eCommerce 101

eCommerce 101

It seems as though we’ve transacted online forever, but really it is only in the last three decades that eCommerce – that is, the buying and selling of goods via online services or the Internet – in its current form has been around.

The History of eCommerce

The germ of the concept dates back around forty years though, to well before the Internet became ubiquitous.

Encryption technology around telecommunications and the semiconductor industry advanced enough that in 1979, English inventor and entrepreneur Michael Aldrich demonstrated the first ‘online shopping system’[1] using a modified television set connected to a transaction processing computer via a telephone line in the UK. He enabled automated business-to-customer or business-to-business transactions in a closed, secure loop that could be shared by third parties, which would go on to become what we called eCommerce today.

In 1982, Boston Computer Exchange, an online market for people to sell used computers, became the first eCommerce company.

eCommerce stores and marketplaces

It took another 10 years till Book Stacks Unlimited debuted as an online bookseller, using an dial-up bulletin board. In 1994, it moved over to the Internet at books.com, today owned by Barnes & Noble.

In 1995, Amazon also launched as an online bookseller before converting into to a broad spectrum eCommerce store in 1998, and finally evolving into a marketplace that also accepted third-party sellers in 2000. Also in 1995, eBay was founded as an auction site which has gone on to become a giant of online retail globally. The takeup of broadband internet connections in the first decade of this century had a big part to play in this trend too.

Amazon set many of the standards for modern-day eCommerce by offering features that mail-order couldn’t, such as one-click shopping, comparison shopping across retailers, product reviews, quick and sometimes free delivery as well as easy returns.

In 2005, by adding a membership component with Amazon Prime that allowed for two-day shipping and later, access to its streaming service, and building warehouses across the US to be closer to the customer and cut delivery times, it revolutionized the supply chain management and fulfillment side of eCommerce. Etsy, the marketplace for crafts and small sellers, was also launched in 2000.

Membership is also how music streaming services such as Spotify and Deezer and operate – as premium subscription services – though actual streaming of music goes as far back as 1881 when the Theatrophone allowed listeners to listen to opera and theater performances via a telephone line. Netflix and Disney have, of course, done the same for video streaming, which has turned them into a club-type good.

While Amazon is the largest eCommerce store and marketplace globally in terms of revenue and market capitalization[2], Alibaba (founded 1999), Rakuten (founded 1997) in Asia and Mercado Libre (founded 1999) in Latin America are significant players in their markets.

Payment Infrastructure for eCommerce

In 1998, though, another important part of the eCommerce ecosystem, that of the payments that power it, launched when Paypal (originally Confinity) was founded. Paypal is now owned by eBay.

Since then, the proliferation of other digital wallets and peer-to-peer payment processing platforms such as Google Pay (previously Google Pay), Stripe and Apple Pay have made mobile payment even easier and more widespread.

Afterpay, Klarna and Paypal Credit are introducing customers to the idea of buy now, pay later, the practice of paying for eCommerce purchases in three or four installments like in actual retail, making it more widely accepted.

Anyone Can Have a Webshop

With customers not necessarily confined to a geographic location, there needed to be a way to reach them. Google Adwords, introduced in 2000, fulfilled that need. It allowed eCommerce businesses to advertise to people using Google search.

The arrival of Shopify in 2004 upended the till-then expensive coding and equipment necessary for the development of a webshop and point-of-sale systems and democratized it to allow anyone with an account to set one up using available templates. Shopify has built up a 20% market share in the US with WordPress plug-in WooCommerce themarket leader with 26%[3].

Types of eCommerce

Business to Business, B2b The traditional route where companies buy and sell goods and services with each other.

Business to Consumer, B2c This is the route when companies sell to consumers.

Business to Business to Customer, B2b2c A route where larger businesses sell to smaller entities who resell the product & services to a customer. A good example would be an HVAC company selling air conditioning equipment to a contractor who services the end customer.

Marketplaces This is where suppliers (business vendors and individual sellers) sell to buyers (businesses or consumers).

Consumer to Consumer (C2c) eBay is the best-known example of a platform that allows consumers to sell and buy products to each other.

Social, mobile and voice eCommerce applications

The future of eCommerce is all about shopping using mobile devices and apps and increasingly, voice. 81% of visits on Shopify sites is from mobiles[4]. SMS marketing is therefor becoming increasingly important. Social shopping has also taken off with brands using sponsored stories on Facebook and shoppable posts on Facebook, Instagram and Pinterest to reach customers.

Choosing an eCommerce platform

BORN Group has been around since eCommerce was in its infancy. Today, we are integrators for the major systems including SAP Commerce, Salesforce Commerce, Adobe Commerce, BigCommerce, ShopifyPlus, Commercetools, VTEX, and Elastic Path. To make informed platform decisions, we use something called a 5C methodology as part of our technical roadmap that we call the Feature Value Matrix at BORN. These include:

Conform We identify requirements that can be supported to conform to out-of-the-box features in a platform.

Configure BORN identifies requirements that can be supported through configurations made to the platform.

Customize We determine the necessary customizations that will need to be built into the platform.

Compromise The configuration and integration of third party tool or systems such as ERP, OMS and CRM systems that cover tax systems, loyalty programs, payment gateways, fraud detection, affiliate programs, email campaign systems, and user reviews

Connect Identifying all requirements that are supported through integration and offer accelerators for a shorter time to market at a reduced cost.

Through optimization of the 5C’s BORN Group is able to pinpoint your businesses specific needs and map those requirements to the most efficient solution.

eCommerce: Even more potential

Currently, only around 14% of retail sales is e-retail[5]. Moreover, 4 in 10 people worldwide don’t have an internet connection and over half the world doesn’t have a smartphone[6], so there is still a huge amount of potential with regard to eCommerce. Expect to see more omnichannel experiences, personalization, and artificial intelligence-enabled shopping.

The situation with Covid saw eCommerce sales accelerate around the globe – the US alone saw a 30% growth[7] – and is expected to touch USD 476 billion in 2024[8].

To know more about how BORN is leading the charge to merge usability with shopability by making informed platform decisions  to drive consumers online, click here.


[1] Michael Aldrich Invents Online Shopping, Historyofinformation.com,

https://www.historyofinformation.com/detail.php?id=4068

[2] Global Amazon retail e-commerce sales 2017-2021, Statista,

https://www.statista.com/statistics/1103390/amazon-retail-ecommerce-sales-global/

[3] Ecommerce Platform Marke Share in the USA, Oberlo, https://www.oberlo.com/statistics/ecommerce-platform-market-share-in-usa

[4] Shopify Announces Third-Quarter 2019 Financial Results, Shopify, https://news.shopify.com/shopify-announces-third-quarter-2019-financial-results

[5] E-commerce share of total global retail sales from 2015 to 2023, Statista, https://www.statista.com/statistics/534123/e-commerce-share-of-retail-sales-worldwide/

[6] How Many People Have Smartphones In The World?, https://www.bankmycell.com/blog/how-many-phones-are-in-the-world

[7] US Ecommerce Growth Jumps to More than 30%, Accelerating Online Shopping Shift by Nearly 2 Years, emarketer, https://www.emarketer.com/content/us-ecommerce-growth-jumps-more-than-30-accelerating-online-shopping-shift-by-nearly-2-years

[8] Retail e-commerce sales in the United States from 2017 to 2024, Statista, https://www.statista.com/statistics/272391/us-retail-e-commerce-sales-forecast/

Driving Digital Strategies with SMS Marketing

Driving Digital Strategies with SMS Marketing

SMS Marketing has seen rapid growth in the past few years, and for good reason. With the right implementation, it can prove to be an exceptional marketing tool for an eCommerce business. The numbers behind its success are staggering – when one considers that 98% of all text messages are opened, 90% of text messages are read within the first 3 minutes of being sent1, and that on average, SMS enjoys a 6-8x higher engagement rates than email marketing, it’s clear that SMS marketing is a tool that many eCommerce businesses can derive value from2. That’s why BORN Group and Yotpo have come together to help you navigate this channel which is acclaimed by Yotpo Customer Data to deliver a 25x ROI when successfully utilized.

This new outlet can greatly complement a digital strategy by serving as the most personalized channel for marketing updates and outreach. Given the higher rates of engagement and the fact that consumers spend twice as much time texting than answering emails, it is an excellent touchpoint within a marketing arsenal. Some may consider the practice intrusive, but according to Yotpo customer survey data, over 48% of consumers have already signed up to receive texts from a brand, with 51% reporting that they are interested in being able to have a line of text communication with a brand to check inventory and recommendations. So long as your brand performs outreach with consent by its consumer and allows them to begin the marketing by opting on, concerns of intrusion are wiped away. 

Personalized text message marketing finds such great success for a multitude of reasons. Mobile commerce has played a pivotal role in expanding eCommerce to where we’ve found via Yotpo consumer data that 65% of online shoppers choose to browse or shop online on their mobile devices, as opposed to a laptop or desktop computer. Furthermore, customers spend on average four hours a day on their mobile phones, with an average check-in rate of 150 check-ins a day. These metrics reveal how mobile commerce is essential to many eCommerce offerings, and tapping into SMS marketing is the most direct way to harness outreach to a mobile user. The 39% click through rate, sourced via Yotpo customer results, on all links in SMS messages means as well that there is a high chance the right content over a text message will find success in driving traffic.

Most SMS Marketing works via either setting up a campaign, which can be sent in bulk to consumers to promote special deals or new offerings on the site, or specific response messages for a consumer’s transaction. Yotpo utilizes SMSBump as its SMS marketing & automation app for Shopify sites with a 2x higher ROI on multiple step messages as opposed to one-off campaigns or automated responses. Building around multiple step messages has shown via Yotpo customer results a 4x higher ROI – and by highlighting SMS marketing during cart checkout, we’ve seen 47% of customers opt-in. Those numbers serve in your favor beyond promotion of sales too, as Yotpo customer data reveals how review requests via SMS  convert 66% higher compared to email due to the channel’s high engagement rates. This can transform a site’s user generated content when utilized effectively.

Altogether, SMS can play an exceptional role in driving marketing in ways conventional digital methods cannot. Given the nature of its opt-in first format, it is a key pillar when considering loyalty and customer experience for your consumer. 76% of loyalty program members will opt-in to communicate with their favorite brands via SMS according to Yotpo customer data – many businesses can stand to benefit from its array of its promotion of commerce, communication, and user-generated content.

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Footnotes

1. Marketing With 98 Percent Read-Rate and 10 More Compelling Stats, Adobe, 27 July 2015.  https://blog.adobe.com/en/publish/2015/07/27/marketing-with-98-percent-read-rate-and-10-more-compelling-stats.html#gs.ntun1x

2. 10 Reasons Why You Need SMS Marketing While Dropshipping, DoDropShipping, 5 November 2020 https://www.dodropshipping.com/dropshipping-reasons-why-you-need-sms-marketing/

A Bank in your (Digital) Wallet

A Bank in your (Digital) Wallet

If there is a recent fintech innovation that can be compared to sliced bread, it has to be digital wallets. In less than the time that it took for people to start banking online, secure, fast and convenient digital wallets have taken over how people store and use money. 

Our physical wallets consist of a mix of cards that confirm our identity, cards issued by financial institutions allowing debit or credit as well as cards that collect loyalty points. A digital wallet seeks to combine all of the above, and then some.

A digital wallet, or an e-wallet as it sometimes called, is a software-based financial account that securely stores users’ payment information and passwords. With this technology, users can quickly complete transactions and pay for them. Digital wallets can be cloud-based or use near-field communications (NFC) technology. When used on mobile phones, they enable smartphone payments. A digital wallet can also be used to store tickets, loyalty cards, and coupon information.

It appears that while digital wallets were already becoming popular, in 2020 their growth – like with that of eCommerce – got another push. Market research firm Apptopia says that mobile app sessions on the leading money remittance apps – such as PayPal, Remitly and Xoom – surged 10.7% in the first two and half months of the year alone.

Digital cash for digital wallets

Before digital wallets, there were contactless stored value cards using RFID and NFC technologies such as the FeliCa cards in Japan, developed by a subsidiary of NTT DoCoMo and Sony. The technology is used by millions of commuters around Asia on rail networks and was used as the basis for NTT DoCoMo’s Osaifu-Keitai, Japan’s de facto mobile payment system.

The idea of digital cash – and the term eCash – however, was floated in a paper in 1983 by researcher David Chaum. Chaum tried to commercialize his concept – named eCash – in a startup that anonymized and encrypted transactions using public key digital signatures. eCash was the basis of cryptocurrencies such as Bitcoin. However, it took until 1989 and the launch of PayPal for the idea of digital wallets to become widespread. Available for both Android and iOS users, PayPal’s relative ease of use has made it the widest used digital wallet globally. Customers have the option of paying with the app, which uses the same process as tap-to-pay options like Apple Pay, or swiping a PayPal Mastercard to make purchases in-store. PayPal also owns Venmo, the popular peer-to-peer payment app.

Technology companies were early into the payments game too. In Asia, communication apps WeChat, LINE, KakaoTalk, and Naver, all have embedded digital wallets. WhatsApp’s version is undergoing trials in India and Brazil first. Samsung Pay can not only be used with NFC but even with traditional magnetic stripe technology. Tech behemoths Google and Apple were later to the game but Google Pay – a combination of Google Wallet and Android Pay – and Apple Pay, supported on iPhones, iPads, Apple Watch, and Macs, are lumbering up to take on the competition. Apple Pay’s two-factor authentication including fingerprint (Touch ID) and Face ID means amounts that can be authorized are higher.

In the US, Walmart Pay uses QR codes – also used by Alipay in China – as opposed to tap-to-pay that relies on NFC technology. This wallet can also be used to organize Walmart gift cards, create shopping lists, store receipts, refill your prescriptions, and even find an item’s location inside your preferred store. 

Other players in the market include Cash App (released in 2014 by Square, and can only be accessed with your fingerprint for extra security), and also stores boarding passes, concert and movie tickets, loyalty cards and coupons. The app Due provides invoicing and time tracking but also offers a digital wallet and along with payment processing and banking capacities. They also happen to own the trademark on the word ‘eCash’ first promoted by Chaum.

Effects of and on eCommerce

With a boom in eCommerce this year, retailers need to keep up with their customers’ preferences for digital wallets and include all these options in their checkout. Here are some of the ways that digital wallets will impact the customer journey and the retailers’ balance sheets;

  • Customer behavior The companies offering these digital wallets – like the banks before them – have knowledge of their buying behavior in a granular sense.
  • Convenience: Not just for the customers who don’t have to open actual wallets, fill out forms or login online, retailers can also conveniently send and receive payments.
  • Reduces expenses Transfer fees and charges are much lower than on traditional banks. Some apps even allow retailers to eschew pricey POS systems.
  • Improved cash flow Credit card or check clearances can take a lot of time. Mobile eCash payments can speed up the process. Most transfers are completed within 72 hours with some even happening instantly. 
  • Conversion rates The convenience and speed while using digital wallets is one strategy that can help increase conversion rates and reduce abandoned shopping carts. Coupons, discounts, promotions can be beamed to customers in-store and loyalty points awarded.
  • More sales opportunities Since wallets are contained on phones, and most people carry their phones everywhere, location isn’t really a problem anymore. This increases sales opportunities making sales truly omnichannel.
  • Security With extra levels of authentication, a digital wallet is much more secure than a credit card. 

Digital wallets around the world

In Asia and Africa, where cash was formerly king, vast swathes of the population have sidestepped credit and debit cards to go straight to mobile payments. Alipay, offered by eCommerce giant Alibaba, and started out as an escrow service between eCommerce buyers and sellers is China’s leading third-party payment solution and digital wallet. In 2016, Alipay expanded to Europe to offer Chinese tourists traveling there a way to make in-store payments and receive offers and now has over a billion users worldwide. In India, its equivalent is PayTM. In Africa, and in particular Kenya, Vodafone M-Pesa allows users to deposit, withdraw and transfer funds, pay bills, and purchase mobile operator services. 

As eCommerce becomes more commonplace, digital wallets are starting to gain favor with customers and in turn, gain ground from banks. Square, for example, has received conditional approval to open a bank. Recognizing this propensity to transact online and on the phone, banks around the world are working on central bank digital currencies (CBDC) capabilities. 

Noting the banking-like features that digital wallets offer, Hong Kong and Singapore regulate digital wallets as stored value facilities. A new bill was tabled earlier this year in the US called the ‘Banking For All Act’ that mandates that all banks that are members of the Federal Reserve open and maintain ‘digital dollar wallets’ for all persons. The unbanked and the underbanked around the globe might fuel the next wave of digital wallets and we will be more digital money to fuel our digital lives.

The Benefits of Buy Now, Pay Later for Consumers and Retailers

The Benefits of Buy Now, Pay Later for Consumers and Retailers

Buy now, pay later integrations are set to stay.

As eCommerce booms with a growth rate poised to top 20% this year according to IBM’s U.S. Retail Index, vendors and marketplaces are trying to draw customers with a shopping experience with an extra payment feature that will help make it very easy to pay for their loaded shopping carts1.

The BNPL field is dominated by a few major players – Afterpay, Affirm, Klarna, QuadPay, Sezzle, Splitit, and most recently, PayPal Credit (formerly BillMeLater). As a payment gateway service that most merchants already offer, PayPal clearly has, despite its late entrance into the game, a natural advantage. Part of PayPal’s suite of pay later products, Pay in 4, is available to consumers who are making purchases between US$30 and US$600. Major brands such as CVS, Revolve, Nike, Levi’s, Urban Outfitters, Expedia, are offering these services on their eCommerce channels.

While the buy now, pay later (BNPL) model has been around for some time, this year it has gotten a particular boost. Splitit saw record growth of 176% quarter-over-quarter and 260% year-on-year during Q2 of 2020 while Afterpay had boosted its active US customer base from 1.9million to 5.6million within a year, an increase of 219%2,3

The BNPL phenomenon has its roots in credit cards and financing schemes of yore such as layaway. However, unlike its predecessors, as a modern one-click payment option, it feels like a win-win for both the customer and retailer. 

Popping up at checkout, the BNPL model allows customers to finance smaller ticket items with either no payment or just a small starting one and to pay the rest at a later date in a few installments, at either low or no interest rates. 1 in 3 US consumers have used a BNPL service while in the UK, 67% of UK millennials have used a BNPL service, according to research from management consultancy Kearney4,5. Retailers, on the other hand, have no risk as the BNPL provider takes it on in case of default. For this privilege, sellers pay a few cents per transaction as well as 2-6% of transaction value, which is more expensive than fees that credit card companies charge.

Innovations in technology such as artificial intelligence and machine learning have made it possible for financial institutions to reduce the risk of fraud and defaults, and their clients benefit from this as they now have an understanding of the buyer’s credit profile without affecting their credit scores.  

Customer demographic skews younger and has access to a range of financing

A report on PYMNTS.com on the BNPL industry showed that 87% of shoppers interested in the services were between the ages of 22 and 446

Consumers, especially the millennials and Gen Z among them, are also wary about the debt that comes with using credit cards. In the uncertain economic climate, customers are more inclined to take on more debt. However, issuers are lowering limits or closing cards altogether7. With uncertainty about the future on the minds of a lot of people, BPNL services stand to benefit from the sentiment. 

Credit cards, in any case, are just one of a range of credit tools available to young people.

Respondents said they use BNPL to buy electronics (43.65 percent), clothing or fashion items (36.95 percent), furniture or appliances (32.81 percent), household essentials (30.96 percent) and groceries (22.54 percent).

Benefits to customers

Customers have the option of buying items and paying for them with flexible terms ranging from 3 months to multiple years, depending on the provider, improving the customer experience and making it frictionless. They can receive their item before completing a full payment. The payments are interest free and sign-up is much faster than for credit cards.

Nearly 42 percent of BPNL users cite clarity of terms as a key priority when making purchases online, and 39.1 percent the ability to monitor spending8.

Benefits to retailers

The BPNL model is being used by retailers for high value goods or by those offering low value goods but want to increase conversions, cart size, reach new customers and keep existing ones. Payment provider Stripe – a QuadPay partner – says it is not a good fit for businesses selling services or software or those sensitive to cost, since fees are higher9.

  • Increased sales value Providers such as Klarna claim that the addition of a BPNL feature led to an increase of 33% in the value of sales at its client GymShark. QuadPay says merchants that have implemented its BNPL product for e-commerce have seen a 20 percent increase in conversions and 60 percent increased average checkout value10.  It is a way to ensure revenue without resorting to tactics such as discounting. 
  • New customers A BPNL option might attract customers who were previously hesitant to buy products because the price was out of their budget. Lifestyle brand BlackCool says its sales rocketed 600 percent after it launched its BNPL plans. Its CEO claims that it brought in “different demographics, including price-conscious consumers who may think our premium products are priced beyond their reach”11. The providers, with their own community, will expose a store’s products and brand to millions of potential customers.
  • Loyalty Customers who know this option is available on an eCommerce store, and like the seamless nature of the customer experience, are more likely to return for repeat purchases.

Retailers will however need to think about how they will be sharing the customer relationship with the BPNL provider.

Integrations

The greatest challenge to BNPL adoption used to be the fact that the direct integration into the retailer’s point-of-sale system is an onerous process. BPNL services are, however, increasing their integrations with existing eCommerce systems such as BigCommerce, Shopify Plus and Salesforce Commerce Cloud to make it as easy as a flick of a switch.

Drawbacks for customers

While the soft credit checks the BNPL providers run at purchase do not impact customers’ credit scores, late payments can. Customers who default may be banned from further purchases. The terms and conditions from the BPNL service providers are not necessarily clear at sign-up either, leading to unexpected fees.

The future of buy now, pay later

As the use of frictionless, contactless experiences, and mobile wallets at the checkout in retail settings increase, the uptake of BNPL should follow suit. BNPL payment methods went from 3% of all eCommerce payments in 2018 to 8% in 2019, according to the Global Payments Report 2020 by Worldpay from FIS12. Customers are steadily being offered BNPL services outside eCommerce as well to pay for purchases, and they will possibly one day become as ubiquitous as credit card payments.

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Footnotes

1. COVID-19 pandemic accelerated shift to e-commerce by 5 years, new report says, TechCrunch, 24 August 2020. https://techcrunch.com/2020/08/24/covid-19-pandemic-accelerated-shift-to-e-commerce-by-5-years-new-report-says/

2. As COVID-19 Continues to Fuel E-commerce, Buy Now, Pay Later Programs Evolve, WWD, 14 July 2020. https://wwd.com/business-news/business-features/as-covid-19-continues-to-fuel-e-commerce-buy-now-pay-later-programs-evolve-1203675418/

3.  Afterpay investor presentation, Afterpay, 07 July 2020, https://www.afterpaytouch.com/images/07072020-Investor-Presentation.pdf

4. Buy Now, Pay Later Services Growing Quickly Among U.S. Consumers, 20 July 2020, https://www.fool.com/the-ascent/research/buy-now-pay-later-statistics/

5. Credit uncrunched: why banks and retailers must develop more PoS credit services, Kearney, Jan 2020, https://www.kearney.com/financial-services/article/?/a/credit-uncrunched-why-banks-and-retailers-must-develop-more-pos-credit-services

6.  How BPNL Services bring value to small businesses, Pymnts.com, Apr-Mar 2020, https://www.pymnts.com/wp-content/uploads/2020/04/PYMNTS-Tracker-Buy-Now-Pay-Later-April-May-2020.pdf

7.  How Covid boosted popularity of buy now, pay later options, 4 Sep 2020, https://www.bizjournals.com/bizwomen/news/latest-news/2020/09/how-covid-boost-popularity-of-buy-now-pay-later-o.html

8.  Millennials, Buy Now Pay Later And The Shifting Dynamics Of Online Credit, Pymts.com, 10 Dec 2020, https://www.pymnts.com/buy-now-pay-later/2020/report-millennials-buy-now-pay-later-and-the-shifting-dynamics-of-online-credit/

9.  Stripe, Buy now pay later – Learn about buy now pay later methods with Stripe, https://stripe.com/docs/payments/buy-now-pay-later

10.  Changing the Game: The Rise of the Buy Now Pay Later Consumer,Finovate.com, 3 Nov 2020 https://finovate.com/changing-the-game-the-rise-of-the-buy-now-pay-later-consumer/

11.  How BNPL Helps Bring Consumers Into Stores, Pymnts, 23 July 2020, https://www.pymnts.com/buy-now-pay-later/2020/how-bnpl-is-helping-blackcool-boost-brand-awareness-and-availability/

12.  Global Payments Report 2020, Worldpay,  https://worldpay.globalpaymentsreport.com/#/en

A Direct Route to Customer Hearts, Wallets, and Stomachs

A Direct Route to Customer Hearts, Wallets, and Stomachs

Presented by BORN Group and Shopify Plus

Direct-to-consumer (DTC) food and beverage sales have come full circle from the days when farmers sold fresh eggs, meat and produce or prepared items such as jams and pickles from his farm store or a stand to his regular customers. He knew their names, he knew where they lived, and he knew how they were going to use those products to prepare a meal.

What better way to respond to customer needs and their long-term buying behavior than to have regular and direct contact with them? Consumers who are well-versed in shopping from their increasingly connected homes on online marketplaces such as Amazon globally and JD.com, Pinduoduo, and Alibaba in Asia are also irrevocably turning to them for their food and beverage needs. 

Amazon responded with initiatives such as Amazon Fresh grocery delivery and Subscribe & Save. The fracturing of the food and beverage landscape by digital-native vertical brands such as snack brands UnReal and Rxbar in the US, non-alcoholic apéritif brand Seedlip and noodle brand Mr Lee’s in the UK, fitness food brand Foodspring in Germany and snack brand Three Squirrels in China are chipping away at traditional brands’ business – and margins – with products that are special, authentic and transparent, and cater to conscious eating trends. Now consumer packaged goods (CPG) companies and brands are taking their lead and following their customers online to stay competitive.

This propensity of consumers to shop online and on mobile has led to beverage company AB InBev’s DTC sales touching a figure of US$1 billion a year1. AB InBev, whose stable of beer brands include Budweiser, Busch, Corona and Stella Artois, says they have made 250 million DTC customer connections across stores, popups and websites. Like many other companies dipping their toes into DTC, they used Asian countries as a test market – AB InBev’s China DTC business is booming – before launching them worldwide. 

Nestle is another DTC pioneer. Earlier this year, they announced that British consumers could get the brand’s snacks, candy and coffee delivered to their doorstep via delivery service Deliveroo. In addition, Nestle’s KitKat Chocolatory offered customers the opportunity to order custom chocolate through a website and popups first before opening standalone stores first in Tokyo before rolling them out around the world. 

While newer entrants such as the plant-based food brands Beyond Meat and Impossible Foods are going the DTC route offering bulk, trial and combo product packs, even brands that have been around for a long time are joining the bandwagon. Maille has been selling its mustard products through retailers since 1723. Since the company’s acquisition by Unilever, they are now available directly through their own website, while household name Heinz is bundling products such as beans and spaghetti for home delivery. Pepsico, another staple brand, set up Pantryshop.com within a month to allow users to select specialized bundles of products such as Quaker oats and Gatorade under categories such as ‘Snacking’ and ‘Workout & Recovery’ with free and fast delivery. 

Why Go The Direct-to-Consumer Route?

CPG brands – traditionally sold via sales channels such as retail stores or third-party eCommerce sites – are sensitive to any changes to those channels. Besides, brand growth for CPGs are slowing on regular channels, if not going away entirely. The Centre for Retail Research predicts, for instance, that more than 20,000 British shops will close in 2020, a 28% increase on 20192.

In an uncertain retail environment, Lindt Canada, historically a brick and mortar supermarket and high-street staple in many countries, went online using Shopify Plus in just five days and enabled curbside pickup at its stores before Easter 2020 and the start of the company’s second-largest annual sales period3.

Another way to growth – build it or buy it

In 2020, eMarketer forecasts that DTC as a percentage of eCommerce sales will grow by 24.3% to US$17.75 billion, rising to US$21 billion in 20214. The share of ecommerce in F&B is also expected to grow to 15-20% in 20255.

Credit: LEK Consulting

CPG companies are investing in DTC models and platforms, alongside their traditional sales channels, to enable direct contact with their end-customers. 

In doing so, they can also:

  • Own the customer relationship
  • Build trust with their customers
  • Gather first-person data
  • Offer loyalty programs and run promotions
  • Personalize the experience across all channels. 
  • Extend the customer experience into different channels such as events and experiences 

Another route is to set up internal innovation labs to develop products specifically for DTC. AB InBev has its ZX Ventures. Ocean Spray is another brand trying to expand from its cranberry juice association to move into new products such as water enhancers for dogs, a line of herbal tonics, and an oral supplement to help protect the skin from the sun. 

Acquisitions can be yet another way to grow. HelloFresh, which has built a leading position with its meal kits subscription service is extending its brand by acquiring Factor 75, a company specializing in health ready meals geared towards health and wellness. Besides bringing with it offices, production and fulfillment facilities, this newest addition joins other portfolio brands such as EveryPlate, which offers affordable meal kits and Green Chef, which offers healthy meals6.

How to Go DTC?

Defining your goals and strategy at the outset of your DTC transformation journey is important. Things to consider include infrastructure support, supply chain networks, frameworks to underpin orders and data as well as the product mix.

The main components for CPG brands considering a DTC transformation, just like with other products that are sold direct, are a robust eCommerce infrastructure that offers speedy set-up, access and can scale quickly, a supply chain and logistics providers that can provide on-time, hassle-free fulfillment, and robust customer data platform and great customer service. Free and fast shipping is part of the deal on most DTC platforms.

Customer Experience is Key

With DTC as a new model of business, customer experience becomes paramount and the brand owns each and every touchpoint. Customers want not just convenience and easy intuitive UX, but they are often looking for the product to improve over time. DTC turns the sales process into a two-way street taking customer feedback to tweak current products or even develop new products. User-generated content is also a common feature. An easy-to-access and centralized customer record is also an essential tool for personalized and intuitive customer service. 

First Person Data

First person data is exclusive to your company and its origin is completely transparent. DTC models use data platforms that can gather first-person data not just from buying behaviour but also from channels such as ad campaigns, emails and social media. AI and machine learning can be applied to get deep insights as well as find influencers7

Building customer relationships and community

Aside from being data protection regulations compliant, the best backends crunch through data on engagement metrics and create a funnel for constant reviews and feedback from customers to power loyalty programs that keep said customers coming back for more. Allowing customers to take advantage of small perks, like free shipping, free returns, or access to exclusive SKUs, gives customers a reason to shop with you.

A big opportunity with omnichannel strategies is to connect customers with an experiential program, be they special events or experiences, with rewards for participation.  Alcohol brand Campari, for example, hosts happy hour Zoom chats, while MyKitKat workshops can be reserved at KitKat Chocolatory stores. Another example is Mondelez’ Toblerone, which offers custom printed sleeves for travel retail.

R&D

By leveraging first-party data and your community, you create a two-way relationship in which community members collaborate with you to co-create new products. You can also test products quickly and get customer feedback before investing in large production runs. Unilever not only sells ice cream flavors on its online store for Ben & Jerry’s, but also their latest Pint Slice innovations, T-shirts and merchandise. The data showed that cereal flavors were a popular concept so new flavors such as Fruit Loot and Frozen Flakes were created.

Brand Control

Instead of relying on other retailers to get your messaging right, take control over how your brand messages its products, creating consistency across all brand-owned touchpoints. By maintaining your brand identity and relationship with the consumer throughout their purchasing journey, you open up new opportunities to connect, achieve a personal touch and create value in unique and meaningful ways.

Marketing to Drive Sales and Cross-selling

The first-person data gathered can also be used to tweak marketing strategies, such as tailoring the messaging and sending out promotions or contests at the right time of day, week, or month. The larger share of millennial customers also means a different marketing mix such as more below-the-line marketing or social media in general9.

When taking a retail-only approach, you can miss out on opportunities to resell, upsell, and cross-sell. Going DTC allows you to test upsell and cross-selling opportunities, not only on site but also through social and email campaigns.

Profitability

DTC enables you to create a more efficient distribution and sales process and helps to retain revenue that would usually go to intermediaries. It also allows for better inventory control, allowing you to scale supply levels based on insights from data.

Channel diversification

Shoppers in four major markets surveyed – US, UK, Germany and France – are increasingly going online to look for CPG products10.

A diversified growth strategy allows you to test additional channels to see what works best with your audience, as each channel will bring a specific value. Further, such a strategy can result in benefits such as:

• Improved brand awareness and recall

• Measurable engagement

• Precision targeting and retargeting

• Direct communications via email

By owning the entire supply chain, you receive data gathered during the whole customer journey. This gives you the agility to test new advertising channels and digest results quickly.

Choosing a global platform such as Shopify Plus means you can use it to sell across 20 channels in over 175 countries in multiple currencies and languages. Of course, an omnichannel strategy also means that customer service should have the right technology and business tools to move across channels and offer personalized service regardless.

The KitKat Chocolatory store concept discussed above also includes other KitKats flavors from other countries as well as digital innovations such as printing photos on KitKats. 

Subscription

One way to keep customers coming back is the subscription model, which works well for food and beverage items such as pet and baby food where there is a regular incentive to purchase.

While subscription can help companies improve forecasting, smarter cross-selling is also possible. The best baby food companies not only offer products for babies as they grow but also customized pouches (Little Spoon), organic purees (Once Upon a Farm) and solid and finger food for growing children (Nurture Life, Yumble Kids, Tiny Organics). Arla’s Baby&Me concept in China, on the other hand, seeks to foster connections and develop trust with parents through a direct approach.

All in all, the sale of food and beverages direct to consumers online is a trend that is here to stay. What we are seeing now is just the tip of the iceberg. Many of the newer brands may  not be able to sustain current growth patterns, but we are without doubt in an era where brands pivot to become their own retailers, bringing DTC to the forefront of a new normal. 

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Footnotes

1.  Inside Anheuser-Busch InBev’s $1b a year DTC business, Digiday.com, March 2020 https://digiday.com/marketing/inside-anheuser-busch-inbevs-1b-year-dtc-business/

2. The Crisis in Retailing: Closures and Job Losses, Centre for Retail Research, 31 March 2020 https://www.retailresearch.org/retail-crisis.html

3. Lindt opened its first ecommerce store in 5 days to serve customers in a COVID-19 world, Shopify.com https://www.shopify.com/plus/customers/lindt

4. Direct-to-Consumer Brands 2020: Growing Pains Hit Disruptor Brands on Their Path to Maturity, eMarketer, March 2020 https://www.emarketer.com/content/direct-to-consumer-brands-2020

5. Online Food & Beverage Sales Are Poised to Accelerate — Is the Packaging Ecosystem Ready?, LEK Consulting, February 2019 https://www.lek.com/insights/ei/ecommerce-packaging-food-beverage

6. HelloFresh acquires meal producer Factor75, RetailDetail, 24 Nov 2020 https://www.retaildetail.eu/en/news/food/hellofresh-acquires-meal-producer-factor75

7. How artificial intelligence is influencing Unilever’s marketing, Digiday, April 2019 https://digiday.com/marketing/artificial-intelligence-influencing-unilevers-marketing/

8. Inside Anheuser-Busch InBev’s $1b a year DTC business, Digiday.com, March 2020 https://digiday.com/marketing/inside-anheuser-busch-inbevs-1b-year-dtc-business/

9. Reinvigorating growth in the consumer-goods industry, McKinsey.com, August 2020 https://www.mckinsey.com/industries/consumer-packaged-goods/our-insights/reinvigorating-growth-in-the-consumer-goods-industry

10. CPG Goes Omnichannel: Shoppers Grasp the Digital Opportunity, McKinsey.com, March 2018 https://www.mckinsey.com/business-functions/marketing-and-sales/solutions/periscope/our-insights/surveys/cpg-goes-omnichannel-shoppers-grasp-the-digital-opportunity

BORN Group’s Year in Review

BORN Group’s Year in Review

On our one year anniversary of being acquired by Tech Mahindra, BORN Group reports a transformative year looking back at our expansion of services and accolades as an agency. In face of the pandemic, BORN has kept buoyant, thrived, and secured landmark wins and awards to continue its status as the most decorated agency of its class.

BORN commanded over thirty-seven award wins throughout 2020. Client work with brands like Starbucks, Cadbury, Digi, Frette, Cartier, Tata Cliq, Tata Cliq Luxury, Tata Tetley, Love Bonito, Changi Airport Group, and Sour Patch Kids enjoyed high honors across the globe, receiving distinctions from the Communicator Awards, the Lovies, the FoxGlove Awards, Campaign India Digital Crest, the dotComm Awards, the Mob-Ex Awards, and the Digies. These wins centered around delivering excellent UI/UX, cultivating best practices, and ensuring best consumer engagement for these marquee brands.

As an agency, BORN Group received various commendations, winning Gold for Best Digital Consulting Agency of the Global Brand Magazine Awards, Company of the Year in Advertising, Marketing, and Public Relations by the International Business Awards, an Agency of the Year Finalist by the Drum Awards, and named advertising + Marketing Research Agency and Brand and Design Agency of the Year. BORN Group’s CEO, Dilip Keshu, was also distinguished as an Entrepreneur of the Year by the International Business Awards, otherwise known as the Stevies, while the agency also enjoyed numerous accolades via partner awards, namely in receiving the SAP APJ Excellence Award 2020 for SAP Customer Experience, Most Innovative Partner of the Year Award by the 2020 Bloomreach Awards, and Best User Experience and Design by the BigCommerce 2020 Partner Awards.

As part of its acquisition by Tech Mahindra, BORN Group undertook a complete digital overhaul to capture their full suite of offerings, verticals, and 80+ comprehensive case studies. The new site was recently awarded multiple CSS Design Awards for Best UX Design, Best UI Design, and Best Innovation, along with an honorable mention from the awwwards. 

Behind all these accolades were our fearless BORNies. With over eighty new hires this year, including key hires in management positions with the additions of, Minna Rhee, Managing Director, North America, Reji James, Head of Managed Services, North America and Dustin Holmstrom, Head of Digital Architecture, we’re proud to note our team grew despite the many challenges of 2020. Finally, BORN came together to build and deploy state of the art strategic frameworks in Stella and SMOC, and pledged support toward change through contributions to the BORN Equality Fund.

With 2021 on the horizon, we look to move towards a post-pandemic world more resilient and able than ever.

As we say here at BORN, onwards and upwards!

Insights, Trends, and Predictions for 2021

Insights, Trends, and Predictions for 2021

The next few months should see us at the cusp of a post-pandemic economy – with multiple vaccines looming over the horizon, there is a light at the end of the tunnel for another tumultuous year globally – a new US President and people adjusting to a post pandemic world. There’s a few trends born out of the disruptions over the year to note when considering the state of eCommerce moving into 2021, and I’ve decided to highlight what we believe are the five most important trends. Of course, I hasten to add, every single one of my predictions could be wrong. I have learned at a very young age that I have no orbuculum at my disposal and my scrying is a game of dice!  

Each trend connects with a greater cluster of users, from the consumer all the way to the integrity of the digital economy, so understanding each pillar of these predictions can go a long way in preparing for future disruptions and innovations ahead.

Hyper-personalizations: Considering the Consumer Alone

As buyer profiles grow more and more distinct with the aggregation of big data and the development of machine learning, hyper-personalization is a vital component of building modern customer experience. The world will move from broad segmentation to one to one marketing as the technology to further target content to the individual advances. We’ve begun to see this already to great effect in social media eCommerce as platforms like TikTok and Instagram have mastered the endless scroll via tailoring content specific to the individual, and now we see clear opportunities for early adopters in both B2B and B2C spaces to capture significant growth. Marketing to broad segments like Millennials or Baby Boomers won’t do. Everyone in these segments is unique so think about how you deliver 1:1 personalization. 

The Elastic Enterprise: Reevaluating Business Models

With demand and supply becoming global, business models will change. We will see more Direct to Consumer (DTC) and composite hybrids – B2B, B2C and B2B2C power the digital economy. Both DTC and B2B2C are now proven business models that have challenged conventional wisdoms in eCommerce and thrived in the wake of their disruption. Throughout the pandemic, DTC models have transformed household essentials into subscription based services that are tailored to one’s needs and personalized to their wants. B2B2C models on the other hand have allowed businesses to specialize in providing services to other smaller businesses who you may engage – like an air conditioning supplier (B) who works with the small business contractor (b) you (c) trust. 

The Longitudinal Book of Record: Understanding Connected Data Science

So I know your name and email. Over time I get to know your preferences.I keep building the small stub of information I have on you- like building a longitudinal book of record. Omnichannel has long been an established pillar of the digital economy, but going into the next decade, connected channels and the data science behind them will only skyrocket in significance. Companies will rely on building an infinitely extendable longitudinal book of record by collecting and compiling data from various channels – connected channels will be the next big thing. Efficient and effective CRMs, OMS’, and ERP solutions will help ensure that a business has that central node by which all customer interactions can connect towards. Building that book of record is the key piece in accumulating and executing the data to accomplish the sort of CX transformations like hyper-personalization that distinguish one commerce practice from another.

The Speed of the Human Mind: Powering Mass Consumption Instantly via 5G

Infrastructure across nations, cities, homes and businesses will upgrade to 5G to cater to mass consumption of information, instantly, everywhere, and as a result, the consequences to the digital economy will be staggering. Already we’ve seen brick and mortar rapidly erode from its conventional use-case as the nexus of shopping into a portal of customer experiences and tailored moments to match robust eCommerce solutions. 5G and the ensuing wave of digital infrastructure will only accelerate those trends further as it becomes even easier to search, engage, and purchase via any electronic device. Furthermore, that digital infrastructure can capture new consumer markets globally, putting more emphasis on useful technologies that can ensure fulfillment and tax liability across the world. So are you ready to deliver rich media. Chips, computers, phones, infra and 5G are ready to deliver it. 

Resilience: Safeguarding Your Business and the Digital Economy

All it took is one pandemic to change the nature of business irrevocably. Companies will seek to protect themselves from such events – a mindset to be battle ready in all circumstances has emerged. Both digital security protocols and multiple routes of fulfillment will be top of mind for businesses as the world moves closer to a pandemic vaccine. Tools to ensure credit monitoring and ID theft protection will find more and more value as we tilt even further into a digital first economy.

All in all, these insights reveal a commanding trend towards leveraging new technologies to heighten CX in the space. Between personalization, distribution, speed, and safety, disruption comes in many waves that each elevate a business towards the most efficient and effective commerce experience. We’re excited to implement these insights and heighten the brands we work with over the next years, and capture our onwards and upwards sentiment with the changing digital economy. In short: is your business capable of change. Rapidly.