Businesses Struggle with E-Commerce Demand

September 15, 2022

E-commerce growth has soared since the onset of COVID-19, surpassing FTI Consulting’s pre-pandemic 2025 sales figures projections. It is on course to reach $1 trillion in 2022 for the first time ever. Analysts predict e-commerce retail to grow at a 10% compound annual growth rate through 2027, and exceed $2 trillion by 2030, which will comprise 31% of the total retail market share. Despite rapid growth, paradoxically, e-commerce demand has not always yielded profit for online sellers due to spikes in infrastructure, operational costs, and the changing role of consumers.

A study conducted by Ipsos for Publicis Sapient and Salesforce surveyed over 300 businesses across Europe, the U.S., and Australia and found that online sellers are almost twice as likely as brick-and-mortar retailers to report that their businesses are unprofitable (44% versus 20%) and nearly twice as likely to say they are struggling to make the investments necessary to improve profitability (69% versus 39%).

Jeffrey Sward, founding partner and CEO at Merchandising Metrics, explained the phenomena citing the changing role of the customer. Traditional pricing in-store schemes were built around the customer acting as a highly productive free employee: “They showed up at the store, they shopped, they selected, they picked, they packed, they took it all to a register then did their own delivery back to the house. Simple. Beautiful.” Today, online sellers are expected to deliver to the doorsteps of their customers in increasingly effective manners, with Amazon and Walmart leading the charge on “same-day delivery,” significantly raising the operational costs for sellers.

Despite the challenges the e-commerce supply-chain poses to businesses (including a higher rate of return for products bought online), Forrester Research Inc.’s Vice President and Principal Analyst Sucharita Kodali predicts that e-commerce will continue to take a greater share from the physical retail each year – reflecting buyer preference for ease of shopping experience, more fulfillment options, and growing use of buy-online pick-up in store (BOPIS) and buy-now pay-later services.

As a result, many businesses are adjusting their strategies to streamline supply-chain costs by either partnering with businesses that can provide brick-and-mortar infrastructure or off-setting delivery logistic costs through selling via Amazon or Walmart Marketplace. Both e-commerce giants have invested heavily in their logistics infrastructure across the U.S., while Walmart has even proposed to sell best-selling Marketplace items directly on their store shelves.