Insights

What Happened on E-commerce in 2019 & What to Look Forward to in 2020

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It’s a wrap. 2019 is in the rearview, and it’s on to 2020. On the whole, Amazon dominated the e-commerce industry this year (shocker), taking a massive chunk of the US e-commerce market and a projected 13.7% of worldwide e-commerce sales. Walmart remained Amazon’s main competitor following as a distant second.

Lots happened over the year. Predominant themes for the industry included faster shipping, new developments in advertising, and the battle against counterfeits. Here are some of the top highlights from the e-commerce industry in 2019.
 

Focus on Fast Shipping


 
It’s a race to be the fastest and most convenient, and Amazon is lapping the competition. E-commerce platforms are continually trying to deliver more to their customers faster. Amazon launched one-day delivery options to its Prime members back in April.

Walmart responded to Amazon’s news with a pointed tweet.

One month later, Walmart announced the start of its free one-day shipping program for orders over $35. Amazon was quick to fire back.

“When customers shop with us, they expect to find great items at low prices,” said Marc Lore, President and CEO, Walmart eCommerce U.S. in a company blog post. “They also want shopping to be easy and convenient, including getting the items they order online quickly.”

Lore’s reference to customer expectations echoes a popular sentiment: convenience and delivery time influence online purchase decisions, which is most likely true. According to an infographic released by GoPeople, 88% of consumers are willing to pay for same-day or faster delivery, 30% of millennials consider an e-commerce business’ ability to deliver same-day before making a purchase decision, and having a guaranteed delivery date is important to 63% of online shoppers.

As consumer demands continue to increase — an estimated 40% of shoppers say they would consider receiving their order via drone to speed up delivery — Amazon is aggressively ahead of the curve in terms of shipping speed and convenience. According to Amazon, one-day shipping is currently available to a majority of its Prime members in the US (10,000 cities and towns).

Walmart’s one-day shipping was only initially available to customers in Phoenix, Las Vegas, and parts of southern California. The company set a goal to have one-day shipping available for 75% of the US population by the end of 2019. It isn’t clear as to whether or not the company was able to deliver on its goal.

While many things remain unclear concerning the current state one-day delivery, one thing is certain: faster shipping times matter, and there’s a highly-competitive race amongst e-commerce platforms to be the best and fastest across the US.
 

Amazon Ends Its Relationship with FedEx


 
FedEx ended its ground-deliver contract with Amazon back in August, which appears to have been a mutual decision. According to Bloomberg News, Amazon stated that FedEx was a great partner over the years, but that the company is headed down a path of innovation, which ultimately translates into Amazon taking more control over their own delivery process.

Amazon has continued to ramp up its own fleet, and as it does, it isn’t surprising to see them moving away from traditional shipping partners. As of right now, Amazon has a variety of internally controlled fulfillment options, including Amazon ground delivery, Amazon Flex, and Amazon Air, with innovations like drones and Scout Robots in the works.

 
In December, Amazon took the breakup a step further by blocking third-party sellers from using FedEx for Amazon Prime shipments, as reported by the Wall Street Journal.
 

Platform Advertising

 
Amazon’s advertising is fast-evolving to compete with leading digital ad sellers. Projected to net nearly $10 billion in ad revenue, Amazon has grown to represent 8% of the digital ad market.

Amazon continued to add new tools to its advertising platform in 2019, including a beta version of Sponsored Display ads. Sponsored Display gives businesses the ability to create display campaigns that appear both on and off Amazon (depending on how you target your campaign). This new service is available to professional sellers enrolled in Amazon Brand Registry, vendors, and agencies.

The retail giant’s advertising growth was noted publicly in Q2 of 2018, where Amazon CFO Brian Oslavsky referred to the company’s advertising business as a “now multibillion-dollar program.” The company opened a new office in Boulder, CO specifically dedicated to supporting their ad growth later that year.

“Advertising drives product discovery, helping customers find brands and products they may not know about on Amazon.com,” Amazon said in a company blog post. “Our ability to show customers highly relevant ads also drives better performance for these advertisers – which include vendors, sellers, and authors – and helps them grow their businesses on Amazon.”

Amazon also introduced a beta version of Amazon Posts. Described as a “new browse and discovery experience on Amazon focused on brand-shopping,” the functionality enables brands to share product-focused content with shoppers.

“Posts” can be viewed via brand detail pages, detail pages for related brands, feeds for related posts, and category-based feeds.
 

 

The Battle against Counterfeits


 
For the first time ever, Amazon used the word “counterfeit” in its annual filing. This move is seen as a warning that counterfeit products are a very real issue facing its online marketplace, and that Amazon could be liable for fraudulent or unlawful activities of sellers.
Amazon rolled out a program called Project Zero in February. Project Zero does three things to combat counterfeit issues. According to Amazon, it provides brands with a way to report and remove fraudulent listings through a self-service tool, it uses machine learning to proactively scan and remove fraudulent listings, and it uses product serialization to confirm the authenticity of products.

“Our aim is that customers always receive authentic goods when shopping on Amazon,” the company said in an official blog post. “Project Zero builds on our long-standing work and investments in this area. It allows brands to work with us to leverage our combined strengths to move quickly and at scale to drive counterfeits to zero.”
 

Nike Ends its 1P Relationship with Amazon


 

Nike elected to end its pilot with Amazon in November, two years after it started. Nike first announced the pilot in a broadcasted quarterly earnings call in 2017.

“In the U.S., we’re executing a new pilot with Amazon with a limited Nike product assortment,” said Nike CEO Mark Parker during the call. “As we do with all of our partners, we’re looking for ways to improve the Nike consumer experience on Amazon by elevating the way the brand is presented and increasing the quality of product storytelling. We’re in the early stages, but we really look forward to evaluating the results of the pilot.”

Nike highlighted their desire to improve consumer experience on Amazon as one of the primary reasons for starting the pilot. Fast forward to this September. During another quarterly earnings call, Parker commented that Nike’s relationship with Amazon has “gone well.” He went on to hint that they were thinking critically about the performance of digital partners.

“It’s really critical that our [Nike] platform partners are actually serving our members or are serving our consumers at the highest level possible,” Parker went on to say. “So that means sort of seamless interaction, frictionless experiences in terms of commerce, looking at an environment where they [consumers] know that they’re buying authentic Nike products and ultimately just to better know and serve our consumers. So those are the things that we expect from our digital platform partners.”

Then Nike decided to part ways with Amazon. In a statement to Bloomberg one month after the call, Nike noted a desire to “focus on elevating consumer experiences through more direct, personal relationships” as the primary reason for the split.
 

Shopify Debuts Fulfillment Network


 
DTC is favored by many brands. However, it requires sophisticated fulfillment capabilities and is extremely difficult to compete with major e-commerce marketplaces like Amazon. Shopify is attempting to change that. In June, Shopify debuted its fulfillment network intended to offer brands timely deliveries and lower shipping costs on brands’ DTC websites.

“Shopify is known for having simplified the online shopping experience,” said the company in an online statement. “And we are now taking this one step further — making the fulfillment systems and technology that used to be reserved for the largest companies in the world accessible and affordable to every merchant, even those just starting to take off.”

Shopify Fulfillment Network aims to keep up with two-day delivery while maintaining 99.9% accuracy. Even with two-day shipping, it will be an uphill battle. Shoppers still tend to gravitate towards marketplaces and retailers for their purchases.

According to a study performed by Publicis Sapient and Salesforce, only 19% of surveyed shoppers chose to originally purchase products directly from a brand. 50% of shoppers said that they would purchase from a retailer, and 31% said they would purchase from a marketplace.

When it comes to repeat purchases, marketplaces dominate the market at 47%, and as we mentioned earlier, Amazon controls an overwhelming percentage of overall e-commerce spending. While Shopify makes DTC easier for brands, consumers control the spending — and as a result, marketplaces like Amazon are still winning big.
 

Amazon Expanded Its Capabilities in Canada


 
In an effort to better serve its Canadian shoppers, Amazon took more control of a key cargo carrier in its middle-mile transportation to Canada, Cargojet. The carrier owns a 95% share of the domestic overnight cargo in Canada, making it a highly-strategic investment for Amazon.

Cargojet’s agreement — which was announced in August — allows Amazon to acquire up to 9.9% of Cargojet’s variable voting shares.

“Cargojet has been a key player in our Canadian middle mile operations for several years,” said Adam Baker, Vice President Global Transportation, Amazon. “We’re thrilled to build a longer-term relationship that will allow us to provide even faster service to Amazon customers in Canada.”

Amazon’s relationship with Cargojet isn’t new. The carrier has been well-established with Amazon in the past and most recently demonstrated its reliability by maintaining a 100% delivery rate during Amazon’s 48-hour Prime Day.

The agreement between the two companies ensures faster delivery to Canadian shoppers at a time when one-day shipping is at the forefront of the industry. In 2018, Prime free One-Day Delivery was only available in 6 cities across Canada. Amazon added 13 cities to the list in 2019 for a total of 19 cities.

The agreement also foreshadows Amazon’s intention to become a transportation and logistics provider on a scale that would rival companies like UPS and FedEx. While that may sound like a distant reality, strategic investments like this one poise the company to become a serious competitor.

In addition to owning a 9.9% of Cargojet, Amazon has also acquired 40% of Atlas Air Worldwide and 33% of Air Transport Services Group.
 

Looking Ahead to 2020

 
If 2020 is anything like 2019, it will be full of changes and growth. Marketplaces will continue to improve their offerings, and shopper expectations will rise in pace. It’s impossible to predict everything, but there are some key areas that brands need to pay attention to in the upcoming year.
 

More Amazon Expansion in Canada

Aside from airlines, Amazon hasn’t stopped investing heavily in fulfillment centers across Canada as the business on Amazon.ca continues to see strong growth. Three facilities were added in 2019 (two in Ontario, one in British Columbia) and three more are scheduled to be complete in 2020 (one in Quebec, one in Alberta, and one more in Ontario) which will bring the total to 13 by the end of the year.

“To give perspective, when Netrush started processing goods in our facility in Mississauga, Ontario in 2017, Amazon had only six facilities across Canada (4 in Ontario, 2 in BC),” said Jennifer Brand, Netrush’s Director of International Expansion. “So we are talking about more than doubling facilities in 3 years.

“It’s exciting to see Amazon continuing to make key investments to maximize the relevancy of its marketplace to all Canadians. Speed to consumer continues to be key, and brands who make the move to proactively manage this marketplace early have a good chance of seeing significant growth.”

In addition to expanding their fulfillment presence, Amazon Alexa added “Multi-lingual” support in Canada in 2019. Now English and French speakers (in the same household) can talk to the same Alexa enabled device.
 

Staying on Top of Amazon Advertising

2020 will be an exciting year for Amazon advertising. One wish on the marketing wishlist would be to see a full release of the marketplace’s new beta, Amazon Attribution. This release would provide clear insights into how non-Amazon marketing channels drive sales, which it already somewhat does on a lesser scale.

“We are looking forward to a potential full release of Amazon’s Attribution program.” said Netrush Digital Marketing Manager Jackson Hathaway. “With this program, brands will be able to understand which channels are most effective at driving business goals on the marketplace.”

A full release of Amazon Attribution would give advertisers the information needed to fine tune channels and campaigns. There hasn’t been a 100% accurate way to measure the effectiveness of certain channels, which is what a full release of Amazon Attribution would provide.

“Historically, we have measured the efficacy of an ad channel by measuring a ‘halo lift,’” said Hathaway. “Moving forward, we will have a detailed view of the multi-channel path-to-purchase all the way from engagement to transaction.”

Advertising has also been thought to influence organic rankings through Amazon’s A9 algorithm. Moving into 2020, advertisers will continue to learn more about how paid and organic work together on Amazon.

“In early 2019, our team received signals that Amazon had tweaked A9 to assign higher SEO value to vendors and sellers that effectively drove traffic to the marketplace via external ad channels. This change, coupled with the roll-out of Amazon Attribution beta, affirmed the notion that Amazon will continue to incentivize this tactic.”
 

Embracing One-Day Delivery

Faster shipping times will continue to be a priority in 2020. Amazon has been well ahead of the competition as far as delivery speed is concerned, and that trend is expected to continue.

“Amazon is fast, plain and simple,” said Netrush Chief Supply Chain Officer Brian Birch. “From click to ship, Amazon processes your order in less than 1 day. That is nearly twice as fast as its competitors. But Amazon does not stop just there. Over the last decade, Amazon has invested heavily in transportation — everything from lockers to drones to Uber-style delivery services. This has allowed them to deliver from click to doorstep in under 3 days.”

As more of the population gain access to one-day shipping, customer expectations are anticipated to rise. Brands on Amazon will have to figure out ways to deliver on those ever-increasing expectations.

“For brands on Amazon, these new expectations can be daunting,” said Birch. “The customer expects fast and accurate fulfillment. And your supply chain has to either be up to this challenge or you can partner with someone who has these capabilities.”
 

Focusing on Sustainable Packaging & Supply Chain Optimization

As delivery times continue to get faster, supply chains and packaging designs need to be adapted to efficiently keep up. This means shifting to a more e-commerce-ready mindset. Packaging is one of the first areas to consider when making that shift.

“Having packaging that is e-commerce ready goes a long way to having a more productive supply chain,” said Colby Grantz, Packaging Director at Netrush. “But it’s also important to consider the customer experience. Packaging is the last thing a customer sees before opening a product, which means we’re enhancing that journey while maintaining an e-commerce ready mindset.

“You also have to consider sustainability. There’s a big responsibility — both on us and on our partner brands — to think sustainably in the way that we do things. Mix all of that together — being more efficient, delivering better customer experiences, and being more sustainable — and you have a basic roadmap for how to be better in 2020.”
 

Final Takeaway

E-commerce has been on a persistent, upward trend that shows no sign of slowing in 2020. 2019 was a year of growth, innovation, and fierce competition. Amazon is bound to grow, and as it does, other marketplaces will do whatever they can to keep pace. Growth and competition spur innovation — whether that be rideshare-style delivery, drones, inventory automation, and robots, or DTC fulfillment capabilities and slim packaging designs. For brands, this type of growth can feel intimidating, but it opens the door to a multitude of possibilities.