The Big Six Forces
Key trends are driving the need for companies to evolve their approach to e-commerce:
Footnotes available at end of article.
Reveal more detail on the forces
Competitive pressures
6
Massive advances in tech and data
5
Less forgiving capital market expectations.
4
Sky-high customer expectations
3
Fast-changing consumer behaviors
2
Accelerating e-commerce
1
4
Less forgiving capital market expectations. The current approach to e-commerce is unsustainable for many companies, particularly in consumer businesses. Some three-quarters of retailers, for example, had negative EBIT margin growth, even as e-commerce became a larger share of revenue.⁷ The market is now punishing that strategy. A sample of North American e-commerce companies, for example, saw an average decline of more than 10 percent in EV/EBITDA from 2018–2022, versus a decline of 2 percent for companies in general.⁸
5
Massive advances in tech and data. New technologies have evolved to massively accelerate scale and speed. 5G has made data consumption cheaper and better for consumers, while the cloud has provided companies with enormous computational power for lower costs. Advances in AI and machine learning have enabled mind-blowing analytic capabilities and intelligence, while tech is enabling automation in almost every aspect of operations.
6
Competitive pressures. B2B and B2C companies are facing crushing competitive forces from two sides. From one side, large, digital-first companies are harnessing their advantages to move into new markets, potentially threatening every established sector. From the other side, a proliferation of start-ups are launching innovative business models that can quickly scale. Funding for e-commerce start-ups reached a record $54 bil-lion in 2021, up from $19 billion in 2020.⁹
1
Accelerating e-commerce. All signs point to strong growth ahead in B2C and B2B, with e-commerce set to grow more than 12 percent each year through 2026.¹ The executives we surveyed expect total digital revenues to grow, on average, from 20 percent to 31 percent of total sales from 2022–2024.² There are at least 25 million “high-potential” digital customers in the United States and Europe who tried e-commerce for the first time during COVID but have not fully adopted it.³
3
Sky-high customer expectations. Each successful digital innovation raises the customer-expectation bar for everyone else—Tik Tok for video, Amazon for convenience, Alibaba for relevance, to name just a few. If companies can’t meet rising expectations, customers will leave. Some 74 percent of B2B customers want product availability shown online, while 72 percent want to be able to buy through any channel they want.⁶
2
Fast-changing customer behaviors. Digital adoption rates over the course of COVID doubled around the globe,⁴ and a sample of leading executives expects that trend to continue. Social commerce, for example, is expected to more than double from 2021–2025.⁵
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