Sometimes, predictions come true! In 2002, U.S. research group CRITO foresaw that globalisation coupled with the widespread adoption of communication technologies would stimulate a period of rapid growth in eCommerce. This has been borne out as retailers now have direct access to new markets, the ability to tap into new worldwide sources of capital and knowledge, and global production networks. Globalisation challenges firms to become more streamlined, innovative and outward looking to new consumers.
Over the past 15 years, eCommerce has transformed the search, shopping, buying and customer experience. Initially, eCommerce was a domestic phenomenon, but national borders have started to be eroded due to the Internet. Estimates of market size differ, due to sector dynamics. AT Kearney’s 2015 ‘Global Retail E-Commerce Index’highlighted that retail e-commerce continued to grow around the world. Sales increased more than 20% worldwide in 2014 to almost US$840 billion, as online retailers continued expanding to new geographies and physical retailers entered new markets. Netherlands-based eCommerce Foundation’s ‘Global B2C eCommerce Report 2015’ stated a market value of US$1.9 trillion, which is nearly double the 2011’s value. Whichever statistics are accurate, it is evident that the largest eCommerce markets are buoyant, offering great opportunities for retailers and the supporting logistics and distribution sectors.
The European market offers growth potential, particularly for Asian retailers. In 2015, Western Europeans bought US$476bn worth of goods and services. ECommerceis particularly strong in the U.K. Germany and France, accounting for over 60% of the region’s online transactions. The Benelux, the Nordic countries, Spain and Italy, are developing too; Europe’s regional markets enjoy significant broadband penetration and a rise of mobile shopping. European consumers will buy cross-border provided the logistics networks are robust and offer predictable end-to-end delivery. The challenge for Asian brands in entering Europe is to adopt a cohesive strategy that combines a mobile-first approach, the use of big data to help build sophisticated consumer profiles, target shopping habits and provide effective payment mechanisms.
In Europe, marketplaces are in good shape. In 2015, over 41% of all retail web sales were made through Amazon and ebay marketplaces. Marketplaces meet shoppers’ expectations in terms of convenience and range. There is a promising future for those that provide a variety of hybrid shopping formats, particularly if they are delivering on a mobile shopping experience. Those that focus on only one channel might fail.
Asia and China – the future centre of gravity for eCommerce
The eCommerce Foundation’s ‘Global B2C eCommerce Report 2015’ put Asia-Pacific’s eCommerce GDP of B2C goods and services at US$23.215bn (3.3% of all retail sales) compared with a global average of 2.6%. Internet access of around 40%, compared with North America’s 77% and Europe’s 72% clearly demonstrates that there is room for growth in eCommerce. This will place further demands on logistics companies to provide effective and efficient supply chains.
The market in China is dominated by the major marketplaces of Alibaba, with its TMall and TMall Global (dedicated to international retailers) platforms and JD.com.
Alibaba’s cross-border expansion is well underway, through the April 2016 $1 billion investment in Singapore-based Lazada Group, operating shopping websites in Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam. Alibaba has also invested into the logistics sector through its own Cainao Logistics network and inward investment into Singapore Post group.
Greater China’s exporters have built significant share into North America, Europe and Australasia. Growth has been through the provision low cost products where access to low cost delivery networks provided by postal operators has been key. As retailers move up the value chain by offering higher priced items, then logistics and distribution networks offered by couriers such as DHL, UPS, and DPD in Europe will come to the fore where consistent, reliable and tracked end-to-end quality of service is essential.
New logistics business models are in place, such as overseas, managed warehouses that help to support Chinese exporters. This development is now well established in the U.S., Australia, Germany and the U.K. Ebay’s joint venture partner Winit is a leading player in this sector where its WMS (Warehouse Management System) supports sellers with enhanced access to new B2C markets. Customers are offered quicker delivery – next day for domestic shipping and 2-4 days cross-border.
Social media product recommendations and cross selling will become increasingly important with the rise of social media channels and the growth in m-commerce. We see this in China through WeChat and a new Swiss-based start-up SOBU.
Asia will become a consumer-driven society that buys from international brands. The challenges will focus on product sourcing and availability, and the development of logistics infrastructures that enable product to get to consumers quickly and reliably. With steadily-rising disposable income and a greater willingness to shop internationally, the Asian consumer is eager for Western brands, not just high-end designer brands but also mid range, original label quality products. The rise of the targeted marketplace (e.g. TMall Global China) enables access to such brands to access markets with a high degree of offer stability, product control, easy payment channels and managed logistics operations. Europe and North America are well placed to serve that demand with key sectors in demand including fashion, apparel, health and beauty products. Complex and changing customs procedures, however, prompt supply chain challenges in getting products to consumers.
New challenges, new supply chain models
Hybrid logistics solutions, where private sector supply chain logistics companies cooperate with postal networks to offer national delivery will become increasingly important. Such networks will offer:
- Quick, reliable delivery
- Access to multiple product and stock availability
- Enhanced planning – connecting the omni channel retailer that has ‘brick and mortar’ stores and an online presence
- Leading-edge technology coupling mobile with WMS, logistics management delivery systems.
eCommerce logistics challenges in the next 10-15 years.
PwC has identified five emerging global megatrends that are emerging and that will shape the business landscape, influencing the way in which organisations will set up and run their supply chains:
- Shift in global economic power.
- Demographic and social change.
- Technological breakthroughs.
- Climate change and resource scarcity.
- Rapid urbanisation.
One industry prediction that was proven incorrect was that eCommerce would see the end of the postal service. In fact, the opposite is true, as postal operators, faced with declining mail volumes are now ideally positioned to serve national and intercontinental last mile delivery for packets and parcels.
Chris Stevens, CEO & Founder at Certis24 Limited (www.certis24.com), is based in the UK and runs his own eCommerce consultancy providing hands-on business development for logistics operators, postal companies, retail brands and marketplaces. An area of specialism is Asia-Pacific building on his senior management experience at two leading postal authorities.
Can be contacted at: firstname.lastname@example.org