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Enabling eCommerce in a digital economy Insight paper July 2018
Insight paper Enabling eCommerce in a digital economy Contents Enabling eCommerce in a digital economy 1 eCommerce is the key to a thriving economy 2 Technology will enable new value 3 The current state of eCommerce 4 New opportunities for eCommerce growth 6 Re-thinking the traditional distribution chain 10 From products to services 11 What’s next for eCommerce? 12
Insight paper
Enabling eCommerce in a digital economy
Enabling eCommerce in a digital economy
The internet has fundamentally In this new market landscape,
changed the way we buy and Australian businesses have the Consumers are in control
sell products and services. opportunity to compete at a global
– with more choice of
scale and make the most of the
Australians spent $21.3 billion benefits the online economy offers.
when, where and how they
in our virtual shopping baskets But only with support and investment. buy online, and how they
in 2017.1 Meanwhile online want purchases to be
service transactions – from This insight paper looks into the delivered or returned.
current trends in eCommerce and
banking and government
the immediate opportunities. While
services to mobile phone plans eCommerce covers both products and
or software downloads – are service transactions; we also look at
also now commonplace. changing expectations for physical
product trade, and the implications
This digital economy has become
for the way we buy and pay for
business as usual. Consumers are
other types of products or services
in control – with more choice of
– including government services.
when, where and how they can
buy online, and how they want it
to be delivered or returned. The
boundary lines between retailer
and supplier have dissolved, and
traditional distribution channels
are being disrupted by direct-to-
consumer marketplaces. It’s now
possible to reach customers around
the world, with just a few clicks.
1 Inside Australian Online Shopping, eCommerce Industry paper, Australia Post – 2018
Australia Post | Business and government solutions 1
Insight paper
Enabling eCommerce in a digital economy
eCommerce is the key to a thriving economy
Australia’s retail sector Further growth is important for several reasons:
employs 1.2million Australians
or 10% of the workforce2 and
retail sales are a significant Online retail encourages local
1
contributor to our GDP – employment growth – in both urban
accounting for about a third and regional areas with lower physical
of all household spending.3 barriers to entry. Entrepreneurs and
Although Australians may have communities outside the major CBDs
been slightly slower to embrace can access more services, and be
online shopping than the UK and empowered to create their own futures.
US, we have been catching up
quickly. In 2017, online spending
growth outstripped traditional
retail by 16.2 percentage points.4
Meanwhile, many of our online retail
success stories are characterised 2 There are significant new export
by smaller entrepreneurial sellers; opportunities in new markets,
such as Shoes of Prey, Mon Purse as our retail export patterns shift
and Birdsnest, and fast growing towards southeast Asia and China,
specialist e-tailers such as
Booktopia and The Iconic.
meeting their preferences for
trusted, healthy, ‘eco’ brands.
3 Consumers, business and government
all share broader benefits – including
convenient access to a wider choice
of goods at better prices, as well as
opening the door to more diverse
markets for suppliers and retailers.
2 Industry Insights 2018, Office of the Chief Economist – 2018
3 Australian retail sales stall, Business Insider Australia – May 2018
4 Inside Australian Online Shopping, eCommerce Industry paper, Australia Post – 2018
2Insight paper
Enabling eCommerce in a digital economy
Technology will enable new value
According to the World These new transaction models
Economic Forum’s report, wouldn't exist without the digital
eCommerce and emerging platforms that underpin them.
business models such as the That’s why digital innovation
sharing economy; curated will be an essential investment
subscription and ‘do it for me’ in Australia’s future eCommerce
services could unlock $2.95 growth, harnessing the potential
trillion globally in value for of automation, connected devices,
advanced data analytics and
industry and consumers over
artificial intelligence. According
the next decade. Consumers to McKinsey, Australia is currently
could capture up to 68% of that lagging behind global players
economic value, by potentially in our digital channel reach
saving time and money.5 and influence on consumers.
McKinsey research indicates a
potential retail EBIT improvement
of $15 to $30 billion if we move
quickly to become a world leader in
digital innovation, claiming it could $30b
transform every step of retail’s
value chain, from sourcing and $15b
logistics to omnichannel consumer
experience and engagement.6
5 Shaping the Future of Retail for Consumer Industries, World Economic Forum in collaboration with Accenture – January 2017
6 Digital Australia: Seizing opportunities from the Fourth Industrial Revolution, McKinsey & Company – May 2017
Australia Post | Business and government solutions 3Insight paper
Enabling eCommerce in a digital economy
The current state of eCommerce
The way we shop and spend However, marketplaces can also
Globally, nearly online continues to change. lead to price becoming the core
12% of total Most recently, we’ve seen the differentiator as they centralise
control of the buyer’s product
retail business to growing impact of special event discovery and experience.
consumer sales days such as Black Friday and
are online.7 ClickFrenzy, which have shifted In this new ecommerce landscape
our traditional seasonal peaks – with a world of choice at our
of Christmas and Boxing Day. fingertips – sales and loyalty are
won through customer experience,
There has also been significant rather than product. Australia’s
uptake of ‘buy now pay later’ merchants have proven their
platforms like Afterpay and innovation capability when it comes
zipPay – allowing instant to personalisation of product – such
gratification on a budget. as Mon Purse’s monogrammed
bags, or custom-made Shoes of
We’re more open to purchasing Prey. Global players like Amazon
on our smartphones too – mobile and Alibaba continue to set the
According to Australia eCommerce transactions grew by bar for personalised experience
Post’s 2018 eCommerce 58% in 20179 – indicating the rise of – from product recommendations
Industry Paper, Australia ‘incidental’ shopping on the go. Often to seamless delivery choices.
is catching up with mobiles are used for browsing and
online sales accounting price comparison on the go before a
for 8% of retail spend. desktop purchase later that day, so
optimising retail content for shorter
By 2020, this is expected attention spans is critical – even if
to grow to one in 10 it’s not the final point of checkout.
purchases.8
It’s never been easier for Australian
consumers to find, compare and buy
products – and new marketplaces
such as Amazon and Catch are
further expanding their options
by creating central platforms for
multiple vendors. It’s the 21st century
equivalent of the department store
concession and it enables suppliers
to tap into large customer traffic
and cross-sell opportunities.
7 Signed, sealed, delivered (and regularly returned), Global Consumer Insights Survey, PwC – 2018
8 Inside Australian Online Shopping, eCommerce Industry paper, Australia Post – 2018
9 Inside Australian Online Shopping, eCommerce Industry paper, Australia Post – 2018
4Insight paper
Enabling eCommerce in a digital economy
New trends in eCommerce
Mobile shopping was
up 58%, accounting
for 1 in 5 purchases
Black Friday and Cyber
Monday sales grew
27%
Buy now pay later
platforms enabled
Marketplace
7.7% of online
purchases
goods purchases
grew by
74.8%
Source: Inside Australian Online Shopping, eCommerce Industry paper – 2018 (2017 figures)
Australia Post | Business and government solutions 5Insight paper
Enabling eCommerce in a digital economy
New opportunities for ecommerce growth
Tapping into a trillion dollar through marketplaces such as TMall
global market Global (owned by Alibaba Group) With 99.9% of global online
and JD.com, as well as Tencent’s
With 99.9% of global online spend sitting outside
Wechat social platform.
spend sitting outside of Australia, of Australia, the digital
the digital economy enables Amazon and Walmart are both economy enables a
a ‘shopfront without borders’. investing heavily in India, where ‘shopfront without borders’.
The global eCommerce goods mobile wallet momentum could
market is set to reach over enable significant eCommerce
growth. Meanwhile, South-east Asia’s
US $2trillion growing middle class also offers
an attractive market for Australian
by 2019, making this a significant eCommerce players.
export opportunity for Australian Australian Export Award winner
suppliers and retailers of all sizes.10 for eCommerce in 2017 aussieBum,
With almost is just one example: sales of its
range of Australian designed and
US $500billion manufactured men’s underwear
and swimwear have grown strongly
in emerging markets, particularly
in potential eCommerce value,
South East Asia and South Korea.
China has emerged as a significant
online market globally – and its
sophisticated online buyers are
particularly attracted by Australia’s
health, beauty and baby products.
Many retailers build awareness
10 Inside Australian Online Shopping, eCommerce Industry paper, Australia Post – 2018
6Insight paper
Enabling eCommerce in a digital economy
Towards one-click check out In response to the challenges Emerging technology, such as
associated with driving AI-powered chatbots and voice,
New payment solutions and transformation in a digital world, can also help to build trust in the
integrated eCommerce platforms we’re seeing digital leaders build online shopping experience. Virtual
also enable growth by making platforms internally. They believe sales assistants can create a
it easier and more secure to doing so will enable them to ‘physical’ level of service in a digital
buy and sell. A range of plug-in maintain control of the end product environment, as Kent & Lime do with
payment options – from Paypal and be cheaper in the long run. their personal shopper experience.
and SecurePay to Afterpay and In fact, 40% of shoppers don’t care
zipPay – helps remove friction They often underestimate the if an AI tool or a human salesperson
in that final moment of purchase. changing scope and complexities helps them, as long as their questions
associated with internal development get answered13 – and it’s predicted
and implementation. We often see the use of virtual customer assistants
However, in general, we these projects run as much as will jump 1000% by 2020.14
are still more likely to bank 56%12 over budget and expose
Digital Leaders to the risk of their
online or use government internal platform. Falling behind
services than shop. As we the market.
discussed in Australia’s
pathway to a digital Alternatively, companies and
government agencies have delivered
economy, online shopping
purpose built solutions on time
is one of the last stages and on budget by partnering with
in the digital adoption specialists who design, build and
pathway. One reason is maintain market leading solutions,
trust: eCommerce websites enabling them to focus on their core
have one of the lowest business. Australia Post’s new fintech
levels of trust in the use of joint venture, AlphaCommerceHub,
provides access to a fully-integrated
personal data at 19% (only
platform of eCommerce services
social media was lower at – including secure payments, fraud
12%). As consumers value and risk management, logistics
their financial information and customer acquisition and
above all other personal loyalty programs. It’s just one
data, payment security is example of a platform designed
a key factor in reaching to underpin a secure, seamless
omnichannel experience.
digital laggards.11
11 Australia’s pathway to a digital economy, Australia Post – August 2017
12 https://www.economist.com/node/4065653
13 HubSpot Global AI Survey Q4 – 2016
14 Are you being served? Why chatbots hold the most insight for Marketers, Robert Schwarz, Marketing Magazine – 24 October 2017
Australia Post | Business and government solutions 7Insight paper
Enabling eCommerce in a digital economy
Meeting expectations on Also an easy returns process is
delivery and returns increasingly used as a differentiator
by Australian online retailers keen to
The other significant friction point in provide an omnichannel experience.
online purchases is shopping costs This is especially true of those with
and ease of returns. Up to little or no retail coverage – and is
65%
a ticket to play for segments such
as apparel, footwear and small
consumer electronics.
of Australians have abandoned
a shopping cart due to high
In fact, recent research
shipping costs – and a bad
delivery experience will prevent by Australia Post (with a
panel of online shoppers),
59% revealed that offering
free returns led to a 13%
increase in basket size,
from choosing that retailer again.15
Two-thirds say they’ll shop more a 13% increase in order
online if shipping is free – but only frequency and a 26%
increase in overall spend.
26 to 39% An Australia Post consumer survey
of Australian retailers offer this also found the majority of frequent
– even with a minimum spend. online shoppers would welcome the
option to pay more for three hour
delivery, and a nominated day
and time delivery – and they’d
shop up to 38% more as a result.16
Online shoppers are willing to pay for delivery choices
3 Hour Delivery
Order
between
8am & 5pm
Receive your
item within
2–3 hours
24%
preferred
Would
pay $8.80
extra
Nominated Day and Time Delivery
Select a 2 hour delivery slot between
9am & 9pm at time of purchase
(with at least 24 hours’ notice)
30%
preferred
Would
pay $5.80
extra
Source: Australia Post consumer survey, Nov/Dec 2017
15 The big problem with the $22 billion online retail industry, News.com.au – July 2017
16 Consumer Delivery Preferences, Australia Post Survey conducted – Nov/Dec 2017
8Insight paper
Enabling eCommerce in a digital economy
As consumers, our expectations A recent PwC survey found Australia Post’s Shipster service
gives local retailers similar
25%
for eCommerce are constantly
elevated by our next great online capabilities, and has become one
of Australia’s largest eCommerce
experience – whether that’s shopping clubs with around 100
with Uber Eats, Airbnb or Netflix. of online shoppers would pay more
merchants providing unlimited free
So it’s not surprising Australian for a delivery in a 1 to 2 hour window
shipping^ on eligible purchases
of their choosing. Meanwhile,
consumer expectations align for a monthly subscription fee.
with global preferences.
65%
consumers value free return shipping
above any other benefit.17
It’s worth noting one-third of
Amazon’s customers have signed
up for their subscription-based
offer, Amazon Prime – and the most
important benefit (for 72% of users)
is the unlimited free delivery, while
25%
value free two hour delivery.18
17 Signed, sealed, delivered (and regularly returned), Global Consumer Insights Survey, PwC – 2018
18 Signed, sealed, delivered (and regularly returned), Global Consumer Insights Survey, PwC – 2018
^ Shipster terms and conditions can be found at https://auspost.com.au/shipster/terms?fm=search-organic
Australia Post | Business and government solutions 9Insight paper
Enabling eCommerce in a digital economy
Re-thinking the traditional distribution chain
The next wave of eCommerce Another option is to outsource
success stories will compete this increasingly complex logistics
on two fronts: customer challenge. Australia Post has
incubated tech start-up Fulfilio
experience, and the cost to warehouse, pack and deliver
and speed of delivery. products to consumers. It supports
Given our ever-increasing custom packaging and product kits
expectations of personalised, to enhance the customer experience,
intuitive experiences and as well as automated fulfilment
fast, convenient delivery, this and split shipping.
may mean re-thinking the Emerging technology will soon
traditional distribution model. help us solve more aspects of this
logistics puzzle. For example, the
We're already seeing National
internet of things could enable a
distribution centres, inflexible routing
smart security device to enable
and standard shipping charges are
a bulky or perishable delivery to be
already making way for hyperlocal
safely dropped inside your home
fulfilment centres, or drop-shipping
– even if you’re not there. Meanwhile,
from the manufacturer or local
your voice-activated smart home
physical store. For example, Coles
assistant could help you make
has trialled using Airtasker for same-
decisions on the day about where
day delivery, while department stores
to receive your goods. Drones and
are experimenting with picking online
self-driving vehicles may also help
orders in store.
to further automate supply chains.
The challenge is to optimise Exporting fresh produce may
delivery for the individual customer. become more straightforward
This will take an ‘omniview’ of stock with developments in cost effective
location and availability. It’s no cold chain direct to the consumer.
longer a ‘business to business’ or
‘business to consumer’ approach:
it’s business to business and
consumer at every touchpoint.
A fully-integrated platform
will be essential. For example,
AlphaCommerceHub can give the
customer visibility and control over
when and where their delivery is
made – including the ability to text
delivery options, or click and collect
in store. It also integrates with
Shipster, and has an identity fraud
detection underlay, giving buyers
and sellers peace of mind.
10Insight paper
Enabling eCommerce in a digital economy
From products to services
When it comes to service From banking and utilities to Online service transactions typically
eCommerce, physical government services, customers require a level of identity verification
distribution is obviously are transacting online. But they – adding friction to the experience.
expect the same convenience As outlined in our Digital Identity
less of an issue. However, and seamless experience as if white paper, A frictionless future
the same lessons in they’re in a branch or retail outlet, for identity management, the ideal
personalised customer or customer service centre, or omnichannel service experience
experience and payment talking to a call centre. requires three things: a single
choice and security apply. over-the-counter entry point, more
Face-to-face experiences will continue effective information and enquiry
to be an important touchpoint – but channels (online, chat or search,
the cost of providing this is growing, or over the phone), and a secure,
even as many transactions are convenient digital identity platform.
digitised.19 In a recent survey, 94%
of Australians told us they expect to
be able to transact with government
online (yet 70% of those saying they
still want the choice of an in-person
option). 20% still prefer to only deal
with government services in person
– a figure that hasn’t changed in
10 years.
Lessons in customer experience
Product sellers and service providers face similar challenges
On-demand Made for me Give me confidence
Expectations for speed Data insights and deep Visibility, control
and delivery continue learning algorithms and security will
to accelerate deliver personalisation win my trust
at every touchpoint,
and recognise loyalty
19 Nous / Australia Post Government Services Consumer Survey 2017, Future of Government services final report – February 2018
Australia Post | Business and government solutions 11Insight paper
Enabling eCommerce in a digital economy
What’s next for eCommerce?
Future opportunities in eCommerce Alternatively, retail stores may
are being driven by customer simply become a ‘click and collect’ This is the most important
expectations for convenience, or physical showroom destination lesson from the ever
access and choice. But they will be for online shoppers.
delivered by technology. New fully -evolving digital economy;
integrated platforms will underpin As Australian consumers continue when customers have a
the omnichannel retailer of the to embrace online shopping, world of shopping choice,
future, enabling faster and more eCommerce players will need to product becomes less
cost-effective product delivery become more innovative in meeting
relevant – you can either
options and a more responsive, their individual expectations for
product personalisation, payment differentiate on price, or
frictionless customer experience.
convenience, security, and on customer experience.
As Amazon Go’s pilot store in delivery choices. This begins with Only the latter creates
Seattle shows, the bricks and mortar knowing your customer intimately sustainable business value.
store will still have a role to play in – capturing data to tailor product
our retail sector. Its role, and the search, provide helpful offers and
experience it provides consumers, recommendations, and continuing
may change. In the case of Amazon to engage after the sale.
Go, it’s checkout-free (scan a QR
code on entry, and your grocery Successful retailers are already
items are added to a virtual cart doing this well – because they know
as you go). Walk in, walk out. it’s far more important to create long
term loyalty than short term sales.
The next wave of eCommerce?
Voice Chat Internet of Things Omniview logistics
Be ready for voice Virtual sales Home security Integrated
-activated product assistants devices and inventory and
discovery, orders that guide more smart appliances supply chain
and delivery complex purchase that order and management
management via decisions accept deliveries that optimise
home assistant delivery speed
devices like Google and cost
Home and Alexa
12Insight paper
Enabling eCommerce in a digital economy
Australia Post is Australia’s largest parcels, freight
and logistics provider and is committed to connecting
Australian businesses and the community.
Through our suite of logistics, supply We’re also investing in the secure
chain and parcel delivery solutions, digital infrastructure needed to
we help sellers and retailers of all manage online service transactions
sizes create seamless end-to-end at scale – including Digital iD™
eCommerce experiences – from and AlphaCommerceHub – giving
checkout to delivery. Australians greater access to the
full potential of our digital age,
and supporting business and
government as key providers
in our digital economy.
Australia Post | Business and government solutions 13To find out more about our business and government solutions, please visit auspostenterprise.com.au
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