The world knows all too well about the growth in e-commerce on the Amazon marketplace. Invisible e-commerce platforms that make branded storefronts possible for millions of merchants are relatively lesser-known. But that may be about to change.
Shopify reported that 2020 had “accelerated the industry by a decade” as merchants embraced digital during long periods of economic lockdowns that saw the widespread closures of physical stores compel consumers to buy and pay for goods and services via digital channels. Consequently, the company’s turnover in the financial year ending December 2020 leapt 86% to US$2.9bn, the majority of which came from the sale of merchant solutions (US$2bn, up 115% year on year). Gross merchandise volume (GMV) reached US$120bn, up 96% YoY, with gross payment volumes (GPV – the amount of GMV processed through Shopify Payments) reaching US$53.9bn.
Shopify’s turnover still represents only a fraction of that generated by Amazon’s digital marketplace, however. That yielded over US$80bn of revenue from third-party seller service fees in 2020, up 50% from US$54bn in 2019. Momentum had continued into the first three months of 2021, with Amazon’s third-party seller services revenue up 60% year on year in constant currency to US$23.7bn, doubling the rate of annual growth seen in Q120 before the global pandemic took hold. Shopify, too saw its revenue expand 110% YoY to US$987m in the first quarter of 2021 as winter lockdowns were re-introduced in Europe and elsewhere.
Consumer habits are changing
Magento Commerce, the eCommerce platform owned by Adobe, is another example that has consistently driven revenue growth for the software company’s digital experience division over the last year. Its latest consumer preferences survey also tracks changes in the way people shopped online during 2020, based on interviews with over 7,000 people of different age groups conducted in October 2020.
Magento found that 55% of consumers spanning Austria, France, Germany, Israel, Italy, the Netherlands, Poland, Portugal, South Africa, Spain, Sweden, Switzerland, the United Arab Emirates and the UK now shop online more frequently than they did before the onset of coronavirus. This figure rises to 65% for frequent online shoppers. Of those polled, 60% also said they had increased their online spend since the pandemic took hold (71% for more frequent users).
While the eCommerce growth rate was phenomenal in 2020, a greater preference for online shopping is likely to continue into 2021 and beyond as people maintain the habits they came to rely on more, or developed for the first time, last year. Statista estimates that worldwide business to consumer (B2C) retail e-commerce sales in 2020 expanded 28% over 2019 to almost US$4.3bn, for example. The exact pace of acceleration is unlikely to be repeated in 2021, but it will still expand 14% to hit around US$4.9tn in 2021 this year, while the market will keep growing to reach almost US$6.4tn by 2024.
Smooth merchant and customer experience is paramount
Competition for customers amongst eCommerce platform providers is bound to become even more intense as the market rapidly expands. But to attract and retain as many subscribers as possible and keep transaction flows healthy, those providers must make it as easy as possible for both merchants and consumers to sell and buy goods and services using their platforms.
Fast, efficient product search capabilities are of paramount importance – 70% of the participants in the Magento Commerce survey said they would shop elsewhere if they could not find products quickly. The top three attributes sought from a retailer’s website are straightforward pricing (highlighted by 66%), clearly displayed discounts (63%) and accurate product descriptions (62%).
Above all, consumers expect their eCommerce experience to be smooth, friction-free and without additional cost or inconveniences. And that expectation applies equally to paying at the digital check out as it does to browsing for products in the first place. Among the consumers surveyed by Magento Commerce, 38% ranked fewer steps in the check-out process as a priority. For example, they indicated they would abandon a cart if that process were too slow (the figure was higher – 44% – for more frequent online shoppers).
Just over a quarter of those interviewed (26%) identified not having to enter payment or delivery details as a “stand out” online shopping experience. Over a third (35%) also singled out support for payment by electronic wallet (eWallet) as a critical factor in driving repeat purchases. Older buyers tend to prefer their laptops, while 48% of 18-24-year-olds prefer mobile phones due to the proliferation of cheaper Android-based smartphones (read more in DOCOMO Digital Chief Commercial Officer Jonathan Bennett’s recent blog here).
Third-party payment providers have a crucial role to play
Security is another critical source of differentiation among eCommerce platforms. Over half of consumers (55%) interviewed by Magento Commerce recognising the importance of a secure website that keeps their payment details safe. Delivering effective authentication mechanisms can be tricky for online retailers, trying to make the buying process as smooth as possible to minimise cart abandonment rates.
Many businesses will benefit from using a third-party payment service to handle the secure payment and customer authentication process on their behalf. That could involve integration with eWallets or other billing mechanisms like direct carrier billing (DCB), which charges purchases to the customer’s mobile phone account, neither of which require buyers to input credit or debit card details on their mobile device.
Merchants themselves can also protect themselves from erroneous payments through access to sophisticated fraud analysis tools that analyse transaction behaviour and user history in real-time to better predict the likelihood of buyers being unwilling or unable to fund their purchases. Competing for customers in an increasingly competitive e-commerce market is difficult enough for retailers – having the right payment service partner can remove some of the complexity and help drive sales by offering a smoother transaction experience in the long run.