According to eMarketer’s forecasts, worldwide business-to-consumer (B2C) ecommerce sales were expected to increase by 20.1% in 2014 to reach $1.500 trillion. The rapidly expanding online and mobile user bases in emerging markets, increases in mcommerce sales, advancing shipping and payment options, and the push into new international markets by major brands are going to be the key factors behind the continued growth. (Source: Emarketer)
The B2C eCommerce industry is booming with emerging economies (majorly Asia & LATAM) driving much higher growth than the developed economies
- eCommerce is increasingly becoming a global trend and no longer restricted to US and UK
- In 2010, US & Europe contributed over 70 percent of global B2C ecommerce sales. However, by 2014 this percentage has come down to 55 percent, whereas percentage of emerging economies (including India, China, Indonesia, Mexico, Brazil & Argentina) in global B2C ecommerce has gone up to 23 percent
- eCommerce sales is largely driven by over 1 billion digital buyers around the world. Asia Pacific currently contributes to about 45 percent of the buyers.
- GDP Per capita in emerging markets is expected to rise from 4,486 USD to close to approx. 5,846 USD by 2016. Rising disposable income will further drive eCommerce.
- China alone is forecasted to cater to 20 percent of global demand for luxury goods by 2020 of which significant percent will be sold online.
Trends that will shape the B2C eCommerce
- Omni-channel commerce: Increased market concentration will lead to omni-channel adaption, customer centric approaches by companies
- Localization: Hybrid model whereby websites all run on a single global platform that is managed centrally, but operations are localized
- Innovative fulfilment approaches: Cash on delivery / One day delivery will be the standard services which will remain necessary to win customer loyalty. For example, Amazon and Alibaba are testing drone technology to facilitate one-day delivery.
- Continued popularity of Marketplace model: The model will remain popular in Asia mainly due to constraints related to FDI in direct online retail and easy scalability
- Global brands expanding in growth markets: Increasing interest of global brands to expand in Asia Pacific eCommerce market
- Mobile Commerce: With increasing smartphone penetration mobile e-tailing will grow in popularity; in the matured markets tablet usage is also popular.
- Increased consolidation: Global giants such as Amazon and Alibaba and growing companies like Flipkart (India) and Zalando (Germany) will look to acquire smaller players to gain scale, portfolio, and cost synergies. Example: Flipkart acquired Myntra in 2014. Recently, there were speculations that Alibaba could buy eBay.
Disruptive innovations in analytics
- The data-intensive eCommerce industry is forefront in capturing and leveraging data for decision making across the value chain, compared to other industries such as manufacturing or healthcare.
- However, with continuous technological innovations many eCommerce companies are struggling to familiarize. Race for disruptive innovations in logistics, mobile commerce, and social media to address rising pressure of enhanced customer service are leading to rapid advancement in analytics in the eCommerce industry.
- For example, Amazon filed a patent for ‘anticipatory shipping’ in December 2013. It is a predictive analytics algorithm that enables a proactive system of delivering products to customers before they place an order.
- While analytics using web, social, and mobile interactions is commonplace in eCommerce, the use of visual analytics in eCommerce is relatively less explored. Visual Analytics is nothing but analyzing data collected from visual searches. Have a look at one of our previous blogs “Applying Visual Social Analytics in Ecommerce”, that explores the possibilities of customer insights using Visual Analytics.
Huge investment through Venture Capitalists in online / B2C ecommerce retail has provided a big boost to the growth of the sector, especially in Asia
- Alibaba which drives 80 percent of online sales in China is valued at approx. 180 billion USD which is higher than 150 USD billion valuation of Amazon.com
- There are multiple other players (example: Jabong, Snapdeal in India Coupang in S. Korea & Rakuten in Japan). There has been huge increase in the valuations of the companies especially after listing of Alibaba in USA.
- India-based Flipkart started in 2007 and received an initial investment of 1 million USD in 2009. The company is currently valued at 11 billion USD.
Is the sector headed for dot-com-like bust?
- Investors seem to have developed an insatiable appetite for eCommerce stocks. However, after several years of operations most of the eCommerce businesses are struggling to be profitable. Example: Flipkart is yet to achieve the break even though their sales measures in millions of dollars
- Amid the current stock market hype about Alibaba, Flipkart, Zalando, and Rocket Internet, parallels are already being drawn to the Internet stocks boom
- There are several reasons why the eCommerce companies are not profitable –Aggressive expansion in new retail segments, acquisitions, heavy discounting and advertising to attract new users, increased competition, looming threat from global players with deep pockets (Amazon, eBay)
With significant scope for expansion in emerging markets and continued investments from VCs, the eCommerce boom may face downward trend in the next 3-5 years. However, most eCommerce vendors will struggle to match up with the heightened ROI expectations from aggressive investors.