The COVID-19 pandemic created an unprecedented surge in virtual buyers, which, of course, led to a significant increase in online revenues of companies compared to previous years.
E-commerce or digital commerce is now one of the fastest growing industries. Digital marketplaces are driving this growth through strategies like a shift to selling essential products, driving cross-border sales, investing in marketing initiatives, and enabling supply chain innovations. Companies are investing on latest technologies and transformation initiatives to make the process smoother, faster and to offer outstanding customer experience throughout.
Trends driving growth in e-commerce
The global retail e-commerce sales revenue, as per a Statistica research, is projected to grow to 5.4 trillion USD in 2022, compared to the amount 4.28 trillion USD in 2020. As the online buyers are increasing, e-commerce companies are also focusing on engagement and experience initiatives across all customer touch points. The growth in e-commerce industry is led by several trends including:
Shift towards hyper-localized model: Technological advancements connect neighbourhood providers directly to customers to supply groceries, medicines, household items, food etc. A few examples of such hyper-localized marketplaces are InstaCart, DoorDash, FoodPanda, GoPuff, Bigbasket, etc. Marketplaces are also going local by partnering with regional providers to offer better customer experience.
The emergence of new last-mile delivery channels: Alternate delivery channels like drones, delivery robots, and autonomous cars are coming up for faster, cost-effective and contactless delivery. Retailers like Amazon, Walgreens have already invested in drones for transferring consumer goods across geographies. Companies such as Nuro and Starship are already using delivery bots in the US and UK.
360-degree personalization and omnichannel customer experience: Marketplaces are connected with multiple touchpoints to understand customer likes/dislikes and provide customized offerings and proactive recommendations. Companies focus on omnichannel customer interaction throughout the purchase journey- in-store, website/app, customer service, loyalty and many more. M-commerce (Mobile commerce) is also simplifying the customer’s online shopping journey by offering e-commerce app and payment facility at customer’s fingertips.
Growth in visual commerce: The Global Image Recognition in the retail market is expected to reach USD 3.7 Bn by 2025. Technology companies assist retailers with augmented and virtual reality to offer better in-store experience for online shoppers.
Social commerce: Asian and European marketplaces are capturing larger audience through livestreaming, incentive-based games, leveraging social media channels etc. Lazada’s livestreaming has increased the gross merchandise volume 17 times higher.
Investment focus in e-commerce market
Ecommerce has made the shopping experience very convenient. However, customer expectations are increasing day by day. To be competitive in the market, e-commerce companies focus on creating superior customer experiences while cutting down the cost of operations to increase profit. The major investment focus in the current e-commerce market are:
Marketing initiatives: Marketplaces are going with the more targeted approach in reaching customers digitally. Social media is part of the marketing strategy of brands and marketplaces. Use of new media channels, new features or technology on the platform, leveraging top influencers and content creators are other investment areas.
Faster delivery: Same-day delivery is the preference for online buyers. Marketplaces invest in expanding delivery networks, increasing pick-up points, route optimization, package tracking, and automated processing of return orders for seamless delivery.
Supply chain transformation: As per a Gartner survey, 61% of the suppliers focus on packaging optimization to reduce the last mile operating cost. Amazon encourages sellers through incentives to reduce waste in packaging. Walmart is heavily investing in supply chain transformation like transformed warehouse management systems, mobile robots for automated warehouses, autonomous delivery vehicles, etc.
Loyalty & gamification: Companies/brands are attracting and engaging customers through loyalty and gamification programs. They incentivize customers to write reviews, shop, and interact in different social channels and share their experience. Chinese company Pinduoduo is challenging Alibaba & JD.com through its gamification platform “The app".
Challenges faced by e-commerce businesses
While COVID-19 increased the pace of eCommerce growth, it has already created several challenges for companies, fierce competition being only one of them. Let's examine some of the key challenges and their impact on the business.
- Regulatory constraints: Government bodies are penalizing dominant market players with surcharges to maintain fair competition in the market. Countries like China are coming up with new anti-monopoly rules, which restrict anti-competitive behaviour like monopoly agreement, differentiated customer pricing, etc.
- Fierce competition: CPG companies or brands are setting up their own e-commerce platform and competing with retailers and the e-commerce marketplaces. On the other hand, retailers are also increasing their private label brands and challenging the CPG companies.
- Personalization for superior customer experience: As customer expectations increase, the omnichannel personalized shopping experience is on-demand. However, targeting the right audience, scaling, and finding the relevant tools and services for personalization are the challenges for companies.
- Effective marketing campaigns: The cost of on-site digital advertising is very high. Companies lack expertise in creating, managing, and measuring promotional campaigns across multiple digital channels.
- Fraud & identity verification: As per Federal Trade Commission, online shopping is one of the most common fraud-related losses reported by consumers. Fraudulent activities result in high operational costs and negative brand image.
- Need for perspective analytics: Perspective analytics of consumer behaviour help e-commerce companies in upselling, cross-selling, forecasting and leveraging other marketing tactics as well in merchandising decisions. However, newcomers in e-commerce lack such data.
- Dark data analytics: A huge chunk of dark data still remains uncaptured and unanalysed, which can give real time insights for company’s strategy and growth. For example, capturing and analysing data on cart abandonment.
- Last-mile delivery complications: As customers prefer free shipping, the high cost of final mile delivery is being passed on to the e-commerce companies. Also, companies lack technology and services for speedy delivery, real-time tracking, route optimization for efficient delivery.
- Return logistics: Same day return is on demand. At the same time, the return volumes are also increasing. High cost of reverse logistics and storage management is a problem for the companies.
Transforming e-commerce with emerging services powered by technology
Technology and service providers are transforming e-commerce companies by bringing together strategy, implementation and enabled services, cloud-based technology platforms, and industry best practices. A few of the emerging technology-enabled services getting importance are
- Promotions and Content Management: Strategize, execute and measure digital marketing campaigns across marketplaces, social media, and other online channels. It also involves creating and enhancing impactful personalized content for brand awareness and sales improvement.
- Product Information Management: Enrich the product content/ information listed in digital commerce platforms and make it uniform across all websites continuously. It enhances customer experience and loyalty, reduces cost and decreases time to market in a continuous change environment.
- Fraud Management: Identify and mitigate different types of fraud (Identity fraud, payment fraud, loyalty fraud, chargebacks or friendly fraud etc.) quickly and effectively. It reduces the cost of operations and helps in providing a safe and secure shopping experience to customers.
- Last Mile Visibility: Connected distribution ecosystem, route planning, live tracking of field and delivery workforce activities improve the visibility of last-mile delivery and maximizes control in inventory and order management.
- Cloud Contact Center and Self Service: Integrate all digital business and customer touchpoints with the cloud to provide an omnichannel customer service experience. Personalized IVR with self-servicing capabilities, reinforcing new channels like chatbots and text to speech, AI-driven analytics takes the customer and employee experience to the next level.
- Analytics: Leverage integrated data-driven insights across business operations and customer engagements from conventional and dark data. It accelerates business growth with powerful strategy, minimizes the cost of operations, and boosts customer experience through personalization. Prescriptive analytics across the entire value chain of e-commerce help the providers in taking better strategic decisions and driving growth. Examples include market basket analysis, analytics driven remarketing, product driven recommendations, assortment planning, etc.
The future of commerce is digital
Digital commerce is getting adopted across multiple industries like retail, CPG, health, hotel, airline, restaurants, banking, media etc. More and more companies as well as brands will get added for digital business in coming years. Marketplaces aim capturing new markets and penetration in rural areas. Local regulations, availability of required facility, and technology are critical factors in ensuring success.
About the author
BPaaS solutions for consumer unit and Presales lead for Hi-tech, Digital Operations and Platforms, Wipro-iCORE.
Thomas has nearly 20 years of overall experience in Business Process Management, process re-engineering, and system implementation. He has keen interest in new products/solutions and building new technology alliances to enable business opportunities.
Practice & GTM Lead for Retail and Consumer Goods, Digital Operations & Platforms, Wipro-iCORE.
Anup has 15 years of experience in Sales, Marketing, Business Development, Bid Management and Practice in the IT and ITeS space. He has developed successful GTM strategies and worked with organizations in Retail, Consumer Goods, Automotive, Consumer Electronics, Healthcare, and Hospitality.