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In 2017, global e-Commerce sales were USD 2.3 trillion accounting for 10.2% of all retail sales. This figure is expected to reach 17.5 % in 2021. The worldwide e-Commerce share of top 4 leading e-retailers, based on GMV(Gross Merchandise Value), is 55%. Due to the dominance of e-tailers, around 8,950 traditional retail stores got closed in USA in 2017 and are projected to increase drastically in 2018. So in a retail world dominated by the fast growing e-tailers, how do traditional retailers survive? In this article, we discuss some future survival scenarios for brands and traditional

retailers. Recently we are hearing trends like e-Commerce enablers, retail 4.0, image/video driven interactive e-Commerce, voice based e-Commerce, personal stylist driven e-Commerce, mobile retail shop, e-Commerce on ecosystems like WeChat, GO-JEK, brand shop in retail etc. Out of all those trends, we have picked up 3 trends namely e-Commerce enablers, retail 4.0 and image/video driven interactive e-Commerce and explain how traditional retailers and brands can differentiate from e-tailers and survive the e-tailers tsunami.

Major e-Commerce companies such as Amazon are growing rapidly. But can manufacturers and retail companies survive against them? Let's think about the winning scenario of the

makers and retailers based on the opinions of experts and the trends of start-up companies

Future e-Commerce scenarios

7Future e-Commerce Scenarios

Co-work with e-Commerce enablers

E-Commerce enablers, a hybrid of IT, logistics and marketing companies, provide end-to-end services for both brands and traditional retailers to effectively reach the customer. In this section, we will discuss three major issues being faced by brands and traditional retailers and how e-Commerce enablers can resolve those issues.

Issue 1: Value chain complexity

New economies and technologies (e.g., shared, platform, digital, connected, smart, circular economy) have created new customer journey. This in turn has created new sales channels. As shown in Chart 3, shared economy will grow from USD 15 billion in 2014 to USD 335 billion in 2025 almost 22 times, IoT connected devices installed base worldwide is projected to be 75.44 billion by 2025, Global connected car market is expected to increase by 70% between 2018 and 2021 to USD 140.9 billion and Smart home products is expected to grow at a CAGR of 14.22 between 2018 and 2022 to USD 53.45 billion.

Due to size of these new economies, it has become mandatory for brands and traditional retailers to sell through those new channels. However managing multiple channels has made the retail value chain complex. Outsourcing the operations by sales channel to multiple players has made the customer experience differ by channel. Due to this, customer is experiencing the channel rather than the brand as a whole. Luckily new technologies (like big data, AI, automation etc) have provided a means to manage

Chart2

Source : Statista *Forecast

Rise of e-Commerce is a�ecting USA chain stores

6,950

4,150

800

4,550 4,950

3,500 3,750

1,900

3,450 3,750 4,000

8,950

Past and forecast of major USA chain store closures 12,950

20082007 2019*2009 2010 2011 2012 2013 2014 2015 2016 2017 2018*

Chart1

Source : Statista

17Taobao.com

15Amazon

14Tmall.com

9JD.com

55Total Share

Based GMV%

%

Worldwide e-Commerce share of retail sales 2015-2021

*Forecast

▎E-commerce share of total global retail sales from 2015 to 2021 ▎Global e-Commerce market share of leading e-retailers 2017

2018*

14

18

10

6

2

02015

7.4

17.5

2016

8.6

2017

10.211.9

13.715.5

2019* 2020* 2021*

Chart3

Source : Statista

335

15

2025*2014

＋2,133%

USD billion

Emerging new economy and technology

▎Value of the global sharing economy 2014-2025 ▎Internet of �ings - number of connected devices worldwide 2015-2025

▎Connected cars global market size 2015-2021

*Forecast

Billion USD billion

15.41 17.68 20.35 23.14 26.66 30.7335.82

42.6251.11

62.12

75.44

201720162015

＋390%

2025*2024*2023*2022*2021*2020*2019*2018*

68.68

2017

56.76

2016

49.61

2015

＋70% 140.88

2021*

121.67

2020*

100.56

2019*

83.1

2018*

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those new channels. Unfortunately it is costly for brands to build and use those new technologies in-house.

Issue 2: High dependency on big e-Commerce ecosystems

Rise in e-Commerce platforms like Amazon, Alibaba, JD.com etc. has weakened the say of brands on those big platforms. As shown in Chart 4 Alibaba has around 576 million users in 2018 and Amazon has around 310 million active users in 2016. With such a big active user base, it has become mandatory for brands to sell their products on those platforms. Although brands can reach multiple audiences through those platforms, but at the same time they face price competition and high promotion and campaign costs.

Issue 3: New market entry complexity

In the below figure, the Chart 5 shows the fastest growing e-Commerce markets are in developing countries especially in South East Asia. It will be challenging for brands to enter those markets by themselves due to barriers like language, local preferences etc.

The solution to the above problems is working with e-Commerce enablers. e-Commerce enablers with lot of experience supporting multiple brands across industries have amassed huge knowledge which can be leveraged by brands either to enter new markets successfully or to create new business models using new technologies. Chart 6 gives a functional overview where enablers can help brands.

The major benefits for using e-Commerce enablers are

•Usage driven costs: Due to scale of economy, enablers have low costs as they are using the infrastructure to support multiple brands. So brands are charged based on the usage of the enabler infrastructure. The amount brands pay will be smaller than costs for owning

Chart5

USD billion

9.110.711.311.4

1212

12.613.7

17.719.9India

Indonesia

South Africa

Mexico

Turkey

China

Argentina

Saudi Arabia

Brazil

Spain

8.8Australia

8.5France

8.3United States

7.9Canada

7South Korea

6.5Germany

6.2Japan

5.8 Global Average 9.6United Kingdom

Retail e-Commerce market

Source : Statista

ForecastAetual

Total

Indonesia

Singapore

Myanmar

Thailand

Philippines

Vienam

▎Retail e-Commerce sales CAGR in selected markets 2018-2022

▎Southeast Asia e-Commerce market volume 2015-2025, by country

5.5

1.7

1.0

1.0

0.9

0.5

0.4

87.8

46.0

5.4

8.2

11.1

9.7

7.5

＋1,496%

＋2,606%

＋440%

＋720%

＋1,133%

＋1,840%

＋1,775%

Emerging e-Commerce platforms Chart4

Source : Statista

224 237209 215

244 250 260 270 278 285 294 304 310

Q1’16

Q4’15*

Q3’15

Q2’15

Q1’15

Q4’14

Q3’14

Q2’14

Q1’14

Q4’13

Q3’13

Q2’13

Q1’13

552 576

Q2’18

Q1’18

515

Q4’17

488

Q3’17

466

Q2’17

454

Q1’17

443

Q4’16

439

Q3’16

434

Q2’16

423

Q1’16

407

Q4’15

Q3’15

Q2’15

Q1’15

Q4’14

Q3’14

Q2’14

Q1’14

Q4’13

Q3’13

Q2’13

386367350334307279255231202185

Million persons;Global;1st quarter 2016 Million persons

▎Amazon: total active customer accounts ▎Alibaba: cumulative active online buyers

9Future e-Commerce Scenarios

the whole end-to-end value chain

•Faster penetration to new markets: By leveraging the accumulated knowledge of enablers, brands can enter the new markets faster

Recently we are seeing some startups popping up in this space like Shopee, SP eCommerce, aCommerce etc that provide one stop shop for brands to reach multiple markets in short time at a low cost

Retail 4.0Show the local shop inventory online

Chart 7 shows the most important reasons why consumers choose to shop online over in-store shopping. 40% said they want to save time and 20% said to locate hard to find items. Due to lack of local shop inventory visibility, some of the customers are moving towards online e-Commerce. How do

we bring such customers back to the local shop?

Chart 8 shows how the local shop inventory can be made transparent.

Pointy, an Irish startup, is solving the above problem by letting local shops to easily put stock online with a simple gadget. Their gadget connects with the store barcode reader and automatically puts the scanned items onto a Pointy powered website. When customers search for similar items, the Pointy powered result will show up in the search results. Sometimes local shops are shown ahead of Amazon in search results if the shop

is nearer to customer. Customer can go to the local shop immediately and purchase the item.

The benefits of this solution are ;

•Increase sales for local shops: For a minute cost, local shops can drive more customers to shop and increase their sales. Big e-tailers dislike this niche segment because customers want to buy and get the items immediately rather than wait for some hours

•Customer save time: There is no need for customers to visit multiple stores and inquire about inventory availability or wait for e-Commerce delivery

•Local community development :

e-Commerce enablers Chart6

･New market entry strategy , e.g., ) channel, customer segment･Cross-border e-Commerce strategy , e.g., ) Customs, payments, shipping, culture･Omni channel and product , e.g., ) customer preferences･Human resources , e.g., ) hiring, training

･Personalized advertising･Real time campaigns･Holistic and data driven approach

･Supply chain strategy･Warehouse fulfillment･In-store fulfillment

･Multi channel commerce partnerships･Multi shipping partnerships

･Web design (B2C, B2B, B2E) for hosting･Language and content localization･Mobile/PC/tablet app development･Payment solutions

･Order management and stock management･Assortment (bulk, bundle)･Shop inventory online transparency･Promotions and campaigns

･Multi-shipping management･Payment/cash on delivery management･Pick up support and tracking･Insurance management

･Inbound/outbound call management･Social media management･Chat bots development

e-Commercestrategy

ActivitiesFunctions

Logistics

Technologyplatform

Online storedevelopment

Offline storeoperations

Delivery

Customerservice

Digitalmarketing

Top reasons why consumers worldwide shop online instead of physical shops 2016

Chart7

Source : Statista

15

20

27

29

29

39

40

46

54

58Ability to shop 24/7

Ability to compare prices

Online sale/better prices

To save time

Convenience of not going to shops

Greater variety/selection

Free shipping offers

Convenience of everything in one place

To locate hard to find items

To avoid crowds

15Products are not sold in my city/country

11To avoid checkout lines

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Local communities are prospered because buying locally will create more local jobs

Image/video driven interactivee-Commerce

By 2020, Netflix household subscribers are expected to increase to 114 million. No doubt the number of households watching on-demand streaming services is going to increase in future. We think the next generation e-Commerce will be driven by content makers like Netflix. Content makers can create an e-Commerce layer on top of the content. Viewers have the option to buy the products shown in the content.

Chart 9 explains how the content driven interactive e-Commerce works.

Consumer will be happy to immediately buy the same product worn by as their idol in the content. There is no need for consumer to take a photo, search in Google, and go to shop and buy the product.

Through interactive content, brands can reduce their dependence on big e-Commerce platforms like Amazon, Google etc. By engaging directly with

consumers, brands not only reduce costs but also in building a long term relationship.

One example in this space is Spott.ai which is helping brands like Nike, IKEA etc. effectively engage their audience through interactive content on this websites. But we think this will expand to mass image/video delivery platforms like Netflix.

Conclusion

In addition to e-Commerce enablers, retail 4.0, and digital content driven e-Commerce, we think following will drive the future retail. Voice based e-Commerce where customers order (schedule) daily use items through smart speakers, personal stylist driven e-Commerce where customers use stylists to recommend lifestyle goods, rental e-Commerce where customers will rent electronic goods rather than buying, mobile retail shop where autonomous cars go to customer house to sell goods and eco systems based e-Commerce like WeChat, GO-JEK etc. which act as one stop life app. We believe cheaper new technologies will help brands and traditional retailers to effectively differentiate themselves from e-retailers and have a bright future.

Make locality shop inventory transparent Chart8

Image Explanation Benefits

ShopAlliance

Enabler

Customer

･Wastage of time when you go to local shop and find out the item is out of stock. -Go to local shop and pickup the item immediately. -Support local community by buying items from local shops.

･Local Shops tie up with a IT company to store inventory in online database.･Inventory is uploaded either manually or by integrating the POS system with online database.

･Online database is integrated with daily life applications like search engines, social networks, messenger apps, etc.

･Customer search in lifestyle app will show the nearest shop where the item is available.

I want to buy Organic shampoo immediately…I cannot wait for Amazon’s delivery…

･Lack of online visibility of local shop inventory is driving customers towards e-Commerce sites. -A new marketing channel to drive customers to local shops.

SHOP SHOP SHOP

Siliconshampoo

Organicshampoo

Multi shop alliance

Scalpshampoo

Database

Distance

Shop

Route

100M 2

200M 1

Inventory

shampoo

Scalp

Scalp

11Future e-Commerce Scenarios

Preetham Edamadaka:

Senior Manager in the Singapore Office.

Copyright © 2019 BayCurrent Consulting Inc. All rights reserved.

Image/video driven interactive e-Commerce Chart9

Watch a scene Option to buy Drive to store

Userexperience

Explanation

Keychallenges

･Users are taken to multiple online stores depending on the content clicked･Through this solution brands can skip using big online marketplaces like Amazon

･When platform users enable the buy option, details like brand, price and link to store are displayed on top of digital content･When user clicks, the user is taken to the corresponding online store where the product is in stock

･Platforms, where digital content like photos, videos are shared, use AI to track the store where products shown in digital content are sold･Platform users are attracted by the content shown on digital content and want to buy it

･Common standard data image file format is required to simplify the find store with same/similar item･Video matching computing power･Monetization model

Viewer

NETFLIX

I want tobuy that

dress.

NETFLIX

Enable the buyoption to find

the store.

Enable buy option.

Click to go to online store.

Store A

Store B

Store C

Dress $1,000

Sofa $500

Bed lamp $100

Bed Lamp$100

Dress$1,000 Buy

Buy

Buy

Sofa$500