From Bargain Hunters to Luxury Seekers: Trends in Retail e-Commerce

From Bargain Hunters to Luxury Seekers: Trends in Retail e-Commerce
Photo by Markus Spiske / Unsplash

The world of e-commerce is in a constant state of flux, and as digital product leaders, it's our job to stay ahead of the curve. With online sales continuing to climb and consumer behaviors evolving at a rapid pace, it's more important than ever to understand the forces shaping the industry.

A recent report from Adobe shows that e-commerce growth is still chugging along, with a 7% year-over-year increase in early 2024. But beneath that topline number, there are some interesting trends at play. Consumers are increasingly gravitating toward cheaper goods and taking advantage of Buy Now Pay Later (BNPL) services. At the same time, luxury retailers are defying economic headwinds and continuing to thrive.

This dichotomy highlights an important point: different customer segments have different expectations when it comes to digital experiences. When I recently purchased a high-end espresso drink maker (ask me about it for the post-purchase review), I was impressed by the website's design, detailed product descriptions, customer reviews, and seamless checkout process. It was a reminder that for luxury brands, creating a clear and intuitive digital experience is table stakes.

On the other hand, bargain-focused retailers like Temu and Dollar Tree are growing rapidly despite having less polished digital experiences. For these value-driven customers, factors like price and selection may be more important than a well-designed website.

Regardless of the customer segment, however, one thing remains clear: forging an emotional connection with shoppers is key. A recent study by Alshohaib suggests that factors like perceived usefulness, ease of use, and emotional states can play a big role in whether shoppers come back for more. In other words, it's not just about having the right products at the right price – it's about creating an online experience that makes people feel good. Though getting a good price might put the shopper in an emotional state that gets them coming back for more.

But of course, there's a limit to how much effort is put into those factors. As Wharton Professor Santiago Gallino notes, retailers need to strike a delicate balance between meeting sky-high customer expectations and keeping their businesses profitable. That means being strategic about what we offer and using data and analytics to inform our product and design decisions.

Looking at the NRF's 2023 Hot 25 Retailers list, it's clear that there's no one-size-fits-all approach to success. Some companies, like Chewy.com, are thriving by tapping into the power of emotional engagement. Others, like Harbor Freight and Sherwin-Williams, have found a sweet spot by focusing on distinct experiences for two core customer segments: DIY enthusiasts and professionals or contractors.

So, what does this mean for teams building e-commerce experiences? Here are a few questions to think about:

  • How can we leverage data and research to better understand our target customers' needs and preferences?
  • What can we do to create online experiences that are tailored to our specific customer segments’ values and motivations, whether that's luxury shoppers or bargain hunters?
  • How might we balance the need for emotional resonance with the practical realities of running a profitable business?
  • What role can personalization play in helping us create digital experiences that truly resonate with our customers?

Retail e-commerce may not continue to grow at the same rate. Yet, it's crucial that we stay up-to-date on these trends, remain agile in our approach, and ask ourselves the hard questions about what digital initiatives are worth the effort. By being curious, experimenting with new ideas, and always putting customers first, we can create digital products and experiences that meet the demands of today and create a foundation for continuous improvement.

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