E commerce market research
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E commerce market research Presentation Transcript

  • 1. E-COMMERCE MARKETTheoretical Aspects andMarket Research
  • 2. CONTENT:1. Theoretical Aspects of Ecommerce Market - 42. Market Research of US Ecommerce Market with Examples - 17 2
  • 3. THEORETICAL ASPECTS OF US E-COMMERCE MARKET 3
  • 4. THEORETICAL ASPECTS OF ECOMMERCE MARKET• Stages of B2C ecommerce;• Competitive Advantage of ecommerce;• Advantage of E-Commerce from Advertising costs perspective• Drivers for E-Commerce;• Drivers for E-Commerce from the Low risk Perspective;• Mobile E-Commerce;• E-Business as E- Commerce extension;• Electronic Data Interchange (EDI);• Integration of B2B systems. 4
  • 5. STAGES OF B2C ECOMMERCEOrganisation’s experience of B2C eCommerce movesthrough a number of distinct stages.The stages are extensions of customer-facing IS include: Engaging in information-seeking and communication, via the search engines and community building; Establishing an online marketing presence. Creating an online catalogues. Conducting online ordering. Handling online payment. Offering online delivery. Performing customer profiling and referencing 5
  • 6. COMPETITIVE ADVANTAGE OF ECOMMERCEAllows businesses to gain competitive advantage in anumber of ways: Price competitiveness: Reduced transaction costs in automated ordering and invoicing systems can lead to lower prices Timeliness: Faster ordering, delivery and invoicing can reduce the time to market for suppliers Knowledge of market: Trading electronically provides additional methods for companies to acquire knowledge of the market in which they operate Customer information and profiling can improve the trading relationship and lead to new marketing opportunities. 6
  • 7. ECOMMERCE AS THE TOOL FOR ADVERTISINGCOSTS REDUCTION Traditional advertising is expensive - newspapers, magazines, television, radio, and advertising hoardings; Creating an online presence is comparatively cheap; Tablets, laptops allow fast access to any E- Business platform; Once running, a online profile provides 24/7 access to your company online presence, products across; The design of profile page could be customized for individual needs and adopted the creativity and quality of television advertising. 7
  • 8. DRIVERS FOR ECOMMERCECost: For a business, the entry costs for participatingin eComrnerce are relatively low. Systems can bedesigned and implemented and a web presence canbe established relatively cheaply. The systemstherefore offer a potentially fast return on theinvestment.Flexibility: Organizations can select the appropriatelevel of participation from simple access to theInternet through the creation of a Web presence tofull-blown transaction-handling systems. The systemscan be developed incrementally to add this additionalfunctionality. 8
  • 9. DRIVERS FOR ECOMMERCE FROM THE LOW RISKPERSPECTIVE Protecting investment: In the Internet world, many common and open standards are employed. The switching costs incurred when a business selects an alternative system are, as a result, relatively low. Connectivity and communications opportunities: Internet technology brings an accompanying range of opportunities, such as creating a local intranet or establishing video-conferencing links. Technology perspectives: A critical mass of e-commerce participants already exists, and the technology, although constantly developing. Government support: There are many government initiatives aimed at promoting e-commerce, and there is a significant level of activity in educational institutions to provide additional backup. Customer service: Improved customer service promotes relation- ships at a distance, the Internet does also provide opportunities for businesses to work more closely with customers. 9
  • 10. MOBILE E-COMMERCEMobile e-commerce is a large opportunity for e-Commerce, but mobile browser sites and poor apps leave several unmet needs open Today, e-commerce is not a popular activity on tablets (even less on mobile phones), rated as one of the lowest use cases in surveys Tablet usage is still in early stages, and consumers are focusing on core use cases (e.g., reading, gaming) over other use cases more prevalent on PC E-commerce companies are not investing heavily in mobile, and so the experience on tablets is subject to poor browser experience or uninventive one-off apps, and the lack of a hard keyboard makes the check-out process cumbersomeIn the current app-heavy environment, the need to download multiple apps from each e-commerce retailer a user likes is cumbersomeTo help solve the problems in mobile e-commerce, a few companies have quietly released early-stage apps in 2011. They aggregate several retailers’ offline catalogs into one downloadable app, and users can peruse catalogs, click-through to buy on retailers’ sites, and bookmark favorite products 10Source: http://www.slideshare.net/joshyang/ecommerce-landscape-2012#btnNext
  • 11. EBUSINESS Internet technology has fundamentally changed the environment and structure of business. The marketplace for all vendors has become potentially global; Execution and settlement of transactions can easily be automated for small as well as large organizations. The trading model has moved from normal business opening hours to a 24 hours a day, seven days a week trading model; The interconnections throughout the supply chain are being reconfigured. 11
  • 12. EBUSINESS AS ECOMMERCE EXTENSIONOrganizational activity within electronichierarchies, markets or networks normally referred toas eBusiness or eCommerce. eBusiness can be seen as a Superset of eCommerce. eBusiness can be seen as the application of ICT in support of all activities undertaken by a commercial organization. eCommerce focuses on the use of ICT to enable the external activities and relationships with individuals, groups and other businesses. 12
  • 13. ELECTRONIC DATA INTERCHANGE (EDI) Companies, in their regular dealings with other trading partners, such as suppliers and retail outlets, might establish electronic communications to process the volume of transactions carried out; EDI provides a standard protocol for encoding this data exchange; 13
  • 14. INTEGRATION OF B2B SystemsB2B eCommerce is an extension of the informatics infrastructure of commercial organizations- Such information systems are supplier-facing Purchase order processing and payment processing systems handle the settlement and execution stages of the commerce cycle- These information systems are an established part of the IS infrastructure of most medium to large organizations, Could be established and standardized for all organizations. Such standardized system can enrich and simplify the majority of B2B interrelations. 14
  • 15. INTEGRATION OF B2B SYSTEMS Pre-sale and after-sale stages of the commerce cycle have been the most open to innovation in B2B eCommerce Requisitioning, request for quote and vendor selection are part of a supplier relationship management information system Area in which most of the discussion of B2B eCommerce occurs. Procurement is the pre-sale activity of search, negotiate and order in the supply chain Sometimes the term is used to refer to all the activities involved in the supply chain It is an important business process in the value chain and involves the purchasing of goods and services from suppliers at an acceptable quality and price and with reliable delivery 15
  • 16. MARKET RESEARCH OF US ECOMMERCE MARKET WITH EXAMPLES 16
  • 17. CONTENTS: US E-Commerce Market; U.S. E-Commerce Market (2012-15) Chart; US E-Commerce Shopping Data (2011-13); Shift from physical stores to online stores; New Business Models; Planned purchases vs Impulse purchases business models; Survived eCommerce business models; New E-Commerce businesses; Not many new businesses are applied for Mass Market; UI features enrich customer experience and drive sales; Recent Trends in E-Commerce Business models • Social Commerce; • The Group buying / Couponing space; • Flesh Sales; • Recommendations; • Personalization; • Customization; C2C MarketPlaces C2C MarketPlaces Difficulties; 17 Online Brands. Online Retail Models; Start-ups examples of Online Brands.
  • 18. US E-COMMERCE MARKETThe U.S. e-commerce market is big ($200B+), getting bigger(9% CAGR through 2015), and still early (only 9% of total retail) .Online shoppers in the United States will spend $327 billion in2016, up 45% from $226 billion this year and 62% from $202billion in 2011, according to a projection released today byForrester Research Inc. Market growth has been driven byconsumers becoming increasingly Internet-connected and creditcard holding, and these consumers being increasingly open topurchasing online: In the last two years, several new business models have garnered VC attention and begun to scale (e.g., group buying, flash sales, subscription, online brands); Consumers have shown willingness to test new e-commerce business models (such as Fancy, ShoeDazzle, RenttheRunway, Gilt), but these are targeted primarily to wealthier consumers; 18
  • 19. U.S. E-COMMERCE MARKET (2012-15) CHART 19
  • 20. US E-COMMERCE SHOPPING DATA (2011-13)More internet users are using internet for shopping.Frequency per user is expected to increase. 20
  • 21. CONSUMERS ARE SHIFTING FROMPHYSICAL STORES TO ONLINE STORES 21
  • 22. NEW BUSINESS MODELSThe only new e-commerce business model that has gainedsignificant traction with the mass consumer is group buying, -Groupon, LivingSocial ; many existing well establishedcompanies have started to offer group buying.There is also room for companies to clone or apply existingbusiness models as well as for new business models:  Clones models are creating new product categories, and/or target to different customer segments (e.g., low-end vs. high-end, male vs. female);  New business models are customer personalization, companies like Trunk Club and online brands like Warby Parker continue to bring offline models into existence online.Start-ups often take existing business models and apply amarketing pivot or alternate strategy. 22
  • 23. DIFFERENT BUSINESS MODELS 23
  • 24. PLANNED PURCHASES VS IMPULSE PURCHASES BUSINESS MODELS1. Planned purchases business models make up the majority of retail spend historically, older companies like Amazon seems to have locked up planned purchasing on the web, as this revolves more around search and catalog layouts than email digests.2. Impulse E-commerce business models usually don’t provide real long-term value to consumers. These models do not meet consumer disenchantment and end up as just a passing trend. In general, the newer business models that have emerged are subscription, C2C marketplaces, flash sales. They are tend to be focused on impulse purchases. Impulse purchases generally have higher rates of regret after purchase and more returns. 24
  • 25. TWO NEW BUSINESS MODELS WHICHSURVIVED1. Online brands are simply new brands/ or existing ones that have chosen online as the marketing channel of choice over offline. Barriers to entry in online brands includes the expertise required to build a vertically integrated supply chain, e- Commerce platform, and user friendly interface.2. Crowdsourced demand start-ups (e.g., Modcloth) also rely less on impulse purchases, as do social bookmarking start-ups like Pinterest, where users create product wishlists for “buy later”. 25
  • 26. NEW E-COMMECE BUSINESSES ARE APPEARING IN THE SECTION OF HIGHER MARGINS AND WEALTHIER CUSTOMERS 26
  • 27. NOT MANY NEW BUSINESSES ARE APPLIED FOR MASS MARKET 27
  • 28. UI FEATURES ENRICH CUSTOMEREXPERIENCE AND DRIVE SALES Forrester Research report says that much of the growth in U.S. e-commerce sales comes from improved, advanced online retailers web sites and services: “This is particularly true of categories such as apparel and jewelry, which have integrated rich selling tools such as zoom, color switching, and configurations, as well as office supply stores, which have broader payment options (e.g., small business purchase orders online) and subscription plans for their buyers” (1) 28 (1) www.forrester.com
  • 29. RECENT TRENDS IN E-COMMERCE BUSINESSMODELS Social Bookmarking, Analytics, Seeds, Commerce; Group Buying; Flesh Sales; Recommendations; Personalization; Customization; C2C MarketPlace; Online Brands; Mobile E-Commerce 29
  • 30. SOCIAL COMMERCE eBay is working on product recommendations based on Facebook data (acquired Hunch) and a feature allowing users to solicit feedback from Facebook friends prior to purchase; (1,2) Walmart makes an effort in social E-Commerce. Walmart has 22 million Facebook fans and an innovative social media contest called "Get on the Shelf," that allowed Facebook fans to vote for products they wanted to see offered at Walmart. The company is leveraging advanced analytics to glean new insights from Twitter and Facebook data streams. (3) The latest in-depth report from Nielsen concluded that: “Consumers continue to spend more time on social networks than on any other category of sites— roughly 20% of their total time online via personal computer (PC), and 30% of total time online via mobile. Additionally, total time spent on social media in the U.S. across PCs and mobile devices increased 37% to 121 billion minutes in July 2012, compared to 88 billion in July 2011.” (4) (1) http://techcrunch.com/2011/05/15/connecting-the-dots-on-ebays-local-shopping-strategy/ (2) http://techcrunch.com/2011/06/15/milo-fetch-allows-local-retailers-to-upload-their-inventory-to-ebay/ (3) http://www.retailingtoday.com/article/walmart-touts-e-commerce-moves-annual-meeting 30 (4) Nielsen Consumer report for 2012
  • 31. THE GROUP BUYING / COUPONING SPACE Now, the group buying industry is facing rising disenchantment, both from customers and merchants:Reasons - Merchants complain that the long-term economics of doing group buying is not favorable, as Groupon does little for customer retention; Groupon takes 50% of companies’ profit for their service of presenting deals online; Customers buying impulsively often don’t end up using the coupons, resulting in ~20% breakage upon expiry; Some customers buy and sell in second-hand markets, but 75% either breakeven or lose money on these dealsDaily deals sites have struggled to organically retain customers, and many have spent enormous amounts on customer acquisition and are now struggling with profitability: According to Yipit, one-third of tracked daily-deal sites (170 of 530) have been shut down or sold so far in 2011 Facebook launched a daily deals service in April of 2011, and then shut down it in August; Yelp cut its daily deals product team by half in August, citing users being unhappy with Yelp Deals; 31 Source: http://online.wsj.com/article/SB10001424053111904491704576575233025971542.html
  • 32. FLESH SALES The flash sales model is under pressure on the supply side, as remnant inventory levels are decreasing; While todays flash sales leaders (e.g., Gilt, Hautelook, Vente Privee) have grown their businesses by selling luxury retailers remnant inventory, today they are looking to change business models as unsold inventory supplies are lower; Gilt and competitors rode the wave of obscenely high inventory levels during the recession (up to 10x normal levels, according to a former executive of Nieman Marcus), but retailers have adjusted and inventory levels are going down – Therefore, as flash sales supply is decreasing, supplies prices are increasing and flash sales discounts are decreasing (Gilts average discount has decreased from 70% to 40-50%. 32
  • 33. RECOMMENDATIONS Product recommendation works particularly well in the fashion category as it recognizes shopper behavior, patterns and recommends items of interest not only by product type, but by brand as well; Recommendations could be integrated into social media, so recommendations can take into account what the customers friends have bought or viewed; This takes into account not only what the individual customer is doing on the site at that moment in time, but what other shoppers who are similar in product views have done before; Personal recommendations are the number one driver of consumer purchase decisions at every stage in the purchase cycle across 10 product categories studied, from banking to vacation travel and from subscription entertainment to retail categories, such as apparel and personal are products.(1) Source: http://econsultancy.com/us/blog/8904-recommendations-help-drive-27-9-holiday-sales-growth-at-john-lewis 33(2) Source: http://www.forbes.com/sites/kellerfaygroup/2012/07/25/recommendations-are-what-drives-your-business-remember-to-ask-for-them/
  • 34. PERSONALIZATION 34 Source: http://www.slideshare.net/joshyang/ecommerce-landscape-2012#btnNext
  • 35. CUSTOMIZATION Customization has slowed as a trend, as the model has generally failed to gain traction and prove scalability  Co-creation e-commerce isn’t new but has begun to enter the mainstream recently  Co-creation sites allow consumers to design their own products for purchase and/or buy products others have  Co-creation companies typically become cash-flow positive quickly because customized products sell at a premium and are sold on-demand (i.e., there is no excess inventory)  To date, start-ups riding the co-creation wave have primarily been e-commerce destination sites focused on a particular product category (or group of categories), and employ one or more of several business models: Several models exist: 1. Consumers design, then buy their own products (e.g., NikeID, BlueNile, Chocri, Blank- Label, Shirtsmyway, etc.) 2. Consumers buy products designed by other consumers or indie designers (e.g., MyFab, ModCloth, Threadless, etc.) 3. Consumers connect with manufacturers and co-design offline Two problems the co-creation market faces today are scalability and design-manufacturing accuracy : 1. Scalability. Companies will need to be creative about how to scale their businesses as consumer demand increases, since it will be harder for manufacturing to benefit from economies of scale 2. Design-manufacturing accuracy. Despite strong user interfaces allowing users to design their own products, a fraction of users will be dissatisfied with how the product actually turns out (i.e., requires stronger, more accurate UIs)Source: 351) http://www.readwriteweb.com/start/2010/03/is-america-on-the-verge-of-a-co-creation-invasion.php2) http://www.crunchgear.com/2010/07/21/new-wave-of-web-services-brings-customization-to-commerce
  • 36. C2C MARKETPLACES Online C2C marketplaces can be broadly segmented into three buckets: Hard good purchases (e.g., eBay), Hard good rentals (AirBnB), and Services (Skillshare)Traditionally, eBay is the preeminent online C2C marketplace and facilitated transactions on hard good purchases. There are not major direct competitors doe eBay while niche players like Etsy targeted only hand-crafted goods.Meanwhile, Craigslist has traditionally served as the go-to portal for consumers looking for hard good rentals/purchases and services online, but it does not offer money transactions, which make the purchase process more complex. 36
  • 37. C2C MARKETPLACES DIFFICULTIES Traditional models of online marketplaces (or intermediate solutions like Craigslist) leave many unmet needs, which many start-ups are tackling but few have perfected.Reasons:1) Seller’s time spent uploading product information;2) Trust in sellers shipping on- time (or at all);3) Inaccurate representation of product quality / condition;4) Rentals: Trust in both buyers and sellers, ease of working with insurance companies;5) Services: safety and trust in sellers, ability of relationships to be taken offline after initial transaction. 37
  • 38. ONLINE BRANDS. ONLINE RETAIL MODELS. “Online brands” have grown in recent years, as consumers become more comfortable discovering new products online. Online brands are start-up product brands (typically apparel) that have decided to leverage the Internet as a channel over traditional offline retail.1. Brands have only recently been able to grow a large enough presence and scale quickly using online as the channel instead of offline, due to the proliferation of social media;2. Key benefits for brands going online include ability to get consumer feedback prior to production and better margins than offline retail, but requires marketing and production competency;3. Bonobos, ModCloth, 20x200, and Warby Parker are brands that have largely begun online and gone mainstream. 38 Sources: http://www.slideshare.net/joshyang/ecommerce-landscape-2012#btnNext
  • 39. OFFLINE VS ONLINE RETAIL MODELS 39 Source: http://www.slideshare.net/joshyang/ecommerce-landscape-2012#btnNext
  • 40. START-UPS EXAMPLES OF ONLINE BRANDS Net-a-Porter just partnered with Karl Lagerfeld to launch a new online fashion brand called Karl Everlane has not even launched publicly (as of Nov 2011) and has generated a lot of hype in Silicon Valley Betabrand is trying to bring the H&M model online, iterating quickly on new 4-6 new SKU’s per month and introducing them in small batch sizes. They also crowdsource design ideas WildFox, Nau, and Eliza Parker are just a few in a long list of smaller up-starts There is also opportunity for influential online content producers (e.g., bloggers, Youtube celebs) to pivot into manufacturing products, but many of these creative people are scared off by the complexity of manufacturing operations 40
  • 41. www.glabex.com 41