posted on: 01.15.2020
Jaka Marinšek

Author:

Jaka Marinšek

Project Manager

What you should know about e-Commerce, PART 1

E-Commerce technology has evolved rapidly over the last decade. Today, it can support any product or solution, no matter how complex. The availability of technology and the growth of the buyers’ expectations, has forced companies out of their comfort zone, and into a reality of automation, cost reductions, and omnichannel sales. Yet, e-Commerce is still an emerging and evolving segment, set for continued growth and improvement.

Future of Consumer e-Commerce

Consumer e-Commerce (B2C) today, is largely driven by the price and convenience. Desire for the instant access and fast 24/7 turnaround will also remain the norm of the future – norm driven by the millennials and Z-gen consumers.

Nonetheless, consumer expectations of the e-Commerce experience will change drastically, along with the shopping experience. Instant gratification will mean something more sophisticated than a quick fix. It will evolve into expectations of a seamless shopping experience across an increasing range of connected devices, in which immediacy and convenience are paramount. Moreover, other expectations will come into the foreground: proactive customer service and support, and free or very low cost of delivery. Anytime, anywhere.

The desire for shopping experiences will intensify as many consumers will want retailers to provide an environment where shopping is an event. This will lead into interactive, highly engaging online and real-world retail environments, where augmented reality (AR) will play a key role.

There are number of factors driving this trend, since nowadays many consumers treat shopping as a leisure activity. Another driver is the need for people to show their participation in activities and experiences on social media. Retailers will have to align not only their brands, but also the shopping experience to consumer desire for encounters worth sharing.

As the traditional linear shopping that we know today is already falling apart and will soon be completely outdated, the consumer journey of the future will look like a knot. Consumers can start and end their shopping experiences on a mobile platform, in store or online. And that’s why one of the key conditions for success for retailers in the future will be their ability to keep track of users across a growing number of devices, and to figure out how to measure which of those are most effective at driving sales.

 

Future of Business e-Commerce

With the evolving Consumer e-Commerce (B2C), a channel that is best-suited for consumer brands and retail transactions, is another “beast”: Business e-Commerce (B2B).

Online B2B is outpacing B2C, and will soon outperform it. Researches estimate that only USA B2B e-Commerce market will reach 1.2 trillion USD over the next few years. That’s approx. 12% of all B2B sales and more than twice the size of the USA B2C market.

E-Commerce consumers no longer need to visit a store or speak to a salesperson during business hours. The impact of B2B e-Commerce on the economy will be more substantial, because the flow of B2B products around the world far surpasses that of B2C sales. Prediction goes that by the end of 2020, manufacturers and wholesalers will account for a combined 30% of total spending on e-Commerce related technology. B2B buyers increasingly prefer the online, self-serve option for research, buying, and managing their accounts.

 

Future of  “Brick and Mortar” shops

And last, but not least, comes the third part of evolving e-Commerce ecosystem. Not the e-Commerce per se, but nonetheless very much digital and very much commerce: Digital Retail. Digital retail is a super-evolving digital transformation of classic “brick and mortar” retail shops, which will not be able to survive the impact of e-Commerce, unless they go digital. Now and fast.

For many retail sectors, physical retail space will include more manufacturers and increasingly looking to showcase products and build brand awareness directly with consumers, with less “take home” product transactions. These will tend to be a small-format stores. More innovative models will evolve to allow manufacturers and private-label online retailers to road­show new products or their brands with pop-ups.

Manufacturers have already demonstrated their power over retailers, especially in the electrical devices market, and will favor only those retail sites where they have control over how their products are displayed (department store). The sale of branded products will switch to the web, as online merchants benefit from the price-comparison shopping, except where superior service and customer experience can justify the higher price points.

Demand for the large, physical retail space will continue to fall, as the need to keep complete inventories in stock at every store diminishes, due to improved logistics built around the online delivery and the “click­and­collect” model. This will increase the pressure on the existing space to be more efficient and effective, although the ability to understand and measure the impact of physical space becomes more problematic, as channels merge.

We will see retail move from an online-physical distinction to an experience–fulfillment distinction. Stores in premium locations will concentrate on the experience at the expense of the immediate availability of the wide range of products, while less desirable locations will dedicate space to as wide range as possible, to satisfy the significant part of the market that will still prefer to buy in store.

Temporary pop-up stores, with retailers and manufacturers moving around to road-show products, will be widespread, giving retail space a more dynamic, interactive feel. Pop-up stores will be integral to the retail experience, rather than an opportunistic use of vacant space. Value and discount players will continue to operate, as some protection from the online competition will remain due to their price points, product availability, and urgent consumer need, though more will move online, as some of the larger players find ways to make money from selling low-value goods online.

Despite the reduced costs of operating online, the cost of fulfillment has made even the largest players struggle to be profitable. The retail winners will be those that can get goods to consumers the fastest and cost-efficient. The largest players will have to invest in their own delivery systems, just to be different.