The geographical battle for ecommerce goes beyond online shopping and traditional retailing

As digital natives increasingly burrow deeper into the internet, will the existence of traditional retail end?

Increasing relevance of e-commerce

In 2017 e-commerce sales reached around $2.3 trillion and is expected to hit $4.5 trillion in 2021 (according to a Statista report). One primary reason for the increasing online sales is the increased use of smartphones to buy online. As much as 11 percent of online shoppers now shop online via their smartphone on a weekly basis, and 35 percent say it will become their main purchasing tool. Around 39 percent of online shoppers use social networks to get inspiration for purchases.

Online sales have taken a flight and the outlook remains positive with grow at 15% from 2016 to 2021. This growth is underpinned by global socio-economic and geographic trends such a growing urban population of over 30% by 2030 (Euromonitor). Hyper-connected and densely populated countries like Singapore already see a sales value growth of 33% in 2016.

In particular online marketplaces, such as Amazon, Alibaba, Tencent play a key role in leading this growth.

Some retail categories do grow faster than others in the online arena. Top ranks are taken by food & drink and apparel & footwear and especially fast –fashion and off-price branded apparel lead the growth. Less commoditized categories are lagging in online growth and tend to benefit from showrooming or assisted sales for a more informed buying experience.

Traditional retailers are here to stay – or are they

By 2021 bricks & mortars will generate 81% of revenues, down from 93% today (EY). Bricks & mortars still have a significant advantage over the online sales.

Forbes explains why stores and not e-commerce are the future of retail based on a number of trends: all but one of the top 10 US retailers are bricks & mortars, stores are (still) more profitable, more and more e-retailers are entering the domain of bricks & mortars, the preference for stores by millennials and generation Z and lastly as online retailers are taken over by traditional retailers.

However you can’t ignore the staggering numbers like that from Amazon: New research shows that Amazon will control 44 percent of all online sales in the US this year, according to eMarketer data cited by Recode. That’s an increase from Amazon’s market share of 38 percent in 2016. Amazon’s online sales are on pace to grow 32 percent to $196.8 billion in 2017.

Other items not mentioned here are the limited online payment options for lower incomes and young people without credit cards or the challenges to fulfill the customer promise in more remote areas due to longer lead times and delivery reliability.

Shifting sales priorities and channels

For consumers the three T’s of Trust, Taste and Touch are integral to their shopping experience (Forbes). The online platforms have worked hard on their reputation and to establish trust through customer loyalty, secure payments and delivery reliability.

Taste and touch are hard to experience online and highly priced, personalized and complex products are benefiting from “showrooming”. Showrooming allows for trialing the products in a store and can be supported by a highly branded environment, and still allows the customer to buy online. The online buying takes ideally place in the store, to not lose the customer to a potential different platform.

One key consideration that sets traditional retailing apart from e-commerce, is that most retailers still consider margins as critical. However, with the customer focus driven by the online giants, customer loyalty has become the top priority (EY). The need to best serve the customer needs has now evolved into omni channel

Omni-Channel O2O wins territory

With the growing online sales and a continued need and preference for traditional retail experience, a blended shopping experience will serve consumers best. Omni-channel retailing involves seamlessly integrating the customer experience across all interaction channels – in store, on the web, and on mobile devices.

Alibaba recently invested $2.9 billion in China’s biggest offline retail group, Sun Art. Hema Supermarket is a good example of how the e-commerce giant Alibaba evolved within the O2O landscape. Hema is a store with fresh foods, imported goods and dining services like other physical supermarkets. Before shopping, consumers are encouraged to download an app, through which products are purchased, and where spending and consumer profiles will be saved and stored online. Consumers can enjoy door-to-door deliveries within 30 minutes if they live nearby. Even Tencent, JD.com invested 863million into the online retailer VipShop.

The Asian Consumer

Asian consumers are famously mobile-first, turning to their smartphones for everything from shopping to banking services, which means that they are also used to the speed and convenience that mobile solutions usually emphasise. For me, what I find exciting is that Asia has a collaborative model of fintech which leverages the start-ups for the innovation and improved customer experience they bring to the table and banks themselves contribute their vast experience with data, resilience, reliability and customer protection.

There is clear recognition in Asia of the value of collaboration and innovation, the future of retail is therefore not a battle between bricks & mortars and online. It’s about harnessing innovative digital technologies across a blended omni-channel approach by all the players in e-commerce through enhancement and development of more mobile-friendly solutions, payment options, more personalized and unique experiences.

Make your customers come back for more.

I’m passionate about everything digital. If you share this enthusiasm I’m happy to connect. The views, analysis and opinions reflected here are mine.