For eight years I’ve held executive positions with third-party ecommerce fulfillment companies — functioning as intermediaries between merchants and customers. It’s a unique perspective, as I’m able to see what works and what doesn’t for merchants and consumers.
My duties have focused on managing tight finances and systemizing “lean” processes, while trying to achieve the lowest error rate possible. As my responsibilities have broadened, my purview now includes sales, marketing, and learning how and why ecommerce companies fail.
I recently attended and spoke at two (Rakuten Expo and I.R.C.E.) of the three conferences that I’ve scheduled to participate in this summer. In this article, I’ll share broad themes that I’ve observed thus far.
Observations from Rakuten Expo and I.R.C.E.
- Judging by the number of workshops offered at I.R.C.E. and the number of mentions in seemingly every presentation, Amazon clearly remains the dominant player. But, historically, I understand the dangers when a business dominates any sector. I wouldn’t call Amazon’s position a monopoly. But it’s as close to an oligopoly as you can get. This creates the opportunity for market control and the ability to influence, create barriers, and determine winners and losers. Amazingly, Amazon dominates without any direct advertising, as Amazon’s sellers do the pitching for it.
- The number of participants at I.R.C.E. appears to be waning. While vendor participation seems to be holding strong, I was struck by the lack of potentially budding ecommerce companies that were there. This seems to be following what is happening globally, as U.S. ecommerce companies are maturing and transitioning into more of a consolidation phase, while companies in other parts of the world enter into an era of rapid growth.
Emerging, non-U.S. markets were a prevalent theme at both Rakuten Expo and I.R.C.E., with a clear understanding that the growth rate in the U.S., although still very healthy, is slowing and the adoption of ecommerce in countries like Mexico, Brazil, China, and India is accelerating. The conflict between “borderless” trade — which ecommerce drives — is challenging traditional regulations, as businesses try to manage duties, taxes, cross-border rules, logistics, and getting paid.
One very successful ecommerce company in Brazil shared that its top obstacle is being able to deliver the product to the consumers in Brazil. The company is addressing the problem by building its own delivery network. A Mexican company’s primary focus is how to receive payment in a country with consumer low credit card use. One key factor that every U.S. ecommerce business should consider is how the GDP per capita varies by country and how much lower it is in most other countries.
- Clearly the top theme was how the multichannel or omnichannel platform is no longer for the early adopters. It will be required for companies to survive. Jason Goldberger, president of Target.com, spoke about how Target’s business plan has moved beyond brick-and-mortar, so that each store is becoming its own fulfillment center and combining shoppers’ use of the Internet and mobile — from products that are ready for pick-up, to targeting specific content to each unique user, to using the store for display purposes only, where shoppers can experience a product. (A May 2015 article called “How to Build a Brand People Can’t Resist” on Inc.com provides another story on this theme.)
Beware Reliance on Amazon?
Crucial Vacuum’s Chad Rubin’s speech at I.R.C.E. gave another perspective on omnichannel. He espoused on how to benefit from the relationship with Amazon while clearly understanding the value of using a multi-channel platform. I was shocked at what I was hearing. Here was a guy that was saying what I’ve always believed in: Many companies fail as quickly as they thrived because they only sold through Amazon.
As great as Amazon can be and should likely play a role in your business strategy, it can also be your downfall if that is the only way you sell. Rubin created quite a reaction in the audience, as many of the attendees didn’t follow what he was saying, as he had to answer multiple times similar questions that basically asked the same question, “How do you sell in multiple channels” at the same time?
He did a wonderful job of explaining: selling diversification, leveraging improved margins through multi-platforms and building a broader, more stable business. This theme will remain dominant in the marketplace as increased competition in the U.S. will force companies to understand how to sell beyond one platform and reduce their business risk by encompassing a broader market.
Evolution of Ecommerce by the Numbers
- Global Internet usage has increased from less than 1 percent of the population in 1995 to 39 percent in 2014. The growth in Internet usage is solid, but slowing, at 8 percent in 2014, 10 percent in 2013, and 11 percent in 2012.
- Global mobile phone usage has increased from less than 1 percent of the population in 1995 to 73 percent in 2014. The migration to mobile will transform consumers’ ability to purchase a product through any device at any time.
- Ecommerce as a percentage of total U.S. retail sales is up from 1 percent in 1998 to 9 percent in 2014 — indicating a large ecommerce opportunity still exists.