The e-commerce landscape has expanded beyond all predictions over the last two years. There has been a dramatic increase in the demand for consumer goods across all categories. According to Statista, the e-commerce market in the U.K. is the largest in Europe and is expected to grow to US$116 billion by 2024.
Consumer spending behaviour is constantly changing. There is evidence of pent-up demand for apparel, accessories and beauty products as we gradually return to a post-Covid new normal. Online grocery sales continue to grow although at a slower rate.
The disruptions in global supply chains including container shortages and port congestion continue to cause delivery delays. These are presenting challenges for merchants and distributors who are responding as best they can.
What the customer wants
Consumers are becoming more selective about what they buy and are less accepting of poor service and slow delivery times. Today’s typical online customer expects:
Fast, free and on-time deliveries.
- Same-day deliveries are now commonplace and expected.
Environmentally responsible packaging.
- Consumers are concerned about recycling and waste that ends up in landfills and the oceans. The new environmentally acceptable materials can be just as efficient and cost-effective as using plastic and other conventional materials. Compostable and biodegradable packaging are among 2022’s top environmental fulfilment trends.
- Ethically sourced products. Consumers want to know that the goods they buy are safe, sourced legally, ethically and without damaging the planet. To satisfy consumer requirements retailers are starting to require proof from their suppliers regarding sustainability and provenance claims.
An easy and free returns process.
- Customers do not want to pay to return unwanted or damaged goods. Due to the cost of managing returns some retailers prefer to refund or credit the customer instead.
- Alternative delivery location options. There is a growing demand for contactless alternatives such as drop-off collection points and parcel lockers. These are becoming a common sight in petrol stations, transport hubs and large retail stores.
Business-to-business (B2B) and Business to consumer (B2C) e-commerce models are well-entrenched and continue to grow. Manufacturers produce their goods, sell them to intermediaries, wholesale dealers or distributors who in turn deliver to the end-users.
With more companies establishing direct and personal interactions with consumers to increase sales, D2C has emerged as an alternative channel. In the UK consumers want brands to connect with them directly and cater to their hybrid work situations. Beyond groceries and fashion, other categories such as hobbies, DIY and health and fitness are taking hold. Fast-growing brands in this sector are Gymshark, Callaly which sells plant-based feminine care products and Bloom and Wild, an online florist.
Consumer behaviour is driving manufacturers and distributors to adopt new initiatives.
To achieve the level of transparency the consumer is looking for we must make it easier to find the information they want. It can be about the food we eat, the clothes and shoes we wear or the furnishings in our house.
The buyer wants to understand terms such as organic, free trade, cruelty-free, and free-range and know that they can be substantiated. Irresponsible suppliers can make fraudulent claims about sources of raw materials and ingredients. Retailers that want to develop authentic relationships that retain the “new” type of consumer realize that they need transparency in their end-to-end supply chain. Tracing solutions make recalls more manageable and quality problems can be addressed quickly.
Technology steps in.
Tracking items manually using paper-based systems is not workable. Digital solutions overcome such challenges and those due to tampering and counterfeit practices, Software solutions can also drive regulatory compliance and support urgent product recalls.
Smart labels, RFID and QR codes are being used extensively on food items to provide consumers with up-to-date, real-time information on third-party certifications, environmental compliance and safe handling. There is some way to go to achieve full end-to-end traceability across supply chains due to outdated technology and a reluctance to share data. However, by leveraging new technology such as IoT and blockchain, retailers can provide the depth of information consumers want.
The Amazon factor
Amazon.com, Inc. is the centre of the e-commerce universe in the Western world. It has developed beyond being an online retailer. It has evolved into a fulfilment organization involving warehousing and inventory management as well as transport logistics. In the US in 2022, Amazon is expected to pass UPS and FedEx to become the largest delivery service in the U.S.
It has now expanded its offering to deliver advertising content and personalized experiences as well as products and services. Its competitor such as Walmart, Alibaba, E-bay and JD.com are playing catchup.
Amazon has been testing drone deliveries where customers can choose from around 3,000 items weighing under 5 pounds. Amazon plans to offer drone services in 32 locations in the US by 2025, delivering 1 million packages annually, free of charge to Prime customers.
McKinsey projects global drone deliveries for 2022 will be close to 1.5 million, up from under half a million in 2021. Worldwide it is estimated that 2,000 drone deliveries occur each day currently.
E-commerce is too large and valuable a channel for sellers to treat it as an afterthought. There is a wide range of channels a business can sell and engage customers on but how you communicate online is key. It must be fast and easy, offering flexibility and convenience.