Future e-Commerce scenarios
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Future e-Commerce scenarios
Major e-Commerce companies such as Amazon are growing rapidly. But can manufacturers
and retail companies survive against them? Let's think about the winning scenario of the
makers and retailers based on the opinions of experts and the trends of start-up companies
In 2017, global e-Commerce sales were USD 2.3 retailers. Recently we are hearing trends like
trillion accounting for 10.2% of all retail sales. e-Commerce enablers, retail 4.0, image/video driven
This figure is expected to reach 17.5 % in 2021. interactive e-Commerce, voice based e-Commerce,
The worldwide e-Commerce share of top 4 leading personal stylist driven e-Commerce, mobile retail
e-retailers, based on GMV(Gross Merchandise shop, e-Commerce on ecosystems like WeChat,
Value), is 55%. Due to the dominance of e-tailers, GO-JEK, brand shop in retail etc. Out of all
around 8,950 traditional retail stores got closed those trends, we have picked up 3 trends namely
in USA in 2017 and are projected to increase e-Commerce enablers, retail 4.0 and image/video
drastically in 2018. So in a retail world dominated driven interactive e-Commerce and explain how
by the fast growing e-tailers, how do traditional traditional retailers and brands can differentiate
retailers survive? In this article, we discuss some from e-tailers and survive the e-tailers tsunami.
future survival scenarios for brands and traditional
6 BayCurrent ConsultingChart
Worldwide e-Commerce share of retail sales 2015-2021 1
▎E-commerce share of total global retail sales from 2015 to 2021 ▎Global e-Commerce market share of leading e-retailers 2017
% 17.5 Based GMV
18 15.5 %
13.7
14 11.9 Taobao.com 17
10.2
10 7.4
8.6 Amazon 15
6
Tmall.com 14
2
JD.com 9
0
Total Share 55
2015 2016 2017 2018* 2019* 2020* 2021*
Source : Statista *Forecast
Rise of e-Commerce is affecting USA chain stores Chart
2
Issue 1: Value chain complexity
Past and forecast of major USA chain store closures 12,950 New economies and technologies (e.g., shared,
platform, digital, connected, smart, circular
8,950
economy) have created new customer journey. This
6,950
in turn has created new sales channels. As shown in
4,550 4,950
4,150
3,500 3,750 3,450 3,750
4,000 Chart 3, shared economy will grow from USD 15
1,900
800
billion in 2014 to USD 335 billion in 2025 almost
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018* 2019*
22 times, IoT connected devices installed base
worldwide is projected to be 75.44 billion by 2025,
Source : Statista *Forecast
Global connected car market is expected to increase
by 70% between 2018 and 2021 to USD 140.9
billion and Smart home products is expected to
Co-work with e-Commerce enablers grow at a CAGR of 14.22 between 2018 and 2022
to USD 53.45 billion.
E-Commerce enablers, a hybrid of IT, logistics and
Due to size of these new economies, it has become
marketing companies, provide end-to-end services
mandatory for brands and traditional retailers to sell
for both brands and traditional retailers to effectively
through those new channels. However managing
reach the customer. In this section, we will discuss
multiple channels has made the retail value chain
three major issues being faced by brands and
complex. Outsourcing the operations by sales
traditional retailers and how e-Commerce enablers
channel to multiple players has made the customer
can resolve those issues.
experience differ by channel. Due to this, customer
is experiencing the channel rather than the brand as
a whole. Luckily new technologies (like big data, AI,
automation etc) have provided a means to manage
Emerging new economy and technology Chart
3
▎Value of the global sharing economy 2014-2025 ▎Internet of Things - number of connected devices ▎Connected cars global market size 2015-2021
worldwide 2015-2025
USD billion Billion USD billion
75.44
335 ＋70% 140.88
62.12
＋2,133% ＋390% 121.67
51.11 100.56
42.62 83.1
35.82 68.68
30.73
26.66 49.61 56.76
20.35 23.14
15.41 17.68
15
2014 2025* 2015 2016 2017 2018* 2019* 2020* 2021* 2022* 2023* 2024* 2025* 2015 2016 2017 2018* 2019* 2020* 2021*
Source : Statista *Forecast
Future e-Commerce Scenarios 7Emerging e-Commerce platforms Chart
4
▎Amazon: total active customer accounts ▎Alibaba: cumulative active online buyers
552 576
Million persons;Global;1st quarter 2016 304 310 Million persons 515
278 285 294 454 466
488
250 260 270 423 434 439 443
237 244 407
209 215 224 367 386
334 350
307
279
231 255
185 202
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 ’13 ’13 ’13 ’14 ’14 ’14 ’14 ’15 ’15 ’15 ’15 ’16 ’16 ’16 ’16 ’17 ’17 ’17 ’17 ’18 ’18
’13 ’13 ’13 ’13 ’14 ’14 ’14 ’14 ’15 ’15 ’15 ’15* ’16
Source : Statista
those new channels. Unfortunately it is costly for
brands to build and use those new technologies in- Retail e-Commerce market Chart
5
house.
▎Retail e-Commerce sales CAGR in selected markets 2018-2022
Issue 2: High dependency on big India
Indonesia 17.7
19.9
e-Commerce ecosystems South Africa 13.7
Mexico 12.6
Rise in e-Commerce platforms like Amazon, Turkey 12
China 12
Alibaba, JD.com etc. has weakened the say of Argentina 11.4
brands on those big platforms. As shown in Chart Saudi Arabia 11.3
4 Alibaba has around 576 million users in 2018 Brazil 10.7
Spain 9.1
and Amazon has around 310 million active users Australia 8.8
in 2016. With such a big active user base, it has France 8.5
become mandatory for brands to sell their products United States 8.3
on those platforms. Although brands can reach Canada 7.9
South Korea 7
multiple audiences through those platforms, but Germany 6.5
at the same time they face price competition Japan 6.2
and high promotion and campaign costs. United Kingdom 5.8 Global Average 9.6
Issue 3: New market entry complexity ▎Southeast Asia e-Commerce market volume 2015-2025, by country
5.5 ＋1,496%
In the below figure, the Chart 5 shows the Total
87.8
＋2,606%
fastest growing e-Commerce markets are Indonesia
1.7
46.0
in developing countries especially in South 1.0 ＋440%
Singapore
5.4
East Asia. It will be challenging for brands
1.0 ＋720%
to enter those markets by themselves due to Myanmar
8.2
barriers like language, local preferences etc. Thailand
0.9 ＋1,133%
11.1 USD billion
0.5 ＋1,840%
Philippines
The solution to the above problems is working 9.7 Aetual
Forecast
0.4 ＋1,775%
with e-Commerce enablers. e-Commerce enablers Vienam
7.5 Source : Statista
with lot of experience supporting multiple brands
across industries have amassed huge knowledge
which can be leveraged by brands either to enter •Usage driven costs: Due to scale of economy,
new markets successfully or to create new business enablers have low costs as they are using the
models using new technologies. Chart 6 gives a infrastructure to support multiple brands. So
functional overview where enablers can help brands. brands are charged based on the usage of the
enabler infrastructure. The amount brands
The major benefits for using e-Commerce enablers are pay will be smaller than costs for owning
8 BayCurrent Consultingwe bring such customers back to the local shop?
e-Commerce enablers Chart
6
Functions Activities Chart 8 shows how the local shop
･New market entry strategy , e.g., ) channel, inventory can be made transparent.
customer segment
･Cross-border e-Commerce strategy , e.g., )
e-Commerce
strategy
Customs, payments, shipping, culture Pointy,an Irish startup, is solving the above
･Omni channel and product , e.g., ) customer
preferences problem by letting local shops to easily put stock
･Human resources , e.g., ) hiring, training
online with a simple gadget. Their gadget connects
･Personalized advertising with the store barcode reader and automatically
Digital ･Real time campaigns
marketing
･Holistic and data driven approach puts the scanned items onto a Pointy powered
･Supply chain strategy
website. When customers search for similar items,
Logistics ･Warehouse fulfillment the Pointy powered result will show up in the
･In-store fulfillment
search results. Sometimes local shops are shown
･Multi channel commerce partnerships ahead of Amazon in search results if the shop
Technology ･Multi shipping partnerships
platform
Top reasons why consumers worldwide shop online Chart
･Web design (B2C, B2B, B2E) for hosting instead of physical shops 2016 7
Online store ･Language and content localization
development ･Mobile/PC/tablet app development
･Payment solutions Ability to shop 24/7 58
･Order management and stock management Ability to compare prices 54
Offline store ･Assortment (bulk, bundle)
operations ･Shop inventory online transparency Online sale/better prices 46
･Promotions and campaigns
To save time 40
･Multi-shipping management Convenience of not
･Payment/cash on delivery management going to shops 39
Delivery ･Pick up support and tracking Greater variety/selection 29
･Insurance management
Free shipping offers 29
･Inbound/outbound call management
Customer ･Social media management Convenience of everything
27
service ･Chat bots development in one place
To locate hard to find items 20
To avoid crowds 15
the whole end-to-end value chain Products are not sold
15
in my city/country
To avoid checkout lines 11
•Faster penetration to new markets:
By leveraging the accumulated knowledge of Source : Statista
enablers, brands can enter the new markets faster
Recently we are seeing some startups popping up in is nearer to customer. Customer can go to the
this space like Shopee, SP eCommerce, aCommerce local shop immediately and purchase the item.
etc that provide one stop shop for brands to reach
multiple markets in short time at a low cost The benefits of this solution are ;
•Increase sales for local shops: For a minute
cost, local shops can drive more customers to
Retail 4.0 shop and increase their sales. Big e-tailers dislike
Show the local shop inventory online this niche segment because customers want to
buy and get the items immediately rather than
wait for some hours
Chart 7 shows the most important reasons why
consumers choose to shop online over in-store • Customer save time: There is no need for
shopping. 40% said they want to save time and 20% customers to visit multiple stores and inquire
said to locate hard to find items. Due to lack of local about inventory availability or wait for
shop inventory visibility, some of the customers e-Commerce delivery
are moving towards online e-Commerce. How do • Local community development :
Future e-Commerce Scenarios 9Make locality shop inventory transparent Chart
8
Image Explanation Benefits
Multi shop alliance ･Local Shops tie up with a IT company ･Lack of online visibility of local shop
SHOP SHOP SHOP to store inventory in online database. inventory is driving customers towards
Shop ･Inventory is uploaded either manually e-Commerce sites.
Alliance or by integrating the POS system with -A new marketing channel to drive
online database. customers to local shops.
Silicon Organic Scalp
shampoo shampoo shampoo
shampoo ･Online database is integrated with daily
life applications like search engines,
Enabler social networks, messenger apps, etc.
Database
･Customer search in lifestyle app will ･Wastage of time when you go to local
Scalp
show the nearest shop where the item is shop and find out the item is out of
Scalp Distance Inventory available. stock.
100M 2
200M 1 -Go to local shop and pickup the item
Customer immediately.
-Support local community by buying
I want to buy Organic Shop
shampoo immediately… items from local shops.
I cannot wait for Amazon’s Route
delivery…
Local communities are prospered because consumers, brands not only reduce costs but also in
buying locally will create more local jobs building a long term relationship.
One example in this space is Spott.ai which is
Image/video driven interactive helping brands like Nike, IKEA etc. effectively
e-Commerce engage their audience through interactive content
on this websites. But we think this will expand to
mass image/video delivery platforms like Netflix.
By 2020, Netflix household subscribers are expected
to increase to 114 million. No doubt the number of
households watching on-demand streaming services
is going to increase in future. We think the next Conclusion
generation e-Commerce will be driven by content
makers like Netflix. Content makers can create an
In addition to e-Commerce enablers, retail 4.0,
e-Commerce layer on top of the content. Viewers
and digital content driven e-Commerce, we think
have the option to buy the products shown in the
following will drive the future retail. Voice based
content.
e-Commerce where customers order (schedule) daily
use items through smart speakers, personal stylist
Chart 9 explains how the content driven interactive
driven e-Commerce where customers use stylists
e-Commerce works.
to recommend lifestyle goods, rental e-Commerce
where customers will rent electronic goods rather
Consumer will be happy to immediately buy the
than buying, mobile retail shop where autonomous
same product worn by as their idol in the content.
cars go to customer house to sell goods and eco
There is no need for consumer to take a photo,
systems based e-Commerce like WeChat, GO-
search in Google, and go to shop and buy the
JEK etc. which act as one stop life app. We believe
product.
cheaper new technologies will help brands and
traditional retailers to effectively differentiate
Through interactive content, brands can reduce
themselves from e-retailers and have a bright future.
their dependence on big e-Commerce platforms
like Amazon, Google etc. By engaging directly with
10 BayCurrent ConsultingImage/video driven interactive e-Commerce Chart
9
Watch a scene Option to buy Drive to store
NETFLIX NETFLIX Bed
Store A Lamp Buy
Dress $1,000 Click to go to $100
online store.
I want to Enable the buy
Bed lamp $100
buy that option to find Sofa
User Store B Buy
experience dress. the store. $500
Sofa $500
Enable buy
option.
Dress
Store C $1,000
Buy
Viewer
･Platforms, where digital content like photos, ･When platform users enable the buy option, ･Users are taken to multiple online stores
videos are shared, use AI to track the store details like brand, price and link to store are depending on the content clicked
where products shown in digital content are displayed on top of digital content ･Through this solution brands can skip using
Explanation sold
･When user clicks, the user is taken to the big online marketplaces like Amazon
･Platform users are attracted by the content corresponding online store where the
shown on digital content and want to buy it product is in stock
Key ･Common standard data image file format is required to simplify the find store with same/similar item
challenges ･Video matching computing power
･Monetization model
Preetham Edamadaka:
Senior Manager in the Singapore Office.
Copyright © 2019 BayCurrent Consulting Inc. All rights reserved.
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