The e-commerce market was showing strong growth rates in several analyst reports prepared in the pre-pandemic period, many of them pointing to compound annual growth rates of over 30% in the period 2019 to 2024.
This was accelerated by the pandemic and e-commerce penetration experienced sudden and extremely rapid growth in 2020. As an example, in the US, in just 8 weeks, +11% absolute e-commerce growth was recorded, bringing e-commerce sales penetration up to 27% compared to total traditional retail sales.
Such a significant growth in e-commerce sales is expected to have a lasting impact even after the pandemic is over, as it will change consumer habits and thus consumer behavior.
Even if one has traditionally shopped in physical retail stores, a new habit is being formed of e-commerce shopping and once the initial hurdle of the “digital barrier” is overcome, online accounts and payment methods are set up by simply clicking a button to make repeat purchases, 24*7 and without having to wait in line carrying bags and enjoying convenience. The migration of consumers increasingly to digital channels is here to stay.
Of note in Mozambique is the high growth rate of internet users – 25.5% in the last year. This growth, coupled with the growing banking system, has a positive effect on the penetration of e-commerce and will tend to raise the current 9.5% of the population that shops and/or pays bills online to closer to the world average of 29%.
The emergence of new business models and channels that better fit the needs of consumers have made us diverge from traditional concepts. This change has put pressure on physical retail and many players have chosen to close stores.
E-commerce platforms have evolved from basic architectures that allow you to browse product catalogs, perform self-service, maintain personalized accounts, and have a unified experience across multiple channels, to new paradigms of interaction and new models of customer experience.
In fact, customer experience is now the priority, across brands, products and channels. The use of artificial intelligence in this design is a reality, allowing the knowledge of behavior patterns and consumer needs and the optimized matching of supply with demand.
Technology empowers consumers by providing greater price transparency. This forces retailers into greater price competition, with a consequent impact on margins. Those retailers that are not competitive on price online risk severe impacts on sales.
The emergence of new business models and channels that better fit consumers’ needs has caused us to diverge from traditional concepts. This change has put pressure on physical retail, and many players have chosen to close stores.
An interesting move that has been seen recently are partnerships and acquisitions to occupy a larger spectrum in the value chain. For example, Walmart has teamed up with Instacart to provide faster deliveries to its customers and to compete with Amazon’s Whole Foods division that makes same-day deliveries. The traditional retailer thus allied with a logistics operator in a “win-win” logic online.
Another movement observed is that the disruptors have transformed products into services that can meet the greatest needs of consumers. We all have the experience of walking into mall stores where the clothes are spread out, making it very difficult to put together a suitable mix of items. This type of environment offers very little value to consumers, as it is difficult and frustrating to navigate.
In contrast, digital stylist “Stitch Fix” puts together combinations of clothes on their online platform, paired by algorithms and customer data to predict what clothes they will want to wear.
Based on combinations of consumers’ favorite colors, patterns and textiles, new products are then suggested for approval by human designers. As a result of this process, customers save time in selecting an outfit and have greater agility and efficiency in choosing.
While some retailers have been able to increase their online penetration, others have struggled for a number of reasons such as distribution chains and IT systems not adapted to the new digital realities and difficulty in adapting the business model to the new paradigms.
A successful example is Walmart whose share price initially fell 10% in October 2015 when its management announced a paradigm shift to digital business models in a long-term business development perpective. Investors who decided to stay with shares were compensated as they rose 138% by August 2020. During this period Walmart has seen some of its boldest paradigm-shifting decisions bear fruit.
Retail is thus at a crossroads and traditional retailers are under pressure from disruptors who can meet consumer needs quickly and efficiently.
Think about it … I imagine you want to be on the side of the disruptors in this new reality.
