Xerfi Global has recently published a study on e-commerce, a booming sector. Worldwide online retail sales shot up by 17% per year from 2011 to 2016 to exceed €1.7 trillion in turnover and are expected to increase by around 18% per year from 2016 to 2020. This rise is thanks to several factors on both the demand side and the supply side. On the demand side, growing internet penetration and usage and rising mobile phone connectivity is boosting internet access and therefore the possibility to purchase online. At the same time, consumers are becoming more tech-savvy and comfortable with internet shopping. Furthermore, rising incomes in emerging countries and price-competitiveness of online retailing is making online shopping more affordable. Demand is also driven by the fact that online shopping provides a high level of convenience and access to products that are not locally available. Meanwhile, on the supply side, as more and more manufacturers, retailers and merchants go online, the range of online products and services grows. At the same time, online shopping platforms, delivery services and other associated services are becoming increasingly sophisticated, making e-commerce more attractive to consumers.
Despite favourable growth outlooks, the global market is characterised by fierce competitive rivalry and multiple threats: weak entry barriers attract new entrants, traditional retailers are enhancing their multichannel distribution strategies to gain a competitive edge over online retailers, and low switching costs reduce e-retailers’ bargaining power over their customers and suppliers. The sector is also subject to stricter public scrutiny and regulation in areas crucial to competition such as taxation, user data collection and exploitation, pricing, and working conditions.
In this context, online retailers are focusing on building strong and comprehensive ecosystems in order to maintain artificial entry barriers, increase scale and profitability and fend off new competitors. To do so, they are attacking on a number of fronts. So as to ensure product and technology development as well as seamless integration of shopping platforms across all devices, they are making investments in user interfaces, additional platforms and IT capabilities. Big data is also being used to refine marketing techniques. Multichannel strategies are being put into place to allow click-to-brick buying. International expansion is being achieved not only by implementation in new countries but also creation of global marketplaces that connect manufacturers, retailers and online shoppers. Improvements in payment methods as well as fulfilment and deliveries are also being made, typically achieved via strategic acquisitions and partnerships. Such an ecosystem generates greater scale on both the supply and demand side with online merchant and online shopper numbers growing, together with a greater product, content and service selection, generating a virtuous circle. The larger scale allows better performance thanks to increased service and fee revenues and thus higher income as well as economies of scale and increased added value allowing increased profitability. These additional financial resources can then be used to promote further growth, via acquisitions, international expansion, diversification and marketing.
In terms of individual operators, Amazon is well ahead of the pack in terms of sales and is also the most visited e-commerce website in major Western e-commerce markets, and the most diversified and multinational operator. However, when it comes to operating margins, the picture is very different, reflecting major differences in operators’ business models. It is operators of online marketplaces such as Alibaba Group or eBay, who focus on operating software that connects buyers and sellers, who prove more profitable than companies like Amazon, who also handle logistics, warehouses and distribution operations.
Kathryn McFarland, The Global E-commerce Industry: the market, une vidéo Xerfi Canal.