Eft by Reuters Events in conversation with Nabil Malouli, VP Global eCommerce, DHL
We discuss the trends shaping e-commerce, changing consumer expectations and the keys to online order success
What are some key recent developments in the industry?
I think this is a unique time. In the last couple of weeks we have seen an acceleration of growth and conversion of online commerce like we never seen before. If you look at online the penetration of new users in places like Latin America, in Europe, in Asia, it's amazing, right?
I think as we are starting to see each companies reporting on their numbers, we're seeing an acceleration of volume that is amazing.
Target reported that during the month of April, the average daily volume was at the same level than Cyber Monday last year. So, it gives us kind of indication as to what is really happening in some of the large retailers.
What we see across the globe, within the portfolio of customers that we are we are working with and companies we are talking with, is definitely a huge, exponential change in regards to the priority that is given to e-commerce as a channel, as well as the importance of supply chain. It is now number one. We've heard that from some of the executives we work with in a very large fortune 100 company that COVID has accelerated their a digital online sales plans by five to 10 years. So pretty impressive.
Right when this pandemic started, we've seen a mixed message in terms of where the volumes were going … whether this is this going to be really positive for the long run or not. But now after a couple of weeks, now that things have stabilized, we see really an accelerated and positive growth through most of our conversations with large organizations that indicates it is here to stay. It is not a temporary spike of volume.
Many companies are really now looking at how do they accelerate their roadmap in regards to e-commerce or how they build one in the case of those ones that haven't really started. For those that don't already have a strong path that is in place, they're going to really need to go fast, because the clock is running.
As we go into the peak season this year, we're going to see some major shifts. I think, the CEO of Coca Cola mentioned in in an interview three weeks ago about systemic changes in consumer behaviour, for example, which was not a small statement. It does give us a sense of the importance of an acceleration to the importance of e-commerce channel and supply chain within organisations, and I think with that comes huge amount of opportunities for many companies.
Facebook just announced yesterday that they're launching shops for small and medium sized businesses, creating e-commerce functionalities and also to contribute to helping the overall economy. We are going to see more of that, and I think the world of e-commerce is probably in the midst of the most exciting time that we've seen in the last couple of years.
What are the key focuses that sellers need to keep in mind going forward?
I think the big thing is expectations of consumers have been growing throughout this time. There are primarily three expectations. One is speed, two is convenience, and the third is choice.
We know times to deliver products are shrinking every year. In the most mature markets we’re moving over to same-day delivery as commonplace, and the next day or second day as the standard, when a couple of years ago, it was four days, five days. We're going to increasingly see a shorter timeframe, especially as people start to buy more and more groceries.
Groceries is a game changer in the consumer mind because if you start to buy groceries online, then you will start to have that expectation of hyper-fast service levels and high convenience, where you can choose delivery windows and more.
What people have to understand grocery was one of the lowest penetrated segments in e-commerce before the COVID. In terms of a penetration growth rate, we’re probably seeing that it is one of the fastest, by far in fact, and that's going to change not only how big retailers are playing and how grocery will impact the total logistic volume that is being moved, but also significantly have a change on the consumer mind in regards to expectations of flexibility costs, and also free shipping.
I think we're going to see that being an accelerator and these expectations only increasing or the very least just changing to be more demanding, faster, cheaper, or eventually a without cost in terms of shipping, and also giving more convenience.
Although convenience means multiple things to different people but in e-commerce, what we hear primarily from studies is, number one, having the ability to decide where you want the delivery, which maybe at your house, maybe at your office, maybe in a pickup or drop application.
Another really, really big thing we are seeing is contactless delivery. We are starting to see it across shipping options and that means not only delivery to the house, but will probably means way more pickup and drop off locations that are automated solutions like the packing stations we have, for example, in different places in the world and a lot of stretching across Europe.
What product areas are you seeing riding a wave in the current environment?
The best illustration of what has happened is people having to work from home. What do you do if you have to work from home and you didn't work from home before? You start to invest in consumer electronics and you start to invest in home furniture just to be more comfortable in your house or wherever you place your offices. These are, for example, two categories that have had huge growth and we think that that's going to continue.
Anything related to cooking and fitness were some of the fastest growing categories, because of course as people are not getting to go out, they're spending more time home. They don't go to restaurants, so then they start to cook more at the house. Bread machines were the second most common item in countries like the US.
Beyond this you also have a lot of the pharmaceutical and sanitary products. We are seeing a lot of a lot of groups grow.
So yeah, I think it's that combination of consumer electronics, lifestyle products, and home furniture where we are seeing a lot of growth.
What areas do companies need to be aware of to put themselves in position to succeed?
I think borderless commerce is a very interesting one, in the sense of we are very far from borderless commerce. It's still a challenge for many organizations, not only from a cost standpoint, but also to understand different regulations and so on. However, it's coming and it is actually a place of huge growth opportunity. Even if people travel across the world less, they will still buy cross-border and it will be even more than before.
We did a study a year and a half ago around the reasons why people buy cross-border. The number one reason why people buy cross-border is not because of price. It is because of availability and options of product. Of course, if you live in the UK, in mainland Europe, in the US, you might not feel it so much because you have a very large representation of brands that are from these regions with a very strong presence. However, when you go to other type of economies, then there are a lot of products that you actually cannot find where you have to buy cross-border because they're just not available in your country. I think that's going to be something that provides a clear sign in terms of what is going to happen. We're going to see more of that volume are as people can travel across the globe.
I think in regards to how do you attack this, you really have to look at what is the right assortment that you need in the right place in the right country?
Can I put in place solutions that are going to help me to have starting point in distributing a global inventory? Companies need solutions powered by data that can allow me to see what product is selling in which country and also considering this down to the level of different cities. Being able to look at all this data dynamically and putting in place a payment solution technology that supports a transaction visibility from the time a consumer would be looking for a product up to inventory or return is a key component of what you need to put in place.
Once you have put solutions for payment for logistics for return, and you have a global inventory pool, then I think you are set up for really being able to operate in an effective manner.
It's a journey, right? It is not a silver bullet. It's a journey that you have to start with couple of SKUs and then expand. Even the most innovative companies and the most powerful companies, without mentioning names in the world of e-commerce, they run with a couple of SKUs, they learn the environment, and the impact in terms of, of duties and taxes returns and so on. And then they start to add categories, add a SKU, numbers and so on. Then they scale up the business.
What e-commerce elements do we need to be keeping an eye on?
I think the first one is the consumer experience of the purchasing process.
I think augmented reality solutions within the within the shopping experience are going to be extremely important. An AR/AI solution to basically help consumers to see how products will look on them and give you a visual representation virtually will be a very powerful technology.
I think AR and AI are going to be critical steps because it's not only about improving conversion, it's primarily about reducing returns, which is one of the biggest pain points in e-commerce, especially in the cross-border space, especially when you add in duties and taxes, which makes return the real complex process. That's a make or break aspect.
The other thing I think is going to be very important is whenever we talk about the premium items, we're going to need to start to see personalization of the experience, such as virtual stylists. I think when we go into like premium categories, that's the type of solution that we're going to need to see.