According to the exclusive study on the e-commerce investments and trends conducted by HexGn. The investment amount in e-commerce startups has increased substantially since 2014
One of the most common definitions of the e-commerce is that it comprises of any transaction made through electronic devices, facilitating business while transforming internal and external relationships. This transformation helps create value and can be leveraged to exploit the market opportunities in the connected economy. It enables the incorporation of all transactions including those of information, products, services or payments via electronic networks, and integrates solutions to any transaction via the Internet. E-commerce is a dynamic product from the convergence of information and communication technologies (ICT) and can be defined from many perspectives.
Some of the most apt definitions are as follow:
In terms of the communication aspect – e-commerce is the delivery of information, products, services or payment made through telephone lines, computer networks or similar means.
In terms of the business processes – e-commerce is the application of technology to achieve the automation of transactions or workflow.
In terms of the service processes – e-commerce is a tool to achieve the objectives of the organisation and the customer, and to properly manage costs significantly improving delivery times.
From an online perspective – e-commerce provides the ability to view and buy products and information from the Internet or other online services.
E-commerce platforms make businesses, consumers or government important stakeholders by enabling online sales and transaction. An e-commerce platform not only facilitates a transaction over the web but also supports the creation and continual development of an online relationship. Common e-commerce functions such as the creation and management of web storefronts, product visualization, personalization, shopping cart management, taxation, transaction management, and settlement are the crux of building basic B2B, B2C or G2C online stores.
The global internet penetration has been growing at around 10% year-on-year. It reached to rate greater than 66% in 2018; the increased adoption has been the key factor for the rise of e-commerce across industries and regions globally.
E-commerce startups have seen around 30% growth in investments the last five years. 75% of these investments have been in e-marketplaces, while only 25% of the investments have been in e-commerce enabling ventures. Some of the markets that have taken the lead with maximum companies taking the lead to adopt e-commerce include multi-product markets, fintech, transportation & logistics, food & beverage, and the apparel industry. Multi-product market accounted for almost 35% of the number of deals on an average year over year.
In 2018, e-commerce startups in 72 countries raised $76.9 billion from 1401 rounds. Eastern Asia, comprising of China, Japan, Hong Long and South Korea, topped the list recording the highest growth in the last five years. Not just that, there has been a 68.45% annual increase in the average investment amount raised as well in the same region for the given period of time.
Startups in South-East Asia and South Asia are the next ones in the list which have shown a positive growth, followed by Eastern Africa that has earned its places a notable mention. There has been a steady development of ecosystems of marketplaces and e-commerce enablers such as delivery systems, payment gateways and other software solutions. Eastern Europe, Southern Europe and Western Africa feature in the declining regions with respect to e-commerce investments. These regions have seen a fall in both investment amounts and the number of deals, in the last five years.
The next level of commerce-specific capabilities includes interactive selling, site merchandising management, and order management. The order management aspect is characterized by a number of processes and functions mainly –
Reordering via previously placed orders
Ordering via order templates
Management of large order lines
Ordering from sales contracts
Distributed order management
This level also encompasses product management and customer/ account management. The latter including:
Management and application of differential customer pricing
Management of customer hierarchies
Transfer of carts, quotes, contracts, and orders to another user of the same account
E-Commerce platforms can also include personalization/ preference profiling, multichannel selling, site/ product search, search engine optimization, customer community management or participation, integration with social media, and mobile stores.Investment Trends in eCommerce Startup
In the last 5 years from 2014 – 2018, there has been a decrease in the number of investment deals in startups across industries, while the investment amounts have climbed up. This scenario includes the e-commerce startups across industries as well, according to an exclusive study conducted by HexGn, a global Pre Accelerator for startups.
The number of investment deals in the e-commerce startups has decreased steadily in the last 5 years. While 2015 saw a 12% increase over 2014, the subsequent years (i.e. 2016 to 2018) witnessed a compounded annual fall of 21.6% in the number of deals. Overall, since 2014, the number of investment deals has reduced at an annual rate of 15.6%. The investment amounts were disclosed for around 70%-75% of the deals every year in this five year tenure.
Since 2014, 17,209 deals have been signed for investments in different stages of funding. Till October 2018, 1954 deals were completed to raise funding for e-commerce startups, compared to 3048 deals in 2017. The new trends indicate an increased focus on value based investing by investors rather than the option of taking a mass approach. This could make the game tougher for early stage entreprneurs who are looking to cash in on the ecommerce wave, they need to demonstrate high degree of sectoral focus from day one.
Investment Deals in eCommerce Startups
According to the exclusive study on the e-commerce investments and trends conducted by HexGn. The investment amount in e-commerce startups has increased substantially since 2014. However, this increase has been quite wavering and yet to find a steady pattern. 2015 witnessed a 32% increase in investment amount over 2014, while 2016 the growth in investments reduced to 7.3%. 2017 shone the brightest in terms of the investment amount and saw the highest growth rate in investment amount at 47%. Till October 2018, the investment amounts have seen a growth of around 31%. Overall, from 2014 to 2018, investments in e-commerce startups grew at a compounded annual rate of 28.5%.
E-Commerce startups have raised an average of $23.1 million per round in the last 5 years. The average investment amount during 2014 to 2016 was $14.2 million per round. An 84.4% jump in the average investment amount as compared to 2016 was noticed in 2017 which was also noticed in the following year. The trend continued in 2018 with a 112.7% growth in the average investments over 2017. In 2018, e-commerce startups had raised an average of $66.3 million per round. E-commerce startups have witnessed a 54.7% growth in the average investment amount per round in the period between 2014 and 2018.
Funding Rounds in eCommerce Startups
According to the report by HexGn, seed funding rounds (pre-seed, seed and angel funding) has led in terms of the number of deals from 2014 to 2016. This changed in the following years wherein the highest type of funding was in venture deals.. Overall, seed funding has seen an annual decrease of 20.15% in the number of deals in the last 5 years and on the other hand venture funding also saw a similar fate with a 5.17% decrease in the number of deals during this time.
At early stage funding stages, seed investments saw an increase of 11.1% in 2015 as compared to the previous year while angel investments increased by 33.3% during this time. however, the number of seed investment deals had a subsequent fall from 2016 to 2018, at an annual rate of 30.1%. Angel investments fell at a rate of 35.7% during the same peiod. Overall, number of seed investments fell at 24.54% and angel investments fell at 25.84% in the period from 2014 through 2018.
Within the venture investments segment, Series A and Series B rounds of funding saw an annual decrease of 8.77% and 1.47% respectively.The number of deals in Series C to Series I rounds experienced positive growth trends in the five years till 2018. Series C witnessed an annual growth of 0.78% while the following Series D was overall flat during this time, and Series E to Series I reported an annual growth of 6.7%.
Overall, venture rounds have dominated the other types of funding consistently over the years especially in the period between 2014 and 2018, in terms of the amounts raised. The investment amount raised in venture rounds has increased by 12.38% in this period. The total investments amounted to $43 billion as of October 2018 from $24 billion in 2014.
Seed funding on the other hand has not witnessed any such positive trends in the 2014-18 period. Seed funding took a fall of 12.2% from $936 million in 2014 to $557 million till October 2018. A silver lining for this type of funding in this period is the increase in average funding amount per round by 24.28%. Venture funding too witnessed an increase in the average funding per round by 23.56% in the same duration.
In the early funding rounds, seed funding fell by 12.61%, while angel funding saw a decrease by 10.05%. Butthe average investment raised in seed funding showed positive trends with an increase of 21.5% while average investments in angel rounds increased by 47.1%.
With the venture round category of deals, the investment in Series D funding fell 5.8%. Apart from that, the average investment in all other rounds have shown considerable increase – Series A by 7.8%, Series B by 16.2%, Series C by 48.1% and Series E to Series I by 7.4%.
Which Regions Are the Best For eCommerce Startups
In 2018, e-commerce startups from 72 countries across the globe raised $76.9 billion from 1,401 rounds. Additionally, there were 553 deals that were signed, the investments figures for which were not disclosed. The percentage growth rates in the investment deals and in investment amounts were plotted for the different regions around the world in order to understand how these regions fared from 2014 to 2019. This helped in understanding the growth or decline in investment activity in the e-commerce startup segment in these regions in the last five years. Let us throw some light on these findings. The average investment in 2018 was used as an indicator of what investors believe is the growth potential of these markets for the same.
As per this analysis by HexGn, East Asia, comprising of China, Japan, Hong Long and South Korea, showed the most impressive growth in the five years from 2014. Startups in East Asia have registered a 68.45% annual increase in the average investment amount to achieve this status of the top startup region. In 2018, e-commerce startups in this region have raised $37.5 billion in 141 rounds, at an average of $266.5 million worth of investment per round. This accounted for 40.4% of the global e-commerce investments this year.
While startups in South-East Asia have witnessed a 75.84% growth in the average investment amount in the last 5 years, the number of deals in this region has fallen by 3.65%, which pushes it to the second place. Indonesia, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam are the countries that fall within this region. In 2018, e-commerce startups in South-East Asia participated in 66 rounds of funding and have raised $9.43 billion from them. This accounts for 10.2% of the global e-commerce investments this year.
South Asia features next in this list with a positive growth in the both the number of deals and the investment amounts. With 140 (disclosed) deals and $20.4 billion raised in 2018, this region accounts for 22% of the global e-commerce investments this year. India is a leading country from the region in this area. Some of the main hubs in the country include Bangalore(known for cheap yet high-quality tech workforce) and Delhi (home to some of the top funded startups in the country). The other top countries in South Asia include Pakistan, Sri Lanka and Bangladesh.
Another notable region worth mentioning here is East Africa. The e-commerce segment in the region has shown a 41.5% annual increase in the average investment amounts between 2014 and 2018, although the size of investments are not high, compared to the rest of the globe. Eastern Africa is a developing region for online market places and is seeing a growth in the number and types of e-commerce enablers in the region by providing a good deal of launchpads and services for e-commerce brands to find a strong footing.
East and South Europe along with Western Africa are three regions that are showing a decline in the amount of investments coming in for the e-commerce segments in each of these area. These regions have seen a fall in both investment amounts and the number of deals, in the last five years, and with abysmal levels of investment especially in 2018.
Which Sectors Are Most Active For eCommerce
According to an exclusive study conducted by HexGn, e-commerce ecosystem can be clubbed in the following segments.
E-Tail and Marketplace – These are platforms where several producers list their products for consumers to view, select, buy and rate. Marketplaces may have a complete end-to-end model for payment and delivery/ fulfillment of their own or may outsource these services to other firms.
Payment and Financial Solutions – Typically these services are sourced from fintech firms that help in securing monetary transactions to facilitate a purchase with their secure and efficient platforms.
Delivery Services – All tangible products need to be physically delivered to the customer to fulfill the order. Delivery services play an essential role in this aspect. Such services may range from courier services facilitating long distant transfers, to only last mile transfers such as food delivery.
Others – Firms offering services such as Data Analytics, Packaging Solutions and other Software/ Hardware solutions form an integral part of the e-commerce ecosystem.
Between 2014 and 2018, more than 75% e-commerce startups have focused on e-tailing and marketplace related ventures. The other areas that the startups have concentrated in order of priority include financing and payment solutions. Delivery solution is one area that has found less attention from the companies especially in terms of the number of deals and investment amount raised.
Sectors In E-Commerce
E-Commerce is commonly addressed and treated as one big umbrella sector of business. However, e-commerce is more importantly a way of doing business whose effects and processes pan out across multiple industries or sub-sectors. It is increasingly being adopted for driving sales by several industries, this adoption is further fuelled with the help of the constantly evolving web commerce technologies.
For the purpose of this report by HexGn, the startups have been classified into the following sectors.
Clothes & Apparels
Consumer Electronics & Hardware
Food & Beverage
Health & Medicine
Media & Entertainment
Real Estate & Home Decor
Software & SaaS
Sports & Recreation
Transportation & Logistics
Travel & Tourism
These sectors have adopted e-commerce at different times and scales in history and are at various stages of maturity depending on the different regions or geographies. It is important to note that e-commerce is not just about creating a marketplace for buying or selling, in order to establish e-commerce ecosystems but also for other associated services. There is high need for such services to be developed along with advanced technology adoption that can lead to the increase in capacity for e-commerce transactions as well.
Top Performing Sectors For eCommerce
According to reserach by HexGn, In the last five years, multi-products markets, fintech, transportation & logistics, food & beverage, and clothes & apparels have maintained their strong footing in e-commerce and are among the leading sub-sector. Multi-Products market accounted for almost 35% of the number of deals on an average year over year. However, the number of deals in this market has seen a 15.7% fall over the years.
In terms of investment amounts raised, multi-products, fintech, transportation & logistics, and food & beverage have shown consistent performance in this five-year period. These sectors account for more than 78% of the investments annually. There has been an annual increase of 32% in the investment amount raised overall in these segments between in the years from 2014 to 2018.
The rise in the amount of investments made in the multi-products markets, fintech, transportation & logistics, food & beverage, and the apparel industries and their steady position as the top invested entities in the ecosystem has also been accompanied by them taking important positions globally. These sectors have consolidated with smaller firms to achieve this maturity at the global level. The smaller firms were either closing down or being acquired by larger players. There are several other promising sub-sectors that look promising and hold a lot of potential for an unprecedented growth by adopting e-commerce. These include agriculture, home needs, education, and software & SaaS show a relatively higher potential than the aforementioned industries for future growth.
Agriculture picked up a phenomenal pace in 2018 especially in China. The convergence of internet and the agricultural sector is still a new realm. While mechanization in various agricultural processes is fairly common, the utilization of internet to do so and much more is yet to be explored around the world.. With the population of the globe increasing and food demand on the rise, internet and e-commerce is the ideal path to make the supply chain of agricultural products efficient.
The home needs market primarily focuses on items ranging from grocery and packaged food, to home maintenance items. This sector, although a hybrid of multi-product and agriculture sector, has branched off as a separate niche sector in the recent times. India and the United States are two of the top countries to have witnessed the highest investments in this sector in 2018. The urban population spends long hours at work, and prefers to spend their leisure time in other relaxing and recreational activities instead of shopping for grocery. It is therefore not long before this sector flourishes in other parts of the globe.
Although the education sector has attracted the fifth highest number of deals in 2018, the investment amount raised by startups in this sector is not very high, compared to other sectors with similar growth in the number of companies. Online teaching and tutoring is one area that has the highest potential for growth as the need for it is increasingly felt in many parts of the world especially those that have a shortage of quality educators.
In terms of e-commerce, software and SaaS still haven’t found a strong footing to witness any incredible growth. In the last five years only one firm, that provides a platform that enables developers to create apps, has raised funds. While it is true that many software companies are acquired by larger companies, this sector provides a huge opportunity for a one-of-a kind marketplace specializing n software development and solutions.
Performance of Different Sectors of eCommerce
The performance of different sectors in e-commerce significantly varies from one another. The early stage entrepreneurs have to be cautious in picking up their e-commerce domain; let’s take a look at how the different sectors fared in the last five years from 2014 to 2018.
The multi-product markets have seen a 38.4% rise in investments in the last five years. In 2018, this ecommerce sub-sector brought in 33.6% of the total investments among the e-commerce startups from different sectors. India, China, and the United States are some of the leading countries that have seen high growth in the multi-product markets in recent times. The main factors propelling this growth include high demand from a young demographic profile, policy support, and availability of e-commerce enablers such as payment and delivery networks (some of which are owned and integrated into the companies). As of 2018, these countries have only tapped into 5-10% of the total retail market indicating a huge gap of opportunity that can be leveraged to establish themselves as a global force to reckon with. Indonesia has been in the spotlight for the fruitful investment rounds its e-commerce enablers have witnessed, which will soon translate into growth of online marketplaces in the regional startup ecosystems.
The e-commerce startups in fintech primarily provide payment solutions for marketplaces. In 2018, fintech startups raised 21.3% of the total investment raised by e-commerce startups. Interestingly, China, United States and India again witnessed the highest investment in this sector in 2018. Ease of payment facilitation is one of the key parameters for the growth of e-commerce in a region, and this explains the growth of e-commerce in other industries. The fintech startups have seen an overall rise of 28.4% in investments between 2014 and 2018.
Transportation & Logistics
E-commerce marketplaces rely heavily on transportation & logistics industry to ensure that delivery of purchased products is hassle free and quick, and is hence a key pillar of the e-commerce ecosystem. Startups in the transportation & logistics industry raised 15.7% of the total investments in 2018, and have witnessed 24.4% annual growth in the five years from 2014. China and United States lead in this industry as in most other sub-sectors.
Food and Beverage
Food & Beverage e-commerce has seen a huge jump with the development of dedicated delivery systems. This sector has seen a 35.14% growth in investments in the last five years up till 2018. India and the United States have developed a balanced ecosystem with both marketplaces and last mile delivery companies raising impressive investments in 2018. This year close to 8.2% of the total investments was raised by startups in this sector.
Education is one of the fastest growing e-commerce sectors, thanks to the fast-evolving ecommerce technologies that are aiding in providing edtech and other educational services across the world and the web. In the last five years, the education sector had one of lowest exit rate of companies and a 10% growth in investments. While demand for quality education and new skillset increases every year, the sector has seen startups develop and provide e-learning opportunities to students looking to learning regular curricula and other skills as well in addition to the specialized education needs.
Clothes & Apparels
A relatively well established and widespread industry, the apparel sector is one of the first adopters of e-commerce. With 5-10% of the offline retail being replaced by e-tailing, this sector saw only 1% annual increase in the total investment amount in the last five years. Some of the traditional hubs such as China also saw a reduction in investment activities in 2018.
Real Estate & Home Decor
The Real Estate sector recorded a 32.6% growth in the investment amount in the five years from 2014 through 2018 but witnessed only 3.5% of the total investment in 2018. China has been at the forefront as a leader for years altogether, while other developed economies such as the United States and the United Kingdom also feature in the top five investment locations fo 2018. Advanced technologies such as virtual reality and fintech solutions are being introduced and improved regularly to make transactions more transparent. These are key factors whose presence is important to develop e-commerce in this industry.
Health & MedTech
The e-commerce aspect of the health and medtech industry is characterized by online pharmacy, consultations and diagnostics. The United States leads the way in this sector in 2018. Overall the sector saw a 14.38% annual increase from 2014 to 2018 and is expected to grow even more in the coming years. New technologies and findings in the health and MedTech segment aimed at improving life expectancy have led to a growing community of ageing population around the world that hold the potential as an important set of a target audience for this sector.
Travel & Tourism
Travel and Tourism have witnessed around 30.5% annual increase in investments from 2014 to 2018. This sector has seen e-commerce being implemented in many segments such as hotel aggregation, travel booking and tour packages. What is surprising to note is that countries with some of the popular tourist destinations do not even have an e-commerce ecosystem in the travel and tourism sector.
Sports & Recreation
Online gaming platforms have helped the industry grow more than any other area and have helped the overall sports and recreation sector extend to include niche sectors such as a marketplace for sports goods and fitness products. This sector also has the scope to further expand with ventures such as a marketplace for sports coaching, listing and rating for gyms among the others. In the duration between 2014 to 2018, this sector saw an increase of 26.15% in the total investments raised.
Consumer Electronics & Hardware
Consumer electronics and hardware has grown from being a part of the multi-product marketplace to an independent niche. China is a trailblazer in this industry and has achieved this status by leveraging the fact it is a prominent manufacturing hub for such goods. This sector has seen a 9.1% growth in investments between 2014 and 2018. The last year in this duration however did not impress in terms of the share in the total investments secured by the consumer electronics & hardware companies in the overall e-commerce segment. The sub-sector raised 2.1% of the total investments in 2018.
Media & Entertainment
E-commerce in media is characterized by the various companies offering dynamic platforms for audio, video, other media content and advertising solutions. The last five years saw 46.7% annual increase in the investment raised in this sector. However, in 2018, startups in this sector raised only 2.2% of the total investments raked in by e-commerce startups.
Agricultural e-commerce segment has peaked in the years from 2014. Although 2018 saw only a 1.6% share in the total investments for this sector, the sector has opened by new fertile areas that are worth exploring. The potential of agricultural e-commerce has still not been recognized fully and is an exciting sub-sector that holds a lot of promising opportunities.
Home needs is a small and profitable niche with low competition, and a tiny share in the overall e-commerce retailing industry specialises in home needs. India is among the few countries that have a strong home needs sector and tops the list. The increasing internet penetration has opened up new horizons for the sector which holds the potential to flourish in many economies globally. This sector has witnessed a 15.24% growth in the last five years.
Software & SaaS
This is a relatively unexplored sector from an e-commerce perspective. While platforms for Software and SaaS development saw an increase in the number of companies in years from 2014 to 2018, the same cannot be said for the investments that were brought in by the companies in this sector.
How Can You Create a eCommerce Hub
Given the challenges and opportunities that e-commerce presents, it is crucial to develop national-level strategies that include measures to increase awareness of e-commerce and its benefits across various stakeholders, to ensure the greater participation by both individuals and businesses. The governments find themselves in a situation where the need to formulate a holistic process to ensure a comprehensive review of priorities with regard to e-commerce as well as to institute profound policy and structural reforms with broader stakeholder participation. Here are a few recommendations according to the study by HexGn.
Policy & Regulatory Support
Despite e-commerce brands like Amazon, Walmart, and Flipkart being household names, there is still a large proportion of consumers who are uneasy about shopping online. The lack of reliability from such consumers can be attributed to several reasons including low internet penetration or the unavailability of secure platforms to conduct the transactions. While stakeholders need to create awareness about the various advantages of shopping on e-commerce websites mainly the convenience, flexibility in payments, a better and comprehensive portfolio of products and services, and attractive prices offered, the government also needs to work on re-framing the legal framework to boost the confidence between the stakeholders further. Some of the key areas that need to be addressed by regulatory bodies are online privacy, quality of goods and the associated guarantees on return, logistics and transportation, and inadequate payment systems from the consumer side should be addressed completely through the most efficient measures.
On the production side, issues relating to payment processing capabilities, logistics and transportation concerns, and high adjustment costs undermine the positive impact of e-commerce in business operations and should be prioritized. The government bodies should also look into reforming the bankruptcy laws, making it easier for both the investors and companies in the digital segment. Simpler and fairer bankruptcy law will not only build confidence in the businesses but will encourage them to think beyond the boundaries and unleash their true business potential.
Consumers are understandably concerned about counterfeit and low-quality products being sold on the Internet. To boost confidence, the e-commerce laws being developed should be effectively enforced. Setting up an IT and legal framework that regulates internet activities to speed up the diffusion of electronic activities is part of these reforms. This process includes approval of the Intellectual Properties Law, e-transaction law, e-signature law, and the updation of related laws that deal with e-commerce activities such as customs and tax laws on electronic purchase items and services.
Strengthening the Enablers of E-Commerce
E-Commerce is a platform that facilitates and automates the connection between buyers and sellers to create a seamless online transaction. Some of the critical facets upon which this seamless connection is built upon detailed below.
There is a never-ending need for establishing reasonable regulations for the telecommunication sector and enhancing it over time. This will allow service providers to offer services that are not stagnant and implement different applications for mobile and internet usage, and enable them to compete globally. Some of the critical activities would be setting up policies for regulation of internet services prices and mobile service costs. Encouraging and supporting investments to enhance mobile and internet networks infrastructure to 5G and by giving incentives to investment activities in this area are two important steps that can go a long way in keeping ensuring telecom readiness. This readiness is what has helped the top e-commerce regions thrive.
E-Commerce Tools & Software
Until the introduction of Shopify and Magento, the number of tools and software businesses resorting to e-commerce remained low. For the SME’s to adapt and get on the e-commerce bandwagon, they need to be provided with affordable and subscription-based digital platforms. The cost of membership fees in cross border e-commerce platforms is a prominent challenge for companies. In addition to, or in place of, membership fees, some e-commerce platforms charge a relatively high commission on the sales that have been made through their platforms. Some e-commerce platforms, for example, may charge up to 40% commission on sales, making the product sales unviable. Large international platforms usually charge between 7% and 15% commission.
Governments can ease these hurdles by recognising initially need to negotiate with these large platforms to offer better and subsidized rate for local entrepreneurs. In the long term, governments would also need to identify local IT companies and work with them to provide a one-stop solution for the vendors who want to get in on the digital game. It will be difficult to expect that the SMEs will acquire or hire IT managers, digital marketing specialists to start e-commerce journeys. However, such a situation seems like a possibility in the subsequent years. The presence of multiple policy levels and subsidies is key here to encourage world-class e-commerce supporting firms to come and set up their business. These businesses can help shape the larger ecosystem and will assist local e-commerce players to find a stable place and footing not just locally but also in the international markets
Authorities also need to work with the local financial institutions and private businesses to promote region level e-wallets to make online payments faster, easier and cheaper. This should be supported by developing strong authentication mechanisms based on new age technologies like Blockchain which will further encourage consumers to shift from cash-based to cashless transactions. Keeping the transaction fees low will enable the transition from primarily being a cash-based one to an advanced cashless and digital economy.
Logistics & Order Fulfillment
Enabling real-time fulfilment decisions and optimized execution via integration with supply chain applications will lead to a more robust e-commerce ecosystem. The governments need to work closely with the private partners to build the network of warehouses and delivery network to pave the way for the creation of an efficient and faster supply chain. Special attention to be given to the last mile delivery as it has been proven to be the biggest contributor to the overall delivery cost and presents a huge challenge to build an efficient last mile delivery network for any private business. The government can look into the option of integrating national postal system which already has a huge network, as an e-commerce delivery partner.
In addition to this, looking at the feasibility of using drones to deliver smaller size parcels can be a game changer for food and medicine delivery e-commerce SMEs. Countries like the USA and India are progressing well on setting up regulations for using drones to deliver small size parcels. Amazon conducted trial runs in some countries to gauge how effective the adoption of this technology is and what issues need to be addressed before launching a full-fledged delivery service with drones. Using drones spares the road network of last mile delivery traffic and the heavy set up costs that the logistics or fulfilment companies incur in hiring people to deliver these parcels. Overall, to become an e-commerce hub, nations must also collaborate and build a super-efficient logistics system to deliver smaller parcels to international locations in a very efficient, affordable and timely manner. This would need the ministries from various ministries to collaborate and set up a task force that would drive this agenda with dedication.
Programs to Support SMEs Go Global or Sell Globally
Online shops do not automatically attract customers. Even with a fully functional online shop, companies still need to invest substantially in online and offline marketing to draw business to their online operations. One of the biggest hurdles for SMEs is to publicize and promote their offerings to the larger audience. Merely increasing the number of sellers in the local market would lead to unnecessary price wars and uncompetitive business practices. It is important to promote cross border niche e-commerce businesses from day one so that the businesses that get on e-commerce bandwagon have a bigger playground to play in. Since most SMEs do not have access to resources to promote themselves in front of their consumers, a team can be constituted by the governments that will have the mandate to take the SMEs to the global market through the digitization and e-commerce route. This would need support from the governments and other agencies in terms of trade fairs, digital marketing, business introductions and trade pacts. The long-term impact of this move would be very good as it would, in turn, boost the local job market and bring in valuable foreign exchange.
Accelerate Adoption of E-Commerce
A structured framework must be established to educate both individuals and businesses. This will be to help them acquire the necessary knowledge that can make them accountable and credible for implementing the e-commerce initiatives provided by the government and the private sector. Additionally, ecosystems would require support to ease the processes of doing business.
Enabling Digitization support
SME sector comprises of organizations of different size and nature, all of which are an important part of the value chain. However, they are not equipped to understand how technologies come together and can support them in their business endeavours, be it accessing new customer segments or further strengthening their relationships with the existing ones. Therefore, it is necessary for the governments to create and nurture an ecosystem that will enable SMEs to do more business and get insights to refine their operations and build a deeper relationship with their customers.
Here are three areas that the governments can focus on to increase seller adoption.
Helping, coaching, guiding or assisting existing SMEs to leverage digital technologies to deliver existing and new products/ services thereby creating new revenue streams, models and markets
Helping, coaching, guiding or assisting existing SMEs to learn customer behaviour/ preferences continuously by leveraging digital technologies.
Helping, coaching, guiding or assisting existing SMEs to increase their sales by utilizing digital technologies to get more leads in real time.
To successfully create a hub for e-commerce and assisted commerce, the governments would need to set forums and events where thinkers and thought leaders can freely rub shoulders with e-commerce service providers, merchants and consumers. These free-spirited events would unleash a wave of creativity and innovative e-commerce products in the regions they are conducted in. Nations need to develop talent and position itself as the hub for applications that support e-commerce business. This can be achieved by integrating new age technologies like augmented / virtual reality or artificial intelligence with e-commerce bringing on a new wave of products to be unleashed. A week-long e-commerce festival with a host of benefits for foreign firms to set shop in a region would give a big boost to the local e-commerce ecosystem and nudge SMEs to take advantage of this opportunity.
As more and more freelancers and homemakers take on the e-commerce bandwagon from their home, the existing set of rules that mandate an office address may not be applicable anymore to the needs of home-based entrepreneurs. These entrepreneurs would need delivery warehouses and logistics support. Supporting these entrepreneurs in finding rightly priced and efficient logistics and fulfilment centres would be a key item in ensuring their survival. The governments may also need to look at the benefits provided by virtual registrations and how such schemes can best help these solo entrepreneurs in staring their entrepreneurial journey. Support and grant schemes for the virtual registration holders would help them transition from a virtual to a full-fledged registration holder in few years and make them significant contributors to the economy.
Rewarding & Recognition for Quality E-Commerce Players
The governments or its allied bodies should look at putting up a formal award and recognition system for e-commerce merchants, which would be given on set parameters. The consumers would be able to see the difference between merchants that are fully geared up for e-commerce versus others who are getting ready. These recognition systems would, in turn, reinforce confidence in consumers too, and they would increase their buying propensity with rated players. By setting up the reward & recognition system, nations would set clear expectations for e-commerce players.
Government Can Boost Economic Incentives To Drive E-Commerce
This is an ideal time for SMEs across the globe to leverage the e-commerce technology and the host of benefits it has to offer. The multi-dimensional changes and the dynamic business environment around the world provide an attractive opportunity for SMEs to build global businesses. By providing structured support to the sellers, the governments can increase the participation rate of SMEs. Countries will now have to look at government initiatives through the lens of e-commerce and make upgrades that make the industry more sustainable and also reduces the various risk factors. A governing body needs to be established to support e-commerce companies and address their economic concerns and challenges. As such, the setting up of an e-commerce council could bring representatives from all stakeholder agencies together to work on developing the e-commerce ecosystem and other aspects of the sector.
The body should work towards fostering a suitable investment environment encouraging regional and global investors to fund online businesses (especially for startups). In addition to creating a conducive environment for traditional investors such as angel investors, venture capitalists, and private equity firms, financial sector regulators could also consider crowdfunding as a viable funding option as it allows the business owners to retain control in the business. For SMEs, the government could try setting up a fund to kick-start their online businesses which can be presented in the form of forwarding credit. The financial institutions would also be required to come together and join the government in these efforts and provide much needed financial impetus to the SMEs in the form of easily accessible loans and business credits. Without supporting the SME’s to get on the e-commerce bandwagon, the growth numbers and economic prospects would remain unfulfilled.
Top Personalities in the Global ECommerce Industry
Each and every top e-commerce company has not risen merely due to the merits of their unique services but also due to the individuals behind it. Here are some of the top personas in the industry who are a brand in themselves and some of the important individuals helping the e-commerce industry grow.
Crowned as the richest person in the world once again this year, Jeff Bezos is the founder and CEO of Amazon. His new year began with a bang and how! Bezos became the first person to amass assets more than $150 billion in the last 30 years in America. The Princeton Alumnus has led the way for Amazon from being a small online bookselling company operating out of a garage to becoming a top e-commerce company worldwide selling virtually everything. Apart from ecommerce, Bezos also has an inclination towards space travel and is a founder of a trailblazing space travel company that is developing a reusable rocket that can carry passengers.
Founder of Alibaba, a notable e-commerce giant, Jack Ma is leader in the industry of how you can build a brand by identifying and leveraging the right opportubities. He is a well-known perosiality in the e-commerce industry especially in the Asia-Pacific region. He has spearheaded the company to become a top e-commerce business which proudly wears the feather of being the one of companies to have participated in one of the largest stock offering rounds in 2014. Jack Ma announced his resignation as the chairman of the company last year and is among the richest entrepreneurs in China. A former teacher and an ecommerce visionary, Ma is a 50% stakeholder at the sister concern of Alibab, Alipay.
Hiroshi Mikitani founded Rakuten, Japan’s top E-Commerce retail brand. Mikitani is a proud Harvard alumni who has helped not just the brand grow but also ensured personal growth for the employees working in the company by introducing innovating campaigns and programs to improve their skills from time to time. Known for embracing diversity and encouraging innovation, the founder and leader received laurels for the Englishnization program he introduced for Rakuten employees. The campaign was aimed at improving the employee’s fluency in English and involved making it the official internal language in the office.
Andy Dunn founded Bonobos, a e-commerce fashion store for men and is a perfect example of you could build a brand purely on the web. The company piqued the interest of e-commerce giant Walmart which went to acquire it in 201. Andy Dunn is one of the leaders in the industry that took up the challenge of bringing about a disruption in the ecommerce industry against all odds and challenges; aspiring ecommerce entrepreneurs can surely take a page out of his book to learn what it takes to establish a successful brand online that thrives without any offline retail activities.
Ryan BeMiller founded Shopping Signals, a brand that helps E-commerce websites to find the maximum footfall on their website with the help of smart digital marketing. The blog run by him about the industry is a popular source of knowledge for those dabbling in e-commerce. It contains everything from niche product selection to understanding the nitpicks of web design apart from being an excellent digital marketing guide.
Akash Shah is one of the genius minds behind ecommerce brand Care/of. The company is a growing ecommerce startup that provides subscription based delivery services for customized vitamin packs to its customers. Shah studied at the prestigious Wharton School – University of Pennsylvania and is a serial entrepreneur who has co-founded several other innovative companies. One of the shiniest feather in his cap is a feature in Forbes 30 under 30 list of leaders for 2018 in the e-commerce and retail segment.
Richard Lazazzera of Shopify is a growing influencer globally who is being looked up to for his successes in the e-commerce arena. His role as a content strategist at Shopify has been monumental for the growth of the brand to what it is today and in establishing a secure place for it in the industry. Lazazzera’s blog A Better Lemonade Stand is an important source of information about the e-commerce industry and its processes that newbies can learn from. He has introduced the industry to quirky digital marketing and e-commerce processes from time to time that have been effective in generating high quality leads.
Ankiti Bose has etched a place for herself among the e-commerce leaders in the ASEAN region with Zilingo, a rapidly growing online fashion marketplace she co-founded with former Yahoo engineer Dhruv Kapoor. Bose brings to the table her expert knowledge in the mobile e-commerce space from her experience from working at Sequoia and McKinsey & Company where she worked prior to giving SEA the much needed e-commerce platform. She was featured in the prestigious 30 under 30 list by Forbes in the retail and e-commerce segment in 2018.
Entrepreneur and philanthropist Eric Lefkofsky, founder and CEO of Tempus is a tech veteran who has lend his expertise to not just Tempus but the series of startups and entrepreneurial ventures he has founded. These includes Uptake, venture capital firm Lightbank, and his ticket to fame venture, Groupon. The VC firm run by him has signed investment deals with more than 100 startups of all scales and across industries. He was featured among the top billionaires in the world in 2018 by Forbes and also found a mention in the 400 Forbes List.
Top E-Commerce Companies Globally
Amazon, Alibaba, and Walmart are some of the top names that pop up when you think of global e-commerce brands. There are several more e-commerce players now in the industry with some of the leaving a mark that is good enough to overshadow the stalwarts in several of the aspects globally and especially in their respective regional markets.
As per HexGn, here are some of these rising e-commerce forces that are now ruling the roost as the top e-commerce companies in the world and in their respective regions.
Jingdong or JD.com is a fast-growing retail e-commerce platform that is competing with Alibaba for the number one spot in China and the overall Asia-Pacific region. The company is known for introducing and planning some of the most quirky and needed technological concepts. It was previously known as 360buy and is a much smaller company than Alibaba in terms of market capitalization. However, it punches above its weight when it comes to revenue, making it an important area where it gives tough competition to stalwarts like Alibaba. The revenue for the fast growing company in the last two years was over $15 billion with over a quarter of billion registered users. JingDong boasts of a large team of over 130,000 members.
B2W Companhia Digital
The Brazil-based ecommerce company is bringing in substantial revenues to the e-commerce industry in Latin America. It is a subsidiary of Lojas Americanas SA, a prominent retail chain brand in Brazil. B2W Companhia Digital holds a majority market share in the region and owns several websites including Submarino Finance, Shoptime, SouBarato, and Americanas.com. The product offering of the company ranges over 40 categories like telesales channels, internet channels, electronics, games, fashion and lifestyle products, and books among the others. The company is in form to widen its nets and plans to set shop in America establishing themselves as a e-commerce leader in the newer markets.
This innovative e-commerce brand changed the way people shop by introducing easily accessible group discounts. Set up in 2008, Groupon is the brainchild of Andrew Mason who founded the company along with Eric Lefkofsky and Brad Keywell. The virtual coupon company offers a win-win situation for both buyers and sellers and has been a hit ever since it was launched. Users can opt for Groupon’s services in more than 500 cities across the globe for shopping online and finding unmatched deals. Groupon is based in Chicago and its services can be accessed by users after a quick sign-up process from phones and laptops.
Rakuten is a prominent e-commerce brand from Japan that owns more than 70 businesses. The services of the company are available across 30 countries in Asia Pacific, Europe, Americas and other regions in the world. Rakuten’s founder Hiroshi Mikitani is a prominent e-commerce leader who has built an efficient team and working culture that is welcoming to diversity and innovation. The open corporate culture has been lauded internationally and has helped the brand attract the most talented lot to its teams. Most of the services offered by Rakuten are membership based with over 1.2 billion members actively using these services.
Fashion e-commerce brand Zalando leads the way in the fashion and lifestyle segment in Europe. The Berlin based company has climbed the ranks to become one of the largest e-commerce brands globally. Zalando’s online fashion platform set new benchmarks and has grown at an unprecedented rate since it was established in 2008. The brand ventured into international markets within couple of years of its launch and there has been no looking back since. Today, Zalando has set shop in 15 European markets and offers its services in 12 language and has 20 local payment options.
Men’s fashion apparel brand Bonobos is a notable company in the American e-commerce industry. It was founded by Brian Spaly and Andrew Dunn in 2007. The company is a good example of how focusing on one key problem and finding solutions can be more beneficial than dabbling in multiple things. Bonobos stuck to one solution for men’s clothing range problems and ensured that there was ample awareness created about it. Known for their quirky, unconventional, and award-winning market strategies, the company is now a subsidiary of the e-commerce giant Walmart in the apparel segment.
E-commerce marketplace Zilingo focuses on fashion and lifestyle products and is a trailblazing e-commerce force in Sotheast Asia. Co-founded by Ankiti and Dhruv Kapoor, Zilingo has got more than 8,000 sellers and is backed by the likes of Tim Draper and Venturra among the other prominent investors. The platform has been a hit among the thousands of sellers and buyers owing to their smart policies and selling system. The company sources its technology from Bengaluru, India’s leading startup and tech hub. The founders have been featured in Forbes 30 under 30 Asia list in the retail and ecommerce segment and are backed by a core team that consists of the best of tech and business talent who are together spearheading the business to ensure Zilingo a long-lasting place among the top ecommerce startups in South East Asia.
Buymie is a Dublin-based startup that is enabling home delivery for groceries from local stores. One of the USPs of the company is the quick delivery. The app has found a user base of over 9,000 users within a short time frame since its launch in 2016. The company is spearheaded by founders Devan Hughes and Sokhikyan. The growing e-commerce startup is a force to be reckoned with in the Irish market and has also piqued the interest of prominent investors like Fergal Quinn and Unilever.
What are The Key Challenges For the eCommerce Industry
While e-commerce has grown in a lot of aspects, there are still many challenges faced by the sector at both international and domestic levels. The revenue in the arena has increased significantly over the years and has helped businesses get access to a customer based beyond geographical boundaries. However, some recurring challenges can be a hindrance to the various stakeholders in it. These are mainly:
Highly Competitive Marketplaces
Lack of the right technical infrastructure
Highly Competitive Marketplaces
E-commerce has helped boundaries disappear encouraging several businesses to jump on to the online sales bandwagon. While names like Shopify and Amazon are the first ones to pop when we think of e-commerce brands, it is important to understand that these are merely platforms showcasing products and services from a number of sellers.With more and more businesses turning to online selling, the competition on such platforms is immense. E-commerce businesses are finding it challenging to find that one USP that truly sets them apart in the sea of online sellers.
High competition leads to difficulty in capturing strong convertible leads. Finding leads that can be easily converted to sales becomes imperative for getting the best out of digital marketing efforts. Digital marketing has grown into a multi-channel process helping to generate a good amount of targeted traffic. Digital marketing, lead generation, and conversion optimization go hand in hand as a cycle and with a lot of competition in the industry can become a tedious task.
Lacking the Right Technical Infrastructure
There is no denying how much e-commerce technologies has advanced till today with several innovations and services being introduced in the last five years. However, the access to the required technical infrastructure like the availability of geoload-balancing technology is limited in several markets. This can hamper brands from creating an impactful presence within an international customer base. The right technology is the crux for efficient and secure transactions.
There is also the problem of stagnation of technology and software used for the transactions. These include the Enterprise Resource Planning and Point of Sale systems used. These are crucial for the smooth functioning of ecommerce processes and needs to up-to-date with the newer technology and trends.
Cross-border commerce and shipping rules are also a looming challenge most business owners wanting to jump on the international e-commerce bandwagon face. Several markets have created a limited entry for international sellers with stringent import regulations and tariffs. This and other factors like local corruption are some of the contemporary challenges that the e-commerce industry faces. The draconian rules coupled in alien markets can hamper the smooth delivery of all kinds of tangible and non-tangible goods.
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