10 challenges (and opportunities) facing e-commerce retailers in 2024

From the rise of artificial intellgience, to a privacy-first world, here are the top challenges for the e-commerce industry - and how to turn them into opportunties.

2024 is shaping up to be a transformative one for the e-commerce business. Artificial intelligence (AI), data privacy, and disruptive technologies — along with nagging concerns about the economy — all pose formidable challenges to an e-commerce landscape that already faces the pressure of increased expectations from tech-savvy consumers.

Fortunately, nearly every challenge retailers face is an opportunity in disguise. Retailers have the option to control their own fate by simply reframing their approach to customer data and personalization.

So here are the 10 trends we see defining the e-commerce space this year, and how retailers can face each with success.

1. Higher expectations for integrated in-store and e-commerce experiences

With the continued strength of Amazon and e-commerce in general, it’s going to take a lot more to get customers into physical stores. Retailers will have to deliver high-quality, personalized experiences as an important differentiator.

For example, consider equipping on-floor sales associates with mobile devices that can access customer accounts and purchase history for more immediate and customized attention. Or offer bespoke locations for quick item pickup/returns separate from the in-store checkout line.

2. AI will become ubiquitous and improve the customer experience

Used correctly, AI can make things easier for both retailers and customers. For instance, automated styling tools that let consumers virtually try on clothing or visualize furniture in their homes before making a purchase can boost customer satisfaction, minimize returns, and deliver a richer, more immersive experience.

Another use is making more relevant suggestions using smart merchandising and correlation tools — such as suggesting matching clothing accessories, or complementary products based on what other customers have purchased together.

3. Increased focus on targeting Boomer shoppers

Boomers hold half the wealth in the US, and are not shy about spending it. What’s more, they’re becoming easier to reach thanks to their increased use of social media. According to Insider Intelligence, 53% of boomers will regularly use social media platforms in 2024.

As consumers over the age of 60 maintain more active lifestyles and continue to embrace the conveniences of technology, marketers must create content, campaigns and promotions that not only engage these consumers, but feature them prominently and include customized messaging.

4. Consumers will take more control over their personal data

According to market research firm Consensys, eight in ten adults want more control over their identity on the internet and are advocating for enhanced data privacy rights. And states are increasingly passing laws designed to restrict the collection of personal information while at the same time empowering consumers with more control over how their data is used.

Progressive companies can get ahead of this by proactively giving customers control over their data to dictate how it's used. That means providing meaningful value to consumers in return for their data, rather that stealing it or spying on them. Create a value exchange, and the data gained will become more valuable than ever.

5. Marketers will become privacy champions

Clearly, privacy concerns are nothing new. What is new is that privacy will become more the domain of the marketing department than the security department. After all, it’s a lot harder to fix the customer relationship damage from a bad privacy experience than it is to fix the underlying security problem that caused it.

That means the marketing department will drive the implementation of smart privacy policies to protect customers further should that security fail. As security breaches become more common, companies who prioritize data privacy are more likely to retain customers who are becoming more discerning about the companies they do business with.

6. Investment in first-party and zero-party data will increase

As the third-party cookie further crumbles, marketers who so far have been slow to adopt alternative solutions will begin to ramp up their efforts. According to eMarketer, spending on B2B marketing data is expected to increase 3.8% in the year ahead, to an all-time high of $3.91 billion.

That means aligning internally first on not only how to collect first- and zero-party data from customers, but also where that data resides, who oversees it, and how it’s used. Companies will need a unified view of customer data at the individual level. This approach allows businesses to deliver relevant experiences while obtaining consent, promoting a more transparent and trustworthy relationship with customers.

7. Political ad spends will wreak havoc on retargeting tactics for brands

With both a presidential and mid-term election cycles returning this year, political ad spending will go through the roof, drowning out all but the most well-heeled brands in terms of both ad inventory, and frequency.

With Insider Intelligence / eMarketer projecting political ad spending to increase 362% this year, brands that rely on retargeting consumers through paid channels will find themselves pushed aside. But those who can leverage owned channels such as email and SMS will stand out and win. Adding a strong identity partner increases marketers' ability to reach more consumers across these channels.

8. The rise of ‘ethical AI’

Retailers own a large amount of data about their customers. Therefore it’s essential to prioritize fairness, transparency, accountability and respect when deploying that data into AI systems. That means using data not only to drive business, but to do so only in ways that are both safe and beneficial to customers directly.

According to a recent Gartner survey, 34% of organizations are already using, or in the process of implementing, AI security tools to offset the accompanying risks of generative AI. We expect to see this trend continue throughout the year.

9. AI will impact business models and how brands work with martech vendors

Cutting to the chase, we predict up to half of all martech SaaS vendors will fail in the next few years as the rise of autonomous, AI-driven marketing platforms disrupt their business models.

Platforms with unique, proprietary datasets that can feed the AI engines powering their core value and offerings are poised to truly disrupt existing models and accelerate the impact they provide for brands.

That means tech companies who rely on selling subscription-based seats, where the price remains the same every month regardless of use, will simply no longer be able to keep up. Replacing them will be companies that guarantee outcomes. In other words, brands no longer want to buy a service. They want to buy a result.

10. Brands re-prioritizing their owned channel experiences versus paid channels

Cookies aside, paid channels like Google and Facebook have already started to see lower engagement and conversion rates as customers take charge of their data and privacy. That’s why brands that invest in channels such as email and SMS are better positioned to succeed in the years ahead.

Leveraging owned channels and taking a first-party mindset will result in more steady, trustworthy, and consistent growth. Chasing the dragon of quick-fix paid channels will only continue to deliver diminishing returns.

For a deeper dive on each of the above challenges, and proposed solutions, download the free report 2024 Predictions: 10 Trends E-commerce Brands Should Look Out For here.

By Tim Glomb, VP digital, content and AI, at Wunderkind