Andrey Pavlenko, CEO at the Scallium platform, highlighted 5 key trends that we observe in the international retail sector in 2021
Marketplaces are the obvious trend. Such growth of e-commerce platforms, as in the last 2 years, has never occurred before.
Why do all retailers want their own marketplace? This business model gives them the business flexibility and the ability to scale up quickly. Marketplaces are convenient for the end customers too, as they allow them to select the most advantageous offer of a product or service promptly.
I believe that marketplaces go beyond Amazon. There are various other business-models for marketplaces. I would not follow the giants. It’s obvious that major retailers are going to grow and strengthen. And moreover, it’s hard to survive in this competition. But when the topic is about competition, why do we always focus on old ideas and turn to well-established parts of the market? Let’s analyze the market’s potential. Imagine that you are going to compete not with Amazon but with no fully shaped segment of the market. Does this look more effective and profitable?
You have no doubts that there is potential, agreed? Let us take a look at the results of “THE FUTURE SHOPPER REPORT 2020” study. Researchers asked customers to define what motivates them to choose another player of e-commerce instead of Amazon. 68% of users named a lower price list as the main reason, 27% chose a more flexible rate and 23% said it is about a distinctly more attractive loyalty system.
At one point in the last year, it seemed to me that the rise of e-commerce meant the end of offline retail. But it is not the situation currently. According to Scallium analytics, half of the global online shoppers (51%) prefer retailers and brands that have both physical and online stores.
Omnichannelty is dictated by the customers’ wishes:
- a wide range of products and a single online and offline prices;
- order on the website, and either pick it up at the store or home delivery;
- a single level of services and guarantees for returns, both online and offline.
Since I mentioned marketplaces previously in this article, I would like to add that the real marketplace is not pure e-commerce. The main point of the marketplace is creating an omnichannel company. At least, this is our mission at Scallium.
In 2020 those companies which had already developed online sales channels suffered from the protectionists restrictions connected to the global pandemic least of all. The remainder of retail had to urgently correct their situation. And since the launch of their own sites and services takes a long time, the companies have relied on strategic partnership.
Most of the offline brands entered big well-known marketplaces. There were a lot of shop-in-shops opened on e-commerce platforms like AliExpress. Delivery services became strategic partners for big retail that did not have time to launch their own product delivery departments. Today most of them already have their own delivery services.
In my opinion, the trend of partnership, which has been observed since winter 2020 in retail and e-commerce, is the stage of “testing” new formats. All major retail players will come to their specific model sooner or later.
I want to give an example from the logistic sphere. On the one hand, retail continues to transform into various types of logistics centers operating the processes of packing and issuing order points. The customer orders online and then he/she picks up the packing order whenever it is convenient for him/her. At the same time, retail companies try to “rediscover” human contact in offline stores – through staff, shop assistants, or sidewalk promoters.
On the other hand, logistics companies become hybrids, too. They started talking about creating their own marketplaces (though they are calling this model differently). This could allow them to connect regions at a time when some of them are partially isolated. Logisticians are introducing new products, using new channels, and looking for new sales markets. Thus, they create competition for retail. So do banks, social media, and search engines like Google. They all are rivals for e-commerce companies to some extent.
I analize this is a long-term trend that companies just started thinking about. The retail businesses have never had so many opportunities to enter foreign markets practically without barriers before. So why not?
Cross-border model helps retailers to scale to foreign markets and significantly increase their customer base. According to a study by Pitney Bowes, two-thirds of the world’s consumers already made cross-border purchases in 2018, and 32% do this monthly. According to experts from Pitney Bowes, by 2025 the volume of retail trade across the border will reach $1.6 trillion.
Forecasts for next year are very optimistic. Offline retail growth is expected to rebound after pandemic restrictions on the economy.
However, this doesn’t predict that everything will be the same. There is no doubt that digital technologies will continue to grow rapidly. Click & Collect, D2C (direct-to-customers) models will become commonplace. As well as more high-tech solutions such as virtual assistants, online fitting rooms, and artificial intelligence systems. E-commerce platforms travel inside value chains, meeting the ever more needs of every participant of the trading process.
Stay tuned. All the exciting things are ahead of us!
About the Author
Andrii Pavlenko, CEO and co-founder of Scallium, has 15 years of experience in developing software products. He used to work with a team to develop a process management tool, which was later bought by Amazon. Also, at one point in his life, Andrii consulted Software companies on how to become more effective, working together with one of the Scrum co-founders Jeff McKenna.
Having applied the accumulated experience and knowledge, Andrii helped companies such as IBM, Oracle, and others to build enterprise processes and develop Agile culture.
Andrii also is one of 5 co-founders of Hubber, which simplifies the process of interaction between suppliers and online stores. Since 2017, Andrii has been developing a separate product for enterprise customers, who want to move their e-commerce business to the next level — the Scallium platform.