Customer data analytics are poised to take off big time, as eCommerce booms in a pandemic that shows no signs of waning
Digital commerce spending will rise to over $11.6 trillion by the end of 2021, from $10.5 trillion last year: a growth of 11.5% in a single year, according to a Juniper Research whitepaper. This spend encompasses money transfer, digital goods purchases, physical goods purchases, digital ticketing purchases, banking bill payments, NFC (near-field-communication) mobile retail payments and QR code retail payments. In 2020, retail e-commerce sales worldwide amounted to US$4.28 trillion and e-retail revenues are projected to grow to US$5.4 trillion in 2022, according to Statista.
The global pandemic has transformed the role and importance of digital experiences16 in customers’ lives. Today’s consumer expects easy-to-use, intuitive digital experiences across channels and devices. Brands that can deliver on those expectations are seeing the greatest returns. According to proprietary data from Shopify, retail merchants with an omnichannel strategy in place replaced 94% of point-of-sale (POS) purchases lost in the first month of the pandemic with online sales.
The success of digital solutions during the pandemic means that consumer behaviour will become increasingly digitally led, rather than reverting to pre-pandemic norms. This will lead to an explosive growth in data and analytics around customer preference patterns. Artificial Intelligence (AI) and machine learning are making it possible for the customer to have automated, personalized shopping experiences. AI is continuously collecting data on how a customer shops, when they buy, and what they’re looking for in a product or a service. It’s a piece of technology that really can’t be replicated in-store. Per Business Wire the global e-commerce analytics market itself is projected to grow at a CAGR of 6.11% to reach US$22.412 billion by 2025, from US$15.699 billion in 2019.
The mobile boom
Competing on customer experience also requires a lightning-fast mobile experience, with majority of global ecommerce sales happening on mobile devices. Even prior to COVID-19, mobile commerce accounted for 92% ecommerce growth. Research indicates 53% of consumers will abandon a site that takes longer than three seconds to load on mobile, warns a Shopify report on Future of Commerce.
Per Juniper, mobile commerce will account for 73% of all digital commerce transactions by value in 2021, rising to 79% by 2025. Mobile has emerged as the most important way to access services, and although online will remain relevant for higher-value transactions, user experiences must be mobile first. The research has also found that remote physical goods purchases will account for the single largest transaction value of any segment in 2021, at 22% of the total, followed by money transfer and QR code payments. However, contactless mobile payments will have the highest rate of growth; increasing over 242% in value between 2021 and 2025, as OEM Pay services add spending insights and other value-added services to consolidate gains made during the pandemic.
- Consumers worldwide are buying items rarely purchased online before the pandemic, like groceries, health and hygiene, and home essentials.
- The pandemic has amplified the consumer’s desire for convenience and immediacy. The permanency of these shifts will be determined by how satisfied consumers are with online experiences.
- Unlocking the future of retail means offline-online innovation that allows consumers to buy anywhere they shop, try on your products with augmented reality (AR) before buying, and engineering virtual versions of retail shopping experiences.
The pandemic has been a widespread increase in contactless payment limits around the world according to the whitepaper. : In December 2020, the Reserve Bank of India announced plans to increase the contactless payment limit in the country from ₹2,000 ($26.65) to ₹5,000 ($66.63). In April 2020, the UK increased its contactless payment limit from £30 ($41.73) to £45 ($62.60). Following the success of this, the UK government announced plans to increase the limit again, to £100 ($139.11), which took effect in March 2021, but will require a transition period throughout the year to achieve. In March 2020, Germany agreed to increase its contactless payments limit from €25 ($30.14) to €50 ($60.29), which was a major move for a country that had previously been quite slow to adopt contactless payment services.
Some major online platforms have seen substantial improvements in financial performance and stock value because of improvements in their business climate during the pandemic according to an UNCTAD (United Nations Conference on Trade and Development) study. The online retailer (and cloud service provider) Amazon, for instance, registered its most profitable quarter in the third quarter of 2020, with growth of more than 35% in both United States and international sales revenue – including 33% growth in own product sales and almost 55% growth in income from sellers on its marketplace. The African platform Jumia saw an increase of over 50%, from 3.1 million to 4.7 million, in the volume of transactions during the first six months of 2020, compared with the same period in 2019. Netflix revenues are reported to have grown by 25%.
Digital is also physical
We must also remember that digital commerce is not purely electronic. While online products can substitute for some physical goods (most notably in entertainment), many e-commerce transactions require movement of goods and/or people, whether within countries or across borders. Challenges arising at the interface between digital and physical infrastructures add, therefore, to those that already exist within traditional trade relationships.
Cumbersome and inefficient customs and border arrangements present bottlenecks to the growth of international e-commerce through ports, airports, and border crossing points. Poor transport infrastructure and insecure transport corridors inhibit transit of freight traffic, both international and domestic, particularly in more remote and rural areas. In the Philippines, for example, an archipelago of more than 7,600 islands, complex geography has long posed a challenge to last-mile delivery, resulting in high shipping costs and slow delivery times. Even before lockdown was imposed, deliveries typically took nearly 12 days for areas outside Manila.
MSMEs missed the bus
The pandemic has shown that many MSMEs (micro small & medium enterprises), especially in developing countries, have lacked the business and technical skills to leverage e-commerce opportunities. Many consumers, especially those new to ICTs, have lacked the digital literacy skills required to make best use of opportunities to shop online. Addressing skill shortages takes time and can benefit from good practices from around the world.
Window of opportunity
Digital literacy is crucial to the development of the digital economy. Awareness of e-commerce is low among government officials and MSMEs in many countries, particularly in LDCs (Least Developed Countries). New business models require new skills, in both technology and commerce, on the part of established businesses and consumers as well as business start-ups. For businesses especially, these skills are not merely technical: e-commerce requires new ways of marketing and managing relationships with customers who are often unfamiliar with the modalities as well as the potential benefits of e-commerce. Digital enterprise is rarely taught alongside digital technology. This is an opportunity for education institutions in digital technologies to penetrate and help MSME entrepreneurs and employees to become digitally dexterous.