By Chris Petersen and Adam Simon
There is a tipping point coming where ecommerce will overtake traditional retail sales. That critical mass is not as far off as many might think. Doug Stephens recently published some interesting forecasts on the growth of ecommerce, particularly the top 3 giants. Based upon the recurring annual growth rates of 12 to 35% for the large ecommerce players:
- Ecommerce will be 25% of total US retail in 6 years, and may exceed 30% of the UK
- Amazon, Alibaba and eBay will control 40% of global ecommerce within just 3 years
- Within just 15 years, ecommerce will overtake traditional retail sales accounting for more than 50% share of consumer sales
This is highly relevant in the Middle East with the takeover of Souq.com by Amazon, and the recent price-slashing at the beginning of this month. Other than being swept away by the tidal wave of ecommerce giants, what are the choices for brands, distributors and traditional retailers?
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Yes, Amazon and Alibaba are retailers and formidable competitors. They have also created the most robust collaborative marketplaces in the world. By literally offering a turnkey solution for marketing, selling online and shipping the last mile, they have attracted millions of brands and retailers. Amazon's Marketplace in the US offers unparalleled choice of over 480 million products online.
Amazon as a retailer seller achieves a huge benefit of only having to stock less than 10% of the actual inventory for all the products listed for sale. The Marketplace sellers also subsidize Amazon's infrastructure and systems costs across many partner sellers in the Marketplace.
Whether it be Amazon, Alibaba, eBay or Walmart … their hyper growth is built upon a collective collaboration ecosystem designed to list, sell and deliver hundreds of millions of products to the consumer's door. Beyond the sale, it is significant to note that the ecommerce giants own only a fraction of the distribution centers, trucks or fulfilment. Distributors are the backbone that makes the ecommerce marketplaces possible and functional, especially in the last mile at the local level. Without distributor partners, marketplaces would collapse under the burden of inventory cost, warehouse space and logistics.
If you can't beat 'em, join them – millions are joining the Marketplaces
There are many reasons over 2 million brands and resellers have chosen to participate in Amazon's US Marketplace:
- A turnkey solution to online ecommerce at a massive scale
- Marketing system, plus Amazon brand value, with traffic from 250 million customers
- Amazon inventory management and replenishment
- Integrated order and shipment tracking with real time visibility for customers
- Fulfillment to the last mile, with automated reverse logistics for returns
The bottom line is that the ecommerce giants continue to rise because they are in fact a collaborative ecosystem designed to meet rising customer expectations for choice and convenience literally delivered to their door.
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Reasons why it won't just be an Amazon – Alibaba -- eBay world
So, why not close stores and just sell on the Marketplaces? There are major financial and consumer reasons why people choose other strategic collaborations and ecosystem:
- High cost of Amazon/eBay turnkey online selling … typically 10% or more of revenue
- While you can get online quickly, your product is just one of over 400 Million!
- As a marketplace seller, you follow the same algorithms as the other 2+ million sellers
- The quality of customer experience/engagement online is severely limited
- The online marketplace owner owns the customer relationship!
The smart brands and retailers are selectively participating in Amazon, Alibaba and eBay marketplaces. In addition, they are also strategically collaborating with other partners where they can differentiate their value, services, experience and engage customers directly.
Retail is transforming through strategic collaboration ecosystems
This blog is part of our series that will examine a wide range of collaborative ecosystems that are emerging in response to consumer behavior and expectations. Future posts will explore a range of scenarios already evolving, including:
- How Google is strategically collaborating to track searches to purchases
- New store formats like b8ta focused solely on customer experience and data
- Retailers and brands knocking your door to provide in home services
- Distributor collaborative services for last mile delivery that beats the giants
- Stores emerging as the most powerful medium of customer experience
Few retailers and brands can afford to independently build their own end to end solutions to sell products to the masses. "Retail" is rapidly transforming to collaborative commerce … ecosystems of partners who can deliver what customers want anytime and everywhere.
Chris Petersen and Adam Simon are collaborating on a series of blogs that explore the rise of strategic collaboration and new customer centric ecosystems. This blog series will culminate with a worldwide panel discussion at the ContextWorld CES CEO Breakfast, where a global Brand, Distributor and Retailer will share their perspectives on strategic collaboration.
If you are interested in more information on this CES event, contact tgibbons@contextworld.com.
A strategic collaborative blog series presented by Chris Petersen & Adam Simon:
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