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Digital Commerce and the Next Frontier

At its Retail (R)Evolution event in April 2017, Pitney Bowes shared research revealing that 94% of global consumers made a domestic online purchase within the last year, nearly half made purchases monthly, and one-quarter made purchases weekly. Pitney Bowes also found that two-thirds of consumers have made a cross-border purchase in the last year. While digital commerce accounts for a relatively small portion of total global retail sales, its growth is outpacing that of traditional brick-and-mortar sales. Aite Group estimates that in Northern America alone, digital commerce sales will be US$715 billion by the year 2020, equating to 11% of total retail sales, and that represents a huge market for retailers to tackle.

Today’s savvy consumers can engage with retailers in a physical store, on a website or mobile app, over the phone, through a mail-order catalog, and even through social media. Each piece of the consumer’s experience with a retailer needs to be consistent and complementary, and above all, the experience needs to be personalized. In other words, successful retailers must be thinking omnichannel when defining the consumer experience and must be prepared to enable a personalized shopping experience based on a consumer’s clicks, interactions, and data. And as if omnichannel were not already a huge challenge, retailers are also faced with ever-escalating consumer expectations. Known as the “Amazon effect,” consumers expect retailers to know where they are, track what they have purchased, and make recommendations based on those purchases. Consumers also expect to receive their orders within a day or two at most, expect shipping to be free, expect taxes and duties to be waived, and are even coming to expect to make orders via voice-enabled devices such as Amazon Echo. The pace of change for retailers is relentless.

And then there’s cross-border commerce. Any retailer with an online presence needs to realize it is part of a global marketplace, and cross-border sales represent a huge potential for revenue. In 2011, WWE Inc.’s international sales were 11% of total sales, compared to 30% of total sales in 2016. Harrods also reported that in 2016, 50% of its total online sales were international. Global consumers have the same expectations for service as domestic consumers, and in addition, they expect to view product information in their native language and expect pricing to be presented in their native currency with no “gotchas” from unexpected fees on the back end. Whether domestic or global, consumers are demanding a frictionless shopping experience.

Given the myriad complexities, it’s nearly impossible for any retailer to go it alone. Retailers need to focus on delivering a superior product and need a partner to help solve the operational, logistical, and compliance-related challenges. Companies with a focus on helping retailers with digital commerce can bet they will see dramatic growth in their overall businesses in the coming years. Not only are payments disappearing into the plumbing of commerce, with a business-to-consumer example in Uber, but innovative companies are also taking a similar approach in business-to-business solutions.

Pitney Bowes is an example of one company that powers digital commerce, combines its expertise in shipping and payments, and provides big-data analytics to help retailers deliver an end-to-end omnichannel experience for its consumers. In the next frontier, retailers will be expanding digitally and globally, and will be looking for cost-effective end-to-end solutions to execute their business strategies. For a deeper understanding of the digital commerce market in Northern America, check out this report written by me and my colleague Thad Peterson. Also, be on the lookout for our upcoming report on the digital commerce market in Europe as well as my report analyzing vendors providing cross-border digital commerce payments capabilities, both of which will be published the second half of this year.