E-Commerce Trends & Innovations

Hamutal Schieber | June, 2014

Introduction

• Today’s retail environment is highly influenced by new digital models which are becoming more mainstream, as consumers enjoy higher internet penetration and seek more convenience and value, as well as choice, personalized offers, and great service.

• This presentation demonstrates the most prominent trends in the e-commerce industry:– Market Size & Breakdown– Consumer Motivations / Barriers– Market Trends & Innovations– Case Studies – Amazon, Ebay and Direct to Consumer retailing.

This is an Executive Summary version of the presentation. To view the entire presentation, please contact Carmelon Digital Marketing.

Digital Commerce is on the Rise

• A robust internet infrastructure and high internet penetration, increasingly at fast broadband speeds, have been driving the online retail market. By 2017 nearly half (48%) of the world’s population will have internet access, up from 32% in 2012 (Cisco VNI SA Forecast).

• Furthermore, a rise in the number of consumers accessing the internet through their mobile devices has changed the way consumers now shop.

Source: International Telecommunication Union, World Telecommunication/ICT Development Report and database, and World Bank estimates. Accessed June, 2014; Kantar Worldpanel, ACCELERATING THE GROWTH OF ECOMMERCE IN FMCG, 2014

Internet users (per 100 people) Global Mobile Phone Penetration

Mobile Commerce Share to Grow• Goldman Sachs estimates that global m-commerce sales reached $133 billion in 2013, and that this

number will reach $626 billion in 2018, which is just shy of equaling total global e-commerce sales for 2013 of $638 billion.

• eMarketer estimates m-commerce sales to account for 26.5% of e-commerce sales by 2017, registering growth of 347% since 2012.

• Source: PFS Web

In 2013, ASOS, one of the leading online fashion retailers in the UK, received a third of the traffic on their website from mobile devices.

Digital Commerce: Market Size and Trends

• According to A.T. Kearney (2014), global online retail sales have increased 17% yearly since 2007. Conlumino report estimates the market at just under $ 607 Billion in 2013, with projected 2017 revenues of $ 1,027 Billion.

AT Kearney, Online Retail Is Front and Center in the Quest for Growth, 2014 Canadean/ Conlumino, Global Online Retailing Market Size and Forecast to 2017, 2013

Global Online Retailing Sales Forecasts (USD billion), by Region, 2012 – 2017

Regions 2013 2017CAGR (%)

2012 – 2017North America 251.7 335.1 7.62%Europe 173.3 255.8 10.67%Asia Pacific 151.2 378.0 24.49%Latin America 24.4 48.2 18.00%Middle East and Africa 6.0 10.1 13.74%Overall 606.8 1,027.3 13.76%

Source: Conlumino

Opportunities, Barriers & Retailers StrategiesMarketer Strategies Opportunity / Barrier

• Utilizing virtual wallets, mobile payments, bank transfers• new payment technologies are becoming more established

• Consumers in many countries do not own a credit card Payments

• Communicating the security technology / level to the shopper• Utilizing social identities to tailor personal offers and enjoy word of mouth

• Consumers do not trust information and payment data sharing

• However, younger consumers do share vast amounts of information with friends and brands to enjoy personal offers

Security

• Price comparison aggregators – both by third parties and by retailers• Loyalty schemes – special offers and discounts• Best price guarantees aimed at building trust

• Better prices are one of the most prominent reasons for shoppers to go online

• The ability to compare prices makes it easier to support price-based decisions

• Pure Play and direct to consumer players are competing with multi-channel retailers on prices

Prices

• Mobile commerce and social commerce enable retailers to reach shoppers when its most convenient for them

• QR-Codes and Virtual Stores enable shoppers to shop on the go

• While online retailing assures hyper convenience, consumers seek anytime/anywhere experiences where online-only may not suffice.

Pure-Play / Omnichannel

• Reviews and Recommendations provide assurance• New tactics such as trials and rentals are taking advantage of the digital

platform, surpassing physical retailers• Online retailers open physical stores to allow a closer product experience

• Consumers prefer to touch the products and try them before they buy them. This is a main barrier to online-only retailing.

Product Experience

• Chats and multi-channel assistance (via phone as well as web and video) • To replace store representatives, advisors and stylists are made

available, as well as bundling completing products

• A flesh and blood person may answer shoppers’ questions more easily, thus eliminating frustration and leading to a bigger sale.

Live Assistance

Shopper Needs: Online vs. Physical Retailing

• Esomar, Unlocking Success with Digital Shoppers: The e-commerce barriers and enablers that you need to consider, 2013

Towards Omni-Channel Retailing• The digital retailing future (Deloitte, 2014):

Deloitte, Last Mile Innovation: Driving Customer Experience, 2014

Market Trends Map

Best Better Good Trend / Strategy

Social Log-in Loyalty schemes, e-mailing & couponing

Recommendations based on previous searches/ orders, Wish Lists

Personal Touch

advisory services / personal touch

Price comparison, Price Guarantees

Ratings and reviews Better Decisions

S-Commerce, omni-channel

M-Commerce, product comparison tools

Bundling & item pairing Hyper Convenience

Same-day delivery, 1-hour time frame, instant tracking

Click & collect, lockers 2 – 5 days delivery, free shipping, package tracking

Delivery & Shipment

Free trial, new business models (e.g., rent it, sell it)

Multi channel service, chats

Convenient cancellation & return policies

Call for Action

Trends Map | Personal Touch

• Online retailers are using social media as a marketing platform to promote their online stores and they are integrating with social media sites in order to take advantage of the growing number of social media users and offer them personalized offers.

• Many retailers offer recommendations based on previous searches/ orders, Wish Lists

Ebay smart hashtags

• Facebook log-in is a common method to register and receive personalized offers.

Via Social Media Utilization, loyalty schemes, special offers and wish lists

• The yoox.com loyalty program: access to “private collection” rooms and preferential treatment by the customer service department.

Amazon “wish list”, for future shopping and/or for sharing with friends.

Trends Map | Personal Touch

• Ebay Help Me Shop is a way to get shopping advice from the shoppers’ social media friends. The shopper saves items from any website to the Help Me Shop bookmarklet in his/her browser bookmarks bar, then invite friends to help him/her decide what to buy (video)

•

Trends Map | Better Decisions• According to A.T. Kearney, consumers do their

homework before buying something online, studying product features, pricing, shipping options, and retailer return policies.

• Retailers offer online tools to help browse and compare products for further convenience. Today, the industry standard is to include reviews on the website.

More consumers are relying on comparison shopping engines (CSEs)—websites to select retailers that offer the best overall product value.

• Aside from value, advisory services aimed at replacing the live retail representative are offered by many online retailers, such as personal stylists and third party reviews. Also emerging are virtual showrooms and fitting rooms. Product reviews are also very common.

• Leading online fashion retailer, Asos, is offering personal stylists on its website

Trends Map | Better Decisions• Idealo.com is an online-only

fashion retailer that offers a wide range of fashion products of popular, niche, and emerging brands in the fashion industry, and is a part of the IDEALO Group. The website was launched in the year 2000 as a virtual multi–brand fashion store.

• The website prominently features decision-supporting tools, such as review and product videos.

Trends Map | Better Decisions

• eBay: Download coupons and request samples

Trends Map | Better Decisions

• Retailers constantly tweak their online pricing to capture consumer demand.

AT Kearney, Online Retail Is Front and Center in the Quest for Growth, 2014

Hypermarket E.Leclerc offers competitive prices online and also operates a price comparison website, quiestlemoinscher.com (translated: "which is the cheapest"), to evaluate prices across retailers. E.Leclerc has in-store kiosks that allow customers to connect to the website and compare prices.

Pricegrabber.com – comparison engine

Trends Map | Better Decisions | Price Guarantees

• Under its “Never Knowingly Undersold” promise, Johnlewis.com offers products at best prices supported by a very strong reputation for service. John Lewis checks and matches the prices of its competitors — a key feature of its in-store business — which in turn helps generate trust in its online operations among customers. If a user finds a product cheaper on a competitor’s website, John Lewis will match the price when the item is purchased, or refund the difference afterwards if the user has already made a purchase.

Trends Map | Hyper Convenience

• Retailers recognize that, to attract today’s sophisticated consumers, they must offer a compelling online value proposition, and they are adjusting their online offerings accordingly. Retailer websites have evolved into product encyclopedias with detailed product images, specifications, suggested item pairings, and user reviews.

• M-Commerce, Social Commerce and omni-channel retailing are other ways to assure that the retailer is reaching the shopper any time, anywhere.

• Carrefour 'Mon Panier’ mobile shopping enables consumer to place their grocery shopping order from their smartphone.

Clustering products can eliminate over-clutter and save time.

Trends Map | Hyper Convenience

• Filtering tools can replace the salesperson, when navigating vast amounts of products.

• Other type of navigation is through online catalogues which directly lead to purchase (e.g., Ikea & Thinglink, 2012).

Crocs.com

Trends Map | Hyper Convenience• On June, 2014, Amazon launched Fire, the first smartphone

designed by Amazon.• It features two unique technologies - Dynamic Perspective and

Firefly. The Dynamic Perspective uses a new sensor system to respond to the way you hold, view, and move Fire.

• The phone has two dedicated shopping/consumption functions, designed to funnel more mobile commerce through Amazon.

• The Firefly button, Amazon's real-world shopping recognition technology: Customers can use the phone's cameras to scan physical objects in the real world, like a store, and Firefly will identify them, and then provide a channel through which users may be able to buy the objects more cheaply.

Trends Map | Hyper Convenience• Amazon plans to offer a handheld device to more easily order groceries and other household goods

from home. The device, Dash, can scan product barcodes or users can speak the names of goods into a microphone to log orders to AmazonFresh grocery delivery accounts.

Trends Map | Delivery & Shipment

• Free delivery is the most important delivery option for the shoppers (PwC, 2012).

• Retailers are pushing the envelope on delivery options to enhance online shopping convenience: from click & collect, and personal lockers, to same-day delivery.

PwC, Global Online Retail Survey, 2012

Trends Map | Delivery & Shipment

STELLAService: sites span from 2 to 5.5 average delivery days; however Best in Class websites (such as Zappos, Amazon) typically outperformed retail stores sites.

Amazon UK and ASOS “Follow My Parcel”

Tesco click & collect

Amazon same-day delivery

Trends Map | Call for Action• Customer Service is of great importance to the shopper, as there are many elements with a potential to

become frustrating during the shopping process, including:– Frustrating registration process– Complicated cart management– Long delivery time– Problematic or insecure payment methods– Bad return policies– Inability to try the product– Etc…

Trends Map | Call for Action• Retailers are responding with expanded services such as free

trials, chats, and innovative models to offer greater overall satisfaction.

• Retailers are providing a wider variety of payment options to enhance convenience.

• Rent the Runway is a popular online website that allows women to rent clothing and accessories direct from the runway.

• Glasses e-tailer Warby Parker can deliver the shopper up to 5 glasses frames for home try-on for 5 days, with no charge.

• Amazon.com 1-Click key

Trends Map | Call for Action | Buy It / Sell It

• We are witnessing a significant trend towards providing the shopper with a platform through which he/she is able to sell goods. Several new competitors have recently launched applications which enable such transactions. The business model is enjoying a certain commission per transaction. This is a win-win model for both the seller (shopper) and the platform.

On June 2014 eBay launched a new iPhone app for sellers called eBay Valet. It finds what items are worth, then sends them in for valets to sell them for you. the seller takes a pictures of their items, and the app gives them an estimated price. They’ll send the seller a free prepaid box, and he can send items to valets for now charge. Valets will then list his items for sale on eBay, and ship them to buyers. The seller gets 70% of the sale price.

Trends Map | Call for Action | Buy It / Sell It

• Asos.com offers to sell unwanted clothes via the mobile app.

• Selling on Amazon is a program that enables both individuals and businesses to sell their products and inventory on Amazon.com

Key Performance Indicators

• Booz & Company, PwC

Digital commerce functionalities significantly improve individual KPIs and thereby are important drivers of financial value. A Booz & Company / PwC report analyzed the effect of various functionalities on KPIs:

Direct to Consumer

• Many CPG brands have begun experimenting with direct sales through e-commerce, usually via 3rd party logistics / store back.

• While brands present this experience as merely collecting insights on the shoppers, brands continue to expand in this space and even venture into social commerce.

Direct to Consumer | P&G

• In January 2010 Procter and Gamble launched its eStore to sell its range directly to consumers. The intention was to dip a toe in ecommerce and to gain marketing insights by engaging more directly with consumers.

• The site lists the P&G brands.• The company also utilizes

Facebook to sell certain brands, which proved to be a successful attempt.

Direct to Consumer | P&G

• An interesting feature, is an offer to a subscription on regular products.

Direct to Consumer | P&G

• The website gives access to reviews and feedback on the P&G products.

Direct to Consumer | P&G

• P&G F-commerce includes “buy now” options on its Facebook Pages, and apps to promote direct purchasing.

https://apps.facebook.com/pampersrewards

Direct To Consumer | Kimberly-Clark

• Kimberly-Clark says that Direct to Consumer is an important area for the company to explore.

• The company fundamentally recognizes that mobile devices are becoming an intrinsic part of the consumer’s life — and this brings dynamic new opportunities to connect with them in compelling ways leading up to and at the point of purchase.

Huggies.com

Direct To Consumer | General Mills

• General Mills discovered that households that are active on the company’s sites, such as Pillsbury.com and BettyCrocker.com, “spend 20% to 25% more annually than average households. Customers get recipe ideas in real time and also share ideas, so they’re part of a community.”

BettyCrocker.com

Direct To Consumer | Nespresso

• Nestle’s Nespresso division is highly reliant on e-commerce (as well as phone reservations).

• The physical availability is limited to brand boutiques.

• To serve as a consultant, the website features filtration and profiling tools as well as a first-timer selection box.

Direct To Consumer | Nestle

• The German Nestle Marktplatz website, lets consumers try Nestle products from around the world, experience them and review them. It also sells local Nestle products.

• The site encourages sharing of ideas and insights.

Direct To Consumer | Nestle

• Product pages include description, price and packaging, as well as ratings.

The research was conducted by: Hamutal SchieberSchieber Research | Market Research & Competitive Intelligence www.researchci.com | hamutal@researchci.com Executive Summary. For the full research - please contact Carmelon Digital Marketinghttp://www.carmelon-digital.com

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