Retail Sector 2016 and some more time :)

Thomas Friedman was true in saying the World Is Flat and that is what is being seen as retailers and platforms (B2B, B2C and C2C) outgrow their markets and expand to newer geographies. Increasingly there is a movement in the retail space to give customers an Omni channel experience that link online and physical shopping. Along with this the increasing mobile penetration in rural markets (largely in Asia Pacific) and a continuously connected customer has allowed for the Internationalization of the retail industry.
As per the 2015 Global Retail E-Commerce Index by A .T. Kearney, the global retail sales is set to grow to $1,506 B by 2018 with a CAGR of 15.71% (from 2014-18). However, the increased market size comes with a challenge of lower growth percentages which were 23% in 2013 and forecasted at 13% in 2018. The growth forecast is lower due to the increasing market penetration & saturation, economies of scale and stabilization of One Provider retailers globally.

Based on research we see the following challenges being dominant in the retail industry and needs to be managed:

1.Targeting the Right Customer and Engage: Expanding sales beyond the local borders and targeting an international audience offers a great opportunity for retailers. However, it is quite challenging to predict the user behaviour when sales expand beyond local borders. Targeted advertising using cookies in multi-regional multi-lingual websites are more effective when compared to a centralized ecommerce website. Analysing billions of cookie information relating to all the regional aspects and implementing targeted advertising for overseas customers without impacting the customer experience is challenging and how retailers tackle this is the key. The advent of the continuously connected customer using mobile devices serves as a technical challenge as the browser history tracking issues limits ad buying, resulting in no universal standards and low bidding in geographies with mobile based users.

2.Spur in Local Payment Formats: Although credit and debit cards are widely used in various countries but the authentication differences (like dynamic PIN, OTP etc.) pose a challenge. Along with this other payment modes like Mobile wallets (upcoming in the Asia Pacific) and cash on delivery does not support the Internationalization of business. This is complimented by low availability of  one-view tools to gather and analyse payment data (due to different payment modes and language) for payment conversion, revenue generation via each payment methods, average order value, fraud analysis, understanding past purchase behaviour, financial potential of the customer etc.

3.Disparate Legal Regulations:  Doing business in overseas is always a challenge especially when the rules of the land puts limitations in the form of FDI, local sourcing and red tapism to do business. Cross border expansion of e-commerce demands retailers to comply with international rules and regulations. In certain countries the lack of secure infrastructure and legal frameworks to prevent financial crimes can introduce risk to the business itself for the overseas retailers. 

4.Communication as a Cultural Challenge: Although Countries with a business friendly ecosystem attract more business. However, socio political environment, purchasing potential of the customers and cultural openness are also important, as that it enables higher adoption rates and openness to try something new. The US, UK and Japan are some of the strong markets in an online trading point of view. Brazil also is one of the fastest growing international ecommerce markets, with the dollars spent online shopping expected to double by 2018.

However, concerns about security in online transactions and personal information sharing makes certain countries reluctant to adopt online shopping from foreign retailers. For example France is a country which is a bit sceptical of shopping online and are very hesitant to pay online with a credit card. Even in Russian market ‘trust’ matters the most. The legitimacy of the product, return policies are also elements that matters in certain geographical regions.

The mantra to lead Internationalization is to “Know your customers intimately”. How efficiently and precisely you can do this determines the success in this highly competitive business arena. A successful ecommerce company can sense the customer’s intent to purchase a product, sense the purchasing capacity, entice with compelling offers, assist in purchasing, offer a wow experience in purchasing and make a customer into their brand advocate.

Ecommerce players use various technology to achieve this.  Since a large amount of data revolves around purchasing, retailers have started to leverage Big Data and Analytics to get the actionable intelligence. For example, cart abandonment is a serious concern affecting almost all the players in the retail industry. Customer behaviour & demographic understanding could result in effective targeted communication. Predictive Analytics can play a major role in reducing cart abandonment by anticipating customer behaviour, enhancing the opportunities to do cross sell or upsell, or offering some targeted promotions thereby avoiding the potential chances of cart abandonment. By analysing patterns on each shopper, coupled with academic research, public information, and general transaction analysis, the retailer can also find anomalies in the transaction. Data sources like customer information and demographics, loyalty rewards and behavioural data, combines these with the right predictive modelling and segmentation methods to achieve the twin benefits of customer segmentation and customer price scoring.