This was a particularly interesting week: Shopify, one of the big players in the eCommerce, announced the dismissal of more than a thousand employees; what does it mean for the state of digital commerce?
It is not minor news. Perhaps my first reaction was to analyze the intertext below it. How is this possible if I have previously talked about the growth of e-commerce itself?
I will go through points on this to develop. Although during 2021, in Mexico there was a growth of 11.3 percent, according to AMVO figures, there is also a fact to highlight: consumers are returning to physical stores. They not only return to the product: they also return to the dough: one of the sectors hardest hit during the pandemic was entertainment. On the contrary, there is now an over-demand: concert tickets are sold out in a matter of minutes.
The tiredness of the people to remain locked up is felt
A few months ago, in February 2022, the sale of tickets for the World’s Hottest Tour Bad Bunny and the tickets were finished the same day of the pre-sale. Almost the same phenomenon with the Corona Capital: in a matter of hours all the locations were sold out. The same phenomenon that happened with Coldplay with a total of 8 dates in Aztec territory; moreover, the band accumulated 10 concerts in Argentina, one of the countries with the greatest crisis in Latin America. In other words, people are eager to get out. For meeting more people: for returning to normality.
I think that although, at least in Mexico, there has been stability in this vertical, as I wrote last week, there has been a need to return to stores, mainly retail. According to AMVO figures, 69 percent of consumers prefer to attend points of sale. Gone are the massive purchases in the Hot Sale when everyone was still locked up. The situation is changing.
Crisis in eCommerce?
Again, the crisis: this week it transpired that Shopify announced a massive layoff. According to Tobías Lütke, CEO of the platform: “[…] We’re betting that channel mix, the portion of dollars that travel through e-commerce rather than physical retail, would move forward permanently in five or even 10 years. […] I was wrong”.
To find the answer to the crisis we must look at the other eCommerce giant: Amazon. The figures indicate that it had an annual growth of 7 percent as of the second quarter of 2022. And if we look even further, Mercadolibre had an exponential growth of 67 percent in the first quarter of 2022.
These data are in stark contrast: so are people fed up with shopping online? According to Amazon, no, on the contrary, it continues to grow. Have retail stores recorded a declining trend in e-commerce? It seems that this is the most viable answer.
My analysis of all this is: although people in Mexico are returning to online stores, the trend of buying in large stores continues. placement vs retail stores on-line. I think that other situations have an influence here: the drop in sales on digital platforms such as Facebook and Instagram, mainly; the contraction of growth in the United States; the international political situation. All this combined results in the massive dismissal of Shopify.
Should we prepare for a digital commerce crisis in Mexico?
My quick answer is: no. No, but we must take the indicator that Shopify provides us with caution. My second answer would be: it’s time to continue innovating from e-commerce, especially if your brand is a retailer.
Whenever they ask me about how they can sell a product on the internet, I answer: your product (or service) must have a greater benefit than going to a physical store: it will arrive the next day, it will have a better discount, more extras: what can you offer the consumer above the experience of visiting your store?
Perhaps, actually, that is the answer for brands in this segment. But we must not forget the phrase that the grandmothers used to say: “When you see your neighbor’s beard cut, put yours to soak.”