6 New Ecommerce Trends Shaping the Future of Online Retail
Ecommerce sales continue to grow on a yearly basis, yet despite this, only 7.7% of all retail sales took place online in the US in the first quarter of 2016.1 That means ecommerce has a lot of room to grow if it is to catch up with non-digital retail sales. In order to determine what direction this growth will take, we investigated the current ecommerce trends and their impact on the market.
1) New Ecommerce Product Categories Will Take Over
According to eMarketer, the product type with the highest number of online sales is computer and consumer electronics.2 The graph below shows the percentage of total US consumer electronic sales that occurred online between 2012–2014.3 Since the figure is already high for this product type, there is little room for computer and consumer electronics left to grow in the future, therefore, this won’t be a large area for future ecommerce growth.
The following graph shows predictions made by eMarketer for the total online spend in the US for each sector until 2018.4 The graph predicts that all sectors will continue to grow at a steady rate as ecommerce develops. However, the graph does not take into account that new market entrants could mean that areas with a low percentage of overall sales online could grow at a suddenly fast rate. If we take the example of food and beverages, currently only 1% of food and beverage sales in the US take place online. However that 1% amounted to $7.9 billion in 2015 — meaning that the overall value of the food and beverage market is $790 billion. Soon more businesses will realize that there is a gap in the market for online food services and there will be large growth trend in this area in the future, as new entrants including Amazon Fresh and Hello Fresh are entering the market.
We predict that the biggest growth will take place in the food and beverage space since only 1% of this massive market is online yet and other categories, such as consumer electronics, are reaching their limits.
2) Developing Countries Will Become The Largest Ecommerce Markets
As the graph below indicates, emerging markets are playing an increasingly large role in the global ecommerce market.5 According to eMarketer, the region with the highest total of ecommerce sales is Asia-Pacific, where ecommerce sales overtook North America in 2014 to reach $525.2 billion, compared to $482.6 billion in North America.6 In fact, according to Forrester, the ecommerce market trend in the Asia-Pacific region will reach $1.4 trillion in 2020, with the Chinese online retail market reaching $1.1 trillion.7 eMarketer attributes the growth of the Asia-Pacific market to the development of technology in the region, allowing customers to make online purchases for the first time ever.
The next graph shows data collected by eMarketer about which countries ecommerce markets are experiencing the highest trends of growth.8 Countries in developing markets are experiencing the highest growth levels, whilst mature markets are growing slowly. China, Indonesia, and India are growing at the fastest rates and are large contributors to the fast growth of the Asia-Pacific market. However, growth across all countries is smaller every year as the worldwide growth of ecommerce is predicted to drop 7.5% from 2012 to 2017.
The Chinese ePacket system is also allowing China to serve customers in the US. The initiative is an agreement between the US and Chinese postal systems. It allows Chinese online retailers to send packages quickly and cheaply to US addresses, meaning that international post is no longer a barrier for Chinese merchants to enter the US ecommerce marketplace. The ePacket system will allow Chinese retailers to continue to grow as their customer base expands, an advantage for Chinese online retail giant Alibaba, who are currently able to compete with US Amazon on their own soil.
Amazon has responded by developing the Fulfilment by Amazon Small and Light Program, cutting domestic shipping fees on small and light items, such as phone cables, in order to compete with low prices offered by Chinese retailers using the ePacket system. The battle between Amazon and Alibaba will lead to both sides developing new and creative initiatives to best serve their customers.
We predict that China will continue to grow at the highest rate, since the Chinese market is still relatively new to ecommerce and retail giant Alibaba will dominate in the Asia-Pacific market.
3) Will Amazon And Alibaba Keep Up Against New Ecommerce Trends?
The next question is whether retail giant Amazon and Alibaba will dominate ecommerce, or if independent retailers will maintain their share of the online market. Amazon take initiatives to provide the best delivery solutions which makes them a first choice for many of their customers. Amazon’s competitors are taking new initiatives to compete with Amazon’s delivery service, for example, Walmart has partnered with Uber to offer fast delivery that can compete with Amazon Prime.
However, Amazon’s ability to offer customers fast delivery will continue through the development of Seller Fulfilled Prime, meaning that high performing third party retailers using Amazon can also deliver through Amazon Prime. Amazon is also working on drones to deliver small items to their customers, and are expanding the Amazon Locker scheme which will give customers the freedom to collect and return packages at a time of their choice.
Yet, whilst Amazon are dominant players in the consumer electronics and books markets, the question is whether they will be able to lead the market in other product sectors. Both consumer electronics and books don’t require showrooming.
This allows Amazon to make sales easily since with these types of productsthe main point of competition is price and delivery. However, Amazon’s approach to the sale of consumer electronics and books is less successful when it comes to the sale of other product types, like clothing and food. Start-ups, such as Hello Fresh, use a different business model by offering new alternatives to the food market that have not previously been offered online, and their approach is being very well received by customers. It would seem that niche players and new market entrants will continue to play an important role for customers in offering new and innovative solutions to serve customers in ways that market leaders are not.
We believe that Amazon and Alibaba will continue its market lead in the consumer electronics and books industries, but new niche players will play a leading role in other market sectors.
4) Marketplaces Vs. Direct Websites, Which Business Model Is The Future Of Ecommerce?
There are benefits and drawbacks for both online marketplaces and direct websites. Whilst direct websites compete by offering customers a unique experience with emphasis on customer relationships, marketplaces allow customers to compare prices quickly and easily.
Marketplaces are continuing to grow and become more popular among customers who want to get what they consider to be the best deal. According to Internet Retailer, Amazon and eBay accounted for 27% of North American online sales in 2015.9 It is also noted that online marketplaces are giving small retailers the opportunity to grow very quickly.
This is happening for several reasons: firstly, small retailers can offer their products to customers in a place with high traffic, when their website might have low traffic as it is relatively unknown. Secondly, customers often don’t trust unknown retailers. If an unknown brand sells their product on a marketplace, customers are offered guarantees by the marketplace — for example eBay Buyer Protection — which make customers feel more at ease when purchasing from less known merchants.
Online marketplaces will continue to grow in the future: statistics from Volusion show that retailers are planning to spend 32% more to sell their products on marketplaces in 2016.10 It also states that Amazon’s net sales increased by 23% from 2014–2015, whilst eBay’s rose by 18%. Ecommerce is a buyer’s market, and marketplaces are able to offer customers ease and security in their transactions, whilst guaranteeing products at the best place. It is unsurprising that marketplaces’ customer base continues to grow at such an impressive rate.
We believe that online marketplaces will continue their growth to become market leaders, since they provide so many benefits to both customers and retailers in ecommerce.
5) Is The Future Of Ecommerce Mobile?
Mobile traffic is on the rise and more and more customers are using apps, mobiles, and tablets to access digital content as opposed to desktops. However, it seems that customers still prefer to actually purchase on desktops and tablets, whilst a small percentage actually purchase on mobiles.
The two graphs beneath show the proportion of ecommerce traffic that took place in the US in 2014.11 Whilst desktops accounted for just 55.7% of traffic, 75.1% of overall revenue came from desktop buyers. On the other hand, smartphones accounted for 29.9% of ecommerce traffic whilst just 1.1.2% of revenue came from mobiles. That means that only around a third of mobile shoppers actually purchase on their mobile devices. Finally, 14.4% of traffic came from tablets, which accounted for 13.7% of total ecommerce revenue.
These figures show that whilst customers like to browse on mobile devices, they prefer to purchase on desktops or tablets. Shopify puts the reason down to small screens on mobile making it difficult for customers to type in payment details and view products comprehensively.12 What is clear is that for now, mobile ecommerce is not even close to generating the amount of revenue that desktops and tablets can. It’s possible that the introduction of larger screened smartphones could increase this figure slightly as the mobile ecommerce market continues to grow with the development of new apps and faster internet. For now, however, the gap between mobile browsing and mobile revenue remains.
We believe that mobile ecommerce will continue to grow, and the development of new technology will make it easier for customers to shop on their mobile phones. This will allow mobile revenue will rise to a figure more proportionate to mobile traffic.
6) Product Visualization Will Become A Crucial Ecommerce Trend As More And More Complicated Products Are Sold Online
The first products that were sold online were books and that was no coincidence. Books, in terms of product are very simple. Everybody knows how they look or “work”. There is no need for visualization or experiencing the product. The focus is on the content of the books and this can be very well described in plain text.
However, one major ecommerce trend for the past 10 years was new product categories coming online. First consumer electronics, then toys and fashion, now furniture and even machinery for businesses. All of them have one thing in common. They are more complicated and depend more on explanation and visualization than the categories that went online before. Ecommerce players in those new categories need to come up with solutions that replace the offline retail experience where you can talk to the shop owner and ask for explanation or touch and try out products.
Zappos for example is already heavily focusing on video to improve their product visualization. Over time they added more and more pictures and videos.
New technologies for visualization like virtual dressing rooms or virtual reality will be adopted and become ecommerce trends. Currently they are still too early for mass adoption. So for the next 2–3 years videos will be the best tool to solve that problem. It is well suited to explain complicated products in an entertaining way and consumers like to watch product videos.
Since more and more complicated products are sold online new technologies for visualization will spread in ecommerce. For the near future product videos will be the first approach that gains mass adoption.
Ecommerce is continuously growing, as new digital solutions are being developed and online retailers are coming up with new and innovative ways to meet their online customers needs. However consumer buying habits continue to change, meaning that ecommerce retailers must monitor market trends and change their offerings to customers in order to remain competitive. Whether this means entering emerging markets, optimising websites for mobile shoppers, or listing their products on online marketplaces, it is important for online retailers to pay attention to what customers want and stay one step ahead.
If you want to add videos to your ecommerce site we’re at DemoUp are happy to help you with that.