SINGAPORE: 2018 has been a significant year for e-commerce. Just recently, we saw record breaking global sales numbers with US$7.9 billion transacted across Cyber Monday in the US and US$30.8 billion on Alibaba alone on Singles Day.
Analysts are predicting e-commerce to be the fastest growing global retail channel in the next few years, and Southeast Asia looks set to see tremendous industry growth in the next few years.
The region's e-commerce market looks set to hit US$102 billion by 2025 from US$23 billion in 2018, fuelled by the 350 million Internet users in the region and with growth led by Indonesia, Vietnam and Thailand.
Here in Singapore, with our high Internet penetration rate, we are the second highest in the Asia-Pacific in overseas purchases, and the second largest ride-hailing services market in value despite our small base.
Our digital infrastructure and status as a finance and business hub has also attracted Internet economy companies to set up headquarters here, bringing in US$16 billion in investment and providing residents easy access to e-commerce services from giants such as Lazada, Grab and Shopee.
From its humble beginning in the 1990s, e-commerce has had a significant impact on the real world, with its convenience and choice changing how products and services are sold and bought.
Today, we are at an inflection point where up-and-coming technologies and the increasing rate of digitalisation will fundamentally change the way individual consumers, businesses and governments buy and sell goods, and even how e-commerce is conducted.
Better and broader availability of smartphones and cheaper, faster and always-on Internet connectivity will mean better and quicker access to on-demand and time-sensitive services.
READ: How can businesses thrive in today’s digital world? A commentary
It will also mean that a lot of time-consuming tasks such as discovering and buying necessities and supplies can be done quickly and easily; saving time, improving productivity and lives.
#1 MORE AND BIGGER MEGA MARKETPLACES OFFERING DIVERSE PRODUCTS AND SERVICES
In 2019, one key trend we expect is that mega marketplaces will grow bigger.
E-commerce players will expand their online marketplaces to provide buyers with more choice and product and service categories, expanding beyond their traditional core businesses and trying to provide a one-stop-shop for online purchases.
China’s WeChat, which started off as just a chat app, now allows users to buy food, book transport, get directions and get updates on sales and purchase through the app.
Back home, Grab and Go-Jek are competing to become Southeast Asia’s super app, with both initially starting out as a transportation service marketplace and now offering food delivery, payments and even ticketing and groceries.
Marketplaces will also be used by other non-marketplace businesses as a value-added offering to their core business. Banks in Singapore, for example, have launched marketplaces for their banking customers to purchase necessities and supplies online, providing additional value to their customer base and linking them to their core financial products.
UOB has created an online marketplace for its SME customers to buy business essentials from stationery, travel bookings and insurance while enjoying bulk-purchase deal prices.
OCBC has created a marketplace using analytics to handpick the most relevant motherhood related products for mothers and mums-to-be, and DBS has launched online marketplaces for electricity and direct seller to buyer car purchases that also provide information to payments and financing options at their digital bank.
#2 MORE HYPER-LOCAL, HYPER-VERTICAL MARKETPLACES WITH SPECIALISED DIFFERENTIATORS
On the other hand, this leaves room for even more specialisation: Hyper-local, hyper-vertical marketplaces will take advantage of the gap in the market from mega marketplaces taking a broader view; focusing on just one category or function or in a specific area.
One reason these hyper-local marketplaces form is because they rely on the physical proximity between buyers and sellers, as well as knowledge of local customs.
Carousell, initially created for students who wanted to sell items in university to each other, worked especially well in the city-state of Singapore in its initial stages because buyers and sellers, both based in Singapore, typically chose mutually convenient locations like train stations to exchange second-hand items for cash.
Another is the need for local relevance for the marketplace. An example of a highly specialised local marketplace is MakanSharing in Malaysia, where people can find home-cooked food in Malaysia.
Niche freelance marketplaces which allow for local hires are continually popping up, the likes of which include creatives and media freelancer site CreativesAtWork and personal trainer marketplace GoTrainer.
One telling sign of the importance of local relevance in the APAC region is how the more localised Grab beat the globalised Uber throughout the APAC region.
Grab, with more focus on the local market, had an edge when adapting to local conditions.
One differentiator Grab leveraged on was to allow their drivers to collect cash, which sped them along the region where passengers were not as credit-card savvy as their counterparts in the US.
#3 B2G E-COMMERCE: PUBLIC SECTOR INITIATIVES DRIVEN BY PRIVATE SECTOR MARKETPLACES
From specialisation in products, we will also see specialisation in buyers: With the biggest being in the government sector. We will see governments like India and New Zealand roll out online marketplaces.
Governments in Singapore (which has used GeBIZ since 2000) and the US are already tapping on online marketplaces for their procurement needs, and they will likely in turn feel an increasing pressure for usability and flexibility in their procurement processes as expectations of user experience rise across the board because of marketplaces like Amazon for government, as well as the individual procurement officer’s use of private sector marketplaces in their personal lives.
We will also see traditionally public sector initiatives being taken on by commercially-driven, private sector companies, to ensure commercial sustainability in these programmes.
This year, Arcadier was chosen by the United Nations to source and distribute critical non-communicable disease medicine and supplies to over 100 countries through a private, global online marketplace. One important objective is to become commercially viable – critical medications which might potentially save millions of lives cannot depend on goodwill and donations alone.
#4 RETURN OF OFFLINE RETAIL TO COMPLEMENT ONLINE
Another key trend is the return of offline retail, with retailers seeing it as complementary to online offerings. We’re seeing large retail players and small shops experimenting with this, after years of focusing on their online experience.
We have been seeing a trend of pop-up stores in malls run by online businesses that allow for lower investments and greater exposure while helping stave off consumer scepticism with a physical presence.
But it’s not just pop-ups that will become more common, but also permanent, brick-and-mortar stores that allow e-commerce business to attract walk-in patrons, while also doubling up as a warehouse and fulfilment station for the delivery of online purchases.
Players that started in the online space such as HonestBee, a Singapore-based online grocery and food delivery service, are investing in their own brick and mortar store, with e-commerce giant Taobao opening a physical store so consumers can see and touch products instead of relying just on pictures.
E-commerce players who can pull together an integrated retail experience will rise to the top.
#5 MATURING TECHNOLOGIES LIKE MACHINE LEARNING WILL ENHANCE E-COMMERCE
But growth and change will also bring about fresh challenges for marketplace operators. Two of the biggest issues for e-commerce today is trust and discoverability.
With billions of products and services being sold on a multitude of websites, buyers question the authenticity of seller’s claims amidst a sea of similarly strong claims. New technologies, which are coming into maturity can help with that.
Marketplaces are investing millions into artificial intelligence (AI) and machine learning to help their customers find products faster and with better relevance, and help sellers set competitive pricing.
Natural language processing capabilities can create AI chat bots that help customers quickly find the services and products they want in the online marketplace, especially in on-demand, time-sensitive services such as ride hailing.
AI-driven analytics can quickly pinpoint fraudulent transactions and prevent fraud. Combining AI and Wall Street high-frequency trading techniques, companies such as CashShield helps secures transactions and consumer accounts from cybercriminals, without the need for human intervention.
2019 will be another exciting year for e-commerce. This same time next year, we expect that there will again be talk about record-breaking volumes for Singles day and Cyber Monday.
But as the years go by, with e-commerce being more established and becoming the default platform for all aspects of buying and selling, from consumer, to businesses and government, we expect that we will just be calling it “commerce”.
Dinuke Ranasinghe is chief executive officer and co-founder of Singapore-based marketplace builder Arcadier.