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E-commerce Industry Overview

E-commerce Industry Overview

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E-commerce Industry Overview

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  1. E-commerce Industry Overview • Electronic commerce (e-commerce) initially referred to the facilitation of electronic commercial transactions, using technologies such as Electronic Data Interchange (EDI) and Electronic Funds Transfer (EFT). These technologies, introduced in the 1970s, allowed businesses to send commercial documents, such as purchase orders or invoices, electronically. The acceptance of credit cards, automated teller machines (ATM), and telephone banking in the 1980s were also early forms of e-commerce. With the introduction of the Internet as a technological system of communication, e-commerce began a process of transformation. By the end of 2000, many European and American organizations and individuals offered their services through the Internet. Since then, e-commerce has developed into a global industry providing Business to Business (B2B), Business to Consumer (B2C), Business to Government (B2G), Consumer to Business (C2B), and Consumer to Consumer (C2C) commerce operations at a highly cost-efficient level. E-commerce has utilized and developed various technologies that have allowed the growth of fast-paced, easy to access commerce platforms. These include mobile commerce, electronic fund transfer, supply chain management, Internet marketing, EDI, automated data collection systems, online transaction processing, and inventory management systems. • As of 2014, e-commerce has developed an increasingly significant influence over individual commerce and overall business operations. With global technological development, widespread use of social networks, and demand for efficiency in commercial and enterprise interactions, e-commerce is becoming increasingly more central to buying and selling processes in nearly every industry. Today, both consumers and businesses have adopted online commerce in order to save time, compare products, and access the diversity of product and service options available on the Internet. E-commerce provides a more dynamic, easy to access, and efficient platform to meet business and consumer needs. • E-commerce can manifest in various forms: virtual storefronts (internet retailing), online marketplaces, social media, email exchange, B2B buying and selling, and more. Not only is e-commerce growing more important to global commerce culture, but it is expanding into previously untapped avenues for market interaction and consumerism. According to Gartner, e-commerce is moving beyond the boundaries of an online selling channel into integrated platforms that deliver a unified customer experience. These include the incorporation of order-management, content management, and digital marketing into e-commerce platforms in order to meet the expectations of their customers. • E-commerce Types • E-commerce is separated into five types: • B2B commerce is when companies do business with each other, such as a manufacturer selling to a distributor or a wholesaler selling to a retailer. Examples of B2B e-commerce sites include McMaster-Carr, Fastenal, Grainger, MSC Industrial, and Quill. • B2C commerce refers to commercial interaction between a business and the general public. B2C e-commerce has grown increasingly prevalent over the past few years as consumers continually supplant physical shopping and retail with e-commerce. Examples of B2C e-commerce sites include Amazon, Walmart, BestBuy, and Staples. • B2G, also known as public sector marketing, refers to businesses that market products and services throughout various government levels. B2G networks allow businesses to bid on government opportunities that are presented as solicitations. Examples of B2G e-commerce organizations include FindLaw and Lockheed Martin. • C2B model of commerce, also known as the reverse auction or demand collection model, refers to the process where individual consumers create a value that is purchased by a business. Within e-commerce, C2B most frequently manifests when consumers offer products and services marketed to organizations online. This trend has grown significantly over the past few years with the increasing importance of blogs, internet forums, and e-commerce platforms such as eBay and Amazon. • C2C commerce refers to sites that offer classifieds, auctions, and/or forums where individuals can buy and sell on online payment systems such as PayPal. C2C has grown increasingly relevant with the growth of companies such as eBay and Craigslist.

  2. E-commerce Industry Overview (continued) Market Size and Projected Growth According to eMarketer, US retail e-commerce will generate $262 billion in revenue in 2014, an increase of more than 16% year over year. By 2017, US retail e-commerce will generate more than $430 billion in sales, with a CAGR of 14%. Quora Analytics suggests that the global e-commerce revenue will surpass $2 trillion in 2017, with a year over year growth of just under 17%. While North America initially dominated the e-commerce market, year over year growth rates in Asia-Pacific, the Middle East, and Africa show enormous potential throughout the next few years. With the global increase in mobile and electronic traffic, there will be a significant growth in the population of e-commerce consumers.

  3. E-commerce Industry Overview (continued) Trends E-commerce is structurally dependent on the development of efficient and dynamic technological platforms. Because of this, there are various trends that are projected to reshape the industry over the next few years. As a response to technological changes in e-commerce, the industry must also adapt to the metamorphosing consumer culture, with its evolving needs, expectations, and behaviors. Among these industry trends are distribution channel build-outs, group and local buying, flash sales, mobile e-commerce, social networking, Big Data, accounting for globalization, and redefining Customer Relations Management (CRM). Distribution Channel Build-Outs Historically, third party sellers have relied on a single channel for online sales, such as eBay. However, the marketplace is constantly changing. Deutsche Bank Securities expects a rapid diversification of online sales channels. Companies, such as Amazon, continue to createnew channels and opportunities for sellers to diversify. Retailers and companies will continue to develop platforms that utilize and profit from e-commerce. This trend towards distribution channel build-outs affirms the projections that e-commerce will soon be the dominant platform for consumers (businesses and individuals alike). Group and Local Buying Another emerging trend driving growth in e-commerce is group buying or “deal-a-day” websites. In the group buying model, companies engage consumers by offering coupons and discounts that are redeemable only if a pre-determined number of subscribers agree to participate in the deal. Typically, these deals are redeemable within a consumer’s locality, geographically tailoring the consumer experience. Companies that facilitate this business model include Groupon, Living Social, Deal Radar, and TownHog. Through location-based commerce and targeted advertising, there are many benefits for both consumers and companies. Consumers receive discounted opportunities for items and services that align with their profile and locality, while businesses engage with consumers with targeted advertising at a cost-effective rate. Group and local buying models also produce more Internet traffic and thus facilitate more consumer interaction. Because of the mutual benefits of this model, consumers and businesses alike have been increasingly adopting the group buying model. Flash Sales Similar to the group and local buying model, flash sale websites operate on the “one deal a day” ecommerce business model. These websites offer single product sales for a period of 24 to 36 hours. Companies that utilize the flash sale model include One Kings Lane and Zulily. Mobile E-Commerce (m-commerce) With the proliferation of smartphones and media tablets, an increasing number of consumers and retailers are adopting m-commerce as an attractive medium for retail transactions. According to eMarketer, m-commerce has been growing at a rate higher than the total growth of e-commerce, accounting for 9% of all retail commerce in 2013 and a projected 17% of all retail commerce in 2016.

  4. E-commerce Industry Overview (continued) According to eMarketer, mobile commerce generated just under $42 billion of the total $262 e-commerce sales in 2013. By 2017, m-commerce sales are expected to exceed $113 billion, with a CAGR of 28%. According to Gartner, mobile e-commerce will contribute to the overall success of e-commerce, but also raises the complexity of an e-commerce initiative. Social media While mobile devices have revolutionized the platforms on which e-commerce takes place, social media has completely reshaped interaction between potential buyers and sellers. As social media sites such as Facebook, Twitter, LinkedIn, Pintrest, Youtube, Google+, and more, engage billions of users, they concurrently provide an attractive environment for advertisers, retailers, and potential consumers. Social media has become the most important and penetrating distribution channel for the content of an organization and/or an individual. Social media allows for increased access to customers, increased visibility for the producer of content (an organization or individual), a stronger platform for targeted advertising, and more fluid channels for communication between buyers and sellers. Big Data Despite the belief that complex data structures are beyond the capabilities of smaller organizations, data analytics and Big Data present enormous opportunity for all e-commerce retailers. As technological mechanisms are constructed that allow easier access to data, e-commerce retailers will begin to utilize Big Data to increase their revenue growth. Big Data will help personalize content, cultivate dynamic pricing, refine customer service, manage fraud, and create more accurate and beneficial predictive analytics. Globalization According to Forrester, in 2014, a growing number of brands and businesses will supplement their traditional retail relationships with new direct-to-consumer websites around the world, offering global online shoppers an immersive, dynamic, and diverse content experience. As a result, e-commerce organizations will increasingly embrace international shipping as a method of reaching customers in markets where they do not have local operations. The Internet allows for organizations to construct a global marketplace for their products and services competing on an international scale. The e-commerce industry will move to further cultivate operations in order to adapt to a globalized economy.

  5. E-commerce Industry Overview (continued) CRM According to Gartner, the top four priorities of CRM programs within e-commerce organizations are enhancing the customer experience (40%), increasing the acquisition of new customers (35%), increasing sales revenue (33%) and increasing customer satisfaction (31%). These priorities are reflective of the technological and cultural trends that are beginning to reshape the operations of e-commerce. For e-commerce strategies to achieve these customer relations goals, mobile, social, globalization, cloud and legacy order management systems all need to be well-integrated and galvanized around a common set of objectives and analytics to measure results. Outlook The global e-commerce market is projected to continue its robust growth, as consumers and business increasingly adopt mobile and online platforms for buying and selling purposes. As physical retailers increase their online presence and as organizations adopt the technological and cultural changes of modern consumerism, e-commerce will become the central platform of business-customer interaction. Customers are increasingly gravitating towards online stores as online retailers have been able to gain critical scale to offer competitive discounts. With the advent of new technologies, consumers have been finding the online experience more attractive than traditional offline venues. Programs such as free shipping and loyalty programs drive online purchasing frequency and repeat business for online retailers. The competitive marketplace has moved to the Internet and the stage for commerce reflects a globalized world. As the technologies that streamline e-commerce continue to develop and as the culture of consumerism continues its transition to the Internet and mobile devices, e-commerce will move to the center of all buying and selling processes.