The gap between e-commerce and brick-and-mortar retail is widening as digital teams face challenges from budget cuts

“E-commerce is definitely key to omnichannel growth… especially in a year where brick-and-mortar stores are struggling, and we’re seeing a lot of brands basically perform because they’re able to accelerate e-commerce. And you have to tell your leadership team that if they’re pulling back on e-commerce, (that) there’s a big risk of losing overall omnichannel market share,” Oskar Kaszbuski, founder and chief growth officer at firstmovr, said in a webinar.

E-commerce sales rise, but growth slows slightly in 2024

According to Circan data shared during the webinar, e-commerce sales growth has outpaced in-store sales growth over the past few years, with food and beverages among the fastest-growing categories.

Omnichannel sales — which includes e-commerce and in-store sales — reached $865 billion in the 52 weeks ending Aug. 20, up 1.3%, according to Circana Complete E-commerce.

This year so far, about $721 billion has come from in-store sales and $145 billion from e-commerce sales, up 9.7% from sales last year during this period. Similarly, e-commerce units have risen 10.3% versus in-store units, which fell 1.6% in the 52 weeks ending Aug. 18.

Online food sales rose by 11.1% and beverages by 11.7%, while in-store sales rose by 0.8% and 1.6% respectively.

However, e-commerce growth slowed slightly this year compared to previous years. E-commerce sales totaled $133 billion in the 52 weeks ending Aug. 20, 2023, up 13.2% from 2022’s numbers of $117 billion.

“We will see brands lose share if they do not invest in e-commerce”

Given the growth of e-commerce channels, many brands and retailers have prioritized the development of omni-channel shopping experiences that include direct-to-consumer offers and in-store pickup options.

“The gap between e-commerce growth and brick-and-mortar growth is widening, so e-commerce is absolutely critical to success,” Kaszbuski said. “We’re going to see brands lose share, even though they’re able to maintain their share for years, if they don’t invest in e-commerce and make it part of their overall omnichannel strategy.”

The majority of manufacturers (75%) said digital commerce is a strategic priority and a key driver of growth, according to DCG’s Digital Shelf Optimism report shared in the webinar. However, 41% of manufacturers do not fully understand the demands and capabilities of digital retailers, and 60% said they do not understand all of the digital shelf metrics they report.

As Kaszbuski explained, despite the growth and importance of the channel, some brands and retailers are refocusing on brick-and-mortar stores, taking their digital assets (i.e. budget) with them, which can negatively impact the digital team’s ability to continue to generate growth.

Additionally, some executives are cutting technology spending to create omni-channel shopping experiences as part of a so-called “year of performance.”

“A lot of senior executives (and) a lot of sales leaders are basically saying, ‘Well, I can move e-commerce resources to brick-and-mortar because I have to defend brick-and-mortar and find a path to growth.’ We’re seeing a lot of e-commerce teams that are (in reality) being cut because (brands and retailers) are basically saying, ‘Well, I feel good about my digital strategy. I really need to reinvest some of that money back into brick-and-mortar or maybe protect profits, etc.’ It’s not the right time… to do that, and you need to have an honest conversation with your leadership team,” he explained.

Updating your content can be key to increasing sales

As Kaszbuski explained, in addition to securing technology budgets, e-commerce teams can also increase sales by creating engaging content on their platforms, which often means regularly updating the images and copy available on product pages.

Soda brands that saw higher growth than the category average updated their main images, titles, descriptions and bullet points 10.1, 6, 1.7 and 1.5 times, respectively, on average during the 52 weeks ending Aug. 11, according to Circana Complete E-Commerce data. Soda brands that fell below the category average updated their main images, titles, descriptions and bullet points 6.1, 5.2, 0.5 and 0.5 times, respectively, during the same period.

“Right now, with Gen AI, there’s no reason why we shouldn’t have better content assets, not just for the largest retailers in the U.S., but even for some of the smaller retailers. We can actually continue to customize that content and update content more frequently,” Kaszbuski explained.