5 Biggest E-Commerce Challenges in 2023 + How to Solve Them
December 13, 2022
The good news for e-commerce businesses is that the industry is booming. According to the Census Bureau of the Department of Commerce1, the second quarter of 2022 saw U.S. retail e-commerce sales of $257.3 billion, a jump of 2.7% from the previous quarter. Insider Intelligence predicts2 that 21.8% of all retail sales will take place online by 2024—up from 20.4% in 2022.
But with this growth in online shopping comes increased competition, among other challenges.
Find out what challenges may await e-commerce professionals in the year ahead and what you can do to help you stand out from the competition and reap the benefits of the sector’s growth.
The rising cost of fulfillment
Even if demand has increased for many e-commerce brands, getting products to customers has become increasingly difficult and expensive over the last few years. And in a recent Saddle Creek Logistics survey3, 51% of respondents said that fulfillment costs increased somewhat or significantly in 2022.
Many factors are to blame for the rising cost of fulfillment—starting with the highest inflation rate4 that the U.S. has experienced in 40 years, which peaked at 9.1% in June.
The far-reaching effects of the COVID-19 pandemic can’t be ignored either. The National Bureau of Economic Research5 estimates that COVID-19-related illnesses have reduced the American labor force by some 500,000 people. Specifically, the ongoing shortage of truck drivers6 and the high wages they are demanding are also contributing factors to increases in shipping costs.
Tip: Minimize shipping costs by getting creative and updating your technology
While you can’t stop major world events, there are steps that you may take to minimize your shipping costs.
The most obvious one is increasing product prices to account for the increased cost of shipping them out, similar to Amazon’s fuel and inflation surcharge.
Allow online shoppers to pick up purchased items themselves via locker collection or click-and-collect options from physical locations. Customers often prefer the option of driving to a close location and picking up an order rather than having to make sure they’ll be home when the package is due to arrive.
Target’s store-centered fulfillment strategy7 resulted in a 30% decrease in digital fulfillment costs.
Retail and shipping experts8 believe that parcel locker options are increasingly cost-effective in suburban areas, where drivers might have to drive miles between delivery locations. ResearchAndMarkets.com9 believes that the smart parcel delivery locker market will increase in value from $678 million in 2021 to over $1.6 billion by 2028.
Still using spreadsheets and long email chains to process and ship out your orders? Switch to inventory management software powered by artificial intelligence to optimize and sync your entire fulfillment process.
Some core features to look for when considering an inventory management solution include:
Inventory tracking: To show you exactly what products you have, in what quantity, and where they are located in real time
Inventory value: To always have a clear overview of all your financials in real time
Low stock alerts: To make sure that you do not run out of a product
Purchase management: To help optimize processes related to suppliers by automating purchase orders and keeping track of purchase history
Forecasting: To understand fluctuations in product demand by analyzing trends and to plan around them accordingly
Offering a consistent customer experience across channels
The idea of omnichannel customer communication is nothing new—many e-commerce professionals know omnichannel is the way to go. Even so, many still struggle to pull off this form of communication.
Only 18% of business owners said they were extremely satisfied with the number of channels they offer.
Less than 20% were happy with the speed at which they resolved customer queries.
Only 21% were satisfied with how easy they make it for customers to interact with them.
In this e-commerce environment, there aren’t many brands that can offer a consistent experience across channels. The businesses that can successfully go omnichannel could be set to stand out and win over customers.
The Zendesk report found that customers spend more with companies that can be reached via their preferred customer service channel. A majority of customers (92%) will also spend more when they don’t have to repeat information when communicating with you.
A great omnichannel strategy doesn't just improve your customer service and retention, it can give your marketing efforts a serious boost as well. Messaging apps in particular present a powerful channel for nurturing leads and keeping them engaged and moving through the sales funnel.
Insider Intelligence predicts11 that shopping from a mobile device will account for $728.28 billion annually and 44.2% of all U.S. retail e-commerce sales by 2025. Messaging provides an easy-to-use yet incredible dynamic way to reach mobile-first consumers.
Ultimately, e-commerce businesses that do turn to messaging can benefit from learning to internally organize and share these customer conversations effectively to help make the most of this increasingly popular communication channel.
Tip: Manage cross-channel communication from one customer relationship management (CRM) platform
The more channels you add to your e-commerce business, the harder it is to manage them manually. Yet Zendesk’s 2022 Customer Experience Trends Report found that only 17% of the companies they surveyed used a platform that connects all channels.
A CRM allows team members to respond to customer communication in different channels in one place. Communication records may be visible to give your agents relevant content and keep the experience consistent. Your team members can tag each other and collaborate to help them resolve customer issues faster.
No more siloed chats that may stop and start from scratch every time the customer contacts you. CRMs can create seamless and enjoyable experiences for both customers and your company.
A CRM can also help you gather, analyze, and act upon insights gained from the endless amount of customer data that these connected conversations can provide as customers move through every phase of your funnel.
Another benefit of messaging apps like Whatsapp and Facebook Messenger is that they can seamlessly integrate with just about any CRM on the market. The convenience that messaging apps offer to both companies and customers is why they are quickly replacing other, once-popular, channels. For example, Gartner predicts12 that 80% of customer service teams will completely abandon native mobile apps in favor of third-party messaging apps by 2025.
Constantly rising customer support expectations
Zendesk found in their 2022 report that more than 60% of customers had higher customer service standards in 2022 than they did a year ago.
And despite the obvious importance being placed on support quality, most customers still feel as if companies aren’t doing enough. According to Zendesk, 54% of customers say that most businesses they interact with treat customer service as an afterthought.
The good news? e-commerce brands that do offer excellent support are likely to retain customers.
Tip: Let chatbots help shoulder the workload
To make issue resolution easier for both customers and agents in 2023, e-commerce businesses can rely on chatbots.
Chatbots are becoming omnipresent in customer service, and Gartner predicts13 that they’ll be the most important customer service tool for 25% of companies by 2027.
Businesses are embracing chatbots because both customers and agents have become more comfortable with them. Zendesk found that 69% of customers don’t mind interacting with chatbots for simple issues, which is a 23% increase from 2021. Customers can get instant answers to simple questions via chatbots, and agents can focus on solving complex customer issues.
At the same time, Zendesk’s report found that only 15% of agents are satisfied with their workload. e-commerce chatbots can take repetitive tasks off agents’ plates, allowing them to be productive and giving them more time to expand their knowledge and improve their expertise.
Chatbots can be easily integrated into messaging apps to answer simple questions around the clock. They can be programmed to recognize keywords customers use and send them to knowledge base articles or frequently asked questions (FAQ) pages instead of engaging your agents.
Messaging apps can be fitted with sophisticated chatbots that automate processes like setting customer appointments, making product recommendations, sending shipping updates, checking product availability data, and more.
Continued increase in e-commerce cyberthreats
According to Imperva14, the most common cybersecurity threats for e-commerce businesses in 2022 included account takeover (ATO), credit card fraud, and distributed denial of service (DDoS) attacks. The report found that 62% of attacks on online retailers were automated attacks that used malicious automated bots.
Cybercriminals focus their attention on e-commerce businesses, especially during the holiday season. According to Webscale's 2022 Global e-commerce Security Report15, 82.5% of merchants experienced security-related incidents on Black Friday/Cyber Monday, up from 78% in 2020.
Tip: Invest in employee education and business insurance
Most e-commerce business owners are all too aware of the serious threat of cybercrimes and are investing in protection. According to PWC's 2022 Global Digital Trust Insights Survey16, 69% of companies expected their cybersecurity budgets to increase in 2022.
But with cyber threats constantly increasing and criminals becoming smarter, e-commerce companies can’t just purchase and install sophisticated antivirus software and hire in-house or outsourced security experts.
Cybersecurity starts with your employees. Train them to understand and be able to recognize potential cyber threats. Why? Because according to Verizon’s 2022 Data Breaches Investigations Report17, 82% of data breaches involved a human element.
Cybercriminals target employees, sending them phishing emails and other social engineering schemes. These types of attacks rely on tricking someone to click on a link or download an attachment that can give criminals access to your systems.
Add detailed cybersecurity training to your onboarding process, and be sure to continue to offer new training periodically to keep employees updated on the latest types of threats. If you don’t have the time or resources to create programs yourself, check online learning marketplaces to secure affordable cybersecurity training courses for employees.
Along with training, invest in insurance products that can help cover the potentially crippling costs associated with serious cyberattacks.
Cyber liability insurance covers expenses associated with cybercrime—such as legal fees, fines, customer notification efforts, and credit monitoring. Technology errors and omissions insurance can protect you from lawsuits arising from customer losses that were a result of an error that your company made—like a data breach that compromises customer data.
Ability to connect with a global customer base
E-commerce businesses that expand their offers globally open themselves up to a wider customer base. According to Insider Intelligence research18, e-commerce accounted for almost a fifth of global retail sales in 2022 and is expected to reach 24% by 2026. Countries outside of the U.S. account for the majority of e-commerce sales19:
China: 46.3% of digital retail sales
UK: 36.3% of digital retail sales
South Korea: 32.2% of digital retail sales
Denmark and Indonesia: 20.2% of digital retail sales
Norway: 19.4% of digital retail sales
But expanding your business to other regions and countries isn’t easy. Two of the biggest barriers are communicating effectively in foreign languages and localizing your offer.
A recent study by CSA Research20 showed that 65% of e-commerce customers prefer online stores that offer information in their native language, and 40% refuse to buy from e-commerce stores that don’t translate information into their native language.
In addition to offering multilingual support, you need to make sure that you’re operating in accordance with the laws and regulations ascribed to each new country and target audience.
Tip: Use messaging apps to offer multilingual, compliant communication
Messaging apps with chatbots are an easy, reliable way to connect with customers worldwide.
AI-supported chatbots in these apps can recognize the language your customers are communicating in. You can program automated chatbots in messaging apps like WhatsApp to seamlessly respond to inquiries or send customers to a product page or a help article in that language.
You can also program messaging app chatbots to serve the right opt-in and compliance-related messaging to your customers based on region. This type of customer messaging can help you avoid inadvertent violations of international regulations or privacy and security laws like the EU’s General Data Protection Regulation (GDPR).
Beyond language and compliance features, messaging apps are also convenient for global customers because they already use them. According to Data Reportal's social media report, there are 2 billion active WhatsApp users and 976 million active Facebook Messenger users worldwide as of October 202221.
Readiness to adapt quickly will be vital for e-commerce success
While preparation is critical for the year ahead, keep in mind that you can't predict the future. Focus on the challenges that seem likely, but be flexible and ready to shift gears if the e-commerce world goes in a different direction.
Messaging apps can offer unheralded flexibility, which is why e-commerce companies should embrace them and properly invest in conversational, reliable, and secure messaging strategies to help grow and build current and future customer relationships.