- 26/12/2016
- Category: Commentaries
Introduction
E-commerce has gotten bigger over the years, and 2016 has proven just that. In this article, we highlight the trends that has unravalled for e-commerce this year, specifically regarding the total and growth of global sales, and the innovations that have been developed in this sector. The stories of Alibaba’s success in its Singles’ Day discount sale and Lazada’s acquisition will be explored, as they represent some of the biggest events in e-commerce this year and there is much to learn from these two study cases.
2016: Bigger Sales but Less Growth
Although there have been both improvements and setbacks in this realm of e-commerce, it has generally become more successful and expansive. If we look at this year’s trends, we can see why. It has been recorded that this year, almost 1.5 billion people have shopped online, which is around 26% of the planet’s population. The fact that a quarter of the global population shops online proves the popularity and growing potential of e-commerce to be shaping the future of commerce.
Business-to-consumer (B2C) e-commerce holds the largest sales compared to other types of e-commerce. In 2016, B2C e-commerce sales have reached up to $2.6 trillion, higher than the $2.2 trillion valuation in the previous year, which has only grown upwards consistently from previous years. However, this year’s B2C e-commerce growth, which is only at 17.5%, is not as high as the previous year’s growth, which is at 19.9%. This has been a declining trend since 2013, showcasing a trend for e-commerce to keep growing but not at the pace it used to be.
One reason that could explain this declining trend is that around a quarter of total consumers have planned to reduce online spending, according to a survey conducted by Boston Consulting Group. Another possible reason is that although the internet has become faster, e-commerce sites have slowed down in the past few years, possibly due to the abundance of website content that is not supported with the suitable optimization technologies. This have led to a decreased interest of customers to purchase online, where businesses have lost one-quarter of online visitors if a website takes more than four seconds to load, based on findings from Radware. It has also been discovered that people tend to spend less when shopping on smartphones than on other devices. So when the trend of online shopping through smartphones has risen recently, overall e-commerce sales slightly decreases, according to a report by NetElixir. Therefore, we can see why there is a trend for global e-commerce to grow less than before, even though total sales keep increasing every year.
Innovations in Customer Experience
Various factors contribute to the increasing number of e-commerce sales, but one that deserves a mention this year is the improvements of innovation in customer experience. Customer experience needs to be maintained at a satisfying level if companies want to deal with problems like the one mentioned previously. In 2016, businesses have developed better technologies aiming to utilize customer data for personalization and increasing overall customer experience. Since data keeps adding up in volume, velocity and variety, companies have taken advantage from this to better target customers. They have achieved this through new marketing campaigns, such as personalized product recommendations and redesigned websites, by emphasizing on relevant content and products.
The improvement of customer experience through greater optimization of websites this year is aimed to cut down the time it takes to load the pages and minimize outages. Companies that underwent this optimization have recorded an increase in transaction conversion rates. However, this year, when segmented to different devices, e-commerce transaction conversion on desktop (3.65%) is still three times higher than on smartphones (1.16%), with tablets (3.22%) trailing just behind desktop. This statistic proves that smartphones still have some catching ups to do, despite an increasing influence of smartphones lately, proven by this year’s 33% increase of Black Friday purchases directly from smartphones.
Another innovation customers are attracted to is the option for a flexible delivery of their online purchases. This is when customers have the option to set their product’s delivery for several days after their purchase, rather than the usual same-day or one-day delivery. Some customers opt for this option because they might not be at home on the day of their purchase, or they might need it at a later time rather than isntantly. This delivery option is highly relevant for, but not limited to, food delivery businesses. So for companies, it has become not how fast companies deliver their products, but rather, how they can adjust their delivery time based on the customer’s preferences and availability.
E-Commerce Success for Alibaba
An event that highlighted the success of e-commerce this year is Alibaba’s Singles’ Day, which is held on November 11 each year. The huge sale event was initiated by Chinese e-commerce giant, Alibaba, and always breaks sales records. For 2016, Singles’ Day marked a record of $23.39 billion in sales, and it has become one of the busiest days for e-commerce globally. No other e-commerce event could even come close to Singles’ Day, with the second and third largest sales events – Black Friday and Cyber Monday – only generated $3.34 billion and $3.39 billion in sales, respectively. Singles’ Day this year was a huge success, as Alibaba managed to secure the most strategic floor and ceiling prices, coupled with their extensive marketing strategy. Other e-commerce sales events could learn a thing or two from Alibaba’s Singles’ Day success story.
However, it wasn’t always good news for every e-commerce retailer this year. Lazada, one of the main e-commerce actors in Southeast Asia, had to be bought by Alibaba in April this year for $1 billion to preserve their business. Although Lazada generated $310 million in revenue during 2015, which was an 78% up from 2014, it also recorded a loss of up to $334 million in the same period – which was more than double the previous year’s loss. It was found that Lazada’s lack of cash in 2016 was due to the deep discounts they offered to incentivize their merchants, which is not financially sustainable in the long run. Lazada’s acquisition by Alibaba will mark a more expansive e-commerce influence beyond China and into the Asian region.
Conclusion
From these two important events, we can see how innovations can boost or harm e-commerce businesses. The deep discount sale event Singles’ Day gave Alibaba a record-breaking number of sales in 2016. However for Lazada, its continuous deep discount offers have proven to be unsustainable for its business. We can learn that a solid strategy is needed to achieve intended profits while not harming the business in the long run. So although offering larger discounts have managed to increase e-commerce sales globally, businesses need to be aware of its harmful potentials. This is why it is important for businesses and retailers to not only focus on pricing, but to also innovate in other aspects that would boost customer experience and satisfaction.
References
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