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E-Commerce
- 1. JANUARY 2016 II THE DOLLAR BUSINESS 63 E-COMMERCE - A GROWING TREND W hile there has been a lot of hype over Amazon's Prime Air drone deliv- eries as the new frontier for e-commerce retailers, Korea Post has stolen Amazon's thunder and an- nounced that they will start drone deliv- eries in 2016. What sounds like science fiction today is tomorrow's reality. The e-commerce of yesterday is evolving into an altogether new animal with multiple channels of user interaction. The all pervasive Internet has trans- formed the way we shop and do business today – buying, selling, trade, transac- tions and services – not just within in a country but across borders. Online platforms like eBay, Amazon and Alib- aba are turning out to be the linchpins of global e-commerce, facilitating ex- ports. For instance, over 90% of eBay commercial sellers export to other coun- tries, compared with an average of less than 25% of traditional small businesses (McKinsey Global Institute). And it's a big number i.e. over 1,90,000 firms. In fact, the e-commerce trend is growing really fast across the globe with India being no exception. According to rough industry estimates, exports from India through the e-commerce route too have grown over 400% over the past five years and the trend will continue for the next 3-4 years. Even India's Foreign Trade Policy (FTP) 2015-2020 seems to realise this growing trend and as such provides incentives under Merchandise Exports from India Scheme (MEIS) to e-com- merce companies (though only to some labour-intensive sectors as of now) that export goods from India. The pace of the global growth of the industry can be gauged from the fact that global retail e-commerce sales are ex- pected to touch $1.9 trillion in CY2016, up from $1.7 trillion in CY2015, accord- ing to eMarketer. Driven by increased digital access and fueled by new horizons of technology, the e-commerce industry continues to grow and evolve and how! According to London-based Euromoni- tor International, “Both fixed and mobile Internet penetration are rising rapidly, especially in emerging markets. In mar- kets where e-commerce is relatively new, consumers are starting to understand the value, cost savings and speed of pur- chase available to them.” GROWTH DRIVERS Having already matured across advanced economies, the e-commerce sector has a lot of scope for expansion in the emerg- ing countries. And, with many devel- oping economies like China and India offering attractive growth rates, global e-commerce players are vying for a larg- er market share in these economies. In fact, the Chinese e-commerce market is forecast to undergo substantial growth in the next few years, growing from about 500 billion yuan in to over of 3 trillion yuan by 2017. When it comes to India, it is projected to be the fastest growing e-commerce market in the BRIC coun- tries – Brazil, Russia, India, and China – in the next five years. Various factors have been driving this trend: convenience of shopping online – easy and quick, and a plethora of offers which the traditional retail cannot offer. As James Storie-Pugh, Head of E-com- merce, Global Brands Group (a member of the Fung Group), London, puts it, “Growing Internet penetration on the back of cheaper digital devices has been one of the major factor of e-commerce growth in the emerging economies.” A research paper titled 'The impact of e-commerce on international trade and employment' by Nuray Terzi, Faculty of Development Economics, Risk Manage- ment and Insurance, Financial Econom- ics at Marmara University, Istanbul too RAPID GROWTH IS THE NEW NORMAL As technology improves and more people around the world have access to the Internet, the role of e-commerce is bound to grow in international trade and commerce. It's rapid growth will not only lead to the emergence of global platform providers that will serve as a link between sellers and buyers, but will also drive the development of international trade patterns and relationships going forward. BY SHIVANI KAPOOR
- 2. 64 THE DOLLAR BUSINESS II JANUARY 2016 COVER STORY WORLD TRADE 2016 merce to cross revenues worth $16 bil- lion by the end of 2015 on the back of increased online shoppers, a PwC report expects the Indian e-commerce industry to touch $22 billion mark in 2015. Although market analysts still see In- dia’s e-commerce industry to be in its infancy compared to the West, India is on route to becoming the world’s fast- est growing e-commerce market, if cur- rent projections are anything to go by. As London-based market research firm Euromonitor International puts it: “The world’s second most populous country has all the characteristics of an e-com- merce growth spot: low Internet pene- tration on the rise, giant urban centres and localized IT clusters.” A joint study by Assocham-PWC too predicts, “India’s e-commerce sector to log a compound annual growth rate of 35% and cross the $100-billion mark in value by 2019.” As Indian e-commerce industry gains further ground, 2016 looks set to be a big year, witnessing greater heights on the back of increasing Internet population and changing dynamics of supporting economic ecosystems. WHAT’S TRENDING With new year bringing more hopes for the e-commerce industry, it’s time to take a look at trends on the horizon for 2016 and beyond. According to Holman Fen- wick Willan, the London based law firm specilising in international commerce, "it appears that, increasingly, large com- mercial transactions will be conducted on an almost exclusively e-commerce basis, for instance from the negotiation and agreement of contracts by email to the conclusion of the transaction and the delivery of the goods under the agree- ment by the presentation of an electronic Bill of Lading." As technology improves and more people around the world have access to the Internet, the role of e-commerce is bound to grow in international trade, both in size and importance. According to research conducted by the US-based International Data Corporation (IDC), it is estimated that "global B2B and B2C e-commerce transactions will account for about 5% of all inter-company trans- actions and retail sales by 2017." states that "The Internet is dramat- ically expanding opportunities for business-to-business (B2B) and busi- ness-to-consumer (B2C) e-commerce transactions across borders. For business to consumer transactions especially, the Internet sets up a potential revolution in global commerce i.e. the individu- alisation of trade. It gives consumers the ability to conduct a transaction directly with a foreign seller without traveling to the seller’s country." A LEAP OF GROWTH When we talk about India, the e-com- merce market has enjoyed a phenom- enal growth, thanks to the lowering of the broadband tariff rates, launch of 4G services and rising number of 'apps' that help make life easy for the average user. A joint study by Assocham and Grant Thornton reveals “a significantly low but fast-growing Internet population as an indicator of the sector’s huge growth potential in India.” If numbers are some- thing to go by, India, in 2016, will be- come the second largest country in the world in terms of the number of Internet users, behind China. And that's one of the many reasons why the e-commerce sector is being considered a new-sun rise sector that has taken the Indian busi- ness by storm. The scope and potential of growth of e-commerce can be seen in the numbers. While a joint study by Assocham-Deloitte estimates the e-com- 2014 2015 2016 2017 2018 2019 2020 Global B2C growth Cross-border e-commerce is predicted to reach $1 trillion in 2020 4000 3500 3000 2500 2000 1500 1000 500 0 110% 90% 70% 50% 30% 10% -10% -30% Source: International Trade Centre Transaction volume of global cross-border (in $ billion;; L-axis) Transaction volume of global domes- tic B2C (in $ billion;; L-axis) Cross border B2C transaction % of total B2C transactions (R-axis)
- 3. JANUARY 2016 II THE DOLLAR BUSINESS 65 James Storie-Pugh, Co-Founder, Managing Partner & E-commerce Director, Pivot Commerce Ltd TDB: What will the e-commerce in- dustry look like in 2016? Given the current scenario, how will global e-commerce perform in the coming year, according to you? James Storie-Pugh (JSP): The e-com- merce industry will continue on a high growth path across the globe. However, in established markets, the sector will be a battlefield with competition con- tinuing to get increasingly fierce. Only the best of the breed will survive in this hyper-competitive market. In emerging economies, trust and loyalty of the con- sumer will be essential to assuring prof- itable operations. In addition, online brand equity will be the key in 2016. TDB: Is e-commerce sector a bubble in the making? JSP: No, because retail is now being built with e-commerce, with the con- sumer at the center of all operations. New processes will ensure that digital will be at the forefront for retail in the years to come. TDB: What will be the impact of m-commerce on e-commerce? JSP: Although mobile commerce still lags behind electronic or desktop com- merce, it is gaining ground. The uptake of m-commerce has fast-tracked digi- tal shopping. Given the popularity and widespread use of smartphones, mobile commerce growth is another exciting trend to watch out for in 2016. There is no doubt that the m-commerce will make shopping easier and ubiquitous, thereby affecting the sales in the brick- and-mortar stores. With a smartphone in his pocket, the consumer will shop anywhere and everywhere. Mobile commerce will make transactions eas- ier with improved payment options. What’s more is that consumers will have ‘pre-shopping’ on their smart phones or tablets, just by snapping a photo of a product or through barcode scanning. In addition, design patterns on mobile sites will provide shoppers with a convenient shopping experience. Besides, email marketing will emerge as a powerful tool available for online retailers and so, mobile devices will be targeted for attracting subscribers and getting more sales. With the arrival of beacon technology – the one that ac- cept signals from customer’s phone and sends notifications like a promotion or deal to the customer’s device – one can engage with the customers when they walk into a physical store. TDB: What are the main e-commerce drivers in emerging markets? JSP: Improved convenience, such as home delivery options, have fast- tracked the growth of the e-commerce industry across the globe. Growing Internet penetration on the back of cheaper digital devices has been one of the major factors of e-commerce growth in emerging economies. The rising presence of Internet amongst the rural populace is yet an- other stimulating factor for growing the e-commerce sector in emerging markets. In addition, the industry of- fers extensive options for secured and effortless online payments, which has now become a major driver of global digital growth. TDB: While trends change with tech- nology, what are the top trends in e-commerce to look out for in 2016? JSP: Mobile is the future, and it would be advisable to modify your e-commerce business to make it mo- bile-friendly. Focusing on mobile op- timisation for multi-channel shopping would help one survive in the compet- itive environment. Multi-channel and Omni channel have become a reality in the e-commerce industry, where an online shopper is no longer confined to one device. Such retail shopping will be a vital trend to look for in order to keep your business relevant. With so- cial media marketing changing, so- cial commerce is gaining momentum, with many social networks opening their systems for selling. A closer look at various social commerce platforms will help the business. Going forward, online sales will not only be driven by price competition, but also with addi- tional value services like free shipping, same-day delivery, free return ship- ping etc. In this competitive environ- ment, increased personal engagement through email marketing, and even so- cial media would improve relationships with customers. "ONLY THE BEST OF THE BREED WILL BE ABLE TO SURVIVE 2016" Further, a lot of the innovation today are being driven by countries like India. COD (Cash on Delivery), for instance, was a godsent for etailers in India, where trust on online payments remain low. In 2016 we can expect to see more country and category specific 'apps', while at the same time see consolidation through M&As in an industry that is burning cash. Having said that, going forward, the growth of e-commerce will be an im- portant factor that will drive the devel- opment of international trade patterns and relationships over the coming years. So, will a drone deliver your morning cuppa from your favourite coffee shop? Nah, not in 2016. But we will be happy to be proven wrong!