Introduction to E-commerce Market in 2020
The first product to ever get sold online on Amazon was a book in 1995. Around two decades later, the e-commerce industry has made more than USD 2 trillion in sales globally. There's no looking back now.
E-commerce has transformed and revolutionized retail. It has evolved to meet consumers' changing requirements and make digital shopping easier for the modern-day user. When it began, e-commerce was very limited in its competence. However, the scenario has changed now. Whether it's advanced automation, improved integration, customization, or enhanced return policies, all of these factors (and many others) have taken the world of e-commerce by storm.
In 2019, online retail sales across the world reached USD 3.53 trillion and expected to grow to USD 6.54 trillion by 2022. Over 2.1 billion consumers are expected to shift to digital shopping by 2021. Mostly, these digital shoppers live outside the United States.
E-commerce Industry Outlook amid COVID-19 Outbreak
Undoubtedly, one of the most significant impacts on the e-commerce trends in 2020 will be the novel coronavirus outbreak. The old normal of the previous year and the early months of 2020 are gone for good.
With countries going into partial and complete lockdowns and governments shutting non-essential stores to restrict social gathering in an effort to combat the virus, more and more people are shifting to digital means of shopping to purchase goods and products.
According to a Salesforce study, around 63% of respondents reported adopting online shopping in 2020, and 57% said the same about how they work with companies. Approximately 62% said that 2020 had changed the way they conduct their lives offline and online.
Additionally, 58% of respondents said they expect to continue shopping online even after things get back to normal. Around 80% of business buyers expect to be more profitable via online retail approaches in the post-pandemic era.
The positive impact of COVID-19 on e-commerce, unfortunately, puts the brick-and-mortar stores at high risk. As many as 100,000 stores are expected to shut down over the next five years. At an estimated 24,000 closures, clothing stores will be the most affected, followed by 12,000 consumer electronics retailers and 11,000 furniture and grocery stores each.
Competitive Landscape: Global E-commerce Industry
Amazon.com, Inc. is a U.S.-based global technology company that provides services in e-commerce and retail, cloud computing, AI, and digital streaming. It is considered one of the Big Four tech companies and Microsoft, Google, and Apple. Amazon's net sales for 2019 were USD 280.522 billion.
Like several other things in 2020, the company's Prime Day sale was different this year. Not only did Amazon managed to hold the two-day sale event on Oct. 13 and 14, but the company also profited from many purchasers' desire to buy holiday gifts ahead of the season. According to a study by Digital Commerce 360, sales on 2020's Prime Day surpassed 2019's 48-hour sale by 45.2%. The study also estimated that this year's sale hit USD 10.40 billion globally, marking an increase from an estimated USD 7.16 billion during the two-day event in July 2019.
Alibaba Group Holding Ltd.
Alibaba Group Holding Ltd. is a Chinese global technology company specializing in technology, e-commerce, retail, and the Internet. Initially, it began as Alibaba's own e-commerce platform, but now it is made public. The company provides business-to-business (B2B), consumer-to-consumer (C2C), and business-to-consumer (B2C) sales services through cloud computing services, web portals, shopping search engines, and electronic payment services. Since its establishment in 1999, Alibaba Group has expanded and operates in more than 200 countries.
Alibaba has been named the Amazon of China, as it's the most prominent e-commerce company in the world's most populous country. For the fiscal year 2019, the company reported revenues of almost USD 56.15 billion, marking an increase of 51% year-over-year. E-commerce contributes 80% of the company's overall revenue, but this is likely to change as they continue investing in other industries.
eBay, Inc. is a U.S.-based multinational e-commerce company specializing in consumer-to-consumer (C2C) and business-to-consumer (B2C) sales services through a traditional online experience, mobile devices, and its APIs. The platform boasts more than 180 million users and over 1 billion listings globally. The company invested in a retail company Flipkart, headquartered in India, to grow its business. In 2002, eBay had also invested in PayPal and maintained it till 2015, following which the parent company spun it off as an individual company.
The company reported USD 10.8 billion in revenue in 2019. In June 2020, eBay went into an agreement with American classifieds company Adevinta to sell its Classifieds Business unit for a staggering USD 9.8 billion. As a part of the deal, eBay will receive USD 2.5 billion in cash and 540 million Adevinta shares, making eBay the company's largest shareholder.
Rakuten, Inc. is a Japanese e-commerce company that operates the country's largest online bank, shopping portal, and credit card payments. The company operates around 70 businesses, ranging from the well-known messaging app Viber to having their logo on Golden State Warriors NBA team and FC Barcelona's jerseys. 90% of internet users in Japan are active on Rakuten, and it hosts 40,000 different businesses at present. The company recorded USD 12.21 billion in revenue in 2019, up from USD 10.64 over the previous year.
Walmart, Inc. is a U.S.-based multinational e-commerce company that operates a chain of grocery stores, hypermarkets, supercenters, supermarkets, and discount department stores. It is the world's leading retailer and the largest company by revenue, as well as the largest employer with 2.2 million associates. The company's annual revenue for 2019 was USD 514.405 billion, marking a 2.81% increase over the previous year. Around 265 million individuals visit Walmart's stores and websites every week.
In 2019, the company acquired Israeli-based startup Aspectiva to leverage its Natural Language Processing (NLP) capabilities to enhance the end-to-end shopping experience. In September 2016, Walmart acquired U.S.-based e-commerce company Jet.com for a whopping USD 3.3 billion to compete with Amazon, Inc.
Zalando is a European e-commerce company that offers fashion and lifestyle products through its online shopping platform. Astonishingly, it is the first European company on the list of the world's largest e-commerce companies. The company hosts over 1,500 brands and more than 150,000 product choices for over 17 million customers in 15 countries. Its revenue for 2019 was USD 7.67 billion, up from USD 6.38 in 2018.
Groupon, Inc. is a U.S.-based global e-commerce marketplace that connects consumers to merchants. The company provides marketing services by selling group discount vouchers through local online marketplaces. Groupon enables real-time commerce across various categories, including travel destinations, live events, local businesses, and consumer products. In February 2016, Alibaba Group Holding, Ltd. announced that it acquired a 5.6% stake in Groupon, Inc. The company recorded revenues of USD 2.2 billion in FY2019.
What COVID-19 Means for E-commerce Startups
Many small enterprises have been affected by the ongoing pandemic and its global spread. The World Health Organization (WHO) has confirmed cases in almost every country across the world. In case you source products from the worst-affected parts, expect shipping delays as the scenario evolves if this has not already happened.
A manufacturing facility cannot move to the production phase if virtually all of their raw material suppliers are closed. Delays are predictable, and as a startup or small enterprise, it's crucial to predict these challenges and make a well-informed decision.
Things will go back to normal as the situation improves and the rate of infection decreases. Nevertheless, the timing of this rebound is still not known and might even not occur for a few more months. Meanwhile, other brands may need to change how they render value propositions to their customers and look for substantial opportunities to capitalize on shifting user preferences.
Key Trends in the E-commerce Industry
Augmented Reality Enhances the Reality of E-commerce
Augmented Reality (AR) has become a focal point with respect to online shopping, essentially bridging the gap of ambiguity. It helps consumers see the items they’re interested in purchasing, ranging from a piece of clothing to furniture. Online shoppers can now see how they would look like wearing a certain clothing piece or how a furniture item would fit in their home, all before selecting the “Buy now” option. This helps consumers overcome the challenge of not being able to see the product personally, giving new meaning to comparison shopping.
While the one-day shipping option has given a positive turn to retail shopping, there has previously been one hurdle: you can’t see how the product would look in your body. AR makes it possible for you to visualize a clothing piece on yourself. For instance, furniture brand Burrow allows its customers to visualize how their furniture will fit in their homes. Their online shopping platform uses ARKit to place true-to-scale 3D models of furniture pieces in photos taken on shoppers’ mobile devices.
According to a 2019 study by Gartner, over 100 million consumers will shop using ARKit by the end of 2020.
Growing Popularity of Voice Search
Voice shopping feature is becoming widespread among Internet users. According to a 2018 study by OC&C Strategy Consultants, around 13% of US smart speaker owners shifted to voice shopping by the end of 2017. The study predicted the number to grow to 55% by 2022. The e-commerce trend has become popular since 2014 with the launch of Amazon Echo. While voice shopping is still in its nascent stages, the study states that it will become increasingly popular over the coming months.
A study by Loop Ventures suggested that 75% of US households will own a smart speaker by 2025. People are switching to voice assistants such as Amazon Alexa and Apple Siri to do everything from checking the weather to purchasing products online.
Products purchased online via voice search are usually not expensive and include categories such as homeware products, low-cost electronics, and food items. The growing interest in voice implies that companies will have to meet the consumer demands as per their requirements, including the comfort that they’re looking for while buying products online.
For example, when you’re in the kitchen and realize that you need some food item, you can order it with a simple voice command on Amazon Alexa or Google Assistant. It saves time on entering your shipping and payment details, and the device holds a record of past purchases, making it easy to buy it again. As more people adopt this technology, it brings forth a lot of opportunities for e-commerce companies looking to grow their business.
Chatbots to Improve Shopping Experience
At the core of personalization and ML capabilities is the chatbot that can serve the role of a salesperson and in-store person. Chatbot enables stores to interact with millions of consumers while giving them accurate recommendations and the feeling of personal attention.
In fact, more and more consumers prefer to interact with chatbots and other AI tools. According to a study, over 60% of shoppers prefer having chatbots, websites, or apps to answer their basic inquiries due to the faster response time. By the end of this year, almost all businesses will introduce chatbots into their shopping portals.
Visual Commerce is on the Rise
One of the many challenges of running an online retail store is having to sell your products to people who have no chance to view them physically. This is where visual commerce comes into the picture. In a nutshell, visual commerce will be the new normal of usual static visuals. It takes shopping to a whole new level rather than simply using product images to run your online store. This feature includes other types of visuals, such as engaging videos, consumer-generated data, user-friendly content, and, as previously stated, augmented reality (AR).
Visual commerce will definitely become an integral part of the online shopping experience, as shown by the growth of the machine learning technology behind it. According to a report by MarketWatch, the global image recognition market is set to rise from USD 20.19 billion in 2018 to USD 81.88 billion by 2026, expanding at a CAGR of 19.6%.
The technology is most widely used in the North American region, which draws a link to the growing demand for visual content among US consumers. In the US, almost 75% of internet users look for visual content before deciding to purchase a product in a regular manner.
Evolving Role of Artificial Intelligence (AI)
The annual global retailer spending on Artificial Intelligence (AI) will increase from USD 2 billion in 2018 to USD 7.3 billion by the end of 2022. This growth is owing to the new opportunities that would lead to increased personalization of the customer experience. Retailers are willing to invest in new tools and technologies to improve their operations and services to customers and provide them a competitive gain. These tools range from chatbots to respond to customer questions immediately to marketing platforms that can generate offers in an accurate manner.
The role of AI will become evident in the future as retailers invest in prominent areas such as customer service, where it will be useful to understand customer preferences or reactions to products or services. This will play a significant part in solving how retailers can advance the customer experience. In order to stay ahead of the competition, it’s crucial that retailers invest in the ongoing e-commerce trend.
Role of Social Media in E-commerce
The number of social shoppers is increasingly growing. With the popularity of the “Buy” button on Instagram and Facebook, social media is playing a huge part in driving e-commerce. It has changed the way we live our lives, including our buying preferences. This opens new avenues for brands to improve their position on social media, which can help them to get discovered. With individuals spending more time on different social networking apps, e-commerce businesses can increase their chances of getting discovered by getting help from influencers.
Moreover, with platforms such as Shopify, brands can easily link their social media profiles with online stores so that consumers can purchase products directly through social media. For instance, Facebook and Instagram are frequently adding new features to meet the needs of their buyers.
And perhaps, TikTok, the latest and rising rave that has not only made its way into the hearts of teenagers but also around Hollywood. The video-sharing app has been thriving to include e-commerce elements, and its latest update includes adding shopping links in their profiles or videos. This implies that individuals who click on the link will be directed to the website within the app itself, without having to leave the app.
As social media and the internet continues to be a part of our daily lives, its power to impact e-commerce trends will continue to grow. This is why brands need to adopt a retail-based approach to their social media strategy.
Sustainability is More Important
Individuals are becoming more aware of their role in making purchasing decisions, considering the limited availability of Earth’s resources. According to a study, almost 50% of participants wanted more sustainability in the clothing industry, and around 75% wanted to see eco-friendly packaging. Companies that are formulating their strategies in an eco-friendly way will have a significant impact on buying decisions. Some of these initiatives include:
Adopting more sustainable practices and ensuring that your customers are aware of them can be a great start towards staying competitive in 2020.
The Bottom Line
While the reasons to shift to digital shopping may vary from individual to individual, the outcome is going to be the same. Retailers that have not yet given in to the e-commerce trend could lose significant revenue in the coming years, as consumers’ purchasing habits will increasingly become digitally oriented. By investing in e-commerce now, retailers will be better positioned to yield fruitful market results in the years to come.