2021: The Tyranny of Growth

Ryan den Rooijen
Ryan den Rooijen

Amidst the misery of 2020, there was a silver lining for those in ecommerce. As stores around the world closed their doors and furloughed their staff, consumers turned to the Internet to satisfy their cravings. What set this shift apart was that it engaged audiences who had never before shopped online. As lockdowns stretched on, ecommerce businesses reported numbers previously only dreamed of. Surely 2021 must have been another blockbuster year?

In the early months, everyone seemed to have a narrative about how consumer behaviour had shifted. As a result, companies set sky-high ecommerce targets for 2021, given this assumed new normal. Nearly 18 months ago, I wrote about my distaste for this phrase as it hinted at some simplified equilibrium. Indeed, reality has proven to be more complex, and during the year many organisation realised that growth was not that easy.

You know, up and to the right. What can possibly go wrong? Photo by Vincent Guth.

Firstly, a type of behavioural regression to the mean has taken place. As stores reopened, so people went back to shopping offline. Granted, some who previously never shopped online have now become hybrid shoppers, but this is a minority. While tempting to assume that the 50-100% growth rates seen in 2020 would continue – and many executives certainly fell into the trap of doing so! – history has taught us such extreme situations rarely perpetuate.

Even tapping into a more modest growth opportunity can be challenging.

On the one hand, the challenge with excessive growth ambitions is that they tend to distort market dynamics. Based on the promise of outsized returns, new players entered the market to fight for a share of the pie, driving up competition. Like an ecommerce tragedy of the commons this influx of participants dilutes or diminishes the growth opportunity that had at first been identified by participants. A blue ocean of consumers quickly turns red.

One area where this was acutely felt was in acquisition costs, where more parties fighting for a modestly increased numbers of eyeballs resulted in a significant cost increase for businesses. Given their reliance on paid traffic, this was a particularly painful situation for those who only committed to ecommerce in 2020. Aggressive top-line targets pressured many to over-invest and discount excessively, eroding their margins and brand equity.

Sales are sales are sales? Who cares! We have targets to hit. Photo by Artem Beliaikin.

On the other hand, demand tends to be more elastic than the capabilities required to service it. Whether inventory volumes, last-mile capacity, or the talent required to run a successful ecommerce business, unrealistic ambitions put a lot of strain on organisations. There was the temptation to cut corners in order to meet demand – whether real or imagined – only for it to become clear down the line that significant resources were wasted in this mad rush.

So, was 2021 a success? In our case, the team pushed back on top-line expectations, giving us the breathing room to focus on making more strategic investments and hires. While this meant more modest growth initially, we saw a year-on-year growth of more than 60% during the peak period at the end of the year. That said, I will follow my own advice to not let this dictate overambitious targets for 2022 lest we risk falling into the above traps.

– Ryan

Ryan den Rooijen

Now Chief Ecommerce Officer; formerly Chief Data Officer.