After a long period of abstinence I finally found the time to share some of the insights that I have seen & experienced first hand from starting & running Lesara and being able to understand the dynamics and big trends that happen in online retail from my own experiences as well as talking to a lot of founders & CEOs of E-Commerce business around the world.
I collected some of those insights for a presentation held last month in Amsterdam at the Webhelden conference, as part of the celebration of our entry into the Dutch market.
The 4 biggest trends I currently see are:
2. Vertical Integration
3. Mobile First
4. Leveraging Community
So let's start with the obvious one, 1. Cross-Border-Commerce.
The internet has always been about democratizing purchasing decisions and extreme transparency. Best value-for-money and a great customer experience just matter a lot, if the competition is just one click away. Irrespective of what people think about the price consciousness of consumers or about the general decrease in margins: The consumer is king and hence every retailer needs to question himself, how to build a better experience, day-in, day-out.
So while until recently competition was mainly limited to local online retail, consumers have started to realize that they don't need to limit their selection to local retailers - as people base their buying decision on customer reviews, referrals and the presence of the online retailer, a retailer abroad can be just as trustworthy, if not even more trustworthy than a local one. In countries where either a.) English is a well-spoken second language (think Sweden, Netherlands etc.) or b.) who are too small for their own local online retail players cross-border-purchase already now contribute more than 50% of total online sales.
Whereas E-Commerce in general is growing at a healthy rate of 20% in Europe, Cross-Border-Commerce is expected to grow an annaul 43%, from $105bn to >$300bn by 2018.
So for every online retailer: Make sure that you are competitive enough to leverage this for yourself or go under.
2. Vertical integration
The online retail industry has been mirroring the developments of brick & mortar-shops over the last decades in just a few years.
The first big rise was from companies re-selling other brands with a focus on desktop.
This mirrored the initial successful concept of general stores - however those are the first in the offline business to loose out, most of them already struggling.
The online equivalents of those general resellers are amazon, zalando & others. The challenge with this model is that in a transparent world you need to constantly deliver best value = cheapest price for a comparable product - something that comes only with scale and which amazon has mastered excellently. But which also doesn't leave any room for competition.
The next wave will be all about the biggest segment in offline retail: Vertically integrated discount & fast fashion retailers. These retailers account for over 60% of offline retail and have been slow in embracing online. This is where the $$$bn opportunity is going to lay in over the next few years, as shown by companies such as alibaba, wish.com, lightinthebox and others.
In a digital & transparent world, every middlemen between the factory and the retailer just doesn't make any sense.
At Lesara we always ask ourselves, what our reason to exist is - and the answer comes natural: We provide the quick delivery, marketing, user experience and control supply chain & merchandise quality, whereas the factory produes the merchandise. A perfect combination, that doesn't need any wholesellers or agents in between and which we believe will be the future
3. Mobile first
While this has been months, even years in the coming, a lot of companies still see mobile as another, smaller version of the desktop website. A by-product which they do responsive and that's it.
Just as people first underestimated the wave that would come with online commerce, the same seems to happen with mobile.
In this case emerging markets such as India and China, where mobile penetration was bigger than computer penetration to start with, lead the way: Over 80% of revenue is generated already via mobile and some of the biggest retailers, such as Flipkart or Myntra are even closing down their desktop websites to focus on mobile development (http://time.com/3829150/india-flipkart-tech-e-commerce-website-mobile-app/).
The reason why also European companies also need to think mobile first: The user behavior and experience is a completely different one than on the desktop. People don't read text, they focus on pictures, they browse with their thumbs and not with their mouses, purchases are easier to make, but less cross-selling possible to name a few.
In any case retailers need to understand that the shift from online to mobile will be just as big as from offline to online and hence requires just about the same ressources to master.
4. Leveraging community
What started slowly with Amazon pioneering customer reviews and developed into sharing via facebook or other platforms has accelerated quickly thanks to the ease of sharing via smartphones. Sharing products, websites and news is just a whatsapp-message away - and hence also we see that sharing ratios are 5x as big for mobile devices vs online devices.
Even more interesting is the increase in user-generated-content, as plenty of retailers start building communities along the way, with Poshmark, Sammydress start adding user pictures to the actual clean product presentations. Sometimes it doesn't need to be picture perfect, but just authentic and real