Extractive summaries and key takeaways from the articles curated from TOP TEN BUSINESS MAGAZINES to promote informed business decision-making | Week 303 | June 30 – July 6, 2023.
What is e-commerce?
McKinsey & Company | June 29, 2023
In 30 short years, e-commerce has revolutionized the way we shop. But when the COVID-19 pandemic hit, triggering lockdowns all over the world, customers went all in. Globally, nearly 20 percent of total global sales in 2021 were made from online purchases. By 2025, nearly a quarter of all global sales are expected to be made online.
Many small companies, in their rush to launch a new business, fall into traps that inhibit long-term growth. The stats for new business survival are grim: only 24 percent of new businesses launched in the past ten years have become viable large-scale enterprises. Nascent e-commerce businesses face special challenges. McKinsey analysis has identified five short-term traps that hamper small- and medium-size companies’ e-commerce growth, as well as ways to guard against them: leading with tech focus, while deferring investment in areas such as operations and channel management; building a directionless tech stack solely useful for launch instead of defining the longer-term architecture and build a minimum viable product as a stepping stone to a larger goal; underinvesting funds and capabilities; learning the economics on the fly, rather than taking time to fully understand unit economics and implement a business model with long-term potential; and building the new business too close to the core.
For larger retailers looking to get a piece of the e-commerce pie, time is of the essence. Generally, companies can create a working e-commerce site in less time than they think; in McKinsey’s experience, new businesses can be launched in fewer than four months. Three advises from a research: Be pragmatic; assign ownership to the teams, not tasks; and putting in place the right key performance indicators early in the process and adapt over the time.
One way brands can build value is via direct-to-consumer (DTC) e-commerce. There are distinct advantages for retailers establishing direct relationships with end consumers. E-commerce can also drive value for brands via live commerce and social commerce.
Four ways consumer packaged goods companies to improve margins in e-commerce are: establish detailed transparency into e-commerce profits and loss; earmark specific e-commerce marketing investment, rather than drawing from shopper-marketing budgets; use e-commerce revenue growth management tactics; and incorporate omnichannel supply chain actions.
Five myths around B2B e-commerce that are past due for dispelling: most B2B companies don’t offer e-commerce, B2B buyers prefer face-to-face interactions, a basic e-commerce site is enough, E-commerce is only for repeat or low-ticket B2B purchases, and digital marketplaces are a next-level nice-to-have.
3 key takeaways from the article
- In 30 short years, e-commerce has revolutionized the way we shop. Globally, nearly 20 percent of total global sales in 2021 were made from online purchases. By 2025, nearly a quarter of all global sales are expected to be made online.
- Large retailers were the primary beneficiaries of this massive collective pivot, particularly those who had invested in e-commerce infrastructure and capabilities for years prior. But for businesses accustomed to operating offline, incorporating e-commerce into the customer experience can be fraught with challenges. Small and medium-size retailers and brand manufacturers, 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 realm.
- For those who rushed to launch e-commerce services, cracks are already beginning to appear. But the e-commerce opportunity, particularly for SMEs, is tremendous.
Topics: Technology, Global Economy, e-commerce, Marketing