The term e-commerce stands for electronic commerce, the process of selling or buying goods and services via the web.
But what does e-commerce involve? E-commerce refers to both the set of commercial transactions that take place on the web related to the buying and selling of products and services, and the virtual place where these take place, thanks to dedicated infrastructures and interfaces.
It is well known by now that online sales are growing rapidly, which is why we want to focus on the topic of the future of e-commerce.
How will e-commerce evolve in the future, what are the new trends and new technologies available? Has the pandemic really led to revenue growth in this area?
We will answer all of these questions in the next paragraphs, but first, let’s take a small step back and understand when e-commerce was born and why we can distinguish between the e-commerce of the past and the future of e-commerce.
When was e-commerce born?
It may sound crazy, but it is possible to locate the very first order placed on the web. According to an article in The New York Times published on August 12, 1994, Phil Brandenberger of Philadelphia used a Visa credit card to make the first online purchase in history: a $12.48 purchase of Sting CD.
This purchase was made on NetMarket, the first e-commerce platform where the first secure retail transaction took place, using a version of data encryption software designed to ensure privacy. It was founded in 1994 by Dan Kohn and Roger Lee, former students of the London School of Economics, and Guy H. T. Haskin and Eiji Hirai of Swarthmore College.
In 1994, the future of e-commerce was characterized by safe and secure online payments. This represented a watershed moment in the digital world.
How has e-commerce evolved?
One year later, in 1995, the platforms that are still the strongest in the market were born: Amazon, eBay, and in 1999, Alibaba.
But let’s start with some data and look at the state of e-commerce in 2016 and the sectors where it was most used. According to research by Casaleggio Associati in 2017, e-commerce revenue in 2016 was €31.6 billion.
Where were these expenditures? They were in online gaming, which represented 35%, and tourism with 31%, followed by shopping malls (10%), insurance (6%), electronics (2.9%) and food (2.4%). As we can imagine, there have been substantial changes since then.
Consider that, in the period before shopping online really took off, due in part to a lack of confidence in the medium, there was still a tendency to move in this direction for a few areas. Travel agencies are increasingly seen as inconvenient and a waste of time, and online gaming offers much more variety.
For the more ingrained habits, such as grocery shopping, going to the bookstore, and buying clothing, physical stores are still preferred.
What were the 2016 predictions about the e-commerce of the future?
In 2016, the e-commerce market trends of the future predicted some of what we experience in the present day:
- Selling abroad: for the growth of the e-commerce market, the cross-border market was crucial; today, it’s much easier to sell across geographical boundaries.
- Frictionless payments: transactions that do not require further authentication; a real innovation in payment management aimed at increasing conversions.
- Actionable data: data is critical, and using it to analyze each and every conversion point and act accordingly is important for improvement.
- Customer-centric and on-demand service: allowing the customer to manage their purchase path according to their needs makes the experience not only more personal, but also more inspiring.
- Artificial Intelligence and chatbots: increasing transactions by offering a guided and interactive browsing experience is a big plus during the path to purchase.
We can definitely say that all of these trends, except the first one, which is now cleared through customs, are still absolutely current. Some more than others are widely used, and others still need to be implemented.
But what is the situation today?
What can we say about the e-commerce of the present?
A lot has changed since 2016, not only from the perspective of technological innovation but also from a more personal human perspective.
Consumer habits have changed. As customers move more and more toward a mobile-first perspective, businesses have had to adapt to this need and optimize their platforms for mobile fruition; they favor speed and convenience and omnichannel.
What is omnichannel? It’s about the synergistic management of the various touchpoints and channels where company and consumer interact in order to optimize the consumer experience.
Even at the level of laws and regulations, there has been an evolution: today, consumers are much more trusting of shopping online, compliance has become much tighter, and options such as “Buy now and Pay Later” or solutions that allow you to pay in multiple installments, greatly encourage the desire to buy.
According to a Nasdaq report, here is a snapshot of the e-commerce of the future: by 2040, 95% of purchases will be made online.
Meanwhile, where do we stand today? The latest data gives us an overview of what happened in 2021. In Italy, e-commerce sales in 2021 amounted to €39.4 billion (+21% compared to 2020).
On the one hand, product purchases continue to grow, reaching €30.5 billion, albeit at a slower pace (+18%) than in 2020 (+45%). On the other hand, purchases of services after the 2020 crisis (-52%) have shown a recovery (+36%) and reached €8.9 billion. The latter trend in particular, although positive, still fails to compensate for the serious losses generated by the health emergency, as the gap with pre-pandemic values (€13.5 billion) still remains high (source: observatori.net).
This last piece of information is particularly relevant because it brings us back to a question we asked at the beginning of the post; we’ll answer it in the next section.
E-commerce grows thanks to covid: is it true?
It’s common to think that e-commerce surged during the pandemic. Certainly consumer habits have changed, as we have already pointed out, and many more people have approached the world of online shopping, some out of want and some out of need.
In reality, the predictions say something quite different. The data tells us that, from 2020 to 2021 there was an increase from €32.5 billion in sales to €39.4 billion; certainly there has been an increase.
But the forecasts say that if we had not had this pandemic period, 2021 sales would have reached €42.9 billion. Certainly a considerable increase.
It is not hard to understand why the forecast failed. The pandemic period not only led to material constraints, but also a severe economic crisis that has forced people to limit their spending and buy mainly necessities.
In fact, it’s not at all surprising that Food & Grocery items top the list of the most purchased goods online during this period (source: observatories.net).
What are the e-commerce market trends of the future?
Statista gives us a preview of what B2C e-commerce revenues could be between now and 2025. As of this year, growth is steady, ranging from $500.8 million in 2022 to $569.2 million in 2025.
But now let’s turn to the trends for the e-commerce of the future.
Voice assistants are something we are already familiar with. Among the most common we have Cortana, Siri, Google Assistant, and Alexa.
The voice assistant’s job is to simplify the lives of those who use them, helping them with a wide range of activities, both everyday and otherwise. These activities include online shopping via voice assistant, an implementation that all e-commerce companies must deal with and use to their advantage.
But what exactly are voice assistants? They are AI-based algorithms that make it possible to search for information through voice alone. The potential of this medium, implemented within an e-commerce, is obvious:
- the possibility of having a personalized shopping experience;
- voice reviews: reviews help increase brand awareness, but it takes effort for the consumer to write one; leaving it by voice may be an easier and more inspiring method;
- smart shopping: selling products online by leveraging artificial intelligence.
A study by PWC USA found that, in the “Takeaway Food” sector, 34% of consumers have used a voice assistant to make purchases, while 35% would have liked to do so.
The use of artificial intelligence is not something of the e-commerce of the future, because it is already happening today. This includes:
- Chatbots and other virtual assistants
- Effective feedback for products and services
For example, Amazon has already been applying hyper-targeting processes across the entire purchasing process for some time now: from online searches to shipping logistics, from brand product enhancement, to defining new products.
Augmented Reality is another trend in the future of e-commerce that is gaining momentum within the e-commerce market. It involves using a device such as a smartphone to add content to an existing reality through the camera.
This medium involves:
- Game changer and augmented reality
- Virtual Try-on
- Social media filters.
For example, Ikea was one of the first brands to innovate in this way. The company’s first experiments with Augmented Reality began in 2017 where customers could use it to create their ideal home. This trend is widely used in the fashion and clothing sectors.
With live-shopping, products can be sold during a live online broadcast that describes the features of the item for sale. This makes it possible to share information, offer a product demonstration, satisfy viewers’ curiosity, and answer their questions.
It’s an interactive system that is useful for brands and stores and also for viewers who can make purchases in real time.
In short, it’s the perfect combination of live-streaming, social media, and online shopping.
The example of Living Wine Labels
To conclude our post on the e-commerce of the future, let’s look at the example of Living Wine Labels. The initiative is the augmented reality way to discover wine.
Here, wine stories of the Australian brand, Treasure Wine Estate, come to life through augmented reality. Thanks to the Living Labels app, which has been downloaded by 1.2 million consumers, simply bring your smartphone close to one of the labels of “19 Crimes,” the range of wines dedicated to Australian pioneers, and you can experience the stories of these characters, which come to life through your smartphone.
Everything started from here, until it expanded to a much wider range of wines. This communication does not go through a traditional approach but offers the opportunity to do two things:
- guide consumers by helping them make informed in-store choices;
- guide retailers, helping them offer customers the best possible shopping experience.
The goal is to reach wine lovers around the world.
After discovering how e-commerce was born, we have seen how it has evolved over time and how it will continue to evolve.
To keep up with consumers’ changing needs, evolution is necessary. Consumers want experiences that are increasingly simple and immediate, but at the same time innovative and interactive.
This is the secret of the e-commerce of the future: listening to what the audience wants and not underestimating the ever-faster advance of technological innovation.