25 years after Pierre Omidyar sold a broken laser pointer on the internet and Jeff Preston Bezos started an online bookstore, e-commerce business has come a long way. According to Statista, e-commerce market is worth about $3.5 Trillion in 2019, and that number is expected to grow to $6.5T by the end of 2023. With almost $2T in sales by end of 2019, China is leading the way by a great margin from the second largest country on the list – the United States. The US market size is roughly about 1/3rd of the Chinese e-commerce market at about $600B, which is considerable feat given China surpassed the US as recently as 2013.
Over the next decade, it will be interesting to see how Chinese e-commerce dominance will shape the market, and how rivals across the world will respond to that. Having worked in e-commerce industry for a while now, here are the five trends I believe will dominate 2020, and in turn, the next decade.
1. Video-enabled Ecommerce:
China has popularized live selling to the point that US celebrities and brands are selling items live on Tmall – a subsidiary of Alibaba to sell branded goods. Live stream has its own advantages. For example, users can ask live questions, can see the actual color, especially for apparels and fashion products, and can mix and match accessories to go with the clothing. All these features are currently unavailable in traditional e-commerce platforms in the US, whereas Taobao and T-mall have been using it since 2016.
Instagram has reportedly been working on its own shopping platform. I wouldn’t be surprised, if it becomes the first live stream selling app in the US, using its IGTV platform.
It ultimately supports the user psychology of immediate gratification of “See now, buy now.” Live selling is also a great way for direct to consumer (D2C) brands to connect directly with their customers rather than relying on a third-party medium such as Amazon. Celebrities can also endorse their brands or can collaborate with D2C brands for certain fixed number of live selling sessions. It is a win-win model for both brands and celebrities.
A16Z partner, Connie Chan, has written an excellent post listing use cases of video first apps such as Douyin (Chinese version of TikTok). Consumers in China are already using them for e-commerce. Some of the popular ones include, farmers directly selling authentic farm to table products, attracting users through demonstrating their produce using live videos. Unboxing videos with direct link to buy the product was another prime example. Taobao reportedly has about half the products listings already with some sort of video demonstrating the product.
Here’s an example of impulse buy product on TikTok. You like the video, now you want to buy it. You can do it on TikTok!
Handmade goods market, which was popularized by Etsy in the States, has grown in popularity over time. Now, Craftsman are using videos – which is a much superior platform – to showcase their art and attract buyers. Connie posted a video of Japanese craftsman displaying his art of making paper umbrella. He now has more than 800K subscribers and was able to earn $15,000 in just a month’s worth of sales!
Pretty cool, huh?
2. Apps are dying:
Sick of downloading hundreds of apps on the phone? Well, no more. Progressive Web Apps (PWAs) are here!
PWAs are essentially mobile websites that look, feel, and function just like a regular app. With increasing number of apps crowding mobile phones, PWAs provide same functionality with more efficient space utilization and seamless browsing experience. Trivago and West Elm mobile website are great examples of PWAs with amazing user experience.
PWA comes with a host of other benefits such as:
a. It allows push notifications akin to standalone apps.
b. Tired of updating dozens of applications every month? With PWAs users don’t need to update anything ever.
c. Just like regular apps, PWAs also work offline.
d. Don’t need to worry about maintaining different apps for Android and iOS.
First launched in 2016, PWAs have been around for a while now, but with recent advances in technology and increased awareness in the tech community, it will likely to become mainstream in next couple of years. Apple has been trying to push back on some of the PWAs, citing security vulnerabilities. More than security, I think Apple is worried about their App Store revenue of $39B. Hopefully, it will come to senses sooner rather than later. I think PWAs are here to stay and slowly developers will adjust to the new trend.
“PWAs and Apps will create the same divide as Waterfall and Agile development methodologies did during the last decade. More technologically savvy companies will move to PWAs and others will play a catch up to avoid being tagged as laggard”.
We all know marketing emails are boring and mostly end up in our junk folders. Luckily, PWAs can help here as well. The solution: interactive live emails. The idea is to show user dynamic pricing and provide superior browsing experience right from the Inbox. Hence, users can browse, select, and pay all in the email. Google’s Gmail already has been an early supporter for PWAs. Outlook recently launched support for PWAs. Here’s a good article listing some other advantages of PWAs.
3. Buy Now Pay Later (BNPL):
BNPL is a payments scheme where you purchase goods now but pay it in installments over multiple – generally three to six – months at no extra cost. Rise in popularity of companies such as Klarna, AfterPay, and Affirm is a clear indicator of the trend. Klarna and AfterPay charges you no interest and their business model revolves around merchant fees and late payment fees, whereas Affirm charges you interest but nothing extra for late payments.
Affirm and Klarna each have raised more than a billion dollar in venture capital and are coveted as fin-tech “unicorns”. Quirky Scott Galloway does a good job summarizing explosive growth of BNPL firms in following
4. Direct to Consumer brands will proliferate:
Rise in popularity of platforms such as Shopify, BigCommerce, and Magento signifies the importance of D2C brands. More and more people are starting their own online stores to sell products directly to consumers. These brands are leveraging social media marketing on platforms such as Instagram and TikTok at low or no cost to promote their brands and directly attract consumers rather than relying on big e-commerce platforms such as Amazon and eBay.
Bonobos, Allbirds, BarkBox, Chubbies, Bombas, Casper, Soylent all are great examples of successful D2C products. This great article by CB Insights list some of these companies and what they did to become successful in D2C space. According to CB Insights, since 2012, at least 400 D2C brands have raised more than $3B in venture capital.
What’s helping D2C brands proliferate? Social proof! Instagramable pictures and product reviews really helped D2C brands thrive amongst millennials and Gen-Z.
Robert Cialdini would surely be pleased to hear this.
Picture Credits: CB Insights
5. Zero-click ordering:
E-commerce companies collects so much data that they can predict when exactly you will run out of those toilet papers and can even send the new ones before you actually order it. Amazon is the usual suspect here.
With more than half of American households subscribed to Prime membership, it is possible for Amazon to create predictive model to determine when exactly you need the next set of toilet papers. Especially for repetitive purchases more data consumer provides the better Amazon can predict the success of consumers actually needing the products. Further, Amazon also has data through its home assistant system, Alexa. Combined that with your shopping history it provides unique data points to predict with good certainty.
What if you don’t need the product? No problem. You’re already a prime member. Someone will come and pick-up the package from your doorstep. Then Amazon can probably adjust its models to deliver those items less frequently.
Similar business model can be applied by other e-commerce players that expect lot of repeated transactions. For example, Chewy.com, which sells pet food. Most of the customers repeatedly order same items month-after-month. Chewy already has an auto ship platform that caters to repeat business. This can be automated with enough data and favorable economics.
What other trends do you think will shape e-commerce as we know?
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