In the coming year the global eCommerce market will continue to
show steady growth, with B2B sales expected to hit $6.6 trillion, more
than double online retail sales of $3.2 trillion.
B2C continues to gain ground on “traditional” retail, but perhaps not as
decisively as is commonly assumed. In 2018, online accounted for 12%
of total global retail sales - a figure expected to rise to over 14% this
year, and attain 22% by 2023.
Those statistics are good news for eCommerce because they show that
the market is far from mature.
At the micro-level, the Dutch eCommerce market is expected to
grow by 8% in 2019 to reach almost €26bn, compared with projected
sales of €621bn for the continent of Europe where growth, at
13.6%, is markedly higher than in the Netherlands. Penetration of
the eCommerce business model varies surprisingly from economy
to economy. For example, this year’s B2C eCommerce sales in the
Netherlands are forecast to present just under 10% of total retail sales.
This figure is much higher in Germany (15.9%) or the United Kingdom
(19%).
In other words, the growth potential in the Netherlands is greater. This
is underlined by The UNCTAD B2C E-commerce Index 2019 which for
the second year running lists the Netherlands as the global economy
best prepared to encourage and support e-commerce initiatives.
Again, it is fascinating to look at the details. Denmark has slightly
greater online penetration than the Netherlands, but it scores less well
because its postal services are seen as much less efficient.
The picture that emerges from the research is that of a growing yet far
from homogeneous market, offering resourceful and agile eCommerce
businesses considerable scope for growth. The initiative and ingenuity
with which they approach the new developments in the market will
play a large role.
The phenomenon of marketplaces is consolidating rapidly. Already,
they account for half of total B2C eCommerce sales. The explosive
growth opportunity lies in B2B where marketplaces account for less
than 10% of annual turnover. In the next five years, marketplaces are
set to transform B2B with this share of total sales surging to over 30%.
Against this background of strong potential growth and the growing
role of marketplaces, this white paper wants to explore some of the
developments that will be setting the agenda in 2020 and beyond.
The customer journey, personalization, great design and content, an
easy and secure checkout, an intuitive experience on all devices and
platforms - these are still the cornerstones of successful eCommerce.
The trends we list below are part of a rapidly evolving technological
and business landscape. The aim of this white paper is to help you
navigate that landscape.
Direct-to-customer is a response to the growing societal demand for sustainability and provenance.
Consumers want to have direct contact with suppliers because it can simplify the purchasing process,
but above all, because it gives them a much more compelling insight into the product.
D2C also helps suppliers because by cutting out the retail intermediary, product margins can be increased. The flip side is that D2C forces suppliers to interact directly with unpredictable retail customers and that can be a rude awakening.
Logistics are crucial. The eCommerce platform of the supplier is often not connected to direct sales
channels; implementations are built around the despatch of bulk deliveries to retailers, and not set
up for the fulfilment of individual orders. Inventory will change much more rapidly and erratically, so
suppliers need real-time insight into D2C orders as much as their customers will want to track these
orders.
D2C is a model that is fast gaining traction because it appeals to the modern consumer. Suppliers can
successfully tap into this demand if - and only if - they have an eCommerce platform that is versatile
enough to support it.
Every eCommerce business has to formulate a strategy with regard to marketplaces. The likes of Amazon and Alibaba take a huge portion of marketplace sales, but niche players are finding there is room
for them and they are increasingly taking the leap from “simple” eCommerce business to marketplace.
One such business is Dutch online children’s clothing retailer kleertjes.com, a site that already attracts
over 1m visitors a month. There are different ways to structure a marketplace: kleertjes.com charges
third parties a monthly fee of €40, a sales commission of 15% (although this varies somewhat per category) with third-party suppliers responsible for the fulfillment of the order.
Bax Music launched its marketplace earlier this year. Like kleertjes.com, the eCommerce site already
had considerable critical mass with annual sales of €100m. The decision to launch a marketplace has
far-reaching technical implications, as you would expect, and Bax is developing a headless eCommerce
platform to make it scalable. Headless technology is another trend for 2020.
The question of whether to set up your own marketplace or risk being swallowed up by larger competitors is a difficult one, but it needs to be faced head-on by every eCommerce business. For some,
a marketplace will not be the right strategic approach, and there is courage in deciding not to join this
bandwagon.
Headless architecture
When top eCommerce names such as Amazon,
Walmart and Nike adopt a new technology, it may
be more appropriate to talk of a must-have rather
than a trend.
The technology in question is known as headless
architecture, and it is increasingly adopted for
Content Management as well as eCommerce.
Headless commerce is the decoupling of the
front-end presentation layer from the backend eCommerce solution. The advantage of
headless is that innovation can be delivered far
more quickly to the front-end — that is to say,
the customer. This makes it an irresistible fit
for brands with a content-led or experience-led
strategy.
The other benefit of headless is that back-end
revisions or upgrades can be built without
disruption to the webshop. This was the
experience at Walmart which introduced headless
as part of a long campaign to phase out its legacy
eCommerce system and re-platform to a best-ofbreed solution.
The agility that comes from headless aligns
with the ethos and demands of omnichannel.
In full-stack solutions the front- and backend of
the system are married, making it impossible to
change one without running that change through
the other, which costs time and money.
An innovation related to headless - and an equally
powerful trend for 2020 - is the progressive web
app (PWA).
PWA
Progressive web apps (or PWAs) are mobile apps
that are delivered through the web. They are
built to take advantage of native mobile device
features without requiring the end-user to visit
an app store. This may appear counterintuitive
because eCommerce businesses want to
drive traffic to their apps. However, the great
advantage of PWAs is that they load instantly - an important functionality in the “now economy”
where 53% of users will click off a site if it takes
longer than three seconds to load, according to
research by Google.
Many brands are using PWAs to hone their
mobile eCommerce strategy. The British
department store Debenhams launched a very
fast and responsive PWA with remarkable results.
The journey time from browse to purchase is two
to four times faster than on the previous mobile
site, and conversions are up 20%.
Luxury cars are never bought online yet as with
any eCommerce business, the browsing stage
is an increasingly important part of the overall
customer experience that brands project and
create. BMW wanted to build a stronger mobile
presence and launched a PWA that attracts
customers with high-quality editorial content
– including videos – while retaining super-fast
loading speeds. Conversion in this context does
not mean sales but click-through to local BMW
sales outlets, and this accelerated from 8% to
30%.
PWAs are sometimes regarded as a forerunner
or a first step towards headless commerce
architecture where, as we saw, front and backend
are decoupled to allow for much greater speed
and agility in customer experience innovation.
A PWA achieves all the benefits of a headless
approach by sitting what is called a Front-endas-a-Service (FaaS) on top of backend systems to
deliver a PWA experience on the front-end.
A complete eCommerce approach will need to
embrace PWAs as part of the mix, and to this
end, providers are partnering with developers
that specialize in headless technology. PWAs do
not spell the end of native apps, far from it. The
longer-term goal is to persuade customers who
use and like the PWA to eventually download the
brand app.
Voice orders
A recent survey showed that eCommerce is
somewhat conflicted about its attitude to voice
orders. While almost 70% of respondents
thought voice ordering was an opportunity, 45%
saw it as a threat to their brand - presumably
because voice ordering capabilities are mostly
associated with Amazon’s Alexa or Google Home.
But as we have seen time and time again in the
Digital Revolution, a technology pioneered by
market-dominant companies soon becomes
commonplace among all eCommerce businesses.
And so it will turn out with voice ordering - among
B2C at first, with B2B playing catch-up not long
afterwards.
QR scanning
QR scanning is an addition to the ordering
process that is growing in popularity. It is a good
example of how the boundaries between digital
and traditional shopping are blurring. QR is an
implementation of the omnichannel approach
where customers in a physical shop can scan a
product using their smartphone, and extend their
shopping experience online. They can research
the product, look at color/size/model and other
configuration options, check the stock position et
cetera. If the customer goes ahead with the order,
the retailer has the option of giving him or her
a QR promotion code for a discount on the next
purchase. No more messy vouchers!
Abandoned baskets are a huge headache for eCommerce businesses - and they work hard at removing
anything that could stand between a choice and a sale. This accounts for the runaway success of online
payment providers such as Klarna that allow customers to place an order now and pay later. This is
much more of a convenience play than an extension of credit because consumers (usually) have to
settle up two weeks after delivery.
Another convenient way to pay is to pre-pay using an eWallet - effectively Klarna in reverse. This payment method is much more widely adopted in the US and Latin America than in Europe. The forecast is
that by 2022 47% of all worldwide online orders will be settled by eWallet.
A detailed report into online payment methods throws a fascinating light on how these differ from
country to country, often in very unexpected ways. In the Netherlands, consumers massively favor
debit over credit cards in card-not-present (online) orders, where they account for respectively 67% and
5% of total sales. In Italy, this ratio is reversed: 36% is paid on credit, 6% on debit. In Spain, debit/credit
and eWaller are neck and neck at 20% each (although for in-store purchases cash is by far the most
common means of payment).
Every country and region has its own culture and history of payment and these traditions are very
strong. The euro has existed for almost two decades but as we saw payment methods have not converged to a meaningful extent. Your eCommerce platform has to be able to move effortlessly from one
payment environment to the next.
One size does not fit all - this is especially true for
payments. If you want to expand your brand
internationally, your eCommerce platform has to
have the clout and flexibility to respond to all
these nuances.
Forbes came up with it first: “the subscription economy”. This business model began in the cloud and
has since been popularised by Netflix, Spotify, and Adobe. The latter has seen its share price soar by
370% since it adopted a subscription-based pricing structure for its Creative Suite products in 2014.
Millennials are very used to not owning “stuff”. They do not have CDs but consume recorded music
through the cloud and pay a monthly fee for it. From this, it is not a gigantic leap to not owning your
bicycle, your washing machine, your furniture - but leasing it instead.
Products that are regular and not one-off purchases, such as shaving products, bin liners, Nespresso
coffee pods, and even T-shirts and underwear, are a great fit for the B2C subscription model.
But the approach is also making inroads into B2B for customers keen to support their liquidity position.
For example, the Dutch home interiors marketplace Flinders is offering a range of business furniture
on a subscription basis.
Technological advances in the Internet of Things (IoT) are expected to lead to a sharp rise in B2B
IoT-related subscription businesses, especially in manufacturing. The subscription economy is rife with
opportunities for both B2C and B2B businesses that can adapt and innovate creatively. The big winners
of 2020 will be those eCommerce businesses that think out of the box to leverage subscriptions.
It is true that Virtual and Augmented Reality are regulars in the “trends to watch” blogs and have been
for some time. Will 2020 be a decisive breakthrough?
It looks like it. As a technology, AR and VR are made for eCommerce because they can give the online
customer a realistic “feel” for a product that is beginning to appear increasingly realistic as the technologies advance.
This can be a differentiator for both B2C and B2B. In a recent survey, 1 in 3 customers signalled that
not being able to see or touch a product was a significant disadvantage of online ordering. Just over
half of B2C shoppers perceived this a barrier to purchase. Although this figure was lower for B2B (32%)
it shows that even business buyers want to engage with products that are vividly described and illustrated. For now, AR and VR is complementary to product description, but that will change.
Warby Parker, an American online retailer of prescription glasses and sunglasses, has launched an app
that uses AR so customers can try on different glasses before ordering. The app is useful and not gimmicky as it might have been only a few years ago. Amazon and Ikea are rolling out similar technologies
to enable customers to see what a piece of furniture would look like in their home.
As AR and VR become increasingly intuitive and realistic they will become (almost) as commonplace as
photographs are today. Omnichannel is blurring the barriers between “real” and “online” shopping -
and the new realities offered by AR and VR are an extension of that development.
This list of “hot trends” for 2020 is by no means exhaustive.
Honorable mentions go to the rise of “reCommerce” (the market
for used products), the Google Shopping marketplace, product
customization, and creative solutions to the problem of returns.
An astonishing example of a new type of eCommerce ecosystem
is the collaboration between Amazon and one of its direct retail
competitors, the US retailer Kohl’s, whereby Amazon customers can
now return unwanted goods to any of 1,105 Kohl’s stores. At first
glance, this seems highly counter-intuitive, especially for Kohl’s who
have to divert staff from selling its own wares to process returns for
Amazon. However, the collaboration (potentially) solves a problem
for both retailers: that of a dwindling footfall for Kohl’s, and for
Amazon, the lack of brick-and-mortar where products bought
online can be returned without too much inconvenience.
Innovation is not always steered by technology, but rather by
mindsets that are thinking out of the box (a box that has been
smashed to pieces by technological change). So there has never
been a more exciting time for eCommerce. The challenge lies in
translating the many different trends we highlighted into concrete
business outcomes. B2B and B2C need clear strategies to achieve
this and it may be that replatforming to a modern eCommerce
solution needs to be part of that strategy, even its starting point.
The race will be won by businesses that marry an omnichannel
mindset with an eCommerce platform that is flexible and powerful
enough to leverage the future.
What all the trends have in common is that they put the customer
center-stage: their needs, expectations, experience and loyalty. If
B2B and B2C eCommerce businesses keep their eyes firmly on the
customer, 2020 will be another great year.
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