Welcome to your new look Ecommerce Quarterly. The same digital commerce news and analysis from the last quarter you have come to expect, in an improved and more user-friendly format. Plus, if you prefer your content in audio format, you can download a podcast version of this round-up via the link on the right.
(Text updated 26 September to incorporate new consumer confidence figures.)
1. Ecommerce overview
As we turn the corner into retail’s busiest quarter, retailers and brands will be pleased to see evidence that the US could finally be shaking off the so-called ‘vibesession’.[1] August saw the US enjoying its first consumer sentiment rise in five months.[2]
Globally, however, the picture looks more mixed. Consumers in APAC[3] and Europe[4] remain wary as the summer draws to an end, while in the UK there has been a sharp drop in confidence ahead of the new government’s autumn budget announcement.[5]
Consumer confidence, of course, translates into consumer spending, particularly on non-essential goods – the kind of products which account for a large share of ecommerce activity worldwide.
Brands should be buoyed by the positive news from the US but will need to carefully consider their pricing and promotions strategy for what – according to all early indicators – is set to be another highly competitive peak season.
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2. Tech round-up
Big box GenAI starts seeing results
Walmart becomes one of the first major retailers to announce gains from GenAI adoptions
Over the last few quarters, we have covered the addition of many new generative AI capabilities, from content generation to enhanced recommendations. We are now starting to see some evidence of the impact these are having for retailers.
In August, Walmart President and Chief Executive Officer Doug McMillon told investors on an earnings call that the retailer had success using multiple LLMs to populate the attributes and characteristics of its product catalogue, creating or improving around 850 million pieces of data.
One of the key advantages of generative AI is the way it can enhance both the speed and scale of content production – something McMillon highlighted: “Without the use of generative AI, this work would have required nearly 100 times the current headcount to complete in the same amount of time.”[6]
The retailer also reported that this level of detail in the product catalogue is allowing Walmart to better match products to customer intent, both in-store and online.
Walmart has been at the vanguard of AI experimentation, so it is not surprising they are one of the first retailers to start seeing and sharing the results.
However, Walmart is not the only US big box retailer with GenAI news. In June, its rival Target announced the rollout of a generative AI chatbot for brick-and-mortar store employees.[7] Named ‘Store Companion’, the chatbot is designed to answer on the job questions like “How do I restart the register after a power cut?” or “How do I sign customers up for our loyalty scheme?”
Target is looking to roll this out ready for the Christmas season and its flurry of temporary seasonal hires.[8] Having a chatbot in the hands of each member of staff, however inexperienced, that can answer key questions and fill knowledge gaps should improve the in-store experience, reducing the number of ‘I’ll have to ask my manager’ delays, which can frustrate shoppers during the peak shopping days.
B2B shopping assistants
Alibaba announces plans to launch an AI-powered assistant to support B2B buyers
According to an August press release, the AI assistant will be able to understand business buyers’ sourcing needs using natural language processing. It will then match buyers with products and suppliers, streamlining the (previously often frustrating) B2B ecommerce experience.[9]
The idea of having a personalised, effective personal shopper who saves you from endless scrolling and product comparisons is a large part of the appeal of AI-enabled shopping assistants, like those offered by Amazon, Mastercard and Instacart. However, this offering from Alibaba is one of the first to bring that kind of experience into the realm of B2B.
Though we have seen increases in B2B ecommerce, it remains a significant [break] opportunity.[10] However, CX remains a barrier, with the experience on these sites often found wanting.[11] Given the nature of B2B purchasing – which is often based on criteria other than just personal taste – bots that take the legwork out of finding the right products or partners may prove even more powerful, and profitable, than their B2C siblings.
Content and commerce get closer
AI vision enables shoppable red carpets, while TikTok Shop gets visual
Product placement is nothing new. However, for non-FMCG brands or other products that do not bear a clear logo, it was somewhat of a gamble. For interested consumers, finding out which brand made a particular dress or outfit that appeared in a favourite show used to require a degree of detective work, or at least some scrolling through dedicated Reddit threads, or in the case of red carpets, Vogue.com. However, thanks to leaps within AI vision, that is no longer the case.
During this September’s MTV VMAs, viewers were given the opportunity to shop the red carpet outfits in real time via a partnership between Paramount Global and shoppable advertising company Shopsense AI. Of course, with red carpets, many of the items are likely to be one-offs, so Shopsense will also recommend similar products or so-called ‘dupes’ from their partner retailers.
This partnership follows a broader trend we have been seeing around the increased integration of commerce into content. Retailers and brands have long been looking to shorten the journey from viewers thinking ‘I like that jacket’ to adding it to a basket without disrupting the viewing experience – visual search via a second device may well provide that.
Though this partnership formalises the connection between content provider and those benefiting from the conversion, visual search is by no means new. Google has long offered visual search via Google Lens, and Amazon and Klarna also offer similar tools. TikTok plans to join their ranks, with the platform reportedly testing image search capabilities in the US and South Asia.[12]
One of the key drivers behind the development of visual search is the ways in which it can support product discovery and purchase. As searching via images or screenshots becomes a greater part of the shopping journey, for brands and retailers this makes it even more important that product pages have strong imagery and the right data.
Don’t call it the metaverse
Shopify partnership brings shopping for physical goods to Roblox
September saw Roblox announce its new integration with Shopify, which will give brands the ability to sell physical items directly to users within their Roblox games without ever leaving the platform.[13] The partnership is not exclusive, so depending on the success of this rollout we can expect to see other ecommerce platforms potentially joining up.
Roblox has long had the ambition to integrate commerce more broadly into its platform. This partnership brings the company one step closer to the gaming company also becoming the internet’s 3D virtual mall.
For brands and retailers, it’s always valuable to keep up to date with new technologies and platforms as they emerge. However, if the metaverse reckoning taught us [break] anything,[14] it is the importance of taking a balanced, customer-centric and use case-based approach when considering the adoption of a new technology, however much hyped – a lesson we may want to keep in mind in 2024.
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3. Cross-border retail
Closing import loopholes
New US legislation targets Chinese cross-border shipments
The Biden administration has announced plans to make it more expensive for companies like Temu, Shein and AliExpress to ship goods into the US.[15] The proposed legislation targets a loophole in US import law that makes shipments valued under $800 duty-free. Packages entering under the de minimis exemption[16] are also able to share less information on the products inside, making it more difficult to block shipments of dangerous or illegal goods.
According to information shared by the government, over the last 10 years, packages shipped under this exemption have increased from approximately 140 million a year to over 1 billion, with the vast majority of these coming from China.
Governments globally are increasingly worried by the rise of these Chinese cross-border ecommerce platforms, driven by a combination of concerns around consumer safety and the ability of local businesses to compete with manufacturers and sellers who are not subject to the same rules.
Last quarter we reported on the EU’s designation of Temu and Shein as ‘very large online platforms’ (VLOPs) – a formal designation that comes with additional regulations and duties. May this year also saw the South Korean government announce a ban on cross-border ecommerce sales across 80 sensitive product categories due to consumer safety concerns.[17]
There can be little argument that these large cross-border retailers have been utilising the de minimis exemption to keep costs low and avoid potential red tape. The closing of this loophole for these platforms makes sense for the US government, though it may not help to warm up relations between the two countries.
The rise of Temu and similar ultra-cheap Chinese ecommerce platforms, and what that has done to the competitive landscape internationally, has been one of the key ecommerce stories of the past two years. For brands and retailers based outside of China, new regulation and the closing of import loopholes will likely be seen as a boon, as it levels some of the playing field between them and their cross-border rivals.
For the likes of Temu, this may see them follow fellow VLOP Shein’s example of investing in warehousing within destination countries. More on that below.
Cross-border ambitions
Taobao launches new English-language interface
Despite the regulatory and tax headwinds facing Chinese cross-border platforms, Alibaba at least feels there is still some untapped opportunity. September saw the ecommerce giant launch an English version of its Taobao app in both Singapore and Malaysia.[18]
Taobao and Tmall are responsible for the largest share of Alibaba’s revenue. [break] However, before this launch, their customer base has been primarily limited to [break] Chinese consumers. The launch of an English-language interface powered by AI translations is seen by many as a test bed for further expansion into other western markets,[19] something Alibaba has already sought to do with Alibaba.com and AliExpress.
In other Alibaba news, this month the company’s share price jumped after stocks became available to Chinese mainland investors, having been added to the Stock Connect programme that links the Hong Kong exchange (where the company is listed) and the Shanghai and Shenzhen markets.[20] In a further boost, Chinese regulators found that the company has successfully completed a three-year regulatory “rectification process”. This follows the company being fined $2.6bn for monopolistic practices in 2021 as part of the regulatory crackdown that prompted these platforms to start looking overseas for growth.
Though regulatory pressure might be growing in other regions such as the EU and US, within China it appears to have been softening. Perhaps recognising both the economic and PR power of being home to some of the US and Europe’s favourite digital shopping destinations, back in June China’s commerce ministry announced a new set of rules designed to promote the construction of overseas warehouses and expand cross-border ecommerce businesses.[21] Overseas warehousing may become particularly valuable in the US as amends to the de minimis exemption will require a change in shipping practices from these large platforms.
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4. Freight and delivery
End-to-end logistics
Uber integrates on-demand delivery with its freight service
The new integration brings together Uber Freight and Uber Direct, Uber’s on-demand delivery-as-a-service platform in the US. Outside of North America and the Netherlands (their one European outpost), many may be unfamiliar with the ride-hailing app’s freight business. Launched in 2017, Uber Freight was designed to bring the app’s superior customer experience and tracking to the realm of logistics.
The world’s growing delivery needs have left companies searching for more efficient and cost-effective solutions for getting orders to customers. This integration creates essentially an end-to-end logistics offer for businesses in the US, including the often challenging and expensive last mile.[22]
Low-impact last mile
Amazon experiments with tram deliveries in Germany
September saw Amazon announce the launch of a pilot project in Frankfurt which will see packages delivered by tram. The project is a partnership between the ecommerce giant, Frankfurt University and the city’s transport network. Once the parcels are brought into the city by the Gütertram (freight tram), the final leg will be handled by cargo bikes.[23]
This is not the first time trams have been used for freight in Germany. Until recently, [bk] the CarGoTram supplied Volkswagen’s factory in Germany with parts for car [break] assembly,[24] while a parcel tram pilot by Deutsche Post DHL in Schwerin concluded [bk] in 2022.[25]
The boom in ecommerce and resulting parcel deliveries has created significant pressure on the road infrastructure and added to the pollution levels of many cities. Though, as previous trials may have shown, success with freight trams may prove difficult, we will likely see more experimentation with the use of low-carbon transport options to reduce traffic and emission levels.
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The omnichannel challenge
Tackling “research online, purchase anywhere” behaviour
Earlier in September, Econsultancy welcomed ecommerce leaders from Boots, Sky and Unilever to the mainstage at London’s Ecommerce Expo to discuss changing consumer journeys and concerns.
Ollie Shayer, Omni-Media Director at Boots, described how the cost of living crisis is lengthening the path to purchase, specifically “that middle part where customers are really deciding where they’re going to buy has got a lot longer, and being able to know when you can interact with [those consumers] and how… has become really important.”
Increasingly, omnichannel journeys and that messy middle – or as what Unilever’s Mark Walker referred to as “research online, purchase anywhere” behaviour – is putting a greater emphasis on ecommerce teams having the right skills in place. Walker shared how its important to think about capabilities in a way that is both relevant and holistic, as “there’s so many teams that contribute to delivering on ecommerce and omnichannel”.
He added: “Whether it’s in the central brand teams, all the way to the markets; [we are] trying to steer the relevant skills to the right group of people in different ways.”
For all the insights from the session, see the full write-up here.
Country focus: Malaysia
Each quarter the Ecommerce Quarterly spotlights a key international market
Malaysia has been benefiting from sustained economic growth over the last half a century, bringing the nation close to the threshold of high-income status according to the OECD. That growth is set to continue, with GDP expected to rise by 4.9% this year.[26]
With that economic growth has come an increase in spending online. According to GlobalData, the Malaysian ecommerce market is anticipated to grow by 12.8% to $11bn in 2024, making it one of the fastest-growing ecommerce markets in Southeast Asia.[27]
The Malaysian government sees increasing cross-border ecommerce exports as a clear opportunity for the country.[28] Across the summer the Malaysia External Trade Development Corporation (MATRADE) announced partnerships with a range of cross-border retailers including Amazon[29] and TikTok Shop[30] in bid to get more Malaysian businesses selling internationally.
November will also see the inaugural 2024 Malaysia E-Commerce Product Selection Expo take place in Kuala Lumpur. Hosting over 200 China-based brands, the event aims to connect Malaysian businesses and consumers directly with Chinese manufacturers and further solidify the two nation’s bilateral trade relationship.[31]
In spite of this apparent cross-border alliance, at the start of the year Malaysia imposed a new 10% low-value goods tax on products under RM500 purchased online and delivered from abroad.[32] The tax is designed to address the tax disparity between local and international sellers, allowing Malaysian sellers to better compete.
5. Ecommerce market share
Latest US data has ecommerce making up 16% of total retail sales
Note: US Census Bureau, Ecommerce Retail Sales as a Percent of Total Sales [ECOMPCTSA], retrieved from FRED, Federal Reserve Bank of St. Louis. Retrieved: September 20, 2024. Source: https://fred.stlouisfed.org/series/ECOMPCTSA
In the UK, ecommerce accounted for 27.6% of total retail sales in August, up from 25.8% at the start of the year
Note: All UK retail excluding automotive and fuel, seasonally adjusted, January 2008–August 2024. Source: https://www.ons.gov.uk
Ecommerce share of total UK retail across grocery, fashion and household goods
| Sector | Aug 2024 |
| Predominantly food | 9.0% |
| Textile, clothing and footwear | 27.8% |
| Household goods | 25.8% |
Source: https://www.ons.gov.uk
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