01. Too Big to Fail? The Year Amazon Stopped Being Unstoppable
Cracks are appearing in the eCommerce conglomerate’s previously impenetrable armor.
eCommerce revenue now represents 10.7% of U.S. retail sales. With 47% of eCommerce transactions (or 5% of all U.S. retail sales), Amazon has surpassed Walmart as the world’s largest retailer. Globally, online’s share of total retail sales is now 16.4%, with eCommerce accounting for more than three-quarters of overall retail growth. Fueled by digital, retail is, in fact, growing.
In short, eCommerce has transcended physical and digital channels as brands and retailers continue to invest in digital to grow their business while juggling with data, privacy and logistical challenges. The “e” in “eCommerce” is superfluous.
As one of North America’s leading eCommerce agencies with retail and B2B clients such as New Balance, Structube, BMR, Garneau, the SAQ, Birks and SAIL – to name but a few – Absolunet has a front row seat when it comes to digital commerce developments. Here are 10 eCommerce trends to watch for in 2020 — developments that brands and retailers need to consider to bridge the gap between how they sell today and what their customers expect in the digital economy.
Cracks are appearing in the eCommerce conglomerate’s previously impenetrable armor.
In May, Amazon surpassed Walmart as the world’s largest retailer. It later became the world’s most valuable public company. Jeff Bezos is now the world’s richest person. In less than 25 years, Amazon has disrupted books, DVDs, movies and TV, groceries, web and cloud hosting, shipping & logistics, home electronics and more. They are now poised to take on Fedex, UPS and the United States Postal Service as a delivery service, as well as healthcare.
The days of Amazon breaking into or simply breaking industries without supervision or oversight may be numbered. As anti-Amazon sentiment grows, talks of antitrust issues get louder and brands begin to question the value/cost of working with Amazon.
We believe many strong apparel (and even non-apparel) brands will continue to avoid or curb their relationships with Amazon in the future. Brands don’t need Amazon.
In November, Nike announced it was ending its association with Amazon and removing all Nike products from the platform.
The Canadian eCommerce platform is becoming an anti-Amazon option that empowers its 1 million merchants to take on Amazon with a growing feature set that includes a $1B fulfillment network, chatbots, POS systems, AI-based returns optimization, personalization and more.
DeWalt power tools sold on Amazon often include a branded image listing authorized resellers. The image specifies “DeWalt does not guarantee the quality of authenticity of products purchased from non-authorized resellers on Amazon”.
In 2017, Walmart reportedly recommended tech vendors move away from AWS-powered cloud apps. "It shouldn’t be a big surprise that there are cases in which we’d prefer our most sensitive data isn’t sitting on a competitor’s platform.”
The US Department of Defense awarded a controversial $10 billion Joint Enterprise Defense Infrastructure (JEDI) contract to Microsoft despite Amazon Web Services (AWS) being considered the clear front runner.
The AAFA, an association that represents over 1,000 brands, including Adidas, Gap, and Target accused Amazon of creating a black market of counterfeit goods.
The suburban mall is undergoing an urban revolution.
Digital continues to reshape brick and mortar as a new breed of malls promote interactions, convenience and experiences over shopping. From coworking spaces to entertainment, destinations that put “experience” and “work / live / play” at the heart of their mission will replace the dated, outgoing malls of the 20th century.
Digitally-savvy malls are becoming foodie destinations as chef-driven food-halls, sushi bars and premium coffee shops now represent 25% of the square footage in Class A malls. Now located in malls, office space, gyms and schools offer proximity, convenience and experiences.
In this day and age, you’ve got to create a different experience.
Shopping Malls Aren't Dying -They're Evolving
Google will move thousands of employees into L.A.’s Westside Pavilion, creating a vibrant transit hub and an instant increase in highly qualified foot traffic.
L.A.’s Palisades Village hosts yoga classes and live concerts. Concierges can arrange family picnics with a free blanket service.
The Quebec City Mall measures people like Google measures clicks thanks to “computer vision” powered cameras, traffic counters and cross-referenced POS data. They measured the actions, movement and purchase behavior of every mall visitor during a pilot project with the Retail Innovation Foundry, Ivanhoe-Cambridge and Galilei.
Industrious’ Scottsdale, AZ coworking space (in a mall) filled up in 2 months instead of the usual 9. The co-working company has expanded into the suburbs in Virginia, California, New Jersey, and outside Atlanta and Chicago - in some cases, replacing former Saks Fifth Avenue and Barney's locations.
Merchants getting closer to true omnichannel by using facial recognition and device tracking
Physical retailers are bridging the gap between online and in-person data collection with cameras, facial recognition, tracking beacons, Point-of-Sale (POS) data and traditional digital measurement and analytics.
Just as online retailers can understand the movement of users on their site, brick-and-mortar locations use WiFi, sensors, Radio Frequency Identification (RFID) beacons and more.
The goal is to identify high-traffic areas in the store, overlooked products, dwell time - even product movement from rack to fitting room.
From real-time merchandizing to making data-based decisions about physical interaction management and store planning, the age of real-world data is upon us. Combined with web, mobile and social data, in-person data collection and analytics brings retailers much closer to a truly 360 degree customer experience.
Getting shoppers to volunteer their information is a matter of offering a sufficiently compelling experience
Eyewear retailer BonLook knows that 86 glasses-wearing, 20-to-30-year-old females passed by its Quebec City store between noon and 1 p.m. on Friday. 12 entered the store. 2 bought a pair of glasses. Conversions increased overnight when they changed their storefront display.
Retailers La Vie en Rose, BonLook and Tristan took part in the Retail Innovation Foundry’s pilot project in Quebec City’s Place Sainte-Foy mall, which combined data from traffic counters, retailers’ POS, and third party Anonymous Video Analytics (AVA) to map the in-mall sales funnels, including the classification of passerby traffic based on attributes like estimated age and genders, thanks to AI-powered facial recognition cameras.
Amazon Go stores are using computer vision to recognize faces and products in order to provide a truly frictionless - with no actual checkout - purchasing experience. Combined with mobile and browsing data, the retailer is equipping itself to make better, more personalized recommendations across platforms.
Retail Deep replaces loyalty cards with facial recognition thanks to AI-enabled in-store cameras, sending notifications and relevant recommendations to staff when known customers arrive. No need for loyalty “cards” as they have already been identified by face. This Canadian startup has found success in the Chinese market where facial recognition is widely used.
Fast & free shipping will be an option for every merchant.
The company that brought consumers free shipping, then free 2-day shipping, next-day and now same-day shipping (Prime Now!) will make it possible for competing merchants to offer the same, by becoming their carrier.
2020 will be a tipping point for “fast and free shipping” as Amazon’s logistics and shipping business aims to disrupt the courier and postal industry; the eCommerce giant will move from client to competitor for virtually every major carrier. After the US Postal Service, UPS and FedEx, consumers can expect to see Amazon’s logo on vehicles delivering parcels.
Certain major customers have recently begun diverting additional volume (...) by in-sourcing the last-mile delivery.
FedEx dropped Amazon as a customer after volume increased 24% but revenue per package went down 7%.
Amazon, who shipped over 5 Billion parcels with its Prime service in 2018, now has 42 planes in its Prime Air Fleet and has ordered 100,000 electric delivery vans to deliver its packages and those of “fulfillment by Amazon” (FBA) clients.
After years of being Amazon’s main delivery provider, USPS moved 47 million fewer packages than the previous year (-3.2%) in Q2 of this year.
The Rise of Privacy by Design + consumers choosing which brands can access their information.
Consumers have been trading data for access (social media) and rewards (loyalty programs) for decades.
Consumers know their data (in-store movement, online browsing, geo-location) is being used. And for the first time, they are coming to the bargaining table, ready to negotiate. Brands and merchants will move from trying to capture as much user data as possible to engaging in an exchange of value.
As the volume of personal data multiplies and as privacy awareness grows, a new type of service and options is expected to grow: privacy by design, privacy as an option and, interestingly, consumers getting “paid” to share their data. The challenge for brands and merchants will be to find the balance between acquiring, using and storing data while maintaining the “as much as we need / as little as possible” balance.
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In an Amazon Go physical store, every single action a customer takes can be associated to them - a price that consumers accept in exchange for a novel, convenient and frictionless shopping experience.
Costco’s membership and credit card programs provide detailed visibility into customers’ purchasing patterns across channels. For Costco members, this data exchange is a small price to pay for Costco’s convenience and prices.
RetailDeep uses AI-enabled cameras to recognize customers as soon as they walk into participating stores, providing staff with past purchases and product recommendations, essentially replacing loyalty “cards” with the customer’s face. RetailDeep has found success in the Chinese market where facial recognition is widely used.
Apple’s Credit Card promises privacy; purchase data won’t be used for advertising, sold to third parties, or anything else. Accessible only to iPhone owners, the Apple card also comes with a cash back rewards program.
Jaguar Land Rover will provide cryptocurrency credits to drivers who share data on potholes and traffic congestion with navigation providers and local authorities while driving. Credits can be redeemed for rewards such as a cup of coffee, toll payments, parking fees, or even electric-car charging. JLR began testing the program in Shannon, Ireland.
Sephora’s Colour IQ device scans a customer’s skin and identifies their skin tone in order to recommend products that perfectly match a shopper’s complexion. The information is saved to the consumer’s profile to help personalize all future interactions across channels.
The world leader in digital commerce will unleash its shoppers and technologies on the world.
42% of the world’s eCommerce transactions happen in China, up from 1% in 2005 - a market larger than the U.S., the U.K., France, Germany and Japan combined. In fact, at $1.94 trillion, it is three times bigger than the US market. Their mobile-savvy population has enabled payment, ordering, fulfillment, automation and personalization technologies to develop at breakneck speeds. Whereas 65% of US mobile users are still reluctant to use mobile payment, China boasts a 100% adoption rate.
And now, Chinese consumers and technologies are expanding beyond the Great Wall.
As Chinese tourism booms, tourists bring their devices, digital habits (QR code payment!) and expectations with them, encouraging merchants worldwide to adopt and integrate Chinese technologies, platforms and interfaces, fast-forwarding many merchants’ degree of digital sophistication. Combined, Wechat Pay and Alipay have 1.7 billion users, 10 times more than Apple Pay.
In 2020 it is forecast that Chinese consumers will transact $45 trillion through mobile payments, by which time the county will be pretty much cashless.
Chinese shoppers who used Alipay spent €1,273 ($1,403 USD) in French stores during Golden Week, 15.5% more than the average US shopper will spend on gifts, travel and entertainment for the entire 2019 Holiday season ($1,284 USD).
China’s most popular payment platform with nearly 1 billion active monthly users has partnered with Visa, MasterCard, American Express, Discover and JCB to allow foreign visitors to link their credit cards to WeChat Pay. This marks the first time that foreign visitors will be able to use international credit cards to pay with WeChat Pay in China.
Singles Day 2019, the Chinese eCommerce giant’s massive 1-day event, was headlined by Taylor Swift and broke their previous sales record, selling $38.3 billion in 24 hours (approximately 1% of all retail revenue on earth for 2019).
Foreign tourists in China can finally use Alipay, previously available only to consumers with a Chinese bank account and local mobile number. The “Tour Pass” program registration requires a foreign phone number, a visa and a credit card, after which tourists can book a taxi, buy a train ticket, book a hotel, etc. with their device.
Fulfillment, order management and logistics are the new battleground for the digital consumer
43% of consumers expect free shipping on their orders, with the same proportion expecting to receive their package within 3 days. Retailers and brands, be they B2B or consumer-facing, are beefing up their delivery muscle with the help of digitally-focused distribution centers to meet increasing pressure on rapid fulfillment.
By having merchandise available in strategically-placed, robo-staffed and courier optimized warehouses, merchants are now competing on simplicity of experience, process, and functionality. Warehouse construction has grown 29% annually for the past 5 years, much of it attributable to eCommerce and fulfillment.
The Canadian sports superstore’s new 80,000 sq./ft. distribution center was designed to serve digital consumers and its network of stores with equal speed, efficiency and simplicity.
The Canadian leader in contemporary furniture built a distribution center measuring almost 700,000 square feet in order to continue its impressive growth, the majority of which is being driven by digital transactions.
FedEx launched FedEx Fulfillment, a multi-channel e-commerce fulfillment and inventory management platform aimed at small and medium-sized businesses who can store their products at 130 FedEx warehouses in the U.S. and Canada. As items are ordered from stores, sites and marketplaces, FedEx will package and ship them to customers in boxes that feature the seller’s branding and logo.
The eCommerce platform plans to integrate seven warehouses in 2020 and is investing $1b over five years to build the Shopify Fulfillment Network to help its 1 million merchants fulfill orders, warehouse and deliver their merchandise faster.
eFulfillment provides a nationwide order fulfillment service that smaller businesses would struggle to build on their own. UPS eFulfillment features an online portal where merchants can create shipping labels and track orders. UPS then handles the shipping and returns for a monthly fee.
Brands and retailers start looking beyond the Google/Facebook duopoly
In 2018, $273b was spent on digital ads globally, 39% of all advertising in the world. Combined, Google (Alphabet) and Facebook take in 61% of all digital advertising spend in the US, monetizing the 12 hours the average American spends interacting with screens every day. Analysts expect Google’s online ad revenue to increase 22% in 2019, as merchants continue to shift their budgets to digital.
Americans see between 4,000 and 10,000 ads daily (up from 500 in the 1970’s) and the “interruption model” is reaching a saturation point, or “Peak Ads”.
Overwhelmed consumers are becoming harder and more expensive to reach through traditional, interruption-based, pay-per-click/view campaigns.
Non-traditional, more native and embedded brand exposure is becoming increasingly common. Brands and merchants are creating content and experiences that get talked about - simultaneously gathering data and creating direct connections with consumers, instead of relying on the “walled gardens” of Amazon, Facebook and Google.
30.5% of CMOs surveyed intend to increase their focus on influencers and content creators.
In 2018, online ad fraud (from bots to false view reporting) cost advertisers $12.5B
At least 75% of North Americans engage in at least one form of regular ad blocking behavior.
In 2019, 25.8% of Americans are blocking advertisements on their connected devices.
P&G, the world’s biggest advertiser, has a rapidly growing database of 1.5 billion consumer IDs to build direct rapport with consumers.
When Adidas’ Latin American AdWords campaign accidentally stopped working, sales and traffic remained unchanged.
P&G’s Bare Skin chat series of video content, featuring James Corden, has garnered hundreds of millions of views and caused an 86% increase in branded searches and increased sales.
Known for their social media presence, Wendy’s created an avatar in the very popular Fortnite game to interact with its publics and drive brand messaging about how they “hate frozen meat”.
Merchants take delivery into people’s vehicles, households, and appliances.
After “free”, two-day, one-day and same-day shipping comes shipping directly into the trunk of your car / in your garage / in your refrigerator. As the shipping wars escalate (Trend #4), carriers and merchants are looking to increase the convenience of deliveries by going into people’s homes and cars thanks to remote access technology.
Aside from convenience, these methods of delivery aim to make grocery shopping easier/possible/safer (avoiding thawing or melting ice cream, for example) as well as reducing package theft which, in turn, may reduce the cost or anxiety of delivering/receiving valuable items, such as consumer electronics or jewelry.
Using smart-entry technology and wearable cameras, Walmart InHome Delivery enables personnel to deliver online grocery orders right to the customer's refrigerator. Deliveries can also be made to a customer’s kitchen or garage.
With Amazon’s Key App, users can remotely unlock their car and/or garage once an Amazon delivery person approaches. For in-garage or in-home deliveries, customers use the Cloud Cam to monitor the drop-off.
The inbox is the new browser
Beyond gifs and screenshots, the inbox is becoming dynamic and legitimately browsable
Consumers and buyers will do everything from choosing product sizes to browsing carrousels, opening menus, choosing colors, leaving ratings and reviews, etc. - without ever leaving their inbox, the email or mail app. Brands and merchants can make emails significantly more interactive, browsable and actionable, including media rich formats like video.
Interactive emails makes it possible to dynamically update emails, which means it’s less likely that you’ll be faced with outdated information just because it’s contained within an old email - like delivery status, for example.
Gap’s mails include a fully browsable menu directly in the inbox, letting consumers choose exactly where they want to go next.
Home Depot uses interactive mails to send product review requests: customers rate (1 to 5 stars) and type reviews into the email.