The e-commerce market saw rapid change in 2020 as the Covid-19 pandemic spread across the globe. In virtually every location social restrictions and stay-at-home orders pushed many to online retail channels. Spikes in e-commerce sales were seen globally with markets reporting accelerated adoption as bricks-and-mortar stores closed. Consumer behaviour also changed as shoppers were pushed online to meet their need for good in a pandemic-stricken world. New retail categories found a willing consumer base online while established sectors like grocery finally saw a breakthrough in terms of online adoption. The demographics of online retail shifted too as access and necessity widen the segments of populations able and willing to turn to online channels.
In 2021 it looks as though the drivers of e-commerce market development will change still further. As the Covid-19 pandemic recedes the change it has instigated will continue ripple across the market for years to come. Here, Ti presents two trends accelerated by the Covid-19 pandemic. Extended analysis of the trends is available in Ti’s latest whitepaper How Covid-19 changed the global e-commerce logistics market.
Increased Competition in the cross-border Market
According to eMarketer, almost 150m people shopped online for the first time during the pandemic, and this number of new shoppers will continue to rise. e-commerce’s growing traction has gained attention from brands wishing to capitalise on this growth. This has led to increased competition in the e-commerce market, domestically and internationally.
Cross-border e-commerce is gaining traction. Across the world, the demand for foreign goods is surging. As the Coronavirus spread and consumers became more comfortable purchasing online, they were also introduced to a variety of international brands. According to Global-e, online cross-border sales experienced a 21% spike in growth during the first half of 2020. In preliminary results for Q4 2020, DHL reported that more than 45% of its TDI volume comprised B2C shipments, having risen from around 33% in 2019 and further illustrating the rise in demand for cross-border sales.
The ongoing growth in cross-border e-commerce poses many challenges, however. Cross-border operations are considerably more complicated compared to domestic operations. For e-commerce to be profitable, providers must overcome the costs associated with residential B2C deliveries which in addition to being more geographically spread also sometimes require multiple delivery attempts. In cross-border operations, those challenges are magnified. Logistics providers also face the increased importance on value-added services such as trade compliance, customers, taxation expertise and documentation and returns handling. Meanwhile, retailers have the additional challenge of tailoring websites and inventories to specific countries.
When it comes to delivery, consumers have stated that the main drivers for choosing cross-border purchases are savings, shipping, and quality. However, the logistical challenges those services create, receive little attention. Additionally, questions concerning how those challenges inflict costs are either passed onto consumers or absorbed by the retailer.
These issues could be mitigated by moving inventory into multiple markets, closer to where the demand is. Doing would ensure reliable and quick delivery and is advantageous for the returns process. However, this presents a new set of challenges that will need addressing. Essentials such as building up a physical warehouse presence with duplicated inventory require additional capital and operational expenditure, as does staffing those locations and investing in automation technology to operate them. Additionally, the introduction of IT and data analytics that can determine appropriate inventory allocation to each warehouse, market, or country can drive down costs. Despite the challenges presented by cross-border e-commerce operations, the growth potential is enormous. The Covid-19 pandemic has emphasised its potential further.
Returns are increasingly becoming a competitive sales point for retailers. According to Doddle, approximately 68% of consumers expect free returns. With the number of returns increasing, retailers will need to establish an efficient returns process to reduce the dampening effect returns have on profitability whilst simultaneously keeping consumers happy. According to Optoro, a provider of returns technology, approximately 89% of consumers are less likely to shop at a retailer following a bad returns experience. Meanwhile, 97% of consumers would continue to shop with a retailer if they had a positive returns experience.
Returns are expensive as retailers often use third-party services to manage returns of digitally purchased products. This process is time-consuming as it can take a while for a product to return to stock and be made available to buy again. As a result, some products are unlikely to be resold at full price. A popular method for returns amongst consumers has been to return the goods directly to the retailer in-store. However, as more retailers either choose or are forced to close their bricks-and-mortar stores, this option may no longer be as viable.
Some last-mile delivery companies are working to help retailers better manage online returns. In January, Hermes UK announced the launch of a new service to improve the returns experience for its retailer customers and their consumers. The service, named ‘What’s inside the box?’, allows consumers to inform the retailer in advance of the exact items being returned. Retailers using this service benefit from knowing which items are being returned, allowing them to update SKUs, manage warehouse stock levels and acquire accurate and up to date customer data. There is also the option for retailers to offer an immediate or expedited refund, helping to keep customers happy.
Source: Transport Intelligence, March 2, 2021
Author: Transport Intelligence
GLOBAL SUPPLY CHAIN INTELLIGENCE (GSCi)