Big money with online eCommerce…

Key eCommerce trends to watch in 2018 (and beyond)

About tech giants, personalization, artificial intelligence and many other trends relevant to both small businesses and large companies

Disclaimer: this analysis is a collection of personal thoughts, data points and quotes from experts. All info is publicly available. The content hereby written does not reflect in any way the position of the company I work for.


Dear reader,

eCommerce is in exponential growth. Let me share with you some data points: Global eCommerce market is expected to Reach $4Tn By 2020[1]. Internet retailing is set to reach $2.8Tn worldwide by 2022, with a CAGR of 12.4% in the period 2017–2022[2]. So the question is no longer if or when to play, but rather how. As in this new world, everything moves at pace, looking at eCommerce trends might be a good starting point to help draft a good eCommerce plan or strategy. So, point by point:

1. The first can be considered as a macro trend: GIANTS WANTS TO RULE THE WORLD. eCommerce giants are already dominating online sales. Amazon, as example, is trying for several years to crack China, one of the biggest and most promising markets, but also invested millions of dollars in strengthening its footstep in the Indian market. On the opposite side, Alibaba makes its moves to win customers outside of China. So now businesses should no longer think were to play in terms of geography, but rather in which platform and how to win the hearts (and wallets) of online consumers/customers. Just to give you a few metrics around this topic: the number of online transactions happened during Cyber Monday in 2017 was 8.6M in Amazon vs. 1.2M by a giant like Walmart. On the other side of the world, Singles’ day became the largest retail promotional day in the world, taking place in China. The record has been set by Alibaba, and then surpassed in 2017 by $7Bn, beating out all other online retailers.

Ask yourself: in which platform do I want to play? How am I planning to win customers using Amazon, Alibaba, Facebook, Instagram, Snapchat? Do I really know my customer and their habits/behaviors in each platform?

Jack Ma explains the importance of having a global vision in order to beat the Americans…

2. ASIANS BET BIG MONEY. The largest eCom deals took place in Asia in 2017. As example, India-based Flipkart, which offers products ranging from apparel to electronics, got funded by $1.4Bn twice last March and August, with investors with the likes of eBay, Microsoft and the Softbank Group (the very latest, as of Feb. 16th 2018: Walmart in talks to buy 40% of the company to counter-attack against Amazon in India). Tokopedia, an Indonesia-based company which brings together retailers and brands to sell online, closed a deal of $1.1Bn coming from the Alibaba Group.

Ask yourself: what’s my presence in emerging markets? What percentage of my investments am I planning to invest to make sure by 2020, 2022, 2025 I have a strong foothold in those markets? Think South Korea as the promised land for Personal Care products, think Indonesia, South Africa, India, Vietnam, etc. The West is no longer the center of the world.

Never underestimate the growth of Asian markets… :|

3. eCOMMERCE DOES NO LONGER NEED A “e”. Online and offline are merging. Today people might search an article on desktop, check something in-store and then buy online via mobile. Or vice versa. The point is: businesses should think about the omnichannel experience and ensure customers are attracted in key touch points. It is also important to notice how companies that started to sell only online, are now moving towards a more balanced online/offline business model. Think Bonobos, Warby Parker, Birchbox, with flagship stores around the world. Many start-ups nowadays are trying to find less expensive ways to move to offline; they do it by opening temporary and pop-up stores, by partnering with classic retailers or by finding new “creative” distribution channels. Hey, let’s not forget about Amazon and Alibaba: the former with the acquisition of Whole Foods, the latter with the Hema stores to blend online and offline retailing.

Ask yourself: what is the journey of my shoppers? How did I develop my customer experience? Did I consider how, where, when and why they behave in a certain way?

Grocery, a tough market, with thin margins… :(

4. LOGISTICS START-UPS UNLOCKS THE FUTURE. The following data points come straight from CB Insights (credits also given below [0]). Traditional retailers are facing difficulties with regards to operating margins and increased competition, so several big players are acquiring start-ups to improve their delivery capabilities. A few examples:

A. Albertsons acquired meal kit start-up Plated for approx. $200–$300M

B. Walmart acquired NYC-based last mile start-up Parcel

C. Target bought grocery delivery SHIPT for around $550M

The interesting fact here is that these start-ups leveraging software and data to improve logistics, especially for online retailers. So small companies can benefit from this by partnering with them, whereas big giants can “simply” taking advantage by acquiring them ;)

Happy logistic employee happy to earn money by helping companies to improve logistics… :D

5. PRIVATE LABELS. This is a serious threat for big players like CPG or even Apparel/Fashion companies. Think AmazonBasics batteries against Duracell.

Based on measurement of online spending from a panel of more than 10 million consumers between September 2015 and August 2016, 1010data found that Amazon and affiliates controlled a whopping 94% of the approximately $113 million in online battery sales. The AmazonBasics private label had a 31% share of online battery sales, more than double the 13.1% share that private-label batteries had in offline stores for the 52 weeks ended Oct. 18, according to Nielsen data from Deutsche Bank. [3]

The tricky part is that small and large companies want to partner with Amazon and sell their product on the platform, but at the same time, they expose themselves to the risk of being replaced by Amazon’s private labels. Let’s not forget that Amazon owns customer data, and it’s reluctant to share these data with its partners, with the exception of sales and a bunch of other metrics.

Amazon is not the only brand selling private labels of course. A few more examples come from companies with the likes of Boxed, a wholesale startup which offers a limited selection of articles in bulk. 20% of its sales come from private labels. Another one, which basically became a brand is… Brandless, which offers a curated selection of consumer goods for about $3 each.

No brand does not mean there is no brand… -_-

6. EXTREME PERSONALIZATION AND CUSTOMIZATION. This is going to be bigger and bigger over time. I see three distinct degrees of product and service personalization [4]:

  1. Mass Personalization. Products are mass produced but can be modified by the business to meet consumer preferences identified through existing data about the individual. This process does not involve any input from the consumer besides allowing the use of their purchasing or profile data. As example, this is the case of Amazon’s personalized recommendations.
  2. Mass Customization. Products are mass produced, but the consumer is offered some limited options to customize the product or service. As example, this is the case of NikeID.
  3. Bespoke Product. The consumer is involved from the beginning to the end of the process to create a unique product or service. As example, this is the case of German-based company Mymuesli.
A clear example of extreme personalization… :D

7. ARTIFICIAL INTELLIGENCE. Hundreds, thousands of start-ups are using or starting to use AI to streamline and personalized commerce: from real-time product targeting to predictive merchandising, from location-based marketing & analytics to conversational commerce, from visual search to in-store visual monitoring. And so on. A few nice examples come from a company called Teemo and the “blockchain equivalent” Nucleus Vision: the former is a France-based marketing service that gathers customer geolocation data through mobile partnerships. Using machine learnings, the company identifies consumers based on physical patterns, sending them mobile adverts on behalf of participating retailers. The latter instead, an IoT & Blockchain Indian-based company, contactless identification system, using nCash cryptocurrency to enable transactions across the retail eco-system. From their official website — F.A.Q. section [5]:

Nucleus Vision has created a proprietary sensor technology that can uniquely identify users and detects temperature, pressure, motion, acceleration, and sound within its vicinity. This sensor can identify any customer in a physical store without Bluetooth, Wi-Fi or GPS protocols, and is completely seamless and frictionless. Our IoT sensor technology is able to detect mobile phones as they pass through storefronts or any other location where a sensor is set up, enabling our users to detect visitor phones and mobile ID data privately over blockchain.
Drones, self-driving cars and robots will be part of our daily life soon enough… :|

That is all for now, folks. I hope you find this content interesting and useful enough. Let me know your thoughts around the new trends in eCom. Do you think something else more relevant should be part of this list?


References:

[0] For this article, I took inspiration by a webinar I recently attended, led by CB INSIGHTS about the future trends of eCommerce. I’d like to publicly give credit to Natan Reddy (on Twitter: @natan_reddy), an intelligence analyst at CB Insights, for his fantastic presentation and analysis.

[1] Ref.: Shopify

[2] Source: EUROMONITOR International

[3] Source: Adage.com

[4] In alignment with Deloitte Researches

[5] Please note that nobody pays me to talk about the companies mentioned in this article. Also, I am not giving any investment advice. In the case of Nucleus Vision, I am just reporting what the company is claiming to be able to do.