The eCommerce Market Maturity Strategy
I had the privilege in my career to have worked in eCommerce in different parts of the world and I had the chance to observe what I call the “eCommerce Market Maturity Strategy” (EMMS for the acronyms lovers).
Here is how it works: all countries go through the same pattern of moving online. One category at the time moves online and to eCommerce and the order of those categories is usually always the same. Let’s observe how that works.
Let us first go through the explanation about the order of each category.
The adult category has always been very keen to absorb and use new ways to deliver their content, in fact they are generally the first movers in that category, they were the first ones to use VCRs and DVDs. Internet in the early days was mainly used for Emails and Adult only activities.
The Adult category players always found new ways to commercialise and monetize their content and the Web and eCommerce was no exception.
Content to Digital Goods
For the obvious synergies that Content found in distribution online, they should have been the second category that moved online in the world. Unfortunately because of Copyright issues, two separate developments were observed in mature markets where the free and infringing content moved first and fast followed years after paid-for/legal concepts taking off and really getting traction.
That would have an impact of how Digital Goods happen to be spent online and I would say that this category is still catching up the “delay” that they had in mature markets.
Travel was the first huge category of expenditure that moved online. If you recall 20 years ago in US and Europe, all bookings were made through thousands of physical travel agents. This revolution created massive change into people managing their travel bookings now. Nearly 95% of all bookings are made online.
Retail was and is next and is still moving aggressively toward online. Some countries being faster than others based on their own fulfillment structure and if the shipping companies in the countries are good or bad.
We then talked about the next revolution which hasn’t even happened yet in most countries. The day-to-day goods that you would need to get delivered asap. Again here, it will depend on how efficient shipping companies can be.
The last category that will move will be fresh consumables where delivery pace is everything. If any delivery mechanism would get to a 24 hours window delivery for any of those goods AND stay profitable would to exist then this category will also move online.
Another consideration is that any of the merchants that don’t piggy back on existing systems can disrupt and be fast mover into markets. If you have a flower company and you take care of delivering the flowers yourself, you have a good chance of being the first.
Plot the countries
The beauty of this strategy is that you can then predict how advanced countries are in their maturity to move their shopping online and you would get a straight answer into how each category is important for this country and also what new players would emerge from the following years.
Let’s take couple examples:
Generally, mature markets have completed the Travel category to go fully online, the retail merchants are now to the point where most have online shops and have are now getting ready for their next wave. I ve put UK to the right of US because I think that the delivery service of UK has a much better chance of getting a good part of their delivery faster and move towards convenience goods more easily based on the fact that UK is smaller in size of country.
You can then extrapolate and say that for those countries, the categories will be “moved online” accordingly.
Developing countries pattern follows the same model but lagging slightly behind in development. They usually have moved most of their Travel inventory online (in India 90% of the market is Travel); Retail is slowly picking up but still represents a small share of the eCommerce.
I think the m-commerce development will help some of those developments but by the “blurring of the lines” between online and offline using mobile payments, we ll see how this influence and accelerate the pace of all categories putting their inventory and transform their business models that can support both online and offline and everything in between.
Happy to virtually discuss as always