Running a successful online venture in today’s ever-evolving e-commerce landscape is no walk in the park. Business owners and marketers face numerous challenges that can make or break their e-commerce ambitions.
In this guide, we will explore common e-commerce challenges, from establishing trust through security protocols to optimizing e-commerce logistics to differentiating your brand to stand out. We’ll also discuss e-commerce advertising formats, platforms and strategies, and see how other brands are achieving better-than-expected results and sales.
Whether you’re a seasoned e-commerce expert or just starting out, read on to discover how to navigate the complexities of running a profitable e-commerce business.
E-commerce: The Basics
Before we dive into e-commerce challenges and strategies, let’s establish a strong foundation by understanding what e-commerce entails and how it differs from traditional retail.
E-commerce, short for electronic commerce, refers to buying and selling goods and services over the Internet. It encompasses various business models, including B2B (business-to-business), B2C (business-to-consumer), and C2C (consumer-to-consumer).
Unlike traditional retail, e-commerce eliminates the need for physical stores. Instead, online businesses leverage technology and digital platforms to advertise products and generate sales, making it a convenient and efficient way to conduct business in the digital age. E-commerce retailers can sell through branded websites, online marketplaces such as Amazon or Etsy, social media channels or mobile applications.
In terms of size, 18% of total global rfetail sales in 2022 were generated through e-commerce; by 2024, it will account for 22%, exceeding $6.3 trillion. The main drivers for consumers’ adoption of e-commerce are ease and flexibility, which lead 20% of consumers to make online purchases once a week, 24% every two weeks, and 31% once per month.
E-commerce Benefits and Risks
E-commerce brings a plethora of benefits to the table for business owners and consumers alike. With an e-commerce business, you can reach customers worldwide, 24/7. Without renting or maintaining physical stores, you can lower overhead costs and increase profits or pass those savings on to consumers.
Technology enables e-commerce optimization, automating order processing and customer service, and freeing up time and resources for other critical business tasks such as marketing and product development.
One of the most significant advantages is the ability to track and measure various metrics accurately. A data-driven approach empowers you to make informed decisions, optimize strategies, and achieve better results. Whether analyzing website traffic, monitoring conversion rates, or studying customer behavior, e-commerce provides valuable insights that traditional retail cannot match.
E-commerce Business Risks
While e-commerce offers numerous advantages, there are risks. However, knowing the challenges will enable you to navigate them effectively. In addition to attracting consumers, building loyalty, meeting customer expectations and finding the best technology partners, three of the biggest hurdles to keep in mind are:
Security: Customers must feel confident that their personal and financial information is safe when purchasing online. Establishing secure payment gateways, having SSL certificates, and implementing other security measures protect data and establish your credibility and trustworthiness with consumers.
Competition: Estimates suggest there are more than 26 million e-commerce sites. Increasing competition means businesses need to differentiate themselves by offering exceptional products at competitive prices and prioritizing customer service to drive repeat business.
Logistics: Online brands must perfect their shipping and return processes to ensure customer satisfaction. Free shipping is often a tipping point – 76% of consumers rate it as most important, 78% will spend more to get it, and 48% will abandon carts due to shipping costs. Return policies are as important – 75% of customers expect free returns, and 55% prefer to purchase from sites that offer free returns.
E-commerce Marketing Risks
Since you can’t rely on foot traffic like traditional shops, you must depend on advertising to bring digital traffic. When it comes to launching ads and ensuring ad spend delivers a positive return on investment (ROI), marketers should consider of the following e-commerce risks:
Ad Fraud: Ad fraud occurs when malicious actors use fraudulent methods to generate clicks or impressions on ads, depleting budgets and skewing performance metrics.
Brand Safety: A brand’s reputation can be damaged if its campaigns are displayed next to inappropriate or offensive content. Advertisers must ensure their ads appear on reputable and contextually relevant websites to avoid negative associations.
Ads.txt: The Authorized Digital Sellers (ads.txt) is a text file that allows publishers to declare who is authorized to sell their inventory and helps reduce ad fraud.
By proactively addressing these e-commerce risks, businesses can safeguard their advertising investments and ensure a more secure and profitable online presence.
E-commerce Metrics to Know
There are several metrics that e-commerce businesses should track to measure their success, including:
- Website Traffic: The number of people who visit your website.
- Bounce Rate: The percentage of people who leave your website after viewing only one page.
- Conversion Rate (CVR): This measures the percentage of website visitors who make a purchase.
- Average Order Value (AOV): This measures the average amount of money customers spend on each order.
- Customer Lifetime Value (CLV): This measures the total amount of money a customer spends with your business over their lifetime.
- Yield Optimization: This is the process of maximizing revenue generated from ad impressions.
- Cost Per Mille (CPM): This represents the average cost of one thousand ad impressions, indicating how efficient campaigns are.
Types of E-commerce Advertising
To thrive in the digital landscape, e-commerce business owners must use diverse advertising models and formats. Here’s a look at the most popular models and how you can use each one effectively:
Display Advertising
Display advertising involves placing text or image banners or pop ups on websites, apps and blogs. These ads do not show in search results.
Display ads can enhance brand visibility and reach a broad audience. However, they tend to have high CPMs and low CTRs, so it’s best to start with a small display budget and test the results.
Search Engine Marketing & Optimization (SEM & SEO)
These are two different but complementary ways to improve your site’s visibility in search engine results pages (SERPs). SEM involves using paid advertising to place ads at the top of SERPs. SEO involves improving your website’s structure and content to make it more likely to rank organically for relevant keywords.
You can use SEM to appear prominently in search results, especially for high-intent keywords related to your products. Investing in SEO ensures long-term visibility and reduces reliance on paid advertising.
Social Media Advertising
Social media advertising entails promoting products or services on social platforms like Facebook or TikTok. The ads show in user feeds in the form of images, videos, and carousels.
You can create highly targeted campaigns based on your audience demographics and interests. Use these to reach new customers, build brand awareness and engagement, and target people who have engaged with your brand in the past, driving them to your site through the ad.
Native Advertising
Native advertising is paid advertising in which the ad matches the style and format of the platform where it appears, such as in promoted search results, on publisher sites and on social media. Since they blend in, they are less disruptive than other ad formats and feel more authentic.
Native ads are effective throughout the e-commerce advertising funnel, earning 53% more views than banner ads and increasing purchase intent by 18%. By aligning the ad content with platform users’ interests or the context of a publisher’s page, they reach relevant users at exactly the right moment. This approach fosters engagement and trust, leading to higher conversion rates.
Pay Per Click (PPC)
PPC advertising charges brands only when a user clicks on their ad. It’s commonly associated with search engine advertising but can also apply to display and social media ads.
These can be very cost-effective since you only pay for clicks, not impressions. You’ll need extensive keyword research and ad targeting to reach the right consumers and maximize your budget.
Remarketing
Remarketing (or retargeting ads) involves showing ads to users who previously visited your website or interacted with a brand but didn’t purchase.
These are best used to re engage potential customers. By showing users tailored ads across various platforms, you can remind them about your products and encourage them to complete a purchase.
Video Ads
Video ads use short clips instead of static images, making content more compelling and engaging.
Video ads are a great way to tell a visual story and showcase products in action. With the rise of video consumption, particularly on mobile devices, video ads can effectively capture attention and drive conversions effectively.
Mobile Advertising
Mobile advertising targets users on smartphones and tablets through mobile apps or mobile-optimized websites.
By 2026, 87% of all retail transactions will happen on mobile devices. You can create mobile-responsive ads, leverage location-based targeting, and reach customers where they spend a significant portion of their online time.
E-commerce Advertising Platforms
Next, you’ll need to choose the platforms that will be most effective for your e-commerce business. Each option has pros and cons, so you’ll want to test them with smaller budgets and see which helps meet your objectives in the most cost-effective way.
Google Ads
Google Ads offers a variety of ad formats, unparalleled reach and precision targeting. Ads can appear on search results pages, websites and apps. The platform provides robust analytics, allowing you to measure and optimize campaign performance effectively.
Pros:
- Reach a global audience
- Variety of ad formats
- Powerful targeting options
- Detailed reporting
Cons:
- Can be expensive, especially for competitive keywords
- Requires a learning curve
- Competition can be fierce
Taboola
Taboola is the leading native advertising platform. It places ads in high-traffic areas on premium publisher sites such as Business Insider, Yahoo and USA Today, enabling you to reach over 1 billion users. Taboola uses extensive contextual targeting options to ensure relevancy, offers automated bidding options to maximize budgets, and generative AI tools to help you create high-converting campaigns.
Pros:
- Cost-free supported service available for accounts with an ad spend of 3k per month
- Creates synergy with campaigns on additional channels
- Relatively cheap CPCs compared to other advertising channels
- High-quality traffic from premium publisher sites
- Easy to achieve performance at scale
- Ad accounts aren’t blocked for no reason
- Generative AI tools to create optimized campaigns
- Simple interface and low learning curve
- Excellent suite of optimization tools and reports
Cons:
- Strict ad approval process
Facebook & Instagram Ads
Facebook and Instagram Ads are a great way to reach people who spend time on social media and are already interested in your products or services. Both platforms have a large, engaged audience and allow you to target people based on interests, demographics and past behavior.
Pros:
- Precise audience targeting
- Unique ad formats, including Stories and IGTV videos
- Cost-effective and budget-friendly
Cons:
- Ad fatigue is a challenge
- Small brands face more challenges
- Unreliable conversion data due to Apple’s iOS 14.5 update
YouTube Ads
YouTube Ads are ideal for reaching people who love to watch videos. YouTube has a large and active audience and offers both skippable and non-skippable video ads. You can target people based on their interests, demographics and watch history.
Pros:
- Part of Google’s promotion
- Quickly reach diverse, global audiences
Cons:
- Ad-skipping is common, and ads can feel disruptive
- Creating video content is costly and time-consuming
- Ad performance may vary based on video quality and relevance
Amazon Ads
Amazon Ads are a great way to reach people already shopping on Amazon. You can promote your products on Amazon’s search results pages, product pages, and other pages. You can target people based on their interests, demographics, and past purchase history.
Pros:
- Direct access to a high-intent audience
- Good range of targeting options
- Competitive pricing
Cons:
- Competition is intense, resulting in higher bid costs for popular keywords
- Only beneficial for businesses selling on Amazon
- Must pay additional referral fees
TikTok Ads
TikTok Ads are a new way to reach people interested in short-form videos. TikTok is increasingly popular and offers unique ad formats, including in-feed and top-view ads, branded hashtag challenges and branded effects. You can target people based on their interests, demographics and viewing history.
Pros:
- A growing and engaged user base
- Creative ad formats
- Good way to collaborate with influencers
Cons:
- Must be native content and requires a unique approach
- A young user base might be unsuitable for some brands
- More expensive than other platforms
Examples of E-commerce Advertising
Now, let’s look at a few case studies that illustrate successful e-commerce advertising strategies. These real-life examples provide insights into how e-commerce businesses have navigated challenges, tapped into the power of programmatic advertising, and achieved impressive results with native advertising.
Bombfell: Mobile Advertising
Bombfell, a personal styling subscription service for men, had trouble scaling with social programmatic, search and other paid channels. The brand used Taboola’s native advertising platform to increase traffic and landing page conversions. Leveraging hundreds of real-time signals, mobile ads were the most successful way to engage its user base, with those campaigns generating a 960% increase in conversions and a 48% increase in traffic.
Flintobox: Content Discovery
Flintobox produces STEAM-based educational activity boxes for children, sold via a monthly subscription service. The brand’s early marketing efforts were ineffective because the selling model was new, and campaigns weren’t reaching parents at the right moment. Flintobox used Taboola’s content discovery platform to attract highly engaged audiences to informative blog content, eBooks, and customized landing pages, resulting in a 15% increase in subscriptions at a 20% lower CPA than any other channel.
Sirloin: Video Advertising
Sirloin, a Korean e-commerce startup that sells high-quality meat products, wanted to acquire new customers and drive repeat purchases from existing ones. It knew high-quality video creatives would help, but few ad platforms could help them distribute the video campaigns. Using Taboola’s audience segments, Sirloin was able to reach engaged audiences with its video creatives. The campaigns had an 82% viewability rate and 45% completion rate. Additional performance campaigns achieved a 2,200% increase in ROAS at a lower CPC than expected.
Advertising Strategies for E-commerce
Finally, let’s explore a few e-commerce strategies you can implement to help grow your brand into a powerhouse. In addition to audience segmentation, content marketing, and A/B testing, try the following strategies:
Omnichannel Advertising
Running ads across a range of platforms or channels is called omnichannel advertising. Since most consumers visit multiple sites daily, omnichannel advertising lets you connect with shoppers no matter where they are. With more touchpoints, you can reinforce brand awareness, improve conversions, and build better shopper profiles for enhanced personalization. By diversifying your media mix, you can avoid becoming overly dependent on one or two channels while leveraging the strengths of each and allowing them to work together cohesively, resulting in improved ROI.
Personalization
You can increase brand awareness, conversion rates, and customer satisfaction by learning about your customers and targeting them with relevant content. Personalization can be done by collecting data about customers’ interests, demographics, and browsing habits and then using that data to target ads and content relevant to each customer.
Retargeting
Retargeting is highly effective and cost-efficient because it re-engages potential customers who have already shown interest in your product or brand. This strategy leverages familiarity and reinforces brand awareness, often resulting in higher conversion rates and improved ROI by focusing campaigns on those most likely to convert.
Recap and Future Trends
In this guide, we’ve explored the fundamentals of e-commerce, the advantages, risks, and the mechanics of e-commerce advertising. We’ve also covered different advertising models, platforms, and practical strategies you can rely on.
To enhance your e-commerce expertise, consider attending webinars, listening to podcasts, and reading industry news to stay updated on the latest e-commerce trends. You’ll also find plenty of industry-specific insights and platform tutorials in Taboola’s Resource Center, which will help you level up your e-commerce advertising game.
In the future, expect to see e-commerce continue to evolve, with trends like augmented reality shopping experiences, voice commerce, AI and sustainability playing significant roles. Remember, the key is to stay agile, adapt to changes, and keep refining your strategies to thrive in the exciting world of e-commerce.