Key Ecommerce Trends in 2020

Traditional brick & mortar retailers will look to shift to ecommerce, investing into new direct-to-consumer propositions or building a presence on well-established online marketplaces. The latter option will allow them to minimise their online costs while leveraging fully established supply chains and fulfilment solutions.

New online experiences will be delivered in an attempt to replicate what was once offered through offline touchpoints to now high-traffic digital channels. 

The Dubai Mall built its online presence on Noon.com over the past few months through a strategic partnership with the growing MENA marketplace. 

JD.com started organising ‘live online parties’ to support alcohol brands on its platform as a new media to engage with its customer base online, creating brand loyalty. 

ASOS re-introduced augmented reality for ‘virtual fitting’ functionalities to reassure consumers still reluctant to try and return clothes purchased on its site.

Engaging, personalised experiences will become more prominent, embedding the commercial and transactional component within highly experiential brand propositions that will create value for consumers. As a consequence, rising technologies like AI, AR and Voice will also see an accelerated and wider growth across multiple industries to address new needs of ‘convenience’ demanded by a larger online consumer base.

The impact on omnichannel players will be a revised shift towards certain channels; specifically towards direct-to-consumer online platforms. Smaller, agile omnichannel brands were able to leverage their direct-to-consumer sites during the pandemic, allowing them to respond more flexibly to the surge in online consumer demand over the past months. 

Larger online retailers and marketplaces had to prioritize storage of essential goods in their warehouses, thus making the delivery of ‘niche’ and specialist products more challenging. This dynamic provided a concrete opportunity for direct-to-consumer sites to serve the needs of consumers looking for more specialised products and quicker fulfilment options. 

New consumers were acquired during this period, providing a substantial opportunity to focus on CRM and drive loyalty post-pandemic. Similarly, a higher rate of ‘repeat’ online shoppers will generate additional opportunities for subscription shopping models for essential goods and groceries.

Another interesting dynamic that emerged as a winning strategy amid Covid-19 is the acceleration of larger CPG companies towards their direct-to-consumer efforts. CPG companies have been facing competition from larger online retailers and digital native brands for a long time, but recent retail climate changes have opened up concrete opportunities for them to serve their consumers directly and revisit their omnichannel strategies. Through direct-to-consumer propositions, these brands can collect customer data and offer more personalised experiences online, but they can also strengthen their CRM strategy and build customer loyalty. Owning the customer relationship will allow companies to lead with their own values, thus aligning with like-minded customers and delivering additional value to them. Nestle, PepsiCo, Heinz all have expanded and invested into their direct-to-consumer online offerings to leverage and capitalise on the growth in demand for essentials and consumer goods experienced in the recent months.

Big marketplaces who own fully integrated logistics’ solutions and global distribution centers will emerge as winners. Players like Amazon, Tmall, JD.com, Walmart have emerged as particularly strong during the lockdown period because of their advantage with product selection; stock; pricing and a wider supply chain ‘net’. 

Their marketplaces have become very attractive to smaller brands who realised the importance of building an online presence quickly at a minimal cost. In fact, supply chain issues may specifically prevent smaller brands from entering the direct-to-consumer space because of increased costs in warehousing and distribution, as witnessed in markets like China where Alibaba is already emerging as the biggest supporting ‘motor’ for a recovering Chinese economy.

One of the main reasons why consumers visit marketplaces is product selection and this will be an important differentiator for marketplaces which will continue to carry a wide range of products as opposed to smaller manufacturers forced to rationalise and streamline their catalog due to the pandemic. This alone will represent an important reason for smaller brands and manufacturers with little online capabilities to build their online marketplace presence. By taking this step they will extend their cross-border customer base, benefiting from guaranteed online traffic.

Walmart

As a testament to marketplaces’ success, Walmart’s online sales’ growth surpassed those of Amazon and eBay in the US with a 55% increase in web traffic over the past months vs 15% for Amazon and eBay. 90% of Walmart’s product offering is indeed carried by third-party sellers, whereas the retailer focuses on grocery as one of its main ecommerce growth drivers. Unsurprisingly, Walmart also decided to retire Jet.com to solely focus on its own marketplace.

Etsy

Sales on Etsy have doubled in April compared to last year, and are 25% higher than their December 2019 sales. The number of new sellers also increased during the pandemic with a growth rate of 40% in April. 

Immediate success on sales was due to the supply of face masks available with a multitude of designs. Additionally, because of lockdown rules and consumers looking for different, unique, man-made products, sales have increased across the board with some sellers struggling to keep up with the consumer demand.

Amazon

Amazon online sales increased by 24% in the first quarter of 2020, at the fastest pace in four years. 

Amazon retail sales more than doubled in comparison to 2019, whereas marketplace sales from third-party sellers (3P) decreased due to a shift in consumer demand towards essentials and grocery, supplied by Amazon retail (1P). 

Revenue from advertising on the platform also saw an increase of 44% in the first quarter, despite some observed downward trends in online advertising across the industry. Facebook and Google are a lot more susceptible to advertising revenue declines, specifically from categories like Travel and Leisure which were badly affected by Covid-19.

Despite a lower growth than from previous quarters, Prime memberships saw a positive increase with a 28% growth in the first quarter. 

First time viewers on the Amazon Media ecosystem nearly doubled, not only on Prime Video, but also on movie rentals and gaming.

Amazon also launched a new collaboration with luxury brands in an attempt to support high-end designers who may struggle to recover from the pandemic. As a collaboration between Vogue and the Council of Fashion Designers of America (CFDA), Amazon launched a new storefront called ‘Common Threads: Vogue x Amazon Fashion’. It’s still to be seen whether Amazon will be able to serve fashion and address luxury through a successful online experience.

eBay

eBay rapidly acted at the start of the Coronavirus pandemic to support its sellers by introducing fees’ deferrals and waiving selling fees for first time sellers. The measures were undertaken to support smaller independent business owners, new to online and to the platform through the ‘Individually Brilliant. Stronger as One’ campaign. 100s of sellers were approached to not only take part in the campaign, but to also help shape it and produce it through engaging and authentic content. eBay created a dedicated campaign page as well as a Small Business Hub featuring the small businesses that come together on eBay.

Noon

The MENA regional e-commerce marketplace launched a next-day fresh grocery delivery service in Dubai via its app to support customers with fast service amid difficult times. The service called Noon Daily will offer everyday essentials including fresh fruits and vegetables, bread and bakery, dairy, meat, frozen food, household essentials, baby food and more, and doesn't require a minimum order. This is a highly innovative step from a strong local player, acting quickly in a region with competition from Amazon. Noon has very recently taken another innovative step to bring the ‘offline’ experience online by launching The Dubai Mall on its platform. The Mall is given a dedicated section on the site where all brands can list their product offerings to serve their regular customers conveniently online. This is a smart move which will lead to new customer acquisition and exciting opportunities to build loyalty post-pandemic.

Tmall

Alibaba’s cross-border consumer ecommerce channel also announced several measures to support its merchants during the pandemic. The platform rolled-out fee waivers for a duration of six months on its annual service fees; it introduced a free use of the platform’s online shop setup tool; it reduced the cost of its warehouse rent along with logistics and agency fees.

Tmall also rolled out a Super Consumer Growth Accelerator Program aimed at increasing new online visits to the platform to support brands hit by the pandemic. Participating brands were given access to enhanced search and recommendations’ functions as well as precision marketing tools to drive growth and sales.

The platform also took important steps to support beauty and personal care brands through innovative plans with the intent to help over 1,000 beauty brands achieve $1.41M in annual revenue over the next year. In response to this step, Sephora recently partnered with Tmall to launch its global flagship store online.

As a testament to the platform growth ambitions, its Tmall Global cross-border unit said it is looking to bring 1,000 new international brands on its platform over the next year as part of a five-year plan to bring $200B worth of imported merchandise to China.

The booming of ecommerce over the past few months put additional pressure on social media channels to develop their online commerce proposition quicker and to monetise their large online traffic. 

Instagram saw a 70% increase in its live content views between February and March, providing a massive opportunity to monetise this space. Consequently, it introduced an advertising model on video content to reward content creators and active influencers. 

Facebook announced Facebook Shops across its Facebook and Instagram channels to accelerate its ecommerce presence by offering free shopping destinations for brands. Brands will be able to create their own shopping destination on the platform, easily integrating with major ecommerce solutions like Shopify, BigCommerce, Channeladvisor. 

In return, Facebook will largely benefit from investments in advertising from brands supporting their new shopping destinations. 

What makes this a particular strong opportunity for social media channels is the fact these are dominant channels in mobile and mobile is already emerging as the ‘future’ of commerce. Instagram also announced ‘Live Shopping’ as a new way to purchase products that will be showcased through video content. Another smart step to tap into the growth of video content as the winning medium of the years ahead, but also as a way to counteract major players like Amazon Live and QVC.

Google Shopping gave an opportunity to brands to advertise their products for free during the pandemic. New solutions were also introduced as part of the Google My Business suite to support smaller and independent businesses: link to add donations and purchase gift cards on business pages; virtual services to allow verified businesses to add online appointment booking and virtual online events such as online classes.

AR

To address new consumer needs, specifically in fashion and beauty, brands will leverage new technologies in AR to allow customers to try products virtually and test samples online without having to walk into physical stores. 

Alice Chang, founder of Perfect Corp, which operates the YouCam beauty app, stated: ‘beauty brands — along with the rest of the world — are being challenged to think digital and adopt virtual solutions quickly. With social distancing limiting physical world interactions, we are seeing increased interest in AI consultations and AR virtual try-on. Consumers are looking for digital solutions, and we expect more and more brands will be turning to digital-first strategies in the days and weeks to come.’ 

Consumers’ nervousness linked to Covid-19 will lead to a period of uncertainty around brick & mortar shops’ footfall and most consumers will revert back to the safety and convenience of online shopping. 

Still, few brands figured out how to fully leverage ‘try-before-you-buy’ solutions online, but such experiences will be adopted by players wanting to address the future of ecommerce. Specifically, environmental and logistic costs of ‘free-return’ services won’t be sustainable for businesses concerned by sustainability and ethical shopping in the upcoming years.

AI

Additionally, more and more brands will develop virtual chatbots to address customer service needs in light of extremely high online traffic volumes and complement human assistants. 

The use of AI will also increase to deliver highly personalised and engaging experiences online and to manage stock and product offering more efficiently by controlling supply chains. The global AI market in the retail sector is expected to grow by $14B in the next three years and brands should be ready to leverage AI solutions to address concrete needs for efficiency and customer experience personalisation.

Conversational Commerce 

Brands still see a vital role for human interaction to drive conversions online, in line with AI and AR technologies. Companies like Perfect Corp are investing in AR training services to provide livestream services to sales advisers who work through live chat tools. Estée Lauder and Nars already adopted Perfect Corp’s technology for in-store use to link associates’ recommendations to AR try-ons. 

The need for human interaction has also increased retailers’ interest in conversational commerce apps like Hero which connects online shoppers to store associates via chat, texting and video interactions. Hero’s co-founder said the service saw a 500% increase in inbound brand requests as a result of the pandemic. Consumers are using the app more extensively with a 29% year-on-year increase in Hero chats in the U.S. and a 21% increase in Europe in March 2020. Conversions were also up 42% during the same time period.

Omnichannel apps are likely here to stay as part of the growth in omnichannel strategies for brands looking to connect with consumers at every customer journey’s touchpoint.

Voice commerce is also relatively new, but more and more households are now investing in smart speakers. Amazon is a great example of a company that is setting the foundations for what Voice commerce may look like in the years to come. Through the newest releases of their Echo show devices, Amazon seems to signal that Voice commerce will operate with smart display devices to leverage the power of visual aids. Consumers’ input will be ‘voice’, but the AI output will be ‘voice and screen’. As conversations powered by AI become more and more organic, Voice commerce will become more important for retail and brands will need to rethink their marketing and product communications’ strategies.

Not surprisingly, coupling voice and screens appears to also signal a clear complement between AR / AI into single shopping solutions.

Fashion re-commerce (renting, reselling, thrifting) is becoming a bigger part of the retail industry. Key players like Rent the Runway have now become established and profitable platforms and the rental apparel market is expected to grow by more than 10% for the next four years.

James Reinhart, co-founder of thredUP, asserted that the total secondhand apparel market will double in five years, reaching $51B. He also stated that nearly 9 in 10 retail executives say they want to get into the resale game by 2020. The fashion resale market has been growing at impressive rates, 21 times faster than traditional retail over the past three years. 

Millennials and Gen Zs are particularly active in this space, motivated by the willingness to address sustainability and conscious shopping as a ‘way of life’. Across this consumer category, the growth of secondhand buying was 45% over the past two years. Thrifting is also embraced as more and more consumers associate it with a sense of authenticity and uniqueness. 

An important factor pushing consumers toward re-commerce is their increasing concern about reducing pollution and waste, heavily affected by fast-fashion and high-street retail.

Companies are also willing to leverage re-commerce models as opportunities to ‘do good’ and act responsibly to address issues related to sustainability and environmental protection.

Shift in consumption trends and the growth of an economic recession led by Covid-19 will bring new opportunities for sustainable, well-thought and conscious shopping.

With fulfilment intermediaries now owning several online consumers’ touchpoints, brands and manufacturers should consider these new platforms as additional opportunities to extend their product visibility to consumers, but also as opportunities to generate additional revenue. Outsourcing logistics solutions has been a key opportunity for retailers to quickly tap into established services, benefiting from ‘up and running’ fulfilment networks.

Particularly in the grocery space, and because of the surge in demand experienced due to Covid-19, more and more independent stores turned towards intermediaries to maintain their store operations ‘alive’ and be able to capture a share of the pie in the online grocery market.

Instacart, the leading US grocery delivery intermediary, experienced order volumes’ growth of 500% year-on-year with app downloads increasing 218% month-on-month in March 2020. The company also recently partnered with C&S, a leading wholesale US grocery supply company to offer its services to over 3,000 independent grocery retailers. With Instacart just launching its own self-serve advertising platform, there will be a need for retailers to build capabilities with a focus on digital shelf execution and optimisation, but also on pricing and promotions. The major opportunity for smaller retailers will be to leverage Instacart as a fully-fledged marketplace solution with dedicated product recommendations and ultimately drive online conversion.

DoorDash, one of the biggest US food-delivery apps, also started delivering goods from convenience stores in April 2020 to leverage their fulfilment capabilities across a broader spectrum of services.

Grab, Southeast Asia’s ride-hailing giant, also expanded its delivery services from convenience stores and supermarkets across 50 cities in the region. The Singapore-based startup was able to expand its services from 2 to 8 countries after the Covid-19 outbreak and is now looking to boost its investments in deliveries to meet a sustained rise in consumer demand.

Shopee, another Southeast Asia’s ecommerce operator, started delivering daily essentials, while Alibaba’s Lazada Group identified new opportunities to tap into the online grocery market. Malaysian farmers were dumping hundreds of tons of fresh produce after Covid-19 lockdowns kicked in, blocking the wholesale grocery supply market and restaurants across the regions. Lazada spotted an immediate opportunity and opened a virtual online store connecting online consumers to farmers directly. After just three weeks of being live with the store, 70 tons of fresh produce had been delivered from farmers to households across Malaysia and Lazada is now looking to continue on this path, covering all of its main regions with grocery deliveries.

Restaurant delivery service Deliveroo also found a way to tap into the wider online delivery market after Covid-19. The company recently partnered with Aldi and Morrisons in the UK to offer grocery deliveries to its customer base, benefiting the grocery retailers with additional fulfillment capabilities to best serve customers across the region and reach a wider audience. This partnership was also extremely beneficial to Deliveroo who had to deal with restaurants’ lockdowns across the country and who found a way to quickly re-purpose and expand its business model.

A similar partnership model was developed by Uber Eats across several markets. The company partnered with Carrefour in France to increase grocery deliveries from stores in the capital. It also partnered with Galp in Spain to deliver products from the chain’s convenience stores. In Brazil, the food delivery company partnered with pharmacies, pet stores and convenience stores to address customers’ needs after the Covid-19 outbreak. This isn’t a new initiative from Uber Eats who is already partnering with multiple convenience stores across Europe, but the company boosted this partnership model over the past few months, experiencing a 59% increase in grocery orders across Europe in March 2020 and reporting over 1,000 stores on its app.

Overall, 53% of companies currently operating with subscription models have not seen a significant impact on their subscriber acquisition rates after Covid-19. 

22.5% of them are actually seeing their subscription growth rate accelerate; 12.8% of them are still growing at a slower rate and the remaining 11.4% of companies are starting to see subscribers churn. 

Growth has been very strong in companies operating in video streaming; e-learning; digital media; communications softwares. 

The launch of Disney + in Europe is a great example of a product launch that experienced substantial growth, benefiting from the current climate. Communication platforms like Zoom have also seen adoption rates grow by 400% in just 2 months due to remote working conditions.

However, the ‘subscription model’ opportunity is tangible for brands and consumer products companies selling online too. 

Brands who were able to acquire new consumers during the past months will need to develop their future strategy to retain these customers and build loyalty. 

The subscription economy focuses on building relationships and on addressing evolving customers’ needs with the ultimate intent to create value and increase loyalty. 

As Deloitte recommended, now is the time to revisit new digital business models and to introduce the ‘subscription model’.

From a 2020 study run by Practicology on 16 global subscription businesses, 3 key reasons emerged on what makes a subscription model attractive to a consumer:

1. Access: to unique products and possibly to attractive subscriptions’ discounts.
2. Curation: inspiring product selections targeted to personal taste.
3. Replenishment: convenience and automated re-ordering.

In alignment with current trends, the need for convenience and access are obvious and will provide a concrete opportunity for brands to acquire and retain customers. 

Interesting takeaways also emerged from the study to prepare brands for this model:

• A subscription model must support customer acquisition and retention through adapted incentives and subscription durations.
• To meet replenishment, flexibility should be allowed to address specific consumer needs around delivery cycles.
• Brands must ensure offers remain attractive beyond the minimum required subscription time frame and add value for customers who surpass this period or commit upfront.
• Looking for ways to complement the subscription model to any existing ecommerce store is a ‘quick win’ approach. Amazon’s Subscribe & Save model would be a good complement to brands’ dedicated direct-to-consumer sites.
• Subscription models can be a good strategy to test new products and gather valuable feedback through the consumer data available and by measuring retention.

The above, coupled with the current ecommerce growth and the increase in digital shoppers worldwide, should be explored by brands looking to create value for their customers in a climate where needs for convenience and accessibility are paramount.

By 2024 there may be more than 220M digital wallets, representing a $800B opportunity worldwide. Traditional banks will lose this space to innovative fintech companies focused on digital wallets, mobile payments, AI, ecommerce.

Already prior to Covid-19, younger generations demonstrated a shift towards digital wallets due to their mobile-first nature. The pandemic, however, is set to reinforce these trends linked to faster ecommerce growth across industries, but also to needs of convenience and taking care of one’s finances remotely while banks remain closed.

Apps like Square, Venmo, Paypal have clear advantages as opposed to banks in that customer acquisitions’ costs are much lower and their adoption rate is comparable to that of social media networks in their early stages, which leads us to believe this will only grow further.

Additionally, by constantly adding new functionalities and because of the growing adoption rate that creates ‘network effects’ these apps will continuously encourage consumers to come back, generating high retention rates.

Advantages of digital payments during Covid-19 are obvious, but major reasons why consumers turn to non-traditional financial services’ providers are: lower costs; ease of use and faster services.

Covid-19 may well be the catalyst boosting digital solutions in the payment market as consumers, reluctant to handle coins and banknotes, turn to cashless solutions. 

Digital transfers’ companies such as WorldRemit and Remitly both reported high growth in transaction volumes during the first quarter of 2020. 25% of small businesses in the US already reported increases in contactless payments such as Apple Pay. Retailers and restaurant chains are also encouraging cashless payments through ‘order-ahead’ apps and additional contactless payments.

The blockchain payment processing provider BitPay saw demand in industries such as software, IT and currency exchange increase from 10% to 40% in 2020. 

This comes as another proof that payment companies offering seamless mobile and secure digital transactions’ technologies will emerge as winners.

Facebook is an interesting example of a company who recently announced its new ecommerce proposition with Facebook Shops and who also owns its own digital currency wallet, Novi. 

We would expect the result to be a ‘quasi-perfect’ and pioneering solution with a fully integrated, seamless online shopping experience.