My view on Ecommerce 2025
For the past few years, it is said that ecommerce is struggling. I see it differently.
2020 started off with a boom for ecommerce. While the rest of the world shut down, ecommerce thrived and became the go-to-channel for the consumer. Brands went digital, digital ad spend increased as the D2C-model thrived, consumers kept spending. More importantly, businesses who didn’t have a financially sustainable business plan or the actual skills to run a business got the boost they needed to keep on running.
This trend has continued. The entire industry of performance marketers that have become addicted and dependent on Meta ROAS to generate revenue and growth, without creating a brand strong enough to contradict the increasing ad-prices. There are large, established businesses dependant on their Meta-performance for their livelihood. Can you imagine being dependant on Mark Zuccerburg for your paycheck? Doesn’t sound like a good idea, and I would say it is not. However, the conventional wisdom that has emerged from the post-COVID period has been that you just need to find your break-even ROAS, and then you optimize your spend.
We have been through several phases in the evolution of ecommerce post iOS 14.5: “Desperation”, “creative is the most important”, “get attribution right”, “profits”, “incrementality”, and now “creative velocity”. While they are all the process of professionalization of ecommerce, no process really answered the question “how can I be less dependant on Mark for my business?”. Throughout this period, many ecommerce stores & D2C-brands have gone under, and many more will in the years to come, but they are all a part of a continuing professionalization of an industry with low barriers-of-entry where you can be up-and-running with your shopify-store in a day.
2025 will be highlighted by big winners, and big loosers. The early D2C-brands like Allbirds will finally give up. There is little happening in-between. The winners in the category of small D2C-brands win because they build credibility through either:
They have someone important praising their brand.
They have 1000’s of microinfluencers promoting their brand & strong WOM.
They are world-class at 1 ad platform.
Small brands who loose:
Start diversifying spend across more than 3 platforms in an attempt to grow revenue, before they reach their full potential on one platform.
Focus on building brand, just to build a brand.
Are too obsessed with attribution, and only search for small, incremental improvements.
They have a marquee partner praising the brand
The era of creator- and influencer driven brands are not over. A shortcut to traction is to have someone important giving credibility to your brand. It does not have to be a founder or co-founder, but they have traded their praise in for shares. That’s not a fake quality stamp though, it is very real. The winners will not be the one with the biggest celebrity, but someone with credibility within a special field. You cannot expect a Gordon Ramsay-partnership like with Hexclad, but someone credible with 100,000 followers will do more than 300,000 followers and no credibility within the area.
They have 1000’s of microinfluencers promoting their brand & strong WOM.’
They have an incredible ambassador-program with a legion of microinfluencers. They have a large focus on microinfluencer partnership, with a large focus on creating a movement within community. Instead of going for the big white whale, you go for 1000 tuna’s. There can be some paid partnerships to bring in credibility, but the partnerships are mainly gifting small accounts on social media. These brands have serious affiliate-payouts to those who are talking positively about the brand & that generate sales.
They are world-class at one ad platform
I believe that we are not over the period where you can build a brand through advertisement. It is because there are still margins left in digital advertisers who are really good at their job. But the winners in 2025 will not be the best at Google shopping or Search or Meta, but at YouTube ads. We can talk as much as we want about attribution, incrementality blah blah blah, but Meta has become a race to the bottom. I mean, how much can we tweak the calculations so we make it profitable to spend more? Youtube is still a platform that is fairly unfamiliar to many marketers. There’s a moat in being skilled on Youtube. It’s tracking is so woeful that performance marketers are staying away. More will get there as incrementality experiments show that Youtube ads makes a difference. But most of them will never see any results because the bar of creating a baller Youtube ads is so much higher than on Meta.
You lose if you:
Start diversifying spend in an attempt to grow revenue, before they reach their full potential on one platform.
If you’re a small business, you have to build your media mix around your competence. Got someone in your team who’s really good at Google? Don’t try to diversify to Meta just because someone said you can get better ROAS there. If you start diversifying your paid media mix too early, you will end up spreading your internal resources, not just money, too thin.
Focus ad spend on building brand awareness, just to build a brand.
All founders have heard that they need to build brand. And I 100% agree. But you shouldn’t do it because you feel like you need to do it or heard that that is the way to go. If you are a small business, putting paid media spend into brand building activities is two things:
- An art
- A massive risk
Building brand effectively through paid marketing is extremely difficult. You must be extremely sophisticated, but more importantly, You need to know how to do it. I will get back to branding later, but it is way more than a logo that you show everywhere. Building a brand through paid media is often an “excuse” for high-production creatives, but more alarmingly, an excuse not to look at short-term revenue impact. If you are a financially sound 8/9-figure business, this is something you have to do. If you are a 7-figure business in a growth phase, this can easily make you bankrupt.
Instead, focus your organic on building your brand.
Know your positioning and create social media content that is consistent with your brand's message.
Use your customer support agent as a brand advocate. Go beyond just answering questions; solve problems and show how your brand behaves.
- Encourage your customers and fans to talk about your brand and its values.
They are too obsessed with attribution and only search for small, incremental improvements.
I get that attribution is important, but it can only get you so far. But if you think that continuous audience targeting and small improvements in ad creatives will make your life easier as a small business, you are far from right. When you are a small business, being obsessed with small incremental changes will not make the difference you think it does. You need to make bigger swings, or you will find yourself running out of cash, as the nature of the modern ad platforms is lower (real, incremental) ROAS. You need to test your offers, your pricing, and your website. All of it can make a small difference, but if you want to grow, you need to get to new ideas and concepts when testing.