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Some of the most attention-grabbing news in the world of freight and ecommerce recently have been the reports about Shopify’s decision to establish a fulfillment network for its merchants, closely followed by reports about eBay’s decision to offer similar services.
That got me wondering about the size of the global ecommerce business, and what might be driving the decisions by Shopify and eBay.
According to the World Trade Organization (WTO), “Electronic commerce, or e-commerce, is defined as the “production, distribution, marketing, sale or delivery of goods and services by electronic means.” An e‑commerce transaction can be between enterprises, households, individuals, governments and other public or private organizations.”
- Global ecommerce sales came to about $29 trillion.
- The number of individuals participating in ecommerce transactions around the world was about 1.3 billion.
These numbers represent a 13 percent and a 12 percent increase respectively over the corresponding values in 2016. There are two additional pieces of information that I did not expect:
- First, cross-border ecommerce is growing. According to UNCTAD, cross-border ecommerce grew from 15 percent of total global ecommerce sales to 21 percent in 2017. The growth is driven largely by customers in the United States buying from merchants outside the United States.
- Business-to-Business (B2B) ecommerce accounts for 88 percent of all global ecommerce sales. However, according to UNCTAD, business-to-consumer (B2C) ecommerce increased by 22 percent, to represent $3.9 trillion of ecommerce sales in 2017.
The top five countries for ecommerce sales are the United States, Japan, China, Germany and South Korea. Noticeably, 2017 ecommerce sales in the United States exceed the combined 2017 ecommerce sales for Japan, China, Germany and South Korea.
This quote from eBay’s 2018 Annual Report puts its decision in context: “Today customers demand more, and our imperative is to evolve to a managed marketplace where uniqueness and value is delivered in parallel with elegant simplicity. Managing our marketplace means building a foundational product catalog, increasingly playing a role in package delivery and returns, and managing the end-to-end payment process. We have strong conviction in the journey we are on, but no misconception of the challenges this brings. This evolution is happening at massive scale.”
With competition for merchants from Amazon, Alibaba, JD.com and others it makes sense that Shopify and eBay are both taking the steps to introduce fulfillment services. Fulfillment by Amazon has contributed to the speed with which Amazon’s marketplace business has grown – small merchants want to focus on what they do best. Supply chain logistics is not what small merchants generally do best. A somewhat similar strategy but adapted to account for the peculiarities of the environment in China, helped Alibaba and JD.com grow their ecommerce businesses.
By introducing fulfillment services to their marketplace platforms, Shopify and eBay reduce the probability that their merchants engage in multi-homing – a practice whereby some merchants list products in more than one marketplace – perhaps to take advantage of services that are available on one marketplace, but not on others. A high degree of multi-homing among merchants will influence the multi-homing tendencies of customers who buy from Shopify and eBay.
The likelihood of a sale happening on a specific ecommerce marketplace increases with the amount of time a shopper spends on that marketplace. Therefore, we should expect large ecommerce companies like eBay, Shopify, Amazon, Alibaba, JD.com and others to continue introducing initiatives and services to persuade and make it easier for merchants to list exclusively on their respective ecommerce marketplaces as people and businesses in other parts of the world become more comfortable doing business with one another online and cross-border ecommerce continues to grow.