4 ecommerce opportunities (and 3 challenges) for 2022
Since our launch, we’ve helped founders from 185 countries register 15,000 US companies.
Unsurprisingly, ecommerce alone makes about half of our total incorporations. In this article, we’ll cover four opportunities and three challenges for new ecommerce vendors to be aware of in 2022 and beyond.
1. Ecommerce is booming worldwide
Recent stats make it clear that ecommerce is experiencing rapid growth. China, for example, is the world’s largest ecommerce market. It already generates annual online sales north of $850 billion, and the industry has been growing by more than 30% per year.
Ecommerce is here to stay, and there has never been a better time to enter the field. Consider:
- Nasdaq predicts that more than 95% of all purchases will be done online through e-commerce by 2040.
- There were more than 2 billion online shoppers worldwide in 2021.
- According to eMarketer, total ecommerce sales will increase by more than 50% between 2020 and 2024.
So how much revenue can a small eCommerce store generate? Arka suggests that new vendors can reach $63,000 in monthly revenue after three months, $127,000 in monthly revenue after one year, and more than $350,000 in monthly revenue after three years.
2. Investors love ecommerce brands
Naturally, this has led to increased interest in ecommerce investment. For example, companies like Razor Group, Branded, and Thrasio focus on acquiring and expanding small, promising e-commerce brands. These businesses provide a critical service by connecting vendors to the resources they need for quick and efficient global expansion.
According to HexGn, ecommerce startups generated 55% more investment in each round of funding in 2018 compared to 2014. If you have a lucrative ecommerce idea, there has never been a better time to connect with private equity and other sources of funding.
3. Traditional barriers to entry are disappearing
Starting an ecommerce business was an extremely complicated endeavor in 2002 or even 2012. In 2022, however, many of the industry’s traditional barriers to entry have been removed (or at least mitigated).
For example, ecommerce vendors often rely on email and social media marketing to get the word out about their products. Instead of running all those campaigns manually, vendors can now leverage marketing automation to deliver consistent messaging with a fraction of the effort.
Similarly, contemporary website builders make it surprisingly easy to set up a new ecommerce store without spending hours and hours on design. While ecommerce is still a tough field to enter, it’s clearly much more approachable than it was in the past.
4. It’s easier than ever to expand into new markets
International expansion is another key aspect of ecommerce that has become more feasible for small vendors in recent years. Ecommerce sales are increasing around the world, and you can now reach those customers more easily than ever before.
Let’s say you own a growing ecommerce business in your home country. Twenty years ago, that might have been the only market you could realistically sell to. Today, you don’t have to limit your audience based on your geographic location.
Here at Firstbase, we’ve incorporated thousands of businesses in the United States. We can also help with other areas of your business such as receiving mail, connecting with investors, and maintaining compliance with state and federal regulations.
1. Competition is intense in nearly every ecommerce niche
The four points above make it a great time to get started with ecommerce. Still, that doesn’t mean that generating ecommerce sales is a walk in the park. In this section, we’ll take a look at some of the key challenges that new ecommerce vendors face in 2022.
First, the rapid growth of the ecommerce industry has already attracted many new businesses. Unfortunately, you won’t be the first one to try to take advantage of the expanded market.
According to Shopify, roughly half of all brands invested in social commerce content in 2022. From Facebook Messenger to LinkedIn, you’ll face tough competition on all social media marketing platforms. No matter what marketing tactics you plan to use, you can bet that somebody is already advertising similar products on the same platform.
Here’s what that means for new vendors: your potential audience is larger than ever, but it will be even more difficult to reach them. As a new vendor, you’ll have to develop strong marketing and outreach strategies to generate visibility and differentiate your brand from other companies working in the same area.
On top of marketing, you also need to match alternative vendors in terms of pricing as well as the overall shopping experience. This is particularly difficult for small businesses that don’t have the resources of major ecommerce companies.
For example, Amazon offers free two-day shipping to Prime members and free shipping for non-members on all orders over $25. Similarly, Walmart offers free shipping to all customers on orders over $35. It can be extremely difficult for new ecommerce vendors to provide a comparable customer experience while still maintaining their margins.
2. Vendors need to respond to evolving cybersecurity concerns
Cybersecurity is a growing concern in every field, and ecommerce is no exception. Ransomware attacks increased by 13% from 2021 to 2022, and there’s no reason to think that trend will turn around anytime soon.
You might think that cybersecurity is only a problem for larger businesses and organizations, but this simply isn’t the case. In fact, more than 40% of cyberattacks are directed at small businesses. Furthermore, small companies don’t have the same resources to prevent and respond to cybersecurity threats.
With that in mind, cybersecurity needs to be a top priority from the very early stages of a new ecommerce business. You need a multi-pronged approach to protect against a variety of risks including phishing, ransomware, malware, and DDoS (distributed denial of service) attacks.
3. Advertising costs are increasing dramatically
Increasing advertising costs are a serious problem for ecommerce businesses of all sizes. Worldwide ad spend is expected to more than double in just five years from 2020 to 2025, making it more and more difficult for new vendors to keep up.
This increase doesn’t just reflect a growing market — marketing is also getting more expensive for each individual firm. According to ProfitWell, B2C customer acquisition costs increased by over 60% from 2013 to 2019. That makes it even more important to optimize your marketing strategies and generate more interest with fewer impressions.
With online sales taking up a greater and greater share of the global retail market, this is an ideal time to enter the ecommerce space. New vendors have access to a rapidly expanding market plus a broad variety of resources to help them turn their ideas into reality.
No matter where you’re located, you should be thinking about expanding your ecommerce presence to the United States. While incorporation isn’t always required to sell products in the US, it can help make your company more credible while offering a number of additional benefits. Learn more about why you should incorporate in the US.
Ready to get started? Incorporate your ecommerce business through Firstbase in just a few minutes.