5 Threats that Could Hurt Your eCommerce Profits in 2020

January 2, 2020
by Tirtza Giles

As a new decade starts, the opportunity eCommerce offers retailers is greater than ever before. With the most recent holiday shopping season just behind us, sales data from its Black Friday and Cyber Monday shows that in 2019, yet again, record amounts of money were spent on online shopping on these two important days. And that’s hardly surprising, given the trends we’ve seen in recent years.

But while the magnitude of eCommerce keeps on its upward trajectory, the risks and obstacles facing online retailers are also at an all-time high. That’s not just because of growing competition, but also because of trends in consumers’ opinions and expectations, an increasingly strict legal landscape, and an expansion of the threat posed by hackers and other bad actors.

In short, while today eCommerce offers companies more potential for profitability than ever before, it also presents them with unprecedented risk.

To help you steer clear of that risk, here is a look at five of the biggest threats facing online retailers in 2020:

1. Customer Journey Hijacking

After all the time and resources you invest in crafting a customer journey that will maximize your sales revenue, the reality is that many of the shoppers who visit your online store will have a markedly different experience there than the one you had planned.

Today, during 15% to 25% of online shopping sessions, the shopper will be exposed to injected ads bundled into software they download directly to their browser, WiFi hijacking, or both. In other words, they will be targeted by Customer Journey Hijacking.

In many cases, these unauthorized ads are designed to look as if they are part of the webpage the consumer is visiting. And most of these ads (60% to 65%, according to online traffic data that we at Namogoo have gathered and analyzed) target customers by promoting products sold by competing stores. All told, unauthorized ad injections reduce online stores’ conversion rates by between 2% and 5%, causing a decrease of between 5% and 7% in their revenue per visitor.

But the damage caused by instances of Customer Journey Hijacking goes far beyond an immediate drop in sales revenue. In a survey of more than 1,300 online shoppers that we conducted, 78% of respondents said that if they were visiting an online store when they saw injected ads promoting products sold by a competing website, that would be either “likely” or “very likely” to negatively impact their view of the retailer whose site they were visiting. And, while most injected ads promote competing products, many of the others advertise controversial content such as adult websites (10%) and online gambling and gaming (15% to 20%).

How can you steer clear of Customer Journey Hijacking in 2020? Because it is a customer-side phenomenon, it cannot be stopped by conventional, server-side measures. However, you can block ad injections in real time using intelligent technology such as Namogoo’s Customer Hijacking Prevention solution.

2. Failure to comply with consumer privacy laws

The past few years have seen a growing international trend toward strict regulation of the ways companies collect, transmit, sell, and use consumer data. This trend started in Europe with the General Data Protection Regulation (GDPR), which was passed in 2016 and went into effect in 2018. And just yesterday, the California Consumer Privacy Act (CCPA) – the most far-reaching law of its kind in U.S. history – went into effect. While there are important differences between these two laws, one critical similarity is that they are both written to regulate companies based beyond the borders of the European Union and the State of California, respectively.

No less significantly, both laws threaten major fines for noncompliance. And while we have yet to see how strictly the CCPA will be enforced in practice, we have already seen that violations of the GDPR can result in major penalties. In the most expensive example to date, after British Airways fell victim to a cyberattack in 2018, that attack resulted in the airline being fined $229 million.

Furthermore, both laws require companies to take adequate steps to prevent any services embedded in their websites from violating their customers’ privacy. Because web development has become largely dependent on third-party services, monitoring all of these services can be a tall order. Adding to the challenge, we at Namogoo have found that 40% of embedded services are not actually third-party services, but rather fourth-party ones – meaning that they are embedded in a service that in turn is embedded in a website.

And following the lead of the European Union and the State of California, other countries and U.S. states are pursuing similar regulations. Three U.S. states (including California) now have new privacy laws on the books, and 19 others have begun debating such proposals.

How can you ensure your business stays on the right side of the consumer privacy laws of today and tomorrow? This can be a heavy undertaking for many businesses, and there’s no getting around the need to understand the implications of these rules. Still, there are technological tools that can help you comply with these laws efficiently – including Namogoo’s Customer Privacy Protection (CPP) solution, which gives you valuable insights into what your website’s embedded services are up to and lets you know if these services have access to your customers’ sensitive details.

Of course, this worldwide legislative trend is largely a reflection of consumer sentiment regarding privacy. That brings us to a third threat to watch out for in 2020.

3. Impaired consumer confidence

Recent consumer surveys make it clear that today’s shoppers are skeptical and concerned about the ways companies handle their personal information. A survey conducted by PwC in 2017 found that only 25% of consumers believe companies “handle their sensitive data responsibly,” and just 15% of them believe that companies tend to use their personal information in ways that benefit the consumer – while 69% believe that companies are at risk of suffering from a cyberattack.

Just as importantly, recent studies show that this skepticism isn’t just a matter of sentiment. Rather, it has a tangible impact on consumers’ behaviors, which can really take a toll on a company’s bottom line. The same PwC study found that 88% of consumers say their willingness to share their personal information with a company depends on their trust in that company.

For any business that relies on eCommerce, the thought of consumers being afraid to provide their details should be a scary one. Not only do these companies need customers to submit their payment information online, but they also rely on shoppers’ data to provide product recommendations and other personalized experiences.

How can you prevent your way of handling customers’ data from hurting their confidence in your company? It goes without saying that every online retailer must take steps to prevent a major violation of its customers’ privacy, such as a data breach. But beyond that basic imperative, it is important (and, in many cases, required by law) for eCommerce companies to be able to answer customers’ questions about the collection, sale, and use of their personal information.

Of course, in order to provide those answers promptly and reliably, you must be aware of how consumers’ information is used within your website, within the vendors behind your site’s embedded services, and throughout your company. That requires you both to have a big-picture view of how data is used and to have awareness of any relevant changes in real time.

4. Frustrating customer experiences

Just as the volume of online sales continues to rise, so do expectations regarding the customer experience. According to a large-scale survey conducted by Salesforce, 67% of customers (including both private consumers and business buyers) say they have higher standards regarding customer experiences than ever before.

Of course, offering an effective customer experience isn’t just about offering an enjoyable customer experience. Rather, it is critical for eCommerce companies to make it as easy as possible for customers to find products they want and then purchase them.

How can you avoid falling into the trap of offering a frustrating customer experience? As technologies develop (and as your competitors adopt them), ensuring that your customer experience is working requires you to frequently update and upgrade your eCommerce website. While each site is different, some common problems to avoid include:

5. High churn rates

Customer churn occurs each time you lose a customer. While there are multiple ways of calculating your company’s churn rate, few would disagree with the basic idea that you want to keep that rate as low as possible. And while this is an important goal for all eCommerce businesses, it is especially critical within the booming subscription box sector.

Yet many businesses still focus on customer acquisition at the expense of customer retention.

Why is this a mistake? The numbers here are clear: It is far more expensive to acquire a new customer than to retain an existing one, and repeat customers spend more than new ones. As a result, a 5% boost in customer retention will raise a company’s profits by more than 25%.

How can you keep your online store safe from the threat of a high customer churn rate? A comprehensive answer to that question depends on your business, but a good place to start is by trying to understand the perspectives of those customers who have stopped doing business with you. Consider at what point in their customer journey they are leaving, and listen to what they have to say. Using a quick survey can be an effective way of gathering useful insights.

It can also be helpful to keep in mind that some customers offer your company more value than others. Some customer churn is inevitable, and investing too heavily in retaining customers who are unlikely to spend significant amounts of money can be an inefficient use of your resources.

Looking forward

As we look ahead at the new year and the new decade, it’s clear that eCommerce offers retailers a massive and ever-growing opportunity to increase their profits. But while the amount of money being spent online continues to increase, so do the hurdles facing these companies. Not only is there stiff competition among retailers, but they face far-reaching consumer privacy laws, increasingly sophisticated cyberthreats, and suspicious consumers.

Still, if your company’s business model includes eCommerce, there are steps you can take to adapt to this rapidly evolving landscape. With the right combination of technology and internal procedures, you can overcome Customer Journey Hijacking, comply reliably with consumer privacy laws, maintain strong consumer confidence, avoid frustrating customer experiences, and keep your churn rate to a minimum.

Most importantly, by carefully steering clear of the threats explored in this post, your company can make the most of its eCommerce potential.

How is Customer Journey Hijacking affecting your online store? For a look at how injected ads are targeting your customers and prospective customers, you can get a free website analysis.