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For the first time, US ecommerce spending is likely set to surpass $1 trillion in 2022, according to the Adobe Digital Economy Index.
If it is reached, this milestone would be marked after two years in which ecommerce spending surged in the pandemic, data released Tuesday at the Adobe Summit show. Just take a look at the figures from March 2020-February 2022:
- U.S. consumers spent $1.7 trillion on ecommerce purchases.
- That's $609 billion more than the two-year period prior to the pandemic.
- In 2021, American consumers spent $885 billion in online purchases, which was up 8.9% year-over-year from 2020.
When it comes to what consumers bought, most of the growth was attributed to the following three categories:
- Grocery grew the most as food shopping moved online. With wider adoption of curbside pickup and more instant delivery options, the category now accounts for 8.9% of ecommerce spending overall. That's up from 6.3% pre-pandemic.
- Consumer electronics was the largest category in ecommerce before the pandemic, and only grew over the two years in which many conducted most of their business and personal life at home. Electronics now account for 18.6% of ecommerce spending overall. with an 8% year-over-year increase in 2021.
- Apparel remained the second-largest category behind electronics, with 14.3% share. But the gap has widened. Adobe noted growth of 9% and 8% year-over-year for the category in 2020 and 2021, respectively.
“Ecommerce is being reshaped by grocery shopping, a category with minimal discounting compared to legacy categories like electronics and apparel,” Patrick Brown, vice president of growth marketing and insights at Adobe, said in a statement. “It highlights a shift in the digital economy, where speed and convenience are becoming just as important as cost savings.”
Adobe forecasts $1 trillion in US ecommerce spending in 2022.(Image courtesy of Adobe)
While there was plenty of growth to report, the data also showed the effects of challenges that emerged in the tumultuous pandemic economy.
- Inflation: Of the $1.7 trillion spent, Adobe stated that consumers paid $32 billion more for the same amount of goods.
- Supply chain: The rising demand for ecommerce ran headlong into supply chain issues that resulted from shortages of labor and materials. That led the chance that a consumer sees an out-of-stock message to rise 235% from pre-pandemic levels over the last two years.
- Demand, however, is still rising. In the first two months of 2022, the data show a 13.8% year-over-year increase in ecommerce spend.
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Microservices architecture allows the company to give retailers ownership over omnichannel software.
With the growth of digital commerce, providing consumer choice is at the center of all of a retailer’s operations.
In recent years, that became especially evident in the area of fulfillment.
Ecommerce made the process of moving an order into place for delivery a crucial function, as the ability to source products close to demand quickly was an imperative.
“Retailers are looking to own more of their fulfillment destiny because consumer expectations have increased,” Chap Achen, VP of product strategy and operations at Nextuple, told The Current on the floor of the NRF Big Show 2023. “Fulfillment is now a competitive weapon.”
As digital operations increasingly blend with the physical store, a host of new fulfillment options are coming online. They can have an item delivered from the store on the same day, or they pick it up. Even a wider offering such as in-store pickup has a host of different choices inside of it. Consumers can pick up an item at a counter, or a locker. They can stop by anytime, or schedule a pickup on Saturday.
While this optionality helps retailers meet customers where they are, it also adds complexity to the systems that run them, and requires operational adjustments to put them in place.
It means the software that powers fulfillment operations must also meet retailers where they are, Achen said. Many retailers have specific setups and processes. They may have a store located in a mall with a nearby distribution center, or a series of small storefronts. At the same time, retailers need to have flexibility with the software that they use so they can provide options to consumers.
For Nextuple, the vehicle to provide this is microservices, which describes a software architecture in which the parts of an application work independently, but are also built to work together. The company harnesses microservices to offer an ownership-centered approach to deploying its software through a product called Nextuple Fulfillment Studio.
“Today, there are only two ways to buy software: [software as a service] or custom building,” Achen said. “You can do it yourself or with a partner. We are a third option. We will help you accelerate your time to market because we've already developed 80% of your requirements, and then we'll give you that as source code.”
The software is composable. Retailers own the source code, and they can iterate. Along the way, they have the ability to swap out components of the software for pieces that enable them to better respond to the needs of customers, if they choose.
It shows how composable commerce is spreading throughout retail operations. A first wave of development applied the approach to the “front-end” of commerce, such as operating an ecommerce store and marketing. With fulfillment software such as Nextuple coming online, there are signs it is being applied to backend operations, as well.
In all, Nextuple offers 14 microservices as part of the Studio, including engines for same-day delivery, storage, inventory management and sourcing.
At the NRF Big Show, Nextuple announced that it is live with five national omnichannel retailers. Together, they have $50 billion in annual revenue and 7000 store locations.
The company is aiming to serve a group of retailers that are widely known, but still looking to hone operations for omnichannel retail. When it comes to fulfillment technology, the retail landscape has distinct tiers.
The largest players have built their own fulfillment tech to power logistics networks that reach across the country.
Name brand retailers with a national presence also want to offer competitive fulfillment, but haven’t made the move to acquire platforms or developed their own software in-house. Typically, they would seek out a software provider that offers a set platform on a subscription model. But the particular needs of commerce require software that powers physical operations with digital tools. That requires a different type of solution, Nextuple believes.
“We want to level the playing field,” Achen said. “We're helping the mid-tier [retailer] compete with Target, Amazon and Walmart.”