ECOMMERCE

                                     

                                   Describe e-commerce.

Online product buying and selling is known as e-commerce. Sellers stand to gain more customers and increase their profitability by optimizing e-commerce as a part of a larger digital commerce transformation.

                            IMAGE SOURCE - ECOMMERCE

E-commerce has completely changed the way we shop in just 30 years. Shopping no longer just means going to a store, choosing, and purchasing items, then taking them home. Shopping journeys that once took hours can now be completed in a matter of seconds from any location with an internet signal. The excitement of the purchase is now prolonged, beginning with the click to buy and ending with the "unboxing" (which has grown into a whole industry).

E-commerce, described simply, is the buying and selling of products or services over the internet. Since the first online transaction in 1994, when a person sold his friend a Sting CD for $12.48 plus shipping, e-commerce has been steadily expanding. Customers, however, went all-in when the COVID-19 epidemic struck and caused lockdowns all over the world. Year over year growth of e-commerce as a share of total retail sales increased 1.6 times in China, 3.3 times in the United States, and 4.5 times in the United Kingdom. In the United States, the percentage of e-commerce sales penetration more than doubled to 35 percent in 2020 from the previous year, which is nearly the same as ten years of growth.In 2021, roughly 20 percent of all sales made in the world were made online. Nearly a quarter of all global sales are anticipated to occur online by 2025.

Large merchants were the main winners of this massive collective pivot, especially those who had spent years building up their e-commerce expertise and infrastructure. However, integrating e-commerce into the consumer experience might be difficult for companies used to running offline. Small and medium-sized retailers (those with less than $5 billion in annual revenue) and brand producers, such as consumer packaged goods and apparel companies, realize a much smaller portion of revenue from e-commerce than large retailers with years of experience in the e-commerce space, according to McKinsey analysis. The e-commerce services of those who hurried to create them are already showing signs of cracking. But we've also realized that there is a huge possibility in e-commerce, particularly for SMEs.

To learn more about e-commerce, keep reading. We'll start by discussing how it may benefit both small and large retailers. After that, we'll discuss how different types of businesses, such as brands, CPG companies, and B2B firms, can create value through e-commerce. We'll now discuss how businesses in emerging markets are utilizing e-commerce.

        How does e-commerce help retailers create value?

E-commerce increases value for merchants of all sizes by promoting effective sales and generating additional sources of income, such as retail media networks.

smaller stores

Many small businesses get into traps that prevent long-term growth in their haste to open a new business. Only 24% of new businesses that were founded in the last 10 years have survived to become successful large-scale businesses, according to the statistics on new business survival.

E-commerce startups encounter unique difficulties. Five short-term traps that impede the e-commerce growth of small and medium-sized businesses have been identified by a McKinsey investigation, along with preventative measures:

While delaying investment in areas like operations and channel management, the company is focusing on technology. To prevent inventory shortages, make sure that the heads of sales and operations have the same success metrics as the IT teams, and develop all aspects of the company concurrently.

assembling a tech stack without direction that is only useful for launch. The improper technological design will lead to technical debt that will impede scaling attempts. Create a minimal viable product as a stepping stone to a more ambitious aim in order to combat this.

underutilizing resources and abilities. Companies are usually enticed to begin e-commerce firms for as little money as possible and then anticipate a rapid return on investment (ROI) for each dollar spent. Build a "learning buffer" into any budget to account for essential (and instructional) setbacks in order to avoid falling into this trap.

Instead of taking the time to thoroughly comprehend unit economics and adopt a company model with long-term potential, people prefer to learn the economics on the fly. Instead, focus on using the prism of profit and loss to comprehend the primary forces behind growth and profitability.

1. Building the new business too close to the core. Corporate business-building activities are often hampered by internal policies that slow the development of new business. Combat this by creating distance between the new e-commerce business and core businesses. This allows for more agile ways of working to develop that reflect the nature of the new business.

larger merchants

Time is of the essence for larger merchants who want a piece of the e-commerce pie. In general, firms may build a functioning e-commerce site faster than they anticipate; according to McKinsey, new businesses can be established in less than four months.

A European retail chain that had about 1,000 physical outlets worldwide and had chosen to establish an online presence was one with whom McKinsey worked. It had a fully operational e-commerce firm in one of its regions 13 weeks later. From the first month, the launch was a success, leading to a roughly 3% increase in regional sales, a tripling of the typical basket size in comparison to retail locations, and continued high levels of customer satisfaction. The following three takeaways come from that program:

Be realistic. The retail CEO chose to enter the market quickly, in a single location, and with a constrained offering rather than attempting to create a fully fledged digital firm across all geographies at once. All projects that didn't directly affect customers were put on hold in favor of ones that did.

Give ownership instead of tasks. The retail chain was able to start quickly by clearly defining which teams were in charge of which tasks. The chain formed four teams to handle the launch: operations, marketing, operations and tech and design.

A retail media network is what?

The year 2020 was challenging for conventional retail. Retailers faced additional difficulties as a result of the epidemic as roughly 30% more customers migrated to online channels. Retailers have had to reevaluate their expansion strategy in order to compete.

Joining a retail media network (RMN) is one strategy for solving the issue. RMNs could be valuable to retailers because they provide them the opportunity to create a high-margin company that would spur e-commerce innovation. The way RMNs function is by utilizing retailers' in-depth understanding of their customers to provide marketers with advertising options to target consumers through a retailer's physical shops, digital channels, and syndication on third-party platforms like Google. Brands can also access customers directly through RMNs by using first-party data. Finally, RMNs may assist brands in offering a smooth, omnichannel shopping experience that is supported by technology.

LINK SOURCE  -     https://www.mckinsey.com/featured-insights/mckinsey-explainers/what-is-e-co