E-Commerce Trends and Innovations
Electronic commerce is becoming more and more widespread. Digital channels will generate a significant share of all retail commerce, whether from pure-play online retailing, from multi-channel commerce or from omni-channel online/offline commerce.
According to A.T. Kearney (2014), global online retail sales have increased 17% yearly since 2007. Conlumino report estimates the market at just under $ 607 Billion in 2013, with projected 2017 revenues of $ 1,027 Billion. There is also a substantial growth in M-Commerce (purchasing via mobile devices): Goldman Sachs estimates that global m-commerce sales reached $133 billion in 2013, and that this number will reach $626 billion in 2018, which is just shy of equaling total global e-commerce sales for 2013 of $638 billion.
Among the industry growth drivers is the worldwide growth in internet and mobile penetration, combined with the shoppers’ search for convenience, better value for money, greater variety, tailored offers and great service – all of which online commerce is well positioned to offer.
Today’s retailers are responding to category barriers, while simultaneously strengthening the digital added-value offering in search for market differentiation. Strategies to respond to shoppers’ insights in the category include:
- Payments – major barriers include consumers’ skepticism regarding the use of credit cards over the web, and the fact that in some markets consumers do not own credit cards. In response, retailers offer a variety of payment methods, including bank transfers, mobile payments and virtual wallets.
- Information sharing – information sharing is a necessary element in the purchase process, but it deters customers. On the other hand, shoppers are interested in sharing data that will enable retailers to suggest tailored offers and discounts. One of the tactics here, is inviting shoppers to log in with their social media identity (such as Facebook), since consumers tend to share more personal information through these platforms.
- Service related barriers – A flesh and blood representative is able to answer questions more easily, eliminate frustration and increase basket size. Online retailers are responding with online chat options, multi-channel service, virtual advisors / stylists, and bundling offers to increase basket size.
- Call for action – shoppers are deterred by complicated registration, ordering and shipment processes, and they demand free and fast shipping. In response, retailers have been developing more convenient and simple buying processes.
- Price related opportunities – price is one of the top reasons for online purchase. Consumers do their homework prior to purchase, comparing prices and reviews. Today’s retailer websites are offering price comparison on the site – so that the shopper does not leave the website. Some retailers have adopted a “Best Price Guarantee” policy. Others have designed a loyalty program. Shoppers also turn to price comparison aggregators to research product / service reviews and prices.
Our research examined Best-In-Class competitor practices. We have found that these competitors are not merely translating physical retail into online; rather, they re-invent retail at a digital form and break the boundaries of common retail models. Here are a few examples:
- Personalization – today’s industry standard is to provide shoppers with recommendations based on their previous orders, searches and wish lists. Some retailers are already offering loyalty programs, as well as tailored offers via email. Best-in-Class retailers offer a social log-in, presenting offers at the personal level.
- Decision support – today’s retailers must consider including reviews and ratings on site, as shoppers will look for them anyway – so they might as well not leave the site for that purpose. More advanced competitors are also featuring price comparisons, comparing their prices with those of their competitors. Best-in-class competitors offer “personal” advisory services, providing access to industry experts, stylists and consultants.
- Hyper-Convenience – convenience is a top parameter for choosing online commerce over physical commerce, due to its 24/7 from-home availability. To make this advantage more compelling, retailers are offering bundled packages, product comparison tools and mobile shopping applications. Leading retailers are already experimenting with Social Media Commerce (S-Commerce) as well. Yet, online/mobile can only take you so far: the main trend in convenient shopping is omni-channel retailing, utilizing digital tools in both physical and virtual commerce in a transparent shopping experience.
- Delivery and Shipping – free delivery when ordering over a certain total, delivery within 2 – 5 days, and package tracking are common in the industry. More advanced retailers offer a variety of collecting and shipping options, including click & collect and locker pick-up. We also see a rise in same-day shipping options, one-hour delivery time slots, and real-time package tracking.
- Call for Action – path to purchase practices include a reasonable return and cancellation policy, as well as multi-channel service. However, today’s leading retailers are changing the game, designing entirely new models such as free trials and renting options. Schieber Research is also noticing a trend towards two-way commerce platforms, turning the buyer into seller and vice versa. Several large competitors have launched applications enabling shoppers to sell products; the business model is based on a commission to the platform provider. We predict that more competitors will enter this field, as this is a classic example of digital platform utilization providing a win-win solution for all parties involved.
Another prominent e-commerce trend is direct-to-consumer selling by CPGs. Many consumer goods manufacturers are already experimenting in e-commerce, usually with third parties as logistics providers. While CPGs are presenting those experiments as insight-collection driven, as to not compete with their customers (the retailers), they clearly expand their online commerce presence and even involve in S-Commerce.
In conclusion, the electronic commerce world is developing immensely, presenting a huge opportunity for manufacturers and retailers to reach more consumers through value offering that can be tailored almost immediately according to the shopper’s responses. To exploit this opportunity, retailers must think outside the box and rethink retail, utilizing the vast capabilities offered by digital tools while keeping a fierce consumer and shopper-focused strategy.