ecommerce landscape and trends 12.17.15

@pesmou

Ecommerce Landscape and Trends

Maria ThomasDecember 17, 2015

@pesmou

@pesmou

Today’s Presenter

MARIA THOMAS@pesmou

@pesmou

Today’s Agenda

A Quick Look Back

The Big [Macro] Picture

The Big [Industry] Picture

Trends and Sectors to Watch

@pesmou 4

The Early Days….

In 1979 Michael Aldrich connected a domestic television by telephone line to a real-time transaction processing computer and invented what he called TELESHOPPING.

AOL in the early 1990s.

@pesmou 5

E-Commerce As We Know It Is 20 Years Old

First Homepage - 1995 First Homepage - 1995

@pesmou 6

Casualties of Phase I of E-commerce

Fashion retail web site Boo.com launched in 1999. The company burned $135 million of venture capital in 18 months, and went bankrupt in 2000.

Malmsten re-emerged in 2011 as CEO of luxury goods company Lara Bohinc.

Founded in 1994, TheGlobe.com was a social network before social networks existed, and offered essentially the same things that Facebook would later. But it made no money.

Pets.com launched in August 1998. It became famous for the millions it spent on TV advertising with the Pets.com sock puppet. The company IPO-ed in February 2000 but was liquidated 268 days later.

When eToys.com shares hit a high of $84.35 in October 1999, who could have guessed that just 16 months later, the company would warn investors that its stock was "worthless?"

@pesmou 7

Ecommerce Companies by 2013 Revenue

Source: Statista http://www.statista.com/statistics/287950/leading-e-retailers-worldwide-based-on-revenue/

@pesmou 8

Top 10 Chinese E-tailers by GMV/Revenue

https://doc.research-and-analytics.csfb.com/docView?language=ENG&source=ulg&format=PDF&document_id=1042623391&serialid=f0GXsvM2pz8e1L0JM%2Bip6oRgNHFWbrq0e502nHRhff8%3D

@pesmou 9

The Big [Macro]Picture

@pesmou 10

WorldwideRetail Sales

~US $22.5 Trillion in 2014

http://www.emarketer.com/Article/Retail-Sales-Worldwide-Will-Top-22-Trillion-This-Year/1011765

@pesmou 11

Global Ecommerce Estimated to Account for

~6.7% of Retail Sales (US$1.6T) in 2015

http://www.emarketer.com/Article/Retail-Sales-Worldwide-Will-Top-22-Trillion-This-Year/1011765

ABI Research predicts that globally about 8% in ecommerce will be transacted via amobile phone in 2015.

@pesmou 12

China and U.S. are, by far, the World’s Leading E-commerce Markets, combining for More Than 55% of Global Retail Ecommerce Sales in 2014

http://www.emarketer.com/Article/Retail-Sales-Worldwide-Will-Top-22-Trillion-This-Year/1011765

@pesmou 13

But, absolute numbers can be misleading…Ecommerce as a % of Total Retail Varies by Country

http://www.emarketer.com/Article/Retail-Sales-Worldwide-Will-Top-22-Trillion-This-Year/1011765

@pesmou 14

Factors Influencing Ecommerce Penetration By Country

SMARTPHONES/DATAPenetration

POPULATION and % of Population Online

OFFLINE RETAILOptions / Urbanization

PAYMENTS% non-cash transactions

SOCIAL MEDIAPenetration

@pesmou 15

POPULATION AND % OF POPULATION ONLINE

@pesmou 16

World Internet Usage & Population Statistics (Nov 2015)

World Religions Population (2015 Est.)

Population % of World

Internet Users Latest Data

Penetration (% Population)

Growth 2000-2015

Users % of Table

Africa 1,158,355,663 16.0% 327,145,889 28.2% 7,146.7% 9.8%

Asia 4,032,466,882 55.5% 1,611,048,215 40.0% 1,309.4% 48.1%

Europe 821,555,904 11.3% 604,147,280 73.5% 474.9% 18.1%

Middle East 236,137,235 3.3% 123,172,132 52.2% 3,649.8% 3.7%

North America 357,178,284 4.9% 313,867,363 87.9% 190.4% 9.4%

Latin America / Caribbean 617,049,712 8.5% 339,251,363 55.0% 1,777.5% 10.1%

Oceania / Australia 37,158,563 0.5% 27,200,530 73.2% 256.9% 0.8%

World Total 7,259,902,243 100.0% 3,345,832,772 46.1% 826.9% 100.0%

http://www.internetworldstats.com/stats.htm

@pesmou 17

World Internet Usage Statistics (2014 estimate)

Rank Country Internet Users (M)

1 China 626.6

2 European Union 398.1

3 United States 276.6

4 India 237.3

5 Japan 109.3

6 Brazil 108.2

7 Russia 84.4

8 Germany 70.3

9 Nigeria 66.6

10 United Kingdom 57.3

Rank Country Internet Users (M)

11 France 56.8

12 Mexico 49.5

13 Korea, South 44.9

14 Indonesia 42.4

15 Egypt 42.0

16 Vietnam 40.1

17 Philippines 39.2

18 Italy 37.0

19 Turkey 36.6

20 Spain 35.5

https://www.cia.gov/library/publications/the-world-factbook/rankorder/2153rank.html

@pesmou 18

Top 10 Global Markets by Retail E-Commerce Attractiveness

https://www.atkearney.com/consumer-products-retail/e-commerce-index/full-report/-/asset_publisher/87xbENNHPZ3D/content/global-retail-e-commerce-keeps-on-clicking/10192?_101_INSTANCE_87xbENNHPZ3D_redirect=%2Fconsumer-products-retail%2Fe-commerce-index

Based on the A.T. Kearney 2015 Global Retail E-Commerce Index (April 2015)

@pesmou 19

Pick Your Country: Google’s Consumer Barometer

https://www.consumerbarometer.com/en/

QUESTION ASKED: How often do you access the Internet for personal reasons, i.e. all non-business or work related purposes? Please think about your usage habits during the last month.

@pesmou 20

CROSS-BORDER E-COMMERCE IS A HUGE OPPORTUNITY BUT PAYMENT PREFERENCES VARY BY COUNTRY

@pesmou 21https://www.paypalobjects.com/digitalassets/c/website/marketing/global/pages/jobs/paypal-insights-2015-global-report-appendix-added.pdf

Half of All Online Shoppers Have Made a Purchase From a Website in Another Country, Though the Popularity of Cross-Border Ecommerce Varies Greatly by Country

@pesmou 22

https://www.paypalobjects.com/digitalassets/c/website/marketing/global/pages/jobs/paypal-insights-2015-global-report-appendix-added.pdf

US contrasts with China as a market for international vendors as only online shoppers in Japan (12%) are less likely to have bought something online from another country than Americans (22%)

@pesmou 23

https://www.paypalobjects.com/digitalassets/c/website/marketing/global/pages/jobs/paypal-insights-2015-global-report-appendix-added.pdf

Pay Attention to Shipping: Cost and Options

@pesmou

https://www.internetretailer.com/static/uploads/071114_Blog_GlobalSales_Chart2.jpg

Consumer Payment Preferences Vary Across Regions

24

@pesmou 25

• Growing interest in cross-border transactions, especially from consumers in emerging markets

• Burgeoning Chinese middle class may be a much larger market for international etailers in the future than it has been so far

• US etailers are selling a lot of goods via cross border trade, but US consumers tend to focus on US sites

• Smart ecommerce companies invest in SEO (discoverability)

Cross Border Take-Aways

Payments Take-Aways

• Supporting local payment methods is a tremendous asset in improving sales

• Offering culturally appropriate payment options will reduce abandoned check out carts

@pesmou 26

SMARTPHONE PENETRATION IS

IMPACTING ECOMMERCE

@pesmou 27

By 2020, 80% of Adults on Earth Will Have a Smartphone

http://www.slideshare.net/a16z/mew-a16z/5-50123451995_2000_2014_2020Billion_people 2014 Growth to 2020

Global Population (bn)

Population Adults Mobile Online population

5

4

3

2

1

0

8

7

6

Smartphones PCs

@pesmou 28

From this….

@pesmou 29

To this….

http://www.businesstoday.in/magazine/features/second-green-revolution-likely-innovation-in-information-tech/story/222535.html

@pesmou 30

Implications on Ecommerce of Growing Smartphone Penetration

DEVELOPING WORLD: “mobile internet” is the internet.

DEVELOPED MARKETS: mobile commerce is all about convenience.

CONSUMERS can do more than make a purchase.

They are using their phones to compare prices, find retail locations, read reviews and find coupons.

It is increasingly a COMPETITIVE ADVANTAGE for mobile sites to upload quickly and be easy to navigate as consumers weigh their options.

@pesmou 31

https://www.paypal.com/stories/us/the-three-keys-to-going-global-seo-shipping-and-smartphones

@pesmou 32

Social Media Penetration

@pesmou 33

http://www.nielsen.com/us/en/insights/reports/2015/global-trust-in-advertising-2015.html

Why Is Social Media Important?Earned and Owned Media Remain the Most Trusted Ad Formats Globally

@pesmou 34

http://www.nielsen.com/us/en/insights/reports/2015/global-trust-in-advertising-2015.html

% of Respondents Who Completely or Somewhat Trust Advertising Format by Region

@pesmou 35

Visitors to Top Social Platforms By Country -% Internet Users Who Have Used Service in Last Month

http://www.smartinsights.com/social-media-marketing/social-media-strategy/new-global-social-media-research/attachment/2015-social-network-popularity-by-country/

@pesmou 36

@pesmou 37

The Big [Industry] Picture

@pesmou 38

Think of Ecommerce As Part of a Larger Digital Strategy

Commerce platform

@pesmou 39

Ecommerce Comes in Many Flavors

B2C EcommerceCUSTOMER TYPES

G2C: Government to Consumer

B2B: Business to Business

C2C: Consumer to Consumer

C2B: Consumer to Business

PRODUCTS TYPES

Physical Goods Digital Goods

Services MERCHANDISE ACQUISITION

Make Manufacture

Consigned Goods

Wholesale

SHIPPING/DELIVERY TYPES

Direct from Warehouse

Drop Ship“Click and Collect”

(Pickup)

BUSINESS MODELS

Retailer

MarketplaceHybrids

Subscription

Private Sale / Flash Sale

REVENUE STREAMS Commissions on

Transactions

Listing Fees

Shipping Margins

Advertising

Subscriptions

Retail Margins

@pesmou

Selected Ecommerce Companies by Products Sold

40

Digital Goods Digital Services Physical Goods Physical Services

@pesmou 41

RetailSingle/Multi-brand

Classified Marketplace

Merchant Services Marketplace Private/Flash Sale Subscription

Single Brand

Multi-Brand

Selected Ecommerce Companies by Model

@pesmou 42

@pesmou 43

Know Your Competitive Advantage: Hard to Compete With Amazon in Many Markets

@pesmou 44

Ecommerce Is Hard

@pesmou 45

Multiple Platforms Competition for Tech/Design/Mkting Talent

Last Mile Distributions Options Warehousing, Inventory Management

Marketing is Increasingly Driven byData/Technology

@pesmou 46

Ecommerce Companies Can “Fail” for Different Reasons

Red-hot startup Fab raised $330 million (valued at nearly $US$1 billion) and then went bust. “We spent $200M and we have not proven out our business model. “ – former CEO, Jason Goldberg

Karmaloop was considered a success story and became a go-to website for streetwear — a mix of skate, surf, hip-hop and other fashions. Success was followed by poor business decisions and shrinking sales in recent years. Founder/CEO launched a series of failed e-commerce sites and a $14 million bid to launch a television channel that never materialized.

Many of Quirky's products had thin to non-existent margins.

Its Wink unit also faced distress, and a botched security update meant the company had to do a nationwide recall in spring of 2015 its smart home hubs.

Homejoy CEO Adora Cheung blamed the worker-misclassification lawsuits the company faced. It had failed to raise enough funding to grow the company as big as they wanted, she said, so it decided to shutter its doors in July. Like Groupon, the company had struggled to entice repeat customers when it offered a cheap initial cleaning and then later raised the price.

@pesmou 47

Sometimes Models Work in One Country But Not Another

Groupon IPO – Nov 2011Raising $700 million for the company, Groupon's IPO was the second-biggest tech IPO in history, behind the $1.7 billion Google raised in 2004. Groupon ‘s IPO valued the company at > $16 billion. Market cap 12/15/15 =$1.91 billion.

Works in Europe (mostly in France) due to nature of retail industry there. In 2007, Summit Partners bought a 20% stake for €108 million. Vente-privee revenue estimated $2 billion.

Meituan.com received US$12 million series A financing from Sequoia Capital in 2010. It received US$50 million series B from Alibaba and Sequoia in 2011. General Atlantic provided a $300 million Series C in 2014.

@pesmou 48

For Traditional Ecommerce, Online Sales Volume is a Product of Three Key Components

Online store traffic/sessions in number of sessions per time period

Conversion % rate (total buyers divided by total sessions for the same time period)

Average order value (AOV) for same time period

@pesmou 49

In Many, But Not All (e.g. Turkey and Other Emerging Markets),

Amazon.com Is a Dominant and Ruthless Player; Alibaba Is Also a Global

Powerhouse

Many Companies Are Also Establishing Marketplaces, So Competition Is

Increasingly Global

@pesmou 50

Amazon.com has global reach & local presence in Canada, Europe, Japan and India

Amazon.com’s Dominance

@pesmou 51

Amazon.com’s Dominance

Amazon.com is a multi-brand retailer and a huge marketplace of third party sellers.

@pesmou 52

Other Large Retailers Have Established Marketplaces

@pesmou 53

If You’re Not Yet Set Selling Online, There is Some Good News

@pesmou 54

Disaggregation of E-commerce: Making It Easier for SMBs to Move Online

Payments Warehousing andShipping - “3PLs”

Delivery

New Ecommerce Platforms

Cloud Computing

Analytics Translation Services

Marketing & Content

Distribution

@pesmou 55

Develop a new proposition / model

Build communities among customers

Use algorithms to hyper-personalize

Hyper-serve a single category with distinctive characteristics

Specialty Retailers Are Competing in Several Ways

Loyalty Programs Are Also Effective, Especially for SMBs

@pesmou 56

Build vs. Buy Case Study: FragranceNet.com is dedicated to creating its own fulfillment and other e-commerce technology. https://www.internetretailer.com/2015/06/02/build-or-buy

But, a growing number of e-retailers are relying on the expertise of vendors.https://wappalyzer.com/categories/ecommerce

@pesmou 57

Buy BuildA licensed or hosted e-commerce solution when your company: Lacks the internal technical and

management resources required to build, deploy, and support an e-commerce system;

Cannot keep up with the pace of innovation in e-commerce, particularly in areas such as mobile and tablet support, integration with social software, or managing billing and payments processing in-house;

Competes in a market that requires rapid response to market changes and has short “time to productivity” requirements that cannot be met with in-house development.

An e-commerce solution when your company: Has a complex product, a broad and complex

distribution chain, or unique market requirements that can be addressed only by with a custom-built application;

Believes that its own e-commerce design will provide a unique competitive advantage;

Has made a large investment in e-commerce early on, and now finds converting to a licensed or hosted solution too costly or too disruptive to their business;

Has depreciated much of its investment in its e-commerce environment, and the incremental investment required for innovation and ongoing support is less costly than starting over with a licensed or SaaS alternative;

Has built up a large IT organization and has legal, financial, or organizational limitations on how quickly it can reduce the size of that staff.

http://blogs.gartner.com/chris-fletcher/build-vs-buy-in-e-commerce-is-it-a-lobster-trap/

Build vs. Buy

@pesmou 58

Trends to Watch

ChinaGrowing consumer class buying power

Recent Paypal survey: support the growth trend: 35% of online shoppers claim to have shopped cross-border in 2015 vs. 26% in 2014

Payment technologies captive to ecommerce companies (Alipay, WeChat)

IndiaMajor opportunity unfolding in India: battle between Flipkart and Amazon India

@pesmou 59

INDIA: Quite early, local players following Amazon India (partnering with Indian postal office and offering same day delivery), smart phone is the eco-system, but mobile data plans are constrained; infrastructure can constrain design

PAYMENTS:

INDIA: Cash on delivery is still dominant (Ola; Uber started offering that); fraud really high; how to get cash back to market; credit card penetration low; two factor authentication imposed by Indian govt impacts conversion rate

Designing for Local Market: Chinese apps tend to be more complex

https://soundcloud.com/a16z/india-china

CHINA: More advanced – AliPay; WeChat; you can pay with phone by showing QR codes; AliPay is more than a payments app (investment in stocks, get credit score; order food; get coupons it’s about wealth generation)

TRANSACTIONS: Critical; chip away at friction to get more transactions

@pesmou 60

• Everything is becoming: connected, intelligent, real-time, multi-platform – DATA!

• Internet of Things (products-as-a-service)

• #Vcommerce (virtual reality is real)

• Re-urbanization in developed countries / urbanization China, India and beyond

• Rising consumer desire for individualization

• Social media moving further down the purchase funnel – share experiences (Asos); customer service

• Last mile logistics – sell anything, anywhere

• Brands still matter but can be created (and die) quickly

Trends to Watch (con’t)

@pesmou 61

Asos Is On Trend

Private Label (Asos brand) Retailer

Multi-brand Retailer

Global Appeal; Free Delivery

Marketplace Platform

Content Marketing

Staff as Curators

User Generated Content

@pesmou 62

Sectors to Watch

• Ride sharing companies moving into food delivery and other adjacent business

• Food and food delivery (Ele.me - China)

• Health care & aging populations (Yao Xin - China)

• Work marketplaces

• Hard goods where economics are out of balance or unevenly distributed: eyeglasses, matress (Casper – U.S.)

@pesmou 63

• Ecommerce is hard: led by tech and design

• Long-term perspective required

• Valuations not great in developed markets

• Most successful ecommerce companies (the three AAAs: Amazon, Alibaba, Apple) offer a lot more than ecommerce

• Ecommerce and payments inextricably linked

• Mobile is eating the world

• Channels converging: omni-channel will win

• World shrinking: cross-border commerce is growing

Final Thoughts

@pesmou 64

Good Data Sources

https://www.consumerbarometer.com/en/insights/?countryCode=GL

http://mobilereadiness.mastercard.com/the-index/

http://ben-evans.com/

1 2 3

@pesmou 65

THANK YOU!Maria Thomas

mariachristinathomas@gmail.com