Unexpected Ecommerce Boom
Even as retailers around the world worry about headwinds, signs of a good future for the ecommerce world abound. In the UK, retailers have faced challenges from Brexit, while for the US and China, the tariff war has spooked retailers.
Despite these looming difficulties, one area continues to grow very fast, and that’s ecommerce. Looking out to 2024, researchers and industry commentators forecast a long trend of accelerated growth. This is a good trend for retailers of all kinds to be aware of and to make the investments necessary now to catch the wave.
From US$3 Trillion To US$25 Trillion
The forecasts of meteoric growth for ecommerce will be of interest to retailers, entrepreneurs, and ecommerce managers. According to Digital Commerce 360, worldwide ecommerce sales amounted to around $2.83 trillion in 2018, as measured in US dollars.
Forecasts for the year 2025, from a variety of sources, indicate that this figure will balloon to around $25 trillion in 2025. Meticulous Research, a research firm, forecasts that ecommerce sales in 2025 will be $24.3 trillion.
Diverging Paths For Ecommerce And Physical Stores
Annual growth rates for ecommerce across the world are already high, and this pace is likely to continue. Forecasts predict around 11% compound annual growth rate (CAGR) in ecommerce revenues up to 2025. In the US alone, as predicted by FTI Consulting, ecommerce could grow at a 10% CAGR in the years up to 2025.
The other side of the coin is that experts now predict a general decline in the footprint of physical stores and malls. According to a Cognizant report, in 2025, physical stores will be increasingly unnecessary as “digital transactions will already have replaced many routine interactions.”
This means that ecommerce will eat away at the physical store footprint, with many retailers closing stores and fulfilling client orders over the internet.
Fastest Ecommerce Growth Regions
While the world at large will move towards higher adoption of ecommerce for its shopping, some outliers are predicted in the forecasts. In other words, growth will not be even, with South East Asia predicted to see the biggest gains in ecommerce. Meanwhile, countries in the Middle East and Africa, as well as parts of Europe, could see slower than average growth in ecommerce.
The Frontier Of Ecommerce Growth
According to the words of Marc Woo, an ecommerce executive at Google, South East Asia is poised to be “the next frontier for e-commerce.” This region includes some of the countries with the fastest growing ecommerce markets. These countries include:
Ecommerce will grow at an estimated 32% CAGR in the region.
In addition, the whole Asia Pacific region has some of the largest ecommerce markets such as China, India, Australia, and Japan. As a result, the region as a whole will experience dynamic and fast growth in ecommerce.
Where Ecommerce Will Grow Slower
The research indicates that growth in ecommerce will lag world leaders in the Middle East and Africa. This is due to fragmentation in payment networks and payments processing. The difficulty of cross border ecommerce payments is noted as a particular challenge for ecommerce growth.
While noting the UK’s leadership role in ecommerce in Europe, the International Post Corporation forecast European ecommerce to grow at the slowest pace globally. UK ecommerce, however, should grow at a faster pace than the rest of Europe.
What’s Driving The Growth Of Ecommerce
Dig a little deeper into the numbers, and you will see that the explosive growth in ecommerce is largely driven by technology adoption. Whether in the US or Europe, consumers and businesses are largely comfortable making use of new technology such as mobile shopping. The same is true in regions of the world with the fastest ecommerce growth rates.
Expanding Internet Access and Tech Adoption
A commentary from Entrepreneur notes that the adoption of new tech by both businesses and consumers has fuelled ecommerce growth. This is true in Western countries, where businesses like Amazon have sought to make shopping ever more convenient. Without the time savings and ease of ecommerce shopping, which have aided adoption, it’s unlikely ecommerce would have caught on.
In other regions like South East Asia, ecommerce has been fuelled by the connection of new users to the internet. The Recurly blog chronicles the rapid adoption of internet usage across Asia generally and its contribution to ecommerce usage. Other technologies like mobile payments have helped in these emerging markets where large populations rely on mobile phones.
Growing Middle Class Populations
Yet another factor accelerating ecommerce growth in emerging markets is the growth of middle class populations. This is of particular importance in countries with large populations such as China and India, which are creating large consumer bases. For example, Chinese demand for foreign goods is now making China the “growth engine” for luxury ecommerce sales.
Ecommerce Vs Brick And Mortar Retailers
The remarkable part about experts’ predictions on the future is the boldness with which they forecast the decline in centrality of the physical store. Whether such predictions will pan out remains to be seen, but retailers need to take note.
A Reversal Of Roles Between Online And Offline
Take the advice of Peter Sheldon, Vice President of Strategy at Magento, an ecommerce powerhouse, for example, who told PCMag, “E-commerce is going to be ubiquitous. This will have a negative impact on the traditional retail experience. Malls, department stores, they’re on a downward spiral.”
That’s just for a start. Jimmy Rodriguez, COO of 3DCart, another ecommerce platform, says, “Retail stores will become an extension of online stores.”
Consumers Are Flocking Online
Consumers are already aware that how they want to shop is changing. They don’t shop at the mall as frequently or as heavily as they did in the past. Amazon Prime memberships and a world of online retailers offers the same convenience that malls once offered exclusively.
This new environment will change the way physical stores operate. There might well be fewer physical stores in operation when 2025 rolls around.
Preparing For The Future
News of large unexpected growth in ecommerce should be a discussion point in retail boardrooms and planning meetings. By 2025, worldwide ecommerce sales could breach the $24 trillion mark. This uptick in online commerce can change the fortunes of retailers in just about every sector imaginable. However, it’s not all good news, as experts foresee a decline in the traditional physical store. To best prepare for the future, retailers need to be having serious discussions about their strategy going out to 2025.