The consumer world is rapidly shifting toward a business model in which eCommerce, or consumer transactions performed entirely online, now represent a major form of economic activity and market orientation of many companies.
Unsurprisingly, the current world leaders in this new brand of internet-based economic activity are the United States, Europe, and East Asia. There is, moreover, a trend among Asian-Pacific countries as a whole that indicates that the current online market, which currently has a combined sale value of $1 trillion in 2012, will continue to expand at a higher rate than other geographic locations. In the United States alone, internet-based commercial transactions are valued at nearly $400 billion in the 2012 fiscal year, and this figure is expected to rise another 13% in 2013 to settle at over $400 billion.
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Naturally, the question must be asked as to what sort of global trends and projections exist for the future of eCommerce. In order to analyze this, however, the question must be asked as to why consumers are so strongly preferring to order their consumer goods online, and what sort of benefits this model offers to both customers and companies.
The benefits of online transactions between customers and companies that provide a service are many. First, it must be said that online companies offer a strong benefit for individuals looking to acquire goods that may or may not be available in their immediate geographic locality. Whereas groceries are commonly available at local markets, many other goods remain either a fairly long commute away for many people, or rather consumers simply prefer to place their order online and receive their package in the mail within a few days.
There is a strong sense of convenience associated with online purchasing, and it allows individuals the freedom to place orders for goods at their leisure. As there is rarely a pressing need for many products ordered via internet-based companies, consumers are more than willing to wait a few days for their product to arrive on their doorstep instead of being faced with the task of going out into the busy world and attempting to find the good for a competitive price and quality and be faced with the logistic difficulties that come with finding brick-and-mortar companies.
Likewise, with the convenience of ordering comes the strong benefit of not being confined to a single source of goods. Ordering online means consumers are able to easily check comparing prices, quality, and interact immediately with thousands of customer reviews on given products. While there are mobile smartphone apps and other useful tools to help customers who enter brick-and-mortar shops, online shopping allows an individual to get objective, true information regarding the price and quality of their product without the influence or pressure from a local salesman. Thus, there is a strong psychological benefit for consumers to order online, as they do not have to face the pressure or sales techniques of physically present employees, and can easily shop around between hundreds of different online retailers to find the price and selection best suited for them.
According to eMarketer, seen in the graph below, read more..
On the other hand, companies themselves can benefit from business done completely online. Online companies, while they may need a physical office space for administrative duties based on the scale and scope of the operation, do not need a brick-and-mortar store or other expensive location. Likewise, online companies do not need to pay utilities, rent, or, in most cases, the salaries of workers that have to physical be present every day in order to shelve goods. There is no need for a horde of expenses that go into making a physical, on-site store location actually appealing to consumers over a well-designed website. Moreover, many companies nowadays and realizing that online business will play a major role in their overall market segmentation, thus necessitating the expense of building a fully functional and operational online site regardless of whether or not they would prefer to remain operating locally.
Online companies, then, are capable of offering better prices and more convenience, at least for goods that do not need to be delivered in person or come with some serious element of customization. While online clothes shopping is immensely popular, many consumers prefer to be able to try on a particular garment in person to gauge the fit and look before purchasing. While an online company will be able to take one’s measurements and offer clothing based on the technical side of sizes, many consumers still prefer the brick-and-mortar approach to the purchase of clothing. Likewise, many consumers prefer to purchase electronic screens, displays, and other devices in person, when they can at least see the product in their hands and gauge the quality that way. Lastly, it can be noted that online companies are capable of offering these prices because they, in effect, cut out a large chunk of the production-distribution supply chain and are able to sale directly to consumers.
These benefits, which can be collectively called the benefits of convenience, are responsible for spurring the remarkable change in consumer purchasing behavior witnessed in the past few years. eCommerce sales and trade now accounts for over a trillion US dollars’ worth of business each year, and this figure is expected to rise approximately 20% to settle at a good 1.2 trillion USD for 2013. Indeed, global trends and projections of online trading indicate that the industry, while slowing down slightly in the context of global recession, are nonetheless still strongly rising, far more than was expected initially. Moreover, while sales increased upwards of 14% in the 2012 fiscal year, that figure is expected to rise “only” 12% in the 2013 fiscal year.
These strong showings, which are again largely due to online companies offering better prices and conveniences, are not limited to areas that are classically wealthy. Indeed, growth in China, Japan, India, and other parts of South and East Asia is largely due to, not necessarily increased individual spending power and the ability to purchase goods, but rather increased capacity of people in poorer areas, as well as urban, to access online markets. However, as disposable income rises with increased salaries in these places, it is clear that the online market will follow trends set in other places of the globe, and ecommerce will jump to the forefront of economic activity in places where online purchasing is a viable alternative to physical locations.
As the industry moves forward, there are several important trends and projections that can be observed. First, the United States will certainly retina its position as the country in the world with the highest amount of online purchases overall. Indeed, with nearly 30% of the world’s online business done within the United States, it is clear that American dominance in this sector is guaranteed for the next few years at a minimum. However, rapid growth in the Chinese capacity to partake in online business means that the People’s Republic of China may, by 2016, be within 5-10 percentage points of the United States’ market share in this regard. Already the Chinese have the highest number of actual customers buying goods online, simply by virtue of their immense population, and as disposable income and salaries rise with increasing urbanization, the Chinese sector will take on more and more importance in the years to come.
There are other, perhaps more significant trends and projections, however. The fact that online business will continue to grow, particularly in regions where disposable income is rising and the capability to access the online market is now a reality, is indisputable. However, there are factors that go hand-in-hand with this. The three primary online internet companies of the world, which are: Google, Apple, and Amazon (though Apple has physical locations, it can be argued that Apple is nonetheless a pioneer in ecommerce with its use of iTunes and other optimized web applications), can all be seen to have significant impacts on the development of trends in this market.
Google, despite its questionable implementation and marketing of its Facebook rival Google Plus, is nonetheless the single most dominant search engine on the market today. It is predicted that, while Google may lose some percentage of the total market as up-and-comers like Microsoft’s Bing and other, much smaller privacy-based search engines gain popularity, Google will undoubtedly retain its position as the default search engine of the world economy.
Apple, likewise, has a massive cash reserve and the drive to invest it. It remains likely that Apple will continue to be a pioneer in consumer electronics and online sales overall, and the importance of iTunes and Apple’s umbrella of associated services cannot be understated. Ecommerce itself is shifting towards embracing mobile purchases and the capacity to buy goods online from the convenience of a smartphone or other mobile device, and Apple is well poised to lead the market in innovative technology aimed at ensuring access to online business while on the go.
Amazon, moreover, is perhaps the best example of an online company that has achieved incredible success. Amazon offers competitive prices, fast shipping, and, while it is now forced to deal with warehouses and mass distribution channels, can nonetheless combine the efficiency of online business with the physical, supply side of traditional shops in order to provide customers with goods delivered quickly and on-time.
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