U.S. E-Commerce Landscape and Trends 2014


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Topics: How consumer needs drive innovation in retail. Evolution of e-commerce SaaS and opportunities. Social media and on/offline purchase attribution.

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  • U.S. E-Commerce Landscape and Trends 2014

    1. 1. U.S. E-COMMERCE LANDSCAPE & TRENDS Carnegie Mellon UniversityAnes Dracic Haruki Chitani Steve Musche Tepper School of Business Entrepreneurship & Venture Capital Capstone May 2014
    2. 2. Executive Summary: Shifting Consumer Desires are Creating E-Commerce Opportunities in Last-Mile Logistics and Social Commerce 2  Re-Urbanization and rising Consumer Desire for Individualization are driving Innovation in Retail Business Models  Last-Mile Logistics will enable Retailers to offer a Seamless Shopping Experience  Social Media is moving down the Marketing Funnel towards Point of Purchase
    3. 3. Start with the Consumer: Consumer Desires Shape Innovation in Business Models 3 + Authenticity - We want to know if products are genuine. We want to trust products, brands, and people. + Ex. Is the coach purse that’s for sale on eBay a genuine product? Are there reviews? + Association - We want to feel unique, but also want to belong to an emotionally defined group + Ex. Mass personalization and sharing of goods + Convenience - We want instantaneous gratification. We want groceries delivered and dirty laundry picked up. + Ex. Drone delivery for same-day shipping or Instacart for same-day delivery of groceries. + Experience - We enjoy culture, sports, concerts, collectibles. We care about atmosphere and presentation. + Ex. Disney creates an ecosystem around products through collectibles, amusement parks, films, and more. + Variety - We like to try many different things. We enjoy renting everything from clothes to cars. + Ex. Bag Borrow or Steal has a plethora of luxury clothing and accessories for rent. + Value – We like to shop smart. We ultimately purchase products or services, because they give us utiliy. + Ex. Costco shoppers purchase in bulk due to the lower priced goods available in their inventory. http://blogs.hbr.org/2012/05/what-do-consumer-really-want-s/ https://scripted.com/content-strategy/using-the-consumers-desires-to-your-businesses-advantage/ http://www.forbes.com/sites/patrickspenner/2012/07/02/marketers-have-it-wrong-forget-engagement-consumers-want-simplicity/
    4. 4. Urbanization is Shifting Consumer Desire towards Instant Gratification 4 1930 1970 2010 Future Power Manufacturer Retailer Consumers Individual Consumer Enabler Mass Production Automobile Internet Smartphones/Tablets /Wearables Example General Store Department Store Mall, Online Mobile Experience Daily Needs Family Excursion Convenience Instant Gratification/Social Lifestyle Rural Urban Sub-Urban Urban Renewal ¹http://www.boston.com/lifestyle/specials/2013/02/01/the-growing-culture-impatience-where-instant-gratification-makes-crave-more-instant-gratification/eu5SPWCVTmFp9Nm6dUndhP/story.html ² http://www.groceryheadquarters.com/2014/03/the-re-urbanization-of-america/ 3 Netflix 2013 Annual report US cities out growing suburbs since 2011, according to US Census2 44 million Netflix streaming users (2013)3 Over 20 million Amazon Prime members
    5. 5. Mobile Devices are Accelerating Desire for Instant Gratification 5 18% of all retail ecommerce sales is expected to take place via mobile devices in 2014. By 2017, that percentage will rise to 25%.¹ ¹ http://www.emarketer.com/Article/Retail-Ecommerce-Set-Keep-Strong-Pace-Through-2017/1009835
    6. 6. Social Media is Amplifying Consumer Desire for Individualization 6 Discovering things that interest you Voicing your opinions Sharing your experiences Participate in a user- empowered platform for fashion Authentic craft goods direct from producers Or through a Personalized Shopping ExperienceBecome your “own hero” by
    7. 7. Markets Develop in Three Steps to Meet Consumer Desires 7 1. Formation • Business Models formed to Fulfill Consumer Desires • ex) Online Coupons (Value) 2. Support • Services founded to Support Business Models • ex) SaaS tools to run online campaigns 3. Evolution • Opportunities arise to Augment Business Model • Business Model applied to other Categories • ex) Integration of coupons to POS
    8. 8. 1. Business Models are formed to Fulfill Consumer Desires 8 Consumer Desire Business Model Innovation Authenticity + Leverage exclusive products + Multichannel customer relationship building Association + Rely on stakeholder input Convenience + Fast fashion model + Self-service model Experience + Innovative shopping experience format Variety + Leverage complementarities of products + Adjacency model Value + Rely on added value tie-ins + “Name your own price” model + Group Buying
    9. 9. 2. Services are founded to Support Business Models 9 Business Functions • Accounting • Marketing • Sales • Inventory • Staffing • Support Solution Provider • Enterprise Resource Planning • Customer Relationship Management • Outsourcing • Consulting Ex) SaaS CRM platforms such as Salesforce support the market by enabling multichannel customer relationship building, thus enhancing customer experience
    10. 10. 3. Opportunities arise to Augment Business Models 10 Opportunities • Stock-outs • Product Returns • Show-rooming • Customer Claims • Product Knowledge Solution Provider • Product Availability • Product Fit • In-store notifications • Product Authentication • Training Ex) Certilogo evolves the market by providing a product authentication platform for fast fashion and other business models such as auction models
    11. 11. 3. Business Models are applied to Other Categories: Examples from the Food & Beverage Industry 11 Subscription Delivery Innovator Amazon WebVan Copy Cat Foodzie LolliHop Amazon Fresh FreshDirect Peapod Apply to Different Categories PaleoPax Tasting Room Conscious Box Instacart Postmates Munchery.com Apply to Innovative Marketing Strategy Turntable Kitchen Google Shopping Express Aggregator Shutl Shippify Evolution http://www.slideshare.net/joshyang/ecommerce-landscape-2012 http://techcrunch.com/2013/09/27/why-webvan-failed-and-how-home-delivery-2-0-is-addressing-the-problems/ “Of the Month” clubs are gaining popularity but are difficult to scale. Same-day grocery delivery will see an uptick in the future if companies don’t make the same mistakes that WebVan and others have made. Namely, these companies must simplify and overcome both logistical and infrastructure challenges.
    12. 12. Apparel & Accessories and Food & Beverage markets seeing largest growth in E-Commerce 12 “Two of the best-performing online categories—apparel and accessories along with books, music and video—will register high CAGRs of 17.2% and 16.3%, respectively, according to eMarketer estimates. Meanwhile, food and beverage, with low online sales, is expected to produce the second-highest CAGR at 17%, a sign of an up-and-coming category.”¹ ¹ http://www.emarketer.com/Article/Retail-Ecommerce-Set-Keep-Strong-Pace-Through-2017/1009836
    13. 13. A deeper dive into the Food & Beverage industry reveals opportunities in delivery/warehousing 13 Doorman Shippify Funding: $10.8M Offering: Same-day grocery delivery from Whole Foods, Super Fresh, etc. Solving: “Last-Mile” delivery issue for $14.99 per delivery. Competition: Peapod (8.7% market share), Fresh Direct (5.8% market share) Funding: $39.9M Offering: Same-day food delivery Solving: Provides convenient and affordable way for consumers to buy handmade dinners by top chefs. Competition: Kitchensurfing ($19.5M raised) Funding: Unknown Offering: Amazon web-services for shipping & logistics Solving: Route optimization and fulfillment platform which aggregates deliveries market. Competition: UPS, Fedex, Uber, etc. Funding: Unknown (Acquired Useluna) Offering: Uber for package delivery Solving: Micro-warehousing (to a degree), providing consumers with a convenient way to receive parcel without missing deliveries. Type of Goods Delivery Micro Warehousing Unprocessed Nondurable¹ Instacart Google Shopping Express Amazon Fresh Processed Nondurable¹ Munchery Kitchensurfing Pantrylabs Durable¹ Doorman Luna Google Shopping Express Doorman Luna
    14. 14. Mapping of E-Commerce SaaS for SMB’s Reveals Opportunities in Social Commerce and Last-Mile Logistics Acquired Opportunity for Last-Mile Logistics
    15. 15. 15 Platforms Opportunity for Social Commerce
    16. 16. E-Commerce Platforms have Evolved to Empower SMB’s 16 Shopping Cart • Payment processing • Basic inventory tracking Package • Integrated functions • App store to expand functions Marketplace • Generate traffic from social media or network of content • E-Commerce platforms enable Small and Medium Businesses (SMB) to operate E-Commerce with minimal infrastructure • Integrating e-commerce platforms with social media generates targeted traffic API’s Socia l Medi a http://www.fastcompany.com/3027493/fast-feed/for-shopify-merchants-facebook-is-king-in-driving-sales ~2000 ~ 2010 2014
    17. 17. WooCommerce leads in E-Commerce Platform Adoption 17 0 500 1000 1500 2000 2500 3000 3500 4000 4500 5000 QUANTCASTTOPMILLIONWEBSITES Magento Go Shopify BigCommerce Volusion WooCommerce 3D Cart Ecwid Amazon WebStore Yahoo Store Data source: http://www.builtwith.com
    18. 18. Fastest Growing Platforms are either Marketplaces, or generate traffic from Social Media 18 Packages Growth ‘12-’14 Magento Go 92% Shopify 273% BigCommerce 61% Volusion -11% 3D Cart 3% Amazon Webstore* 84% Average 36% Marketplaces Growth ‘12-’14 Woo Commerce (WordPress) 1615% Ecwid (Facebook, WordPress) 270% Yahoo Store -33% Average 90% • Marketplaces integrate E- commerce functions with a social network or themed content, such as a WordPress hosted page • Facebook accounted for 85% of Shopify’s orders from social media1 1 http://www.fastcompany.com/3027493/fast-feed/for-shopify-merchants-facebook-is-king-in-driving-sales
    19. 19. Last-Mile Logistics will enable SMB’s to deliver a Seamless Shopping Experience 19 Shopping Cart • Payment processing • Basic inventory tracking Package • Integrated functions • App store to expand functions Marketplace • Generate traffic from social media or network of content Seamless • Fulfillment across channels • Sell anything from anywhere API’s Socia l Medi a Last-Mile Logistics • A robust last-mile logistics network can fulfill consumer’s desire for instant gratification (convenience) • Local merchants can become curators of niche markets (variety, experience) to fulfill consumer desire for individualism
    20. 20. Current Shipping Management tools don’t integrate with Last-Mile Delivery Services 20 App Category Platforms supported Fedex/UPS integration Last-Mile Delivery service integration shipping 12 Yes No* shipping 10 Yes No inventory 8 - - shipping 6 Yes No inventory 5 - - shipping 5 Yes No inventory 5 - - inventory 5 - - inventory 2 - - inventory 2 - - Platforms: Shopify, Magento, Volusion, 3dcart, BigCommerce, WooCommerce, Yahoo! Stores, Amazon Webstore, Etsy, ebay, Storenvy, SquareSpace Last-Mile Delivery: Zipments, Postmates, Instacart, etc. *possible via API
    21. 21. Social Media is moving down the Marketing Funnel towards Point of Purchase 21 Awareness Education Validation Close Delight +Inform customers about broad solutions to their problem +Prove to the customers that your solution makes sense +Convert leads into customers +Maintain ties with the customer to improve their experience after the sale +Introduce product or service to target group of customers Historical Social Commerce Focus Current Social Commerce Focus New Social Commerce Focus
    22. 22. Dominant Social Networks are still at the top of the Marketing Funnel 22 + Dominant social networks + Facebook + Pinterest + Twitter + They have begun to invest in technologies that could facilitate purchases directly through their networks, but progress towards true social commerce is slow + Twitter partners with Amazon4 + Pinterest’s Gifts Feed + Many retailers may not want to sell through these channels because they will want to control the experience + Companies that prioritize a consistent brand image could be turned off by the prospect of losing control over order fulfillment + This is a data-rich process that provides merchants with valuable insights + Benefits smaller merchants with limited budgets and those selling commodities + Many companies working to optimize content distribution through these channels + HubSpot + Marketo + Social is also being used effectively by retailers for customer service + Responses through Twitter and Facebook
    23. 23. Social Networks have the potential to create a Coherent Experience from Awareness to Conversion 23  Opportunities for social networks to expand through the marketing funnel  53% of active social network users follow a brand¹  In 2012 20% of Pinterest users purchased an item either in-store or online after pinning it, in 2013 that grew to 40% of users²  The large networks have been unable to do this effectively yet  Pinterest gifts has a small presence  Twitter recently announced a partnership Amazon that lets people use specific tweets to add items to the cart of their Amazon account³  This leaves space for smaller companies to come in and innovate  Chirpify is a platform that allows merchants to convert sales through twitter by using action-tags ¹ http://cn.nielsen.com/documents/Nielsen-Social-Media-Report_FINAL_090911.pdf ² http://www.visioncritical.com/sites/default/files/pdf/whitepaper-social-to-sale.pdf ³ http://mashable.com/2014/05/05/amazon-shopping-cart-twitter/
    24. 24. Purchase Attribution (“closing the loop”) will give retailers clear ROI of marketing 24 + Advances in customer tracking for online and offline merchants + Online retailers have struggled to understand the true cost of acquiring a customer as they have been unable to accurately measure effectiveness of all media + Rely on “last click” attribution methodology + Spillover Effect: Cannot accurately ascribe the impact of previously viewed marketing materials + Offline retailers have even fewer data points to draw from + Difficult to link a customer’s online behavior with their in-store purchases + Accurately measuring the impact of traditional media is almost impossible + Results in more relevant and personalized messaging which leads to higher ROI + With most companies deploying messaging to multiple channels, optimizing distribution of ads is a difficult task + Tremendous opportunity for companies to analyze this data and offer targeted marketing solutions + Many large firms are attempting to do this in-house, but they still require outside partnerships + Facebook partners with Datalogix + Has the potential to lower the marginal cost of acquiring a customer for most retailers and to increase revenue for companies offering ad placement + Improved ROI is driven by targeted product/service promotions presented at the right time and place
    25. 25. Closing the loop is necessary for a 1:1 customer experience 25 Previous retail models have relied primarily on offline interaction to provide a 1:1 customer experience = Direct mail + Trade Shows + E-mail Current retail models rely on online interaction through social software and some hardware Future retail models will rely on online/offline interaction through both software and hardware to provide an intelligent 1:1 customer experience¹ = Previous + Online/Offline Ads + Mobile Devices + Triggers (QR Codes, RFID, etc.) + Social Media = Previous + Current + POS Integration² + Insightful Data Analytics ¹http://www.forbes.com/sites/lisaarthur/2011/09/14/the-next-big-thing-for-marketing/ ²http://marketingland.com/facebook-seeking-to-close-the-loop-on-offline-sales-with-datalogix-data-22435 ²http://www.onlineeconomy.org/tag/online-to-offline
    26. 26. Opportunities in Purchase Attribution have yet to be realized 26  Google surveyed 600 marketers and found 1 in 10 still consider “last click” attribution to be effective, however, over 50% still rely on it1  Can’t look at purchases decisions in a vacuum, need to consider other influencers besides last click  90% of marketers that have adopted attribution report seeing significant benefits1  Google Ad Executive estimates that the market for tracking the usefulness of digital ads is worth $200 billion2  Google has a lot to gain and is investing heavily in this space with modifications to its AdWords platform  Estimates Total Conversions tool  In-Store Attribution Reporting  Technologies coming that allow merchants and advertisers to collect more personal data  Customer tracking through the store : ex. Customer tracking mannequins3  Location discovery allows merchants to push targeted promotions ¹ http://www.forbes.com/sites/forbesinsights/2013/07/29/8-trends-driving-marketing-attribution-now/ ² http://dailycaller.com/2014/04/14/google-can-now-follow-you-from-the-computer-to-the-store/ ³ http://www.businessweek.com/articles/2012-12-06/in-some-stores-the-mannequins-are-watching-you