Ecommerce Landscape and Trends 12.17.15

@pesmou
Ecommerce
Landscape and Trends
Maria Thomas
December 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
The Early Days….
4
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
E-Commerce As We Know It Is 20 Years Old
5
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
Ecommerce
Companies
by 2013 Revenue
Source: Statista http://www.statista.com/statistics/287950/leading-e-retailers-worldwide-based-on-revenue/
7

@pesmou
Top 10 Chinese E-tailers by GMV/Revenue
8
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
Worldwide
Retail 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
ABI Research predicts
that globally about
8% in ecommerce will be
transacted via a
mobile
phone in 2015.

@pesmou
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
12

@pesmou
But, absolute
numbers can be
misleading…
Ecommerce as
a % of Total
Retail Varies
by Country
13

@pesmou
Factors Influencing Ecommerce
Penetration By Country
14
SMARTPHONES/DATA
Penetration
POPULATION
and % of Population Online
OFFLINE RETAIL
Options / Urbanization
PAYMENTS
% non-cash transactions
SOCIAL MEDIA
Penetration

@pesmou
POPULATION
AND % OF POPULATION ONLINE
15

@pesmou
World Internet Usage & Population Statistics
(Nov 2015)
16
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
World Internet Usage Statistics
(2014 estimate)
17
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
Top 10 Global Markets by Retail
E-Commerce Attractiveness
18
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
Pick Your Country:
Google’s Consumer Barometer
19
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
CROSS-BORDER E-COMMERCE
IS A HUGE OPPORTUNITY
BUT PAYMENT PREFERENCES VARY BY
COUNTRY
20

@pesmou 21
https://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
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
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
SMARTPHONE PENETRATION IS
IMPACTING ECOMMERCE
26

@pesmou
By 2020, 80% of Adults on Earth Will Have
a Smartphone
27
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
To this….
29
http://www.businesstoday.in/magazine/features/second-green-revolution-
likely-innovation-in-information-tech/story/222535.html

@pesmou
Implications on Ecommerce of Growing
Smartphone Penetration
30
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.smartinsight
s.com/social-media-
marketing/social-media-
strategy/new-global-
social-media-
research/attachment/20
15-social-network-
popularity-by-country/

@pesmou 37
The Big [Industry] Picture

@pesmou 38
Think of
Ecommerce
As Part of a
Larger Digital
Strategy
Commerce
platform

@pesmou
Ecommerce Comes in Many Flavors
39
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
Marketplace
Hybrids
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
Retail
Single/Multi-brand
Classified
Marketplace
Merchant Services
Marketplace
Private/Flash Sale Subscription
Single Brand
Multi-Brand
Selected Ecommerce Companies by Model

@pesmou 42
© LUMA Partners LLC 2015
Coupon Aggregators
Community
Platform
Social
Enablers
Fulfillment /
Distribution
SaaS
COMMERCE LUMAscape
Social Commerce
Affiliate Mktg
Secondary MarketDaily Deal AggregatorsWhite Label Solutions
Daily Deal Data / Analytics
Exchanges
Marketplaces / Auctions
Price
ComparisonStorefront /
Cart
Payment-SpecificOrder Mgmt
Flash Sale Sites
Daily Deal Sites
Publisher Deals Realtime
TravelBeautyHome
CRM
Subscription/Push
E-Commerce Implementation
Mobile Commerce
E-mail CommerceAnalytics
Performance
M
A
R
K
E
T
E
R
C
O
N
S
U
M
E
R
Denotes acquired company Denotes shuttered company

@pesmou 43
Know Your Competitive Advantage:
Hard to Compete With Amazon in Many Markets

@pesmou 45
Multiple Platforms Competition for Tech/Design/Mkting Talent
Last Mile Distributions Options Warehousing, Inventory Management
Marketing is
Increasingly Driven by
Data/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
Sometimes Models Work in One Country But Not
Another
47
Groupon IPO – Nov 2011
Raising $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 and
Shipping - “3PLs”
Delivery
New Ecommerce Platforms
Cloud Computing
Analytics Translation
Services
Marketing &
Content
Distribution

@pesmou
Develop a new proposition / model
Build communities among customers
Use algorithms to hyper-personalize
Hyper-serve a single category with distinctive characteristics
55
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 Build
A 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
China
Growing 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)
India
Major opportunity unfolding in India: battle between Flipkart and Amazon India

@pesmou
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
59
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
Good Data Sources
64
https://www.consumerbarom
eter.com/en/insights/?countr
yCode=GL
http://mobilereadiness.mast
ercard.com/the-index/
http://ben-evans.com/
1 2 3

@pesmou
THANK YOU!
Maria Thomas
mariachristinathomas@gmail.com
65

Ecommerce Landscape and Trends 12.17.15

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