a lot to consider when it comes to digital commerce investments. RSR Research and Coveo announced a research report this week "Winning at Customer Acquisition in the Digital Shopping Age," which found 57% said that the majority of their customers begin their shopping journey on either Google or Amazon and 83% of respondents said that they have increased their interactions with Amazon over the past 12 months.
How are these brands pivoting to these trends?
- 83% named their most important priority as acquiring new site traffic, significantly more so than driving more onsite conversions (59%).
- 61% said digital experience has become an increasingly important part of their brand, followed by 56% saying their competition is doing a better job acting on customers’ expectations.
- 65% of retailers said more personalized offers and promotions are an important opportunity for an improved online shopping experience, and 61% said automatically suggesting relevant product recommendations would improve the online experience.
Further, 5% of shoppers log in to retailers’ sites while shopping. It appears most customers opt to wait until checkout or simply use guest checkout. “The findings of this report surprised us in a number of ways,” said Steve Rowan, managing partner at Retail Systems Research. “Everyone knows COVID has turned the world upside down, but what we wanted to know going into this research was exactly what that means for retailers who’ve been trying to fill in every new gap (and the list of gaps in their businesses certainly keeps growing) with improved ecommerce. The very first thing they told us? Google advertising isn’t going to be enough anymore, and they’re starting to reevaluate the money they’ve been pouring into that channel for far more engaging tools going forward. It’s a true inflection point.”
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Climbing Toward Digital Commerce Maturity
What are some action items that marketers can take to ensure they're making the most of their digital commerce programs? Marketing leaders must have a clear roadmap toward digital commerce maturity, Duffin said, because organizations with the highest degree of maturity outperform those with more of a developing level maturity, Duffin said.
Organizations should develop a framework that looks across strategy, culture, organization, execution and operations. Where are they right now? Where do they need to be? “And look at that in the context of their industry, in terms of customer need, but then also in terms of what their competitors are doing,” Duffin added.
Digital commerce leaders must also treat maturity as an area of competitive advantage, not just to deliver short term results, but also to deliver sustainable growth and resilience into the future, he added.
Adapting Despite Budget Cuts
Marketers are expected to deliver a strategy to deliver sustainable short and long-term growth, and 90% of surveyed leaders agreed that they are investing in additional capabilities to drive digital commerce, according to Gartner. “Marketing budgets are decreasing, but what you're asking is an increase in digital commerce,” Duffin said. “And the challenge of what we see in the last 18 months is that because of that shift and groundswell into digital commerce, it's now becoming an incredibly competitive landscape.”
The added challenge, he said, is starting to impact in increase media costs. Marketing leaders need to determine their core marketing channels. Social media, advertising and direct digital marketing like SMS and email are usual go-to channels across all industries. “What we're saying is where are you going to differentiate?” Duffin said. “Where are you going to create those value-added experiences that starts to carve out a new path that adds value to the customer? We're starting to see (marketers) pivoting into AR and VR as a part of the path to purchase and to enable the customer journey and purchases.”
And if you think the commerce leaders are done innovating and differentiating, think again: Amazon this month announced its first physical apparel store, leveraging mobile technology in-store and in fulfillment centers to offer a more personalized and convenient shopping and shipping experience for consumers, who need a boost in shopping experiences after feeling the effects of supply chain woes. More than half (57%) of global consumers say they have recently experienced one or more items not being available, have had to purchase alternatives when preferred products were not available, or have had to go to different retailers to find items in stock, according to the SOTI Global Supply Chain Crisis 2022 report this month.
Marketers must determine the overall performance of media channels, Duffin said, and really start to double down on the ones that are effective. “So don't start to spread your resources across many channels,” he said. “Start to focus and double down on those that are really delivering value, and then start to build up your channel portfolio again over time. So it's just eliminating the waste… and thinking about what they can do in the future.”
Addressing Talent Challenges
Another challenge for digital commerce leaders is retaining their top digital commerce talent, according to Duffin. It's hard to acquire talent, he added.
“It's even harder to try and keep it because this is an ever-growing cycle of organizations wanting to grow their talent capabilities," Duffin added. "And as part of that, what we have said … many times focus on your retention activities, to be able to provide challenging stretching work for your best talent. Put them into stretch situations, put them into strategic situations where they can help them to grow and make them feel valued.”