Avatars to do your online shopping for you
E-commerce is one of the few sectors of the economy that is generating double-digit growth rates even in Europe. What is the way forward for the segment and its logistics needs? A study undertaken by Deutsche Post DHL investigates. Will drones deliver our purchases in future? Four scenarios provide an insight into the future worlds of digital retailing and serve to stimulate interesting debates.
Jürgen Gerdes appears to be cautious. «Of course we cannot predict what the future will really be like,» the Deutsche Post DHL corporation’s board member for mail, e-commerce and parcels admits during the presentation in Berlin of a study entitled Global E-Tailing 2025.
The document is intended to open our eyes to possible developments – even if some of the envisaged scenarios initially appear improbable. One thing is clear for Gerdes, however: e-commerce will not only grow more strongly than was previously anticipated in the industrial countries, but it will also significantly affect trade in emerging and developing states. The logistics industry has an important role to play in paving the way for this.
Still a lot of potential
The present is already exciting enough though, regardless of the study. In Germany alone the national e-commerce and distance-selling trade association (Bundesverband E-Commerce und Versandhandel) estimates that e-commerce revenues came to around EUR 39 billion in 2013, which represents an increase of almost 42% vis-à-vis the previous year.
In other words, e-commerce already has a 9% share of the overall retail volume. The situation is not much different in other major industrial nations. According to Deutsche Post’s assessment, the boom is still in its infancy, however. Even in its most conservative of scenarios, the study forecasts that e-commerce will command a 20% share in emerging markets and 25% in industrial nations by 2025. In addition to pure online revenue the study also takes account of income from so-called hybrid forms of trading. This means multi-channel concepts, in which at least a part of the transaction is carried out via the internet.
Driven by Asia
In the worst scenario, DHL’s study sees a 15% share for pure e-commerce. As is usual when analysing the future, growth and revenue forecasts are not necessarily the determining factors of the study of the global e-tail market. Mainly qualitative trends are described in the scenarios, based on possible political, social, technological and economic developments.
The first scenario – given the somewhat flowery title of «hybrid consumer behaviour in digital retail worlds» by the authors – is based on moderate but stable growth. It is driven primarily by Asian national economies, with a model of a global achievement-oriented society ruling the roost. Social disparities are expected to increase, especially in developed economies. For the winners in these achievement-oriented societies, consumer convenience plays an important role, whilst price is still a highly-dominant factor for the vast majority of people. A technological revolution is absent from this scenario – tablets and smartphones are still the state-of-the-art technology. Retail companies offer their goods online as well as in bricks-and-mortar shops, with the latter increasingly acting as showrooms.
Focus on self-fulfilment
Timely delivery – frequently on the same day – to any desired location is also a standard service provided by these bricks-and-mortar stores. The demand for logistics services is equally high, with providers having to link their information technology networks with those of the retail sector and its customers. Recipients’ impact on the logistics chain is increasing in this outlook. In industrial nations, including China, the proportion of pure e-commerce comes to 20%, with a further 20% of revenues generated by hybrid forms of trading.
The second scenario («self-presentation in virtual communities») is brimming with optimism. People are prospering, an affluent, global middle class has emerged. In contrast to the first scenario, people focus on leisure time rather than on work. Self-fulfilment is more important than professional success. Lifestyle communities dictate the trends and strongly influence the shopping habits of broad sections of the population. Small online platforms specialise in serving the needs of members of individual communities. Large online retailers serve the mass market.
Wearable electronic devices
So-called wearables (wearable electronic devices) are an essential part of everyday life in this scenario. One of the purposes of this portable technology is to measure and optimise one’s own actions – in relation to nutrition or fitness, for instance.
One wearable electronic device could, for example, advise against eating a particular dish – on the basis of its calorie content – and suggest healthier alternatives. Wearables also assist communication and act as an ordering tool. As in the first scenario, online retail is booming, and the volume of goods transported by logistics companies increasing – also because the individualisation of demand leads to lots of small-scale deliveries. This also has disadvantages, however, as huge traffic problems prompt conurbations to regulate deliveries.
Brave new world
Logistics companies will have to collaborate with each other – and experiment with innovative forms of delivery. In this scenario, DHL has established what it calls a parcelcopter, a type of delivery drone. Some logistics companies may operate 3D printers, thus entering the production process. The proportion of pure e-commerce comes to 30% in the industrial nations, plus a further 25 to 30% for hybrid forms of trading.
The third scenario, «artificial intelligence in a digital retailing sphere», is the most far-reaching in terms of technological changes. Data glasses, even so-called smart contact lenses, and other wearables have become indispensable parts of everyday life in this sketched world. Intelligent avatars act as virtual shopping advisers and even purchase everyday goods independently for their owners.
Consumer data is freely available, with web shops adapting their offerings to customer profiles in real time. Same-day deliveries – sometimes carried out by drones– are standard, as are same-hour deliveries in cities. Automated handovers, sometimes even before a customer has placed the order, are common practice in this scenario.
Even parked vehicles can be used as goods deposit centres, thanks to highly-intelligent sensors. Product piracy and cyber crime are serious problems, so logistics providers have to offer especially secure supply chains. Cross-border trade has risen sharply and is dominated by major logistics operators. The retail sector sometimes competes with established companies, using its own logistics services. The proportion of pure e-commerce in the industrial nations is 40%, plus 40–45% revenue from hybrid forms of trading.
Localisation, not globalisation
The fourth scenario («collaborative consumption in a regionalised retailing landscape») is a crisis scenario. The global economy is stagnating in this picture. Protectionism and high energy and raw materials prices have lead to the regionalisation of the economy. Sustainability and energy efficiency are the key factors influencing shopping. Leasing and sharing models flourish. The importance of personal possessions has diminished. Availability is what really matters. Defective appliances and consumer goods are repaired. They are modular in design, making it easier to replace parts.
Logistics operators suffer as a result of the decline in shipments transported, but at least they benefit from spare-parts logistics and the regional exchange of goods. Cross-border e-commerce activities remain the exception. The proportion of pure e-commerce is stagnant at 15% in the industrial nations, plus 15% from hybrid forms of trading.
Things never turn out as expected, of course. But the study is less about accurate predictions of the future, and more about initiating discussion of modern retail and logistics processes. It succeeds with this aim, thanks to the interesting scenarios it presents.