Global Leaders In E-commerce Industries
Today e-commerce holds a sizable chunk of the retail market. Online shopping is growing at about 15 – 17% globally, while offline sales are at just about 5%. The e-retail revenues are projected to grow to $4.88 billion by 2021. Such trends are a clear signal to incredible growth, e-commerce has achieved over the past few years and how it might just go past the traditional brick-and-mortar form of retail. Traditional retail no longer holds the sway as it used to. Introduction Online shopping is one of the most popular online activities globally. It comes as no surprise that the largest internet companies happen to be e-commerce based. Here the attempt is to broadly outline the largest e-commerce companies according to a metric known as Gross Merchandise Value (GMV). This is a measure of the value of the total goods sold by an e-commerce website. GMV is different from revenue. Many e-commerce sites can have large GMV but small revenue. For example, eBay has a large GMV but relatively small revenue since it does not sell directly to the customer. In this write-up, I would spell-out the largest global e-commerce companies - how they started, their business strategy and marketing approach. The aim here is to educate and inform the reader how the big names in e-commerce began and grew. Now, let’s look at each one of them: I Alibaba Gross Merchandise Value: $768 Billion CEO: Daniel Zhang About the Brand: Alibaba was founded in 1999 by Jack Ma, a former English teacher from Hangzhou, China. He led a group of 18 people in establishing the company. Alibaba.com a B2B platform was started with the idea of providing Chinese SMBs and wholesalers’ access to overseas clients. Within a few years of its launch and several rounds of equity funding, it turned profitable in 2003. This milestone paved the way for Alibaba’s diversification into B2C (Tmall) and P2P (Taobao) trade. Jack Ma had no prior experience with coding or the internet but was fascinated with the idea of the internet when he encountered it on a trip to the US in 1995. He was part of two failed internet ventures before he finally established Alibaba from his own apartment. He was able to convince his friends to invest in him and his vision for an online marketplace that allowed Chinese exporters to post product listings for overseas customers. Alibaba’s first known investors’ were Goldman Sachs and SoftBank, who invested $5 and $20 million respectively. In 2013, the company got listed as a public company on the New York Stock Exchange with a $150 billion IPO. Business Strategy: The meteoric rise of the company can be attributed to its focus on the enormous supplier base in China and other Asian markets. The B2B marketplace can be called a gateway to China, which leverages the enormous capacity of the economy to produce goods that the world wants. To serve this demand, Alibaba does everything to improve the level of trust among buyers through initiatives like business verification, factory inspections and stringent quality standards to be approved by the website. Alibaba started by providing free membership to attract clients, which became its core competency and opened up business opportunities for the company. When the number of registered clients reached a threshold, it started charging membership fees. The company primarily has two revenue streams - advertising fees and value-added services such as listing and membership fees. Presently, Alibaba is not just a B2B e-commerce website but incorporates a range of services to serve the client in every stage of the purchasing cycle. In other words, Alibaba is Amazon, eBay, Paypal, FedEx and others all rolled into one. Marketing Strategy Pricing is one of the strategies used by Alibaba to affect sales and market share, it also is known to give discounts to stimulate sales and retain customers. Discount is one of the means to encourage customers to buy in bulk especially during the festive seasons. Next, there are value-added services like shipping, instant delivery etc that get added to cheap cost price to ensure the total cost of the product is higher than the production cost to generate profits. Moreover, the popularity of the brand Alibaba has led to the increased usage of its other services. For example, Alipay, a subsidiary of Alibaba, has emerged as a payment processing leader in China with an estimated 80 million transactions per day. II Amazon Gross Merchandise Value: $239 Billion CEO: Jeff Bezos About the Brand: Amazon was founded in 1994 by Jeff Bezos’ in the garage of his rented home in Washington, through an initial investment of $250,000 by his parents. It raised a series A of $8 million from Kleiner Perkins Caufield & Byers in 1995. The same year, the company began as an online book store, within two months Amazon’s sales were up to $20,000/ week. However, the company envisioned long-term goals and continued to invest the revenue back to support growth. The profit remained near $0 or below but the revenue continued to rise. In 1997, it announced about going public and got listed on NASDAQ at $18 per share with an estimated worth of $438 million. Over the years, Amazon has acquired many companies to consolidate its position in the market, with its first acquisition done way back in 1998. The inspiration to start a company came to Jeff Bezos when he encountered a startling statistic that the web usage in the US was growing at an incredible 2,300% a year. He began pondering that this kind of growth is quite unusual and what sort of business can be built with such a technology that is getting adopted at such a frantic pace. The rest, as they say, is history. Currently, the Amazon shares on NASDAQ trades at $ 3,175 starting from $18 a share, an astonishing 580% return on investment. Business Strategy: Amazon sole focus is to provide great customer experience through low prices, convenience and a wide selection of merchandise. The company thrives on customer loyalty and repeat purchases. While many dot coms were able to create awareness, they failed to turn that into loyalty. It is able to achieve sustained loyalty through easy to use functionality, fast fulfilment, timely customer service, feature-rich content and a secure transaction environment. Besides this, features on the website like customer reviews, manufacturer product information, web pages matching individual preferences such as recommendations and notifications, easy search, high-quality images contribute to great user experience. Interestingly, the website offers low prices for popular products and sells less popular products at higher prices for a greater margin. Amazon has also managed to create and nurture an active community of online customers, who have helped create feature-rich content including product reviews, online recommendation lists, buying guides, wedding and baby registries. This helped the company to attract new customers. Free shipping is another aspect that has contributed to the increase in basket size since customers have to spend above a certain amount to receive the free feature. The company has been wise enough to evolve strategies for free shipping with rising competition and considering promotional reasons. Marketing Strategy: Amazon has been quite consistent with its marketing tactics since its inception and has added these elements to the marketing mix to make it more appealing to users. These tactics include: Email Marketing: Amazon has been able to develop email marketing into a refined strategy and every opportunity to market within a transactional mail is taken advantage of. There are a total of 9 types of email that Amazon sends to its customers. The messages seek to nudge buyers into purchasing more. The company also pioneered the concept of sending highly personalized product recommendation emails based on purchase history, demographics and browsing behaviour. Ratings & Reviews: They were the first companies online to put out a review system in place, way back in 1995. The company asks for individual review for each product separately through emails with very specific subject lines. The chance of getting a review is quite high with this tactic.
Customer Loyalty: Amazon has been able to leverage its existing customer loyalty with the Amazon Prime program. And, it has been extremely successful at persuading customers to sign-up for exclusive features. The Prime membership drive has helped the company to improve revenues as members are known to make more purchases than non-members.
III JingDong (JD.com)
GMV: $215 Billion
CEO: Liu Qiangdong
About the Brand:
The company was founded by Liu Qiangdong (Richard) in 1998. Richard poured $1,700 of his savings to open a small retail unit at Beijing’s technology hub. It started as JD multimedia, which would eventually become JD.com. Initially, it operated as a magneto-optical store but soon diversified into electronics, mobile phones, computers and similar items. Presently, it is based out of Beijing and it’s the closest competitor to Alibaba’s Tmall.
The SARS outbreak of 2003 was the breakthrough moment for JD.com when it was able to harness the potential of the internet to sell products online. After it found success online in 2004, it shut its physical retail unit to become an online store. By 2007, JD had built its own proprietary logistics network that ensured ‘last-mile’ delivery. In 2008, JD ventured into general merchandise and transformed the business into a full-fledged e-commerce operation.
In 2014, it announced a strategic partnership with Tencent, which gave JD access to WeChat and Mobile QQ platforms. In 2015, it launched JD worldwide which gave the Chinese audience access to imported products.
Business Strategy:
The company primarily sells an array of consumer products across 10 categories directly through its online platform. Some of the products that are offered include computers, home appliances, furniture and household goods. JD.com also serves third-party vendors by providing them with a platform to transact with customers. The company provides advertising and logistics services such as payment support to these vendors.
The reason for the success of the brand has a lot to do with JD simplifying the shopping experience for the everyday customer. JD provides consumers access to a wide variety of consumer products through tie-ups with international brands. The company has eased payment by offering a variety of payment options, which allows shoppers to transact quickly and nudges them to buy more.
The pricing of products on JD.com is kept low compared to Alibaba. In turn, it allows the company to grab new customers and retain existing ones. The commission from suppliers and retailers help the company to keep the cost low.
JD.com operates around 210 warehouses in China allowing it to hold more stock and diversify retail offerings. This is one of the reasons enabling it to provide speedy delivery. With increased storage space, it can support third-party vendors in its marketplace, creating opportunities to generate more revenue from the market place.
Marketing Strategy
The company uses traditional media such as newspapers, magazines to inform the public about the latest offerings on the website. During the festive season, it is known to put extensive advertisements on televisions mentioning heavy discounts. Search Engine Optimization (SEO) is used extensively to get higher results and visibility on regional search engines like Baidu. Sponsoring events and corporate tie-ups are important facets of its promotional strategy.
IV eBay
Gross Merchandise Value: $93 Billion
CEO: Jamie Lannone
About the Brand:
Incidentally, eBay started as “AuctionWeb” by Pierre Omidyar, who coded his way through the Labour Day weekend to create a new website that was aimed to bring together buyers and sellers in an honest and open market place. One of the first items sold on eBay was broken laser pointer at $14.83, which opened for bidding at $1. For a week, there were no takers, but after a week, bidders began weighing in and drove the price up. This was the moment when Omadiyar realized he was onto something big.
Omidyar started the website as a hobby to earn a few extra bucks during the weekend. After the first online sale, traffic began to increase and Omadiyar was forced to switch to a business account by his Internet Service Provider because of the growing number of buyers and sellers. After his internet bill ballooned from $30 to $250, he was forced to charge eBay users to conduct transactions. Users willingly paid up and eBay hired its first employee specifically to process checks. In 1996, eBay grew to become a million-dollar business. In 1998, the company went public with a share price of $18. Presently, the company has a market capitalization of $29 billion and the founder Omadiyar has a net worth of $13.1 billion.
Business Strategy
eBay was found on the simple business model of bringing buyers and sellers to a common platform and charging a fee on any completed transaction. Sellers can register on the site and start selling goods and wares online within moments.
While the bidding remains free-of-charge the seller is charged an insertion fee and is charged an additional promotional fee to sell products that include bold fonts that help them to stand out. eBay mainly earned its fees by getting an item listed on the site and notifying the seller when the auction price level was met or exceeded. From there on the buyer and seller closed the deal independent of eBay.
During these years, eBay has acquired various companies to consolidate its brand as the main user-to-user retail company in the US. These included PayPal and Craiglist among others. Today, the company is a global e-commerce powerhouse with 182 million registered users and a highly successful mobile app that has been downloaded 476 million times.
Marketing Strategy
When it began eBay was known as an online auction site. But, the perception has changed and it has become a place where you can buy anything even a $400,000 plane. 80% of the products bought on the site are new products. During the course of all these transactions on the platform, there is close to 50 terabytes of behavioural or transactional data getting generated. eBay has invested and deployed resources to understand this data to gain individual insights about its customers and their buying habits.
Today, with enhanced data-driven marketing capabilities, eBay primarily focuses on email marketing to keep it’s messaging super-individualized and relevant. Now emails get sent every day informing their core audience about ‘Daily Deals’ or ‘Hot Items’ based on their browsing history and available inventory. Another email type known as ‘Trending Items’ is sent to users based on most searched keyword terms/ items on the platform. The email strategy is not restricted to regular users and includes first-timers who are encouraged to get involved in selling as eBay believes sellers are the most engaged customers.
Conclusion
Among all these e-commerce websites we have mentioned, the commonality lies in the owners recognizing the potential of the internet in creating a business and a brand. All of them were willing to go the extra mile in developing a sustainable business model. They believed in their convictions and made others believe in their vision, all of them were able to create an enduring brand that stood the test of time. Today, they are enjoying their success but remain motivated to grow their business to the next level in the coming future. All these are stories of hard work translating into opportunities that were exploited to the optimum. I believe these stories would be narrated time and again when the history of e-commerce would be told to the upcoming generation who have grown up with the internet as the norm.