With some 500,000 eCommerce sites in the US and presumably over double that in Europe (considering that each country has to have its own language and that France alone has over 100,000), eCommerce is hitting the big time. If you take the USA and Europe combined, eCommerce registered slightly over 350 billion euros in revenues in 2011, representing between 7-8% of retail. In China, there are now around 145 million cyber buyers, nearing in on the number in the US (170 million). Electronic commerce is clearly playing on the world’s stage.
eCommerce: a road with bumps
All the same, growth in eCommerce will not be a gimme. I wanted to highlight a few points :
- eCommerce is dominated by a few players (of which there are only a handful of pure players); read: Amazon in most of the western world and Taobao (Alibaba) in China. The vast majority of the eCommerce sites are absolutely minute. When you factor out the $48 billion (or 35.7 billion euros) by Amazon alone, the average revenues per site would be around 200,000 euros, but such a number hides an enormous number of microscopic sites.
- eCommerce is barely profitable as a whole. The #1 player Amazon is riding on a 4% operating margin (due in part to the recent “investment” in Kindle). Just like mass distributors, à la Carrefour or Walmart, margins for marketplace eCommerce are tight and volume is critical.
- eCommerce may be without real boundaries, but the cross-cultural divides are palpable. Issues such as language, returns philosophy, legislation, fiscal differences and method of payment make the internationalization of eCommerce extremely arduous. In fact, among the top 20 eCommerce sites in the US, there is only one non-American site (Sony Style). In Europe, outside of the big 3 (Amazon, eBay and Apple), the landscape is generally local as well.
So, what will it take for eCommerce to continue to grow as a channel?
Outside providing good products and the basics of commerce, companies — whether brick & click or pure player — will need to drive deep the value added components that are available to the eCommerce channel to ensure continued growth. Here is a list of the key bonuses that electronic commerce can provide:
- Always on. The 24/7 convenience is a godsend in our time constrained world. In order for this benefit to be optimized (from the customer standpoint), customer service will need to be 24/7 as well.
- Easy search. The wizardry of the search function is only as good as the engine and the tagging that is installed. Tagging of photographs and videos should also be well tagged.
- Best pricing. The ease with which consumers can compare prices is a double-edged sword for the site. Hopefully limiting the inevitable gaming on fine print, the issue will be to find ways to value properly the items on sale; for example, to have selective merchandise, limited series or time sensitive offers. Transparency will be a key ingredient, otherwise, the returns (and social media bad buzz) will be all-too-frequent.
- Personalization. The functionality exists to allow each customer to personalize his/her desired item. Whether it is the custom-ordered car, the monogram on the back of the ipod or customized furniture, the web site allows for easy personalization. Of course, the internal processes and systems must be in place.
- Rich media. Internet allows for all media in one: video, links, photographs, not to forget social media. Accordingly, good eCommerce sites should optimize the user interface. Social Commerce is one interesting angle to be exploited.
- Mobile friendly. As the prevalence of smartphones grows, sites will need to be adapted to the mobile interface — as evidenced by the growth in mCommerce in the UK.
- Peer advice. The access to ratings and reviews makes the online shopping a fantastic resource. Making those peer reviews & ratings more easily accessible is going to be an important part to the eCommerce experience.
The lines between eCommerce and Commerce to merge
To the extent that eCommerce cannot provide touch and feel of a physical object, the customer service component and rapidity of delivery will be forever strategic — both areas at which Amazon excels. As the mobile smartphone continues to spread, customers will be able to bring in to the store many of the above features such as price comparisons, rich media, augmented reality, ratings & reviews, and even ease of payment (cf Square). eCommerce has a long way to go to gain everyone’s confidence. As the world moves to online commerce, it seems that the notion of blended commerce (brick & click) will become evermore prevalent. It certainly seems that the majority of the winners (excluding the trio of Amazon, eBay and Netflix) are both offline and online. And it makes sense. For example, a client can decide to research online, feel/try the product in the store, buy online (with a group of friends), get delivery via a local spot, expect to have after-service online and enjoy a seamless social experience in social media as well as attend an event at the store… Truly, a marriage between IRL and URL.
It is my opinion that providing seamless fluidity between store and eStore — whereby the client is at the center of the business — will become the most critical success factor. The road should be long and positive, but there will be plenty of casualties along the way for those that do not accentuate the added value inherent to the eCommerce channel.
I'd like to think tht the real issue here is the product offering. Sure, the channel itself opens up for some advantages, but when we talk about putting the customer in the center and looking at the power of consumer reviews, it's really the product (or service) that matters. And maybe it's only with e-commerce that the improved product offering could be reality… ?
Where did you get the stats on how many ecommerce sites there are in USA and other countries – I have been trying to find those numbers but of no luck. I would love to know. Thanks
Nice article. Thaanks for the read.amazing