November 26, 2014
With 2015 looming, it’s time once again to sift through our e-commerce stained tea leaves and make some predictions for what the new year will bring to e-commerce. Among other things, 2015 promises to boom after a heady 2014, with U.S.-based e-commerce predicted to reach $350 billion in sales by year’s end.
When they finish tabulating the numbers, global sales are expected to reach $1.5 trillion. Even the holidays promise to be bigger than ever, with an estimated $617 billion in sales.
We’d like to call this the year of the consumer. The customer’s always been right, but these days, they have more power than ever. Let’s unpack why we think so.
- Location, smocation
No longer is global breadth just another notch in the business strategy concocted in a corporate boardroom. Hungry consumers are actually pulling brands into new territories, and 2015 will see the consumers leverage greater control. Not convinced? Just look at how Kickstarter and Indiegogo have changed the landscape: Now, a product can go global before it is even built thanks to crowdsourcing. And once you give consumers that power, it’s not easily taken away.
This trend toward global cuts two ways. Broader market diversity can help companies that might have traditionally been hurt by declines in local economies. But with any luck, in this case diversity means sustainability (which of course ultimately means profitability). Those worldwide sales figures are pretty tempting, after all.
But it won’t be that easy, right? Remember: In 2015, everything is on the customer’s terms. They will expect a familiar user experience and local pricing. For you, that means you’re really staring down questions about local delivery and supply chains. How do you balance global v local with buyers sending strong demand signals? Supply chain flexibility!
Without flexibility globally integrated supply chains can punish in the same way they reward. A problem in one part of the world can impact other areas. Narrow focus on one part of the world, misses the opportunity visible in your buyer demand in another part of the world. Having multiple options to enter a market such as in-country fulfillment, int’l shipping and landed cost visibility will help your supply chain stay limber.
- Guess what? With the web, you’re always open
Your selling online, so you are selling 24/7 and people all over the world can find you.
You have to ask yourself if your supply chain, fulfillment facilities fulfillment centers and customer service can respond to buyers all the time, too. Carrier companies already are, by beginning to support extended pickup and delivery times. Delivery and fulfillment services will soon be seven days per week to match the retail opening times. Even the USPS is rolling out Sunday delivery, in a partnership inked with Amazon in November 2013 that is just now gaining traction.
- Big buying days are getting bigger – and more volatile
You used to know all the big days in your local market, which made it easy to plan accordingly. Black Friday, Super Saturday, Small Business Saturday and so on. And then, with the web, along came Cyber Monday. Last year, U.S. Cyber Monday sales were $2.3 billion—up 29 percent from the year before. Nothing to sniff at, but China’s big buyer day, November 11, dwarfs it: This year, Alibaba only took two hours to reach $2 billion in sales on Singles Day, and by day’s end reported sales surpassed $9 billion.
Global B2C e-commerce spikes mean you need to have scale on demand and operate an ultra-tight supply chain as you enter these markets.
- Same-day, in-store pick-up finally becomes relevant
Though Same Day service has tried and failed in many markets—consumers just weren’t ready for it—we predict next-day and rapid in-store pickup will be king for 2015. Retailers are evolving the in-store experience so that you can browse online and use the store as your personal pick-up center. It’s all comes down to being faster, cheaper and more convenient.
To achieve this, companies are keeping warehouses closer than ever to buying hubs. Even Amazon, that dragged it’s feet for years has now gone all-in with local delivery hubs: The e-commerce giant long resisted building warehouses to take advantage of tax loopholes, but now that the tax benefit is no longer quite so lucrative, they’re building space rapidly to keep pace with consumer demand and training buyer’s delivery-time preferences.
Services like Ebay Same Day (possibly being shuttered), Amazon Local and Google Shopping Express are some of the ways that e-commerce is becoming more nimble with the help of brick and mortar. These essentially provide free and immediate shipping, and allow online to effectively partner with brick and mortar. Watch out Ebay and Google, Uber and Lyft have built a massive local transportation network and you can bet that courier and same-day delivery is in their cross-hairs.
- Wow the customer or die!
Deliver your products, and deliver on your promises. With more shopping and shipping options than ever, your consumers are hyper-empowered, and they know it – which means they’re very vocal, too. They are tracking every aspect of the experience, and you can bet they’re going to tell you (not to mention the rest of the world) how you’re doing. So when it comes to wowing the customer, the stakes are high: Not only is your buyer’s loyalty on the line—so is that of untapped prospects, too. But if your delivery experience fails, fret not. Authenticity goes a long way with shoppers. Here’s the silver lining of mistakes: You can use them as an opportunity to tell shoppers just how important they are to you.
You hear it all the time: Fast and free shipping is everything. Ultimately, it really boils down to giving customers what they want. They want options. These days, customers can dictate where (post office of my choice, office, home, hotel), how (gift wrapped, sprayed with perfume, embossed, engraved), and when (same day, next day, deferred delivery, rerouting like FedEx package redirect). Brands are also communicating the brand message in the box, with customizations to wow the consumer at the point of reception. Expect more personalization.
- The offline experience is actually evolving
That uneasy truce between retail and online is finally turning into a mutually beneficial partnership. The retail store is not going away, it is simply being “right-sized.” E-commerce has continued to chew into brick and mortar, but offline is quickly evolving into a buyer experience.
Retailers with a tightly integrated online and offline experience are winning by perfecting the buyer experience on the buyer’s terms. The online world is being merged back into the offline one, and the really successful players are finding ways to leverage the digital investments in the stores, and focusing on providing that ultimate user experience in-store.
When you think about it, it’s a lot like the evolution of the music industries. As music delivery went from discs to digital, the music industry fought back by including signed posters in CDs, providing exclusive content, and more.
- 2015 is all about adaptation and transformation
Transformation will be the keyword of 2015, with flexibility not far behind.
Ultimately, you need to be flexible enough to be able to adjust to your newly hyper-empowered customers—and have the foresight (and dare we say courage) to know what trends to bet on, and which ones to sit back on.
Understanding consumer demand requires tools and processes like social monitoring, customer feedback channels, and so on. Retailers and brands that do this well will gain market share quickly where their consumers are telling them they need to be.
The new era of pull commerce has a lot of implications: As we mentioned, ideas are being pulled into reality on Kickstarter and Indiegogo each day. Consumers are pulling brands into markets and products onto shelves.
To truly transform, then, you have to not only understand consumer demand, but also respond with end-to-end logistics flexibility—from an adaptable supply chain, on-demand global fulfillment, payment options, even the ability to transition from B2B to B2C or cross border. That’s where the real opportunities are made.
- What goes out, often comes back as a return
It’s an expensive proposition, but the return experience is absolutely critical to the ongoing buyer experience and customer satisfaction.
If customers think a return policy sounds too good to be true, you can bet they’re going to love it. Many retailers have enjoyed considerable success with offering insanely flexible, seemingly unprofitable, return policies. Zappos was a pioneer here, allowing consumers to return purchases for up to 365 days from the purchase date. (You’re in real luck if you buy on a Leap Year: They give you till the next Leap Year to return those orders – four whole years.) This isn’t easy—a reality few know better than REI, which offered a no-questions-asked lifetime return policy for more than half a century, up until 2013, when the outdoor outfitter curbed the policy to a year.
The biggest motivator for returns tends to be problems with sizing, which means apparel and shoes are disproportionately impacted. But many retailers are working to help consumers better estimate the right fit with technological innovations or order history.
- Ditch inventory, gain customers
We talk a lot about how faster is better, but in 2015, expect that more online retailers will start ditching inventory and giving discounts to consumers in exchange for waiting for products.
Zulily is the pioneer here, and it’s quickly become among the fastest-growing e-commerce stores. Its model puts a spin on the flash sale: Offering great apparel at a steep discount for a limited time; booking all the orders; and then ordering from the supplier and cross-docking the apparel to the buyer. The buyer wins with a discount in exchange for a longer delivery.
It will be interesting to see how drop-shipping gets into the mix. Zulily is only now starting to use a drop-ship approach, and still processes many orders through its own fulfillment centers before shipping back out to the customer. That takes time, and to give customers the best of both worlds, the combination of convenience and low price that drop-ship can offer will become even more relevant in 2015.