eCommerce didn’t just grow globally in 2020, it exploded in volume terms as the pandemic took hold around the world. In an article last year, I talked about how the increasing use of technology was driving the consumer’s online experience; little did we all know how the scope and duration of COVID-19 would impact our online shopping habits.
Now, in 2021, it is clear that eCommerce has grown at a rate 2 to 5 times faster than before the pandemic and in virtually every country. That growth occurred most significantly in online marketplaces, groceries and food delivery, clearly showing the most pressing needs of consumers during the pandemic.
Marketplaces allow any company to radically expand its business globally, and they create transparency in availability, stock levels and prices. In addition, marketplaces allow companies to function 24/7 and generate trust between a brand and its customers, meaning those customers are more likely to purchase from an online marketplace with a wide range of brand options.
An average of 56 percent of consumers across eight focus countries said they intended to continue online shopping once the pandemic subsides, according to a McKinsey survey in November 2020.
The key reasons given were that consumers appreciate the convenience of eCommerce and that delivery companies have managed to keep up with demand with only minor glitches. The report states: “This sustained expansion of eCommerce will potentially lead to a significant shift in occupations, displacing store sales assistants and cashiers in the on-site customer interaction arena and adding jobs in the transportation and warehousing arena.”
All of this extreme growth poses significant challenges and opportunities for the transport and logistics industry, as the marketplaces seem to hold the dominant market position in the eCommerce arena.
In essence, eCommerce marketplaces are information technology companies acting as intermediaries connecting buyers and sellers in a simple way. Third-party companies can sell their goods in an online environment without requiring their own website. These companies still sell their same goods but as part of a larger shopping ecosystem—one owned and operated by the marketplace.
The big names are very familiar to all of us. Alibaba had 70 billion orders last year, with Amazon at 17 billion orders. With a world population of approximately eight billion, that’s considerable market penetration and volume. The United Nations Global Trend report confirms this saturation and states that the eCommerce sector has seen a dramatic rise in its share of all retail sales.
The report goes on to state that consumers in emerging economies saw the greatest shifts to online shopping with the strongest increases in China and Turkey. In locations such as Germany and Switzerland, the increases were the smallest due to consumers in those countries being already highly engaged in eCommerce.
Pure players — marketplaces and e-retailers — account for the majority of the market. The data simply confirms the focus on these two sectors.
The clear difference between marketplace companies and other online players is that they are extremely technology savvy. The companies seeing the largest increases in scale by volume are those who invested massively in technology. As little as five years ago, industry commentators were still asking if marketplaces could work, because they all seemed to be losing money. Today, they are the dominant force and will continue to be so in the foreseeable future.
According to the Mastercard Economics Institute, eCommerce now makes up $1 of every $5 spent on retail, up from $1 for every $7 in 2019. Yet eCommerce is not a product or a market segment in its own right. In my view, eCommerce is a catalyst that affects every aspect of the supply chain. So, technology cannot be the only differentiator.
The other difference with marketplaces is their mindset. eCommerce marketplace operators have their own distinct mindset when compared to mainstream logistics. They tend to not be as conservative as traditional logistics service providers (LSPs) who, for the most part, are too bureaucratic and too risk-averse and whose processes are undertaken in the same way for every customer. These LSPs desire long-term, stable contracts, but these relationships present no opportunity for growth and no drive for new business or aggressive growth initiatives.
Marketplaces are looking to seize every opportunity, and central to that expansion is rapid-reaction operations through vibrant and fast-moving partnerships with logistics providers. Truly digital players must have fully integrated eCommerce and digital sales that allow them to quickly react to changing customer demand, deftly adapt their existing offerings, rapidly introduce new products, and then seamlessly deliver those solutions to the customer.
These rapid-reaction operations start with being able to spot opportunities quickly. Being responsive to the market is not being reactive. It’s being attentive and aware of the slightest changes that provide an opportunity to advance or that foreshadow a market obstacle to avoid. The shift to eCommerce is likely to persist because of the convenience and efficiency offered to the end consumer. One side effect is that this produces jobs in logistics and supply chain—jobs that have helped offset losses in other occupations during the pandemic. The projected, sustained expansion of eCommerce will potentially lead to significant occupational shifts worldwide, adding jobs in the transportation and warehousing arena, both long-term and to meet seasonal demand.
It has been suggested that, in the coming decade, the workforces at eCommerce marketplaces could increase by up to 50 percent to meet the surge in eCommerce demand. Those jobs are not only in warehouses, but also in customer service and, of course, in software and hardware engineering for cloud computing and AI functions. These changes will also affect the logistics service providers, who have the capability to service the marketplaces’ needs and who will be tasked with handling and managing ever increasing volumes.
The last two years have shown us all that consumers value convenience and reliability. Retailers have come to both understand and appreciate the appeal and resilience of eCommerce, recognizing that marketplaces can be used to develop a new source of revenue and bolster their bottom line.