Grading Our 2025 Ecommerce Financial Forecast

I'm Stephen Brown with LedgerGurus. Today I have with me Kelley Birrell, who runs our marketing, and we are going to grade our predictions that we made at the beginning of the year. It was also our first episode for this podcast, so it'll be a good test to see how we do.

0:25 Stephen Brown

I wanted to do these predictions, shameless plug, I was inspired by Ecommerce Fuel. But my predictions were more grounded in reality, because I'm trying to decide how to plan a year.

And so as we go about predictions and try and learn from what we saw, I'm hoping when we do the next episode on 2026 predictions, they can be useful for anybody who's listening and planning their year.

Kelley, welcome back to the episode.

0:44 Kelley Birrell

Thank you very much.

0:45 Stephen Brown

You're going to be my interrogator, so go ahead and interrogate me on the 10 predictions we made.

0:49 Ecommerce growth

Kelley Birrell

Okay, actually I'm really excited about this, because I am interested to see how it went. I've been reading your newsletter and just paying attention to things this year, so I'm interested to see where this goes.

So the first thing that you said was that you expected that ecommerce was going to rebound and even climb back towards its 2020 peaks. Looking back, did it actually do that?

1:10 Stephen Brown

Yeah. So we talked about the ecommerce market, retail sales as a percentage of total sales. And I want to bring this up again.

We looked at it at the beginning of the year. One of the things you saw was a peak in Q2 of 2020, and then it dived. And then the market climbed, climbed.

1:35 Stephen Brown

Right now we only have data through Q2 of 2025, and it was 16.3%, which was the same number we had in Q2 of 2020.

So five years later, the ecommerce retail sales as a percentage of total sales is back. I'll be curious to see what Q3 and Q4 is, my guess is it's growing. So we are back to where ecommerce is ahead of retail, is continuing to grow, and it's at an all-time high.

2:00 Stephen Brown

Now, why does this matter? Some other data points that I was reading about Black Friday. Ecommerce sales grew faster than retail sales.

That's where I want to ask you a question, Kelley. As a mom, moms tend to be consumers. How's your holiday shopping? Have you got most of it done?

2:07 Kelley Birrell

Almost all of it, yeah.

2:09 Stephen Brown

How much of it did you do online versus in store?

2:12 Kelley Birrell

About 99% of it.

2:14 Stephen Brown

Yeah, and I've done 100% of mine so far online.

I think this is a tailwind for the industry. Even if retail is soft, ecommerce is still growing as a percentage of retail sales, just because it's easy.

2:28 Kelley Birrell

Yes, exactly. That's exactly it. It's so much easier to just go to my computer and pull up a site and just get every bit of shopping out of the way. I don't have to traipse all over the stores, I don't have to go to multiple stores. It's easy.

2:41 Stephen Brown

Yeah. And so there are a lot of tailwinds, and at 16% there's a huge opportunity for market growth.

So why does this matter? Regardless of the economy, I think there are tailwinds for ecommerce. There's the convenience factor, there's the ability to find exactly what you want.

3:00 Stephen Brown

I do like a couple of retail experiences. I like Costco, I like Best Buy, I like the Lego store, the Apple store. But for the most part I don't, it's a pain in the butt.

So I mean, this was a softball, but I'm going to give myself an A. I think this year has proved that ecommerce is continuing to have a lot of strength. And looking ahead, it's going to continue to do so.

3:22 Kelley Birrell

I can't imagine why it wouldn't, because the things that make it so good are not going to go away.

3:29 Marketing costs, interest rates, and inflation

Kelley Birrell

Okay, so you said that you expected that marketing was going to get more expensive and that brands were going to need to get more hands-on.

I have a couple of different ways that we could ask this question. Did it end up being as big of a challenge as we thought leading into 2025? And where did you see brands struggling the most with rising costs this year?

3:52 Stephen Brown

So yeah, this prediction was around marketing efficiency.

As I've done some research, I don't feel like costs have gone up significantly like we've seen in some years, costs of advertising. But they definitely haven't gone down.

Again, this was another softball. I think the one thing we can predict, although I am going to make an interesting prediction when we get into the next episode on 2026, but for the most part the cost of marketing is continuing to put a lot of pressure.

4:20 Stephen Brown

I've seen in the data, I haven't seen anybody's costs go down significantly. No, this was a softball. I'm going to give myself an A.

4:26 Kelley Birrell

Okay, awesome. So the next one. This was about interest rates and inflation. You predicted that the rates were dropping, but the inflation would still stay really sticky. Did it actually play out the way that you expected it this year?

4:38 Stephen Brown

Yeah, I think I'm going to give myself another A. We did see rates come down, but it's an A with an asterisk.

We saw the Federal Reserve reduce interest rates, but there were fewer cuts than predicted, and they came in the latter part of the year. We just had one here in December. Inflation has been really sticky, it's sticking around that high 2%.

5:05 Stephen Brown

Now here are some interesting things about interest rates and why I feel like this is important to watch.

Lending is a really important part of a consumer products business, because of the cash cycle around buying inventory. Unfortunately, the interest rates that are cut at the Federal Reserve don't always trickle down to a lot of loans.

5:30 Stephen Brown

What I've seen is, if you had a loan that was tied to the prime rate, the prime rate is really closely tied to the federal funds rate, you probably saw your cost of lending go down.

A lot of the stuff we see in ecommerce is kind of specialized lending. I did not see those costs going down. So even though we've seen interest rates going down, these specialized lenders, I have not seen them reduce their rates.

5:55 Stephen Brown

And inflation, I guess compared to what we were a couple of years ago, this feels pretty good. But we had almost two decades of inflation below 2%, and in some cases much lower. So there's still a lot of pressure on the consumer, and I think we see pockets of inflation.

So I feel bad, I think I got it right. I'll give myself maybe an A minus or B. Pretty accurate on this one. Unfortunately I don't think the outcome for ecommerce businesses was great from this prediction, but I do feel like I had an accurate pulse on this.

6:16 Regulation and tariffs

Kelley Birrell

Okay, that makes sense. The fourth one was on business friendly regulations and the environment. So was there more breathing room for businesses, or did it get any better?

6:27 Stephen Brown

So, business friendly Trump administration. I think this is a mixed bag. For ecommerce I would say it's a C at best.

Let me tell you where I think it's good, and I think this will lead into the next prediction. We have seen a lot of deregulation at the beginning of the year. There was talk about beneficial ownership information reporting that went away.

6:50 Stephen Brown

The big beautiful bill, very controversial, but there are a lot of provisions in there that are really good for business. There's going to be greater depreciation, a lot of incentives to buying equipment, to making investments.

DOGE was interesting, I think there's a mixed bag there. We had the government shut down, I don't think that was great, it shut down SBA loans.

7:20 Stephen Brown

So overall I think the new administration is business friendly. But when you look at ecommerce, you can't ignore tariffs, which is one of our projections.

So I'm going to give myself a C as it relates to ecommerce. I think there are some things to be optimistic about, but overall I think there were a lot of headwinds from the economic policy of the administration.

7:33 Kelley Birrell

Well, that is actually the very next thing, is talking about tariffs and what that did. Tell us a little bit about where that went, and also what smart brands did early that helped them stay ahead of these changes.

7:45 Stephen Brown

I'll give myself an A. Yes, there were tariffs.

Actually, I'd probably give myself a C. I was blown away at the magnitude of what they ended up being.

8:00 Stephen Brown

I'm looking at my notes from the beginning of the episode. There seemed to be a lot of talk around Mexico and Canada. There was a lot around drugs and fentanyl.

What we didn't expect was the nuclear bomb of tariffs that we saw in April, and the back and forth and the ramp up with China and the EU.

8:20 Stephen Brown

If there was one theme of 2025 for ecommerce, I'd say it was tariffs. If you were lucky enough to be manufacturing in the US and were having success, you might be having more success than ever, because a lot of cost differentials have gone away. But boy, that's been devastating.

8:40 Stephen Brown

I don't have easy answers to your other question. Price increases have been one thing you can do, but that comes with its own challenges.

And I would argue that the full impact of them hasn't been felt this year, because there were delays in them rolling out, there were changes. And to be honest, if you think about the time it takes to buy inventory and then sell that inventory, I really only feel like about now that we're moving into fully tariffed inventory.

9:00 Stephen Brown

So 2026, we'll probably see a year of everybody experiencing the tariffs in their totality. And I have some predictions about the implications of that in the next episode.

9:15 TikTok Shop

Kelley Birrell

Yeah, I'm interested to hear that. Okay, so this is a totally different topic. TikTok Shop.

You said that there was huge potential, but at the moment we were looking at a possible US ban. How did things unfold, and with all this uncertainty, did you see brands diversifying?

9:34 Stephen Brown

I think depending on who you talk to, this could be an A. I think overall in the industry this is like a B. Let me tell you why.

I recently saw that TikTok had now approached the size of eBay. So there's been huge growth. They've been avoiding the shutdown, it doesn't look like that's happening. There's a lot of maneuvering. And I think you're seeing growth there.

10:00 Stephen Brown

Now, why would I not give it an A? I know there are some brands that are killing it, I know there are some people that are huge on social commerce.

I really think what TikTok Shop has done is very clever around their in-app checkout. I really like the model. I haven't seen widespread adoption. I still think we're early in the growth curve, and I'll be really curious to see how it grows.

10:30 Stephen Brown

So in terms of TikTok Shop having success, considering that they were up against a ban, I think they're proving success, and it's something brands should be considering.

There are a lot of nuances. Go back and listen to the episode I had with Michelle Barnum Smith, she had a lot of really good insights there.

10:50 Stephen Brown

I haven't seen widespread adoption yet, but I still think it's an emerging channel. And the realities of what it's going to be for everybody are yet to be determined.

My hope is, there are some things about TikTok Shop that I really like. I hope we see that more in other social commerce elements, whether it's YouTube or Meta. But they both have work to do.

11:04 AI

Kelley Birrell

Yeah, definitely. Okay, so AI. You said that AI would make things and business easier, cheaper, and more helpful. Did it end up being the game changer that you expected it to be?

11:18 Stephen Brown

I'd say an A for that. I also think AI has evolved in ways I wasn't thinking about. I was thinking about it mostly from a cost efficiency perspective.

I'll tell you from real world experience with the brand I co-own, Solé Toscana. Preston's going to actually do the 2026 predictions episode with me. He has been able to cut costs by using AI.

11:50 Stephen Brown

Nano Banana is amazing for imagery, it is an incredible tool. Obviously you've got ChatGPT, you've got Gemini, you've got Claude. In terms of creative, and being able to iterate really quickly, generate some really cool creative, I think it's an A.

12:10 Stephen Brown

The thing that I wasn't expecting, and I'm going to talk about this in the 2026 predictions, is I'm really excited about AI commerce.

That really wasn't on the radar at the beginning of the year. But we've got in-product checkout that is rolling out with Shopify and ChatGPT. I think it's only a matter of time before we get ad channels. I don't want to get into too many details, but I have a lot of thoughts on this.

12:25 Stephen Brown

I think AI, for those that have leaned in, has given a lot of positive outcomes.

You're in marketing, tell me, are you using more or less AI right now versus the beginning of the year?

12:33 Kelley Birrell

Exponentially more.

12:36 Stephen Brown

And has it cut down on the time to do things?

12:39 Kelley Birrell

Oh yes, definitely.

I think back to the beginning of the year and the things that I was doing. Most of what I use it for is writing, of course. And I just use it constantly for writing now. Whereas before I was still trying to puzzle it out and figure it out.

And no, I literally use it all day every day and it makes such a difference. It has sped up all of the processes and made the result that much better.

13:04 Stephen Brown

Even the software we're using here, Riverside, we fell in love with it because of the way it edits and does the transcriptions. The transcriptions are really good. It has the ability to automatically take out ums and pauses and stuff.

I still think we're early in the curve. But I think if an ecommerce business has leaned into AI tools, I don't see how they haven't had some success. And we're only at the beginning of the journey here.

13:33 Supply chain, de minimis, and new channels

Kelley Birrell

Yeah, definitely. I'm excited to see where it goes, because I'm already blown away by what it's done.

Okay, next section. The supply chain complexities. You were saying that there were potential port strikes, global route issues. Tell me about how that ended up turning out.

13:46 Stephen Brown

I'm going to say a C, but I'm a happy C.

It's hard to believe it, but this time last year we were dealing with an East Coast port strike. There were the issues in the Red Sea with the Houthi rebels targeting ships.

14:05 Stephen Brown

The strike ended up getting resolved. It seems like Red Sea traffic has improved.

So I'm glad to say this hasn't seemed to have been an issue. I thought it might be, I was worried about it, but it ended up being not so, so far. So knock on wood. I'm glad to be wrong on that one.

14:21 Kelley Birrell

Yeah, some things it's good. Okay, so de minimis rule changes. How has this been hitting the drop shippers and other brands?

14:31 Stephen Brown

I'm mostly sad to be right. I'm mixed feeling to be right. I think I got an A.

The wind down of this came a lot faster than I thought. This was baked into, I want to say the big beautiful bill, but there was momentum going into 2025 from the Biden administration. Everybody knew that Chinese sellers were abusing the de minimis rule.

15:00 Stephen Brown

And I think this is mostly good, because you had foreign sellers, particularly Chinese sellers, that were known to circumvent regulations using this loophole. And so this has gone away.

I think it's hurt anybody who's an international drop shipper. But I think for the industry as a whole it's a good thing, because it equalizes the playing field. It's going to require foreign sellers who are using this loophole to play by the rules.

15:30 Stephen Brown

For the consumer, is it good or bad? If you're talking about low cost goods, it's bad. You had Temu and Shein who were really built on top of this. You could sell goods cheaper because you weren't having to pay duties.

So I have a mixed feeling about being right on this. I would say A for accuracy. And I think long-term this is probably a good thing for the market.

15:45 Kelley Birrell

Yeah, I think you're probably right. Okay, last one.

We were talking about new sales and marketing avenues like AppLovin and streaming TV ads and new platforms. Tell me about what you've seen with that. I guess the main question is, did they live up to the hype?

16:04 Stephen Brown

Well, TikTok Shop was one of these, I had a separate TikTok Shop prediction. I think we've seen a lot of growth there.

AppLovin, I've heard mixed things. AppLovin opened up, they were somewhat limited. I've heard mixed feedback around AppLovin. I guess I would say a B or C.

16:30 Stephen Brown

I do see more opportunities. I've seen some customers that are having success on Faire. But nothing is replacing Meta or Amazon in terms of advertising or sales channels. None of these things are on a runaway velocity.

You're always going to find that brand who's having massive success on some new channel. But I think it's really hard.

17:00 Stephen Brown

Let me talk about Amazon, just kind of take a tangent. Amazon continues to be crushing. They keep adding more fees, it's just painful, but they're the biggest marketplace. So it's kind of like, well, do I sell on there or not?

Meta has been interesting this year. I think you've seen some changes. And it's still just a really good discovery platform, because it knows a lot about us.

17:30 Stephen Brown

But I've yet to see somebody who is doing the majority of their sales on any of these channels. So I give myself like a C.

I think they are good emerging channels. There are going to be people that are having massive success. But as an industry, I'm not bumping into anybody that has been able to redistribute a significant amount of spending.

17:55 Stephen Brown

We did have an episode on marketing spend two episodes ago, with Kurt from Dash.fi. He did talk about that they're seeing the spending on Facebook and Google go down, but it wasn't significantly down.

So we're seeing some diversification. But it's still very much, I think for ecommerce, Meta is still such a huge channel for advertising, and Amazon is a huge channel for selling on.

18:15 Stephen Brown

I haven't seen a lot to break up that monopoly. And there's some goodness and there's some badness to that.

It is an interesting landscape right now. I think it is good to see these new platforms put some pressure on the old ones that can abuse their power. But I've yet to see anybody really crack the empire, so to speak.

18:29 Kelley Birrell

Yeah, that makes sense. So they're kind of sticking with the old stuff, it's tried and true. Experimenting a little bit with the new stuff.

Well, that is all of our predictions. I think you did pretty well overall, Stephen.

18:40 Stephen Brown

Let me wrap up. Why did I make the predictions? And let me talk about a teaser for the next episode.

I want to talk about what brands should be thinking about as they're planning their year. A lot of people are either wrapping up their plans, or in the middle of their plans, or maybe they're going to start their plans in January because January tends to be a slower month.

19:10 Stephen Brown

So I'm trying not to stretch too hard with some crazy predictions. I am trying to think about what are the things that I should be thinking about from a financial perspective as I'm going about planning my business.

As I look at these, a lot of them felt like softballs. But at the same time, these are the things that I was thinking about going into 2025. I think that's pretty good.

19:30 Stephen Brown

I'm trying to think, what did I miss this year?

I think the biggest miss I had was underestimating the scope of tariffs.

19:36 Kelley Birrell

Who could have known that? That thing exploded.

19:39 Stephen Brown

Clearly.

That was probably my biggest miss. I think everybody knew we were going to get more tariffs, but I feel like the magnitude of them was just mind blowing, and it's still just a big suck fest.

19:55 Stephen Brown

I'd say the other surprise I have, this has been an interesting year. I was really economically excited about this year, because the Trump administration, they tend to be business friendly.

There's been a lot of turmoil. Love them or hate them, he's a roller coaster. I'm a little surprised at how much economic turmoil we've had with that administration, between the tariffs, DOGE, the government shutdowns.

20:30 Stephen Brown

There are some interesting things with the big beautiful bill that I think could be stimulatory. I am concerned long term around some of the policies and their impacts to the US economy, but I think in the short term that'll be stimulatory.

So it's been a real roller coaster of a year.

20:53 Stephen Brown

And one of my big surprises, we're recording this after Black Friday, Cyber Monday. Never doubt the American consumer. The consumers are still showing up.

I read a really great article, it was in one of our recent newsletters, talking about the cranky consumer. Everybody's feeling squeezed, they're feeling stressed, but people are still spending. And so that has been helpful for ecommerce. But it's been a hard year.

21:15 Stephen Brown

And if you're listening to this and you're in ecommerce and you haven't had a hard year, just be grateful.

I think we were just experiencing a lot of challenges. But I go back to that original prediction. There's a lot of opportunity for ecommerce, that's a long-term macro tailwind.

And so if you can navigate all the craziness, the tariffs, the de minimis changes, the never ending fees from Amazon, I still think there's a good opportunity.

21:50 Stephen Brown

Next episode, I'll talk about my predictions for 2026, and why a seller should think about those as they're planning out or finalizing their plans for the next year.

21:56 Kelley Birrell

Well, I'll tell you, I'm excited to listen to the next one.

21:58 Stephen Brown

Yeah, I'm excited to have the conversation. And hopefully these predictions are helpful for anybody that's listening.

If you think I'm smoking weed, send me a comment wherever you see this content, we'd love your feedback.

But if you made it through 2025, congratulations. It's been a really hard year. And I hope that you have a good end of year and are able to take a break in January. Come back stronger than ever.

So stay tuned for the next episode, we're going to get into those predictions. For now, thanks for joining us. Until the next time.

22:29 Kelley Birrell

Thanks, Stephen.