Hlavní práce72060_hont00.pdf, 9.1 MB Stáhnout

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University of Economics, Prague

Master’s Thesis

2020 Tomáš Hons

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University of Economics, Prague

Faculty of Business Administration Master’s Field: International Management

Title of the Master’s Thesis

Growth Strategy of iPrice on the E-commerce Market in South East Asia

Author Tomáš Hons

Supervisor Ing. Ladislav Tyll, MBA, Ph.D.

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D e c l a r a t i o n o f A u t h e n t i c i t y

I hereby declare that the Master´s Thesis presented herein is my own work, or fully and specifically acknowledged wherever adapted from

other sources. This work has not been published or submitted elsewhere for the requirement of a degree programme.

Prague, August 26, 2020 Tomáš Hons

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Acknowledgement

I would like to express my sincere gratitude to my thesis supervisor Ing. Ladislav Tyll, MBA, PhD. for providing me with limitless support throughout the whole process of thesis

preparation and writing.

Additionally, I would like to thank iPrice for a great cooperation during the project, namely David Chmelař and Jeremy Chew for their time and meaningful insights for the thesis. Also, I would like to thank Ján Kešelák for his valuable ideas and opinions during the practical part of the thesis.

Finally, I would like to thank my friends, girlfriend and my family for an unconditional positive attitude during the whole period of writing my master thesis.

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Title of the Master´s Thesis:

Growth Strategy of iPrice on the E-Commerce Market in South East Asia Abstract:

The goal of this master’s thesis is to provide business growth strategies on the e-commerce market for a price comparison website iPrice, which operates in seven different countries in South East Asia. In the first part of the thesis, the author will explain the e-commerce industry from the theoretical perspective, which will include the history, main objectives, the current outlook, future trends, and lastly the overview of e-commerce market in South East Asia.

Furthermore, different online marketing strategies will be introduced with the key focus on search engine optimization (SEO), domain authority and content marketing and their influence on the organic traffic of the website. Additionally, the theory behind price aggregating (comparison) websites will be interpreted with a closer look to different meta-search engines in South East Asia. Secondly, the practical part of the thesis will be conducted by a thorough market research to identify popular vertical markets in Vietnam, Thailand and Indonesia. In the next step of the practical part of the thesis, the consumer behavior survey will examine different online shopping patterns and preferences among consumers in these three selected countries.

The results will provide a necessary foundation to formulate main research questions and business growth options which will be later tested and evaluated by two in-depth expert interviews. Based on the key findings, the author will recommend three most feasible growth option strategies for the company. These strategies will be an increase of SEO activities and high-quality content building, creating additional media publisher relationships in examined countries, and establishing new partnerships with suitable mobile applications such as e-wallets to increase the online traffic on iPrice website. After providing the final recommendations with brief feasibility studies, cost assessments and project timeframes, the conclusions of the whole master’s thesis will be presented.

Key words:

E-commerce, SEO, content marketing, online marketing, price comparison websites, iPrice, growth strategy,

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List of Tables

Table 1: iPrice Website Structure (author’s processing) ... 59

Table 2: The Top 3 Most Searched Product Impressions in Indonesia Collected by Google Search Console (author’s processing) ... 69

Table 3: Top 5 Product Categories in Vietnam (author's processing) ... 70

Table 4: Top 5 Product Verticals in Vietnam (author's processing) ... 70

Table 5: Top 5 Product Categories in Thailand (author's processing) ... 71

Table 6: Top 5 Product Verticals in Thailand (author's processing) ... 72

Table 7: Top 5 Product Categories in Indonesia (author's processing) ... 73

Table 8: Top 5 Product Verticals in Indonesia (author's processing) ... 73

Table 9: #1 Strategy: Feasibility Factors (author’s processing) ... 90

Table 10: #1 Strategy: Cost Assessment (author’s processing) ... 91

Table 11: #1 Strategy: Project Timeline (author’s processing) ... 91

Table 12: List of Top News & Media Websites in VN, TH, ID (author's processing) ... 93

Table 13: #2 Strategy: Feasibility Factors (author's processing) ... 93

Table 14: #2 Strategy: Cost Assessment (author’s processing) ... 94

Table 15: #2 Strategy: Project Timeline (author’s processing) ... 94

Table 16: #3 Strategy: Feasibility Factors (author's processing) ... 96

Table 17: #3 Strategy: Cost Assessment (author's processing) ... 97

Table 18: Strategy #3: Project Timeline (author's processing) ... 97

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Introduction

With the incremental rise of the internet, the online shopping has become of the most convenient way how to purchase variety of products such as electronics, clothing, cosmetics, and even grocery every day. We live in very fast-pace world and economy, where going to the actual mortar and brick stores doesn’t seem as the biggest added value and we prefer to save our time by purchasing products online. It is very likely that every second, millions of people browse the internet with the intention to buy product or simply search for something. We can constantly see new business that use the advantage of internet and offer their goods and services to customers all around the world. One of the reasons that online shopping has become so popular is the fact, that business are able to offer a high level experience to their online shoppers, that the need of personal contact at the retail store is diminishing. It is expected to have more than 2.14 billion online shoppers by 2021 (Clement, 2019). Searching through different retailers has become very convenient, but on the other side it can be very time- consuming due to homogenous and abundant products from high number of retailers.

At this point, it is the good time for price aggregators websites to ease the hustle for the shoppers and provide them with wide variety of retailers and special options in one accessible platform. Comparison shopping engines collect the product information including price and other most essential information and display them in one aggregated page. Therefore, it allows customers to browse through one website without the need of visiting multiple other sources when purchasing desired products. The customers can compare not only price, but also shipping options, and level of service which will help them to decide which merchant meets their requirements the best. On the top of the price comparison websites, we can find platforms such as Google Shopping, PriceGrabber, Shopping.com, or Shopzilla. (Hayes M. , 2019).

Moreover, price comparison websites have been gaining the popularity due to simplicity and being able to list massive amounts of products from different merchants at one place. To put this into better perspective, there are more than 500 million products from over 1300 merchants displayed on the iPrice website (iPrice, 2020). Thus, the amount of time which is saved to the customers is substantial.

The main topic of this Master’s thesis is to provide optimal growth strategies on the e- commerce market in South East Asia for iPrice, by conducting a thorough market research in Vietnam, Thailand, and Indonesia. The key findings will supply necessary foundation to form main expansion opportunities which will be later validated and tested by valuable insights from in-depth expert interviews. iPrice group is a Malaysian based price aggregator founded in 2014 which operates in seven countries in South East Asia with more than 140 employees. The first part of the thesis will focus on the theoretical part where will be described the definition of e-commerce in South East Asia and its current status. The author will also focus in more detail on price aggregators, their core elements and best practices from other parts of the world. After that, the vertical markets definition will be examined.

Moreover, the thesis will provide a definition of market share within the online retail,

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specifically describes the two main metrics, the gross market value (GMV) and online monthly traffic, which are usually used as the main indicators of market share in e-commerce. The latter part will be focusing on online marketing practices, specifically the search engine optimization, domain authority and its impact on organic traffic to the website. In connection to this topic, multiple best practices that help to increase the domain authority such as link building, or high- quality content creating will be introduced. Moreover, different digital marketing strategies such as social media marketing, search engine marketing, content or mobile marketing will be described. All of the mentioned theory will provide the necessary pedigree to understand the business model of iPrice and its generation of online presence within South East Asia.

Thereafter, the core information about iPrice company will be introduced while describing the main website characteristics and other meta-search aggregators in the region will be mentioned.

After the theoretical part, the practical part will be following with its main purpose to apply the theory on practice case of iPrice. The first part of the market research will be conducted to identify the most perspective product segments in all three countries which will provide the necessary foundation for the next part of the market research. Secondly, the consumer behavior survey will be conducted to clarify the product value drivers and gather data on the shopping habits in all of these countries with a designated part focusing on changes in their online purchases amid the COVID-19 pandemic situation. Thereafter, the expert interviews in form of two in-depth expert interviews will be led to test and validate proposed business growth opportunities. The practical part of the thesis will also describe the methodology, approach of the author, benefits and limitations of the research tools that were used to provide the most reasonable growth strategy options for iPrice on the e-commerce market in South East Asia.

Based on the material collected throughout the whole master thesis, including theoretical part and practical research, the final recommendations will be concluded.

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1 Theoretical Part

1.1 E-commerce

1.1.1 Introduction

The online world is evolving with incremental growth every single year. Internet offers all kind of possible options by being never ending source of information that people can access from any point in the world. It was 1989, when English scientist Tim Berners-Lee developed the world wide web and revolutionized the way of communication for all the upcoming generations (Roser, Ritchie, & Ortiz-Ospina, 2020). Since that moment, there are more than 4,5 billion users of internet worldwide which meant the growth of 1,167% since 2000. Just Asia itself comprises the biggest chunk of this users, precisely around 2.3 billion users of internet (Miniwatts Marketing Group, 2020). This all represents a great opportunity for rise of e- commerce, which by definition refers to a business model of selling goods and services and involves all the transactions happening on the internet (Fereira Martins, 2018). E-commerce, also known as internet commerce or electronic commerce focuses specifically on transaction of goods and services, whereas e-business refers to all aspects of operating an online businesses, thus it can be sometimes misleading and it is important see the difference between those two definitions. For example, Amazon is the most popular online shopping store with its monthly average traffic above 2 billion visitors during the first half of 2020 and offers wide variety of products to customers all over the world. Specifically to the Asian market, the biggest players are considered the Japanese e-commerce giant Rakuten which has around 470 million total visits as of February 2020 and Chinese online reseller tmall.com with around 165 million visitors (SimilarWeb, 2020). In general, the e-commerce helps to connect the retailers and customers through very convenient environment of online world with the possibility to exchange goods, services or information in exchange for monetary benefits.

1.1.2 History of E-commerce

The first signs of electronic commerce can be tracked to early 1960s, when businesses conducted electronic transactions via very simple computer network. They used Electronic Data Interchange (EDI) which enabled them to share business documents with other companies. At same period of time, military system called ARPAnet was used to share and circulate important information during a threat of a nuclear attack. Both of these inventions put the backbone to the successful groundwork of e-commerce as could be seen today. Another step towards introducing the current outlook of e-commerce was in early 1980s when most of the owners of computers were still universities which were allowed to send messages and shared documents through networks such as BITNET or USENET. CompuServe introduced the Electronic mall which allowed users to shop from more than 100 online retailers in 1984, however the most historical step to speed up e-commerce growth was in 1991 when National Science Foundation enabled the commercial use of internet (Hussung, 2016).

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The genuine component of online shopping was invented by Michael Aldrich in the United Kingdom in 1979 when he connected his modified domestic TV to a real-time transaction processing computer via his telephone line and was accredited as a founder of e-commerce (Ruhaniika, 2020). Between 1990s and mid 2000s, the biggest rise of personal computers increased in every household due to more affordable prices of PCs which paved the path for bigger popularity of e-commerce. After the PayPal was introduced in 1998, it simplified the broad acceptance of credit cards across different platforms and paved the way for wider spread of online retailing even further. Very important role on the e-commerce market played two key corporations, Amazon and eBay. Amazon, which was founded by Jeff Bezos in 1994 and firstly offered to sell books online, has become the most successful mogul on this field, mainly due to perfect timing of Jeff Bezos. In the early beginnings of Amazon, there was barely any competition which enabled him to set a benchmark on this field and introduce very user- friendly platform that allowed its users to review their orders or browse by category and titles.

Furthermore, Amazon kept expanding its offerings and after acquisition of Whole Foods in 2017, they are able to sell products all the way from grocery, electronics, and clothing, to provide an online music and movie library. (Hirsch, 2018) Simultaneously with Amazon, eBay got its start by Pierre Omidyar who firstly started an online auction website called AuctionWeb, where users could bid on each other’s item. It was very innovative way how to bring customers to the online environment, where even non-experts could sell their products, rather than limit the website to solely entrepreneurs or scientists with higher level of knowledge. The idea cherished a great traction which helped eBay to earn more than $52.2 billion dollars and had more than 220 million users by 2007. Both of these companies paved the path for upcoming generations and helped to create backbone for current e-commerce status (Hussung, 2016). By 2008, the online sales accounted for 3.4% of overall sales in the world with the great potential future growth and it was estimated to have around 12 to 24 million online stores (Fereira Martins, 2018).

1.1.2.1 Key Milestones During The Evolution of E-commerce

Here is the list of the essential milestones that shaped the e-commerce industry which some of them were previously described in more details:

• 1979 – Michael Aldrich is credited with the invention of online shopping

• 1982 – Introduction of Minitel in France which was used for online ordering

• 1994 – Netscape release the Navigator browser while Pizza Hut offers its first online orders

• 1998 – PayPal introduction

• 2002 – eBay acquires PayPal and transform the scope of online retailing

• 2003 – Amazon experiences first profits after its launch in 1994

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• 2012 – E-commerce sales in the United States are projected to reach to $226 billion which would be an increase by 11% compared to 2011 (Wai, 2016)

1.1.3 Current Status of E-commerce

There were more than 1.8 billion shoppers that purchased goods or services online according to research made by Statista in 2018. (Mohsin, 2019). The overall online retail sales totaled around $3 trillion USD globally in 2018 and it is expected that the worldwide e-commerce sales will reach $4.9 trillion US dollars and make up 16% of total retail sales by 2021 on the B2C level, excluding some of the services such as travel and event tickets, taxes or money transferred, and online gambling (Lipsman, 2019). This trend will keep steadily increasing as it can be seen from the image below and by 2023 hit the limit of $6.5 billion sales worldwide.

(Meyer, 2020). Additionally, it is predicted that by 2023 it will take up to 22% of total global retail sales (Statista, 2020). On the other side, the global e-commerce growth rate is steadily decreasing since the 2017 when it reached 28% and it is expected to shrink to roughly 15% by 2023, which means that the speed of the growth is not as fast as it was before 2017 (Statista, 2020). The most popular worldwide marketplace in 2018 based on the Gross merchandise value (GMV) was Chinese online retail Taobao with $515 billion USD, followed by Tmall and Amazon. (Statista, 2018)

Figure 1: Retail E-commerce Sales Worldwide

Source: (Statista, 2020)

There are numerous reasons for the uprising popularity of e-commerce such as very competitive prices and the convenience of shopping from all kinds of devices that allow shoppers not only to save time but also to gain knowledge and information through customer reviews and online research. On top of that, online businesses keep improving the level of customer experience which results in shortening the gap between online purchases and the visit

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of physical retail stores. This includes very detailed product description, 360 degree product views or very detailed clothing sizes tables which enriches the customer’s journey from the beginning to the end (Mohsin, 2019).

In 2016, more than 78% of American adults shopped online at least once that year and 69% of them purchased on average one item every month (E-commerce Nation, 2016). Clothing, shoes, electronic devices and books were the most purchased product categories worldwide in 2018.

Besides the main figures which were mentioned previously, there are a couple very crucial facts that need to be taken into consideration while talking about the current status of the worldwide e-commerce.

• Shopping Journey Starts Online

One of the first important figures is the fact that 63% of the shopping occasions have their initial point in the searching goods or services online. The customer journeys are very diverse and it will be almost impossible to find two same paths to the final purchase of the product.

Some of them can be described as short and focused, when the customer finishes his or her shopping experience within a of couple minutes, but there are also occasions when a shopper spends months looking for products and using many different websites, platforms and other source of information. The main reason behind this digital shift is the shopper’s opportunity to fully control the journey and explore wide amount of different options. To give a more concrete example, the journey of Shannon, which is a 31 year old female, was elaborated. During her shopping journey to buy video games, she had more than hundred touchpoints on the internet over a span of 50 days. Therefore, in order to be successful in online retail, the brands or the shopping platforms must be actively present on the social media and other relevant channels.

They need to understand the consumer’s needs and optimize the communication to bring them values. Lastly, they need to be quick and flexible to respond to all the sudden changes in the current turbulent world (Google, 2020).

• Nearly Half of The Shopping Happens on Mobile Devices

Mobile is definitely the device which has been experiencing the biggest rise among other shopping channels. According to eMarketer, the average time spent on the mobile devices will continue to rise with predicted time of almost 4 hours per day in the U.S. (He, 2019). It is expected, that purchases through the mobile devices will rapidly surpass the desktop computers. For instance, the revenues in the United States will hit $400 billion US dollars within a couple of years. The Asian countries such as Indonesia, Thailand or Philippines, in which between 70% to 80% online shoppers have bought something via phone over the past month are another visible proof of this phenomenon (Statista, 2020). More than half of millennials and generation Z prefer to shop online rather than in physical stores. Moreover, Chinese app like WeChat or Vietnamese ZALO offer very comprehensive environment with

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many different services such as taxi or hotel bookings, direct online shopping and financial services on the top of the regular messaging. This have crucially positive impact on the rise of mobile devices use within e-commerce industry as well. Even though the purchase will be done in the mortar-brick store, it is expected that mobile will influence more than $4.5 trillion US dollars retail sales by 2018 (Ibotta, 2018).

• Shoppers Constantly Cxpect to See New Products

The very consuming-focused economic model keeps forcing shoppers to expect new products all the time. Consumer’s behavior is shaped by not only the fast fashion but also all the new upcoming products that are introduced to the market in the blistering speed. Based on the research done by the Salesforce, which asked more than 6,000 consumers across six different countries, 69% of shoppers expect to see new merchandise every time they visit a retail store or online marketplace. On the top of that, 75% of the consumers search for entirely new query each month, which points out how fast the demand for the fresh products, brands, or features is moving. Additionally, within 5% of the top best selling merchandise on online sites, 59% of them change monthly. It all goes together with the fact, that online marketplaces gain more traction among the shoppers and keep pushing the brands and the businesses to deliver in blistering speed, quality and competitive prices. This is supported by the 56% of the shoppers who choose the online marketplace such as Amazon based on better pricing (Young H. , 2018).

1.1.3.1 Demographics

According to the current resources and consumer behavior research on the sale of physical goods and services to the private end user done in 2019, the most represented age group which shops online is 25-34 years, particularly 31%. In terms of users split by the gender, the males are more frequent online shoppers with 54% and females 46%. Lastly, the users divided by the income to; low income, medium income, and high income, were spread almost equally with around 33% for all groups (Statista, 2020).

1.1.3.2 E-commerce on the B2C level¹

The revenue that was generated within the online global retail in 2019 hit almost $2 trillion USD and it is expected to grow up to $3 trillion by 2024. However, this number does not include revenues from other e-commerce segments such as the digitally distributed services, the digital media downloads or streaming services, the traveling and entertainment sector or the biggest chunk of e-commerce market which is the B2B segment (Statista, 2020). The leading segment on the B2C level according to (Statista, 2020), is Fashion with the annual revenues of $550 billion US dollars in 2019 and expected compound annual growth rate (CAGR) around 12.2%. The Fashion is followed by the Electronics & Media with annual revenues of $405 billion USD in 2019 and CAGR 11.4%. The last three of the top six e-

1 The main reason to focus on B2C level of e-commerce is the business model of iPrice company which is the main topic of this master’s thesis

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commerce industries Food & Personal Care, Furniture & Appliances, Toys, Hobby & DIY -

“do it yourself” goods. The total compound annual growth rate in revenues is expected to slow down from current 17% to around 4% by 2024 (Statista, 2020). Another important figure on the e-commerce market is definitely ARPU (average revenue per customer) which was in 2019 roughly $500 US dollars with the potential to grow up to $600 US dollars by 2024 (Statista, 2020).

Eastern Asia is expected to be the leading region with around $1.2 trillion USD in revenues in 2020. China being the second best region on the e-commerce market with roughly $1 trillion USD, followed by the Northern America and which experienced roughly half of the revenues as China and lastly, the Central & Western Europe, which should record sales around $220 billion USD in 2020 (Statista, 2020).

Overall, the current overview shows that e-commerce market in developed countries stands in maturity phase and it is quite difficult for smaller e-commerce players to enter the market due to fierce competition and extremely high cost-sensitive level. The market is mostly dominated by the key incumbents like Amazon or AliExpress which generate bigger revenues every year and thrive in all aspects. Additionally, it is very difficult for smaller businesses to find their unique selling point when brand loyalty is decreasing and cart abonnement is around 78%.

(Statista, 2020).

1.1.4 Objectives of E-commerce

E-commerce’s main objective is to drive targeted traffic to the website. In other words, to generate more sales by convincing the online shoppers to place the order. The methods how to drive the traffic to the website vary according to the nature of the business. Content based website aims to increase the number of subscribers, whereas the online store needs to generate revenue. There are several marketing objectives for the e-commerce website which will be described in the following paragraphs.

1.1.4.1 Deliver Traffic to Your Website

Nowadays, the most used way to bring the customers to the website is through paid search advertising, specifically Google AdWords which is an online paid service that places advertised website on the top of the searching list when customers are looking for certain products or services through Google search network. Google Ads uses Google tools, which focuses on providing the consumers relevant content when looking for information via Google search and chargers marketers on PPC (pay-per-click) bases. It generated more than $130 billion USD in 2019 (Statista, 2020). It allows marketers around the world to tailor the advertisement to all different types of e-commerce websites and target the right audience. Secondly, the organic (free) traffic can be delivered to the website through mainly SEO practices that rather focuses on optimizing the technical parameters of the website and make it more visible for the Google crawling algorithm, that ranks websites based on their quality.

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1.1.4.2 Brand Awareness

After the acquisition of the customer, it is crucial to build the brand awareness and the recognition in order to create the relationship which will lead to the top of the mind recognition among customers. The following sections will explain the main aspects of the brand awareness (Decker, 2020).

i) Importance – brand awareness fosters trust. With so many options that are offered to customers, it is the key component how to convince the customer to purchase something. It gives the brand a personality, a face that customers can rely to and helps to collect honest feedback that support the business growth Additionally, the brand awareness builds the brand equity which is the value determined by the customer’s experience. Higher brand equity has direct impact on the major aspects of the company such as:

• higher price of the products due to the perceived value

• higher stock price

• the ability to expand business to product or service line extensions

• greater social impact and possibility to include proper CSR activities

Another key factor of the brand awareness is a creation of association. Certain brands have unquestionable association such as Google with searching for information, Amazon with online retailing, or Ferrari with sports cars and motor sport.

ii) Establishing brand awareness – it takes some times to build the awareness and usually requires great efforts to do so. There is no secret that personalized attitude fosters the relationships and helps to build a long-lasting connection with the audience. It is even more applicable to online stores which misses the opportunity of physical contact with the customers. Being active on the social media is a must and those companies who master a creation of an original content can become the world class companies. Global executives nowadays attribute more than 50% of their brand recognition based on how they are able to interact with the customers (Weber Shandwick; Forbes Insight, 2011). Nevertheless, e-commerce companies also should tell a certain story and make sharing easy

iii) How to increase brand awareness – one way to increase the brands awareness is the extension of your services such as freemium. This is a favorite strategy of the software companies like LinkedIn or Trello that offer basic product or services for free with a possibility to upgrade them at certain price. Other way is to create a free content on the website such as the “iPrice e-commerce map of Asia” or production of podcasts and other supporting material that refer to the core offerings.

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Additionally, sponsoring of certain sports events, concerts, festivals and other entertainment helps the brand to stand out and capture more attention (e.g. Red Bull, as an energy drink producer took the marketing to an extreme by sponsoring vast number of sports events and succeed to bring attention to seemingly simple product).

iv) Measure the brand awareness – the most effective way how to measure the brand awareness efforts are twofold

• Quantitative – the main metrics are direct traffic, site traffic and social engagement which could refer to the number of the followers, likes, or tweets linked to the brand

• Qualitative – searching Google and setting up Alerts when there is an online talk about the brand, social listening, or running brand awareness surveys

1.1.4.3 Conversion Rate

The essential metric for every e-commerce business is a conversion rate which is generally used as the main KPI to review the effectiveness of the site. Conversion rate defined by Google is the “The ration of transactions to sessions, expressed as a percentage” (Chaffey, 2020).

After a deeper look into the number of different industries, the conclusion could be drawn that average conversion rate among examined segments is around 3.0% per user, with the highest number being attributed to health & pharmacy products or clothing with around 4.5%. On the other side of the spectrum is consumer electronics which holds only 1.4% conversion rate. The research has shown, that more expensive products such as cars, jewelry or home furniture requires more visits on the website which decrease the conversion rate (Adobe Analytics, 2019). The high performing websites have the ability to bring the customers back over and over, which means attracting the consumers with great re-marketing. Some of the key engagement metrics are shown in the image below (Wolfgang Digital, 2019).

Figure 2: Website Engagement Metrics

Source: (Wolfgang Digital, 2019)

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1.1.4.4 Retention

Repetition of the orders and retaining the customers to come back to the e-commerce website is another key goal of successful business. The research done by Bain & Co. in the early 2000s showed that increased retention rate by only 5% led to the growth in profits from 25% to 95%

(Reichheld & Schefter, 2000). After analyzing the customer life-cycle economics across several different e-commerce sectors including books, clothing, grocery and consumer electronics, there were visible several typical loyalty patterns. Specifically in online retail, it is very costly to acquire new customers in the beginning. Compared to the traditional retail industry, it is 20% – 40% more expensive to gain a particular customer. On the other side, the higher initial cost are outweighed later in the customer life-cycle. For example, in the e-tail apparel sector, frequent buyers tend to spend twice as much in the next 24-30 months compared to the first six months of the relationship with certain store. This pattern is even more visible on the B2B level. W.W. Grainger, one of the Fortune 500 companies who supply industrial products in the United States realized, that loyal customers substantially increased the volume of the orders after the company released an online shopping website (Reichheld & Schefter, 2000). Additionally, there are multiple key metrics that matter and should be a high priority for a successful e-commerce business. Solving these three main topics will help the online retail to boost its sales. First important customer retention metrics is “Repeat customer rate” which measures the customers willingness to purchase repeatedly from the same e-tail. Higher the customer rate, the more likely will the customers use the same website in the next buying occasion. Secondly, “Purchase frequency” which shows how often the individual customer shops on the e-commerce website. This metrics is even more important when taking into consideration that returning customers make up to 40% of the average store’s annual revenue (McEachern, Repeat Customers Are Profitable and We Can Prove It!, 2018). To make the final piece in the puzzle, the online retail business should focus to maximize “Average order value”

which refers to the average amount that the customer spends in the store for each transaction (McEachern, Shopify, 2019).

In the current turbulent digital world, there are several factors that influence the success of the customer retention within online retailing:

• Customer Service

Customer service is the #1 factor influencing the trust of the consumer to a company. In other words, 92% of companies recorded a decline in the customer satisfaction when the customers claimed unsatisfactory and inconsistent customer service (Fagan, 2013). Another supporting fact of this phenomenon is that a customer is four times more likely to buy from a competitor if there is a problem with customer service. Additionally, 45% of the American customers are more likely to leave their online transaction if they are not helped with their query or issue immediately (Fagan, 2013). Some of the most used techniques how to retain the customers are for example free delivery and returns of the purchased products, free gifts or enabling shoppers

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the option to collect the package in the physical retail location to enhance the relationship with the client. Some companies choose to upgrade their packaging and bridge the distance between the customer and the corporation. Great example of this approach is the Dollar Shave Club who puts an extra effort and goes beyond expectations to bring additional value to its customers (WordStream , 2019).

• Interaction with the Customers

It is clear, that shoppers interact with the online retail businesses mainly through the three primary channels, which are the website, the mobile devices and social media. Even though more than 30% of shoppers browse social media when looking for new products, the 74% of the purchases are yet done on the actual website of the online retail. Therefore it is vital for the business to keep interacting with the customer through all three channels and be actively present on social media which increases the visibility and also forwards the shoppers to the website. More than half of the shoppers who follow brands on social media are doing so to look for inspiration and view new products. Almost a third of the online shoppers is on Facebook which is the most popular social media website for shopping (26% of people use it for shopping), which is followed by Instagram and Pinterest (Chahal, 2016). The social media influence on consumer’s purchasing habits can easily be seen from the number of American internet users where 36% of them say, that social media has become the most important source of information (Keyes, 2019). The power of social commerce is even more visible on the graph below which shows the growth rate and the share of the total U.S. e-commerce sales and the expected forecast.

Figure 3: Estimated US Social Commerce Sales (in billions USD)

Source: (Keyes, 2019)

• Ambassador Programs

The ambassador program gives the great opportunity to build the relationship between the customer and retail by giving the ambassador the chance to spread the word about the business among his or her community across many different channels. One of the best programs in the retail industry has Lululemon. This clothing brand identifies the loyal clients and awards them not only with free gifts but also by highlighting their importance on their website. Additionally,

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the company invites all the ambassadors to a global summit each year which brings the community even closer and give the members of this program a motivation to create a credible user-generated content which is highly appreciated (WordStream , 2019).

• Cross-Channel Remarketing

There are two main strategies that marketers around the world use to target the customers that previously have been in some kind of contact with the website before. The Google AdWords uses several tools to target the ones that leave the online website and tailor the message to specific customers accordingly. It uses different techniques that analyze the clients which had browsed the website before and remind them to come back to the website. The next most used tool Facebook ads which also enables the marketers to use custom audiences and retarget the customers on Facebook (WordStream , 2019).

• Subscription Models

The subscription businesses have been dramatically growing in their size over the past years.

According to a survey done by McKinsey and Co. the subscription e-commerce grew by more than 100% per year from 2011 when then revenues were around $57 million USD compared to 2016, when the largest retailers generated more than $2.6 billion USD (McKinsey &

Company, 2018). There are strong pioneers of past few years such as Netflix, Spotify, or Amazon Prime who dominate this segment. The experts predict that Netflix will reach more than 300 million subscribers by the year 2028 (Kelly & Robinson, 2020). Another example of successful subscription model business is the Dollar Shave Club which sends their customers shaving and grooming products and were lately acquired by an FMCG giant Unilever for $1 billion USD (Kelly & Robinson, 2020). Moreover, other rather traditional industries have been joining this type of business model such as car makers. There are several examples of new ways of mobility and ownership models such as Porsche Passport which enables its customers to choose from wide variety of available Porsche models for a certain monthly fee.

Furthermore, the Daimler’s joint venture with BMW - Share Now, which is a smart car sharing platform allowing for simple and convenient city transportation (Diaconu, 2019).

1.1.5 Types of E-commerce Business Models

Mainly, there are four business models that e-commerce is categorized to. This section of the thesis will deeply examine the B2B (business to model), B2C (business to consumer), C2B (consumer to business) and lastly C2C (consumer to consumer). On the top of that, the future options of different business models will be discussed as well (Laurinavicius, 2019).

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1.1.5.1 Business to Business (B2B)

The B2B model captures all the online transactions from business to business which usually are wholesalers, manufacturers, and distributors. In other words, it refers to exchange of goods and services between companies through the electronic platform. The global B2B e-commerce is growing rapidly with its current value of $12.2 trillion USD in 2019 which is almost three times of the B2C market. Since 2013, the GMV (gross merchandise value) growth rate was calculated roughly at 13% which is almost a double compared to the B2C model. Asia Pacific is the leading region with more than 80% of the market share, leaving North America and Europe way behind. China is the leading B2B market with revenues around $3.5 trillion USD in 2019 and the CAGR of 17%. In fact, the Chinese e-commerce market is bigger than the North America and Europe combined due to its rapid urbanization, the comprehensive digital disruption, the fast growing middle class and the general increase in the production and consumption. The governmental approach favors Chinese growth on the e-commerce field with simplified capital registrations procedures, lowering barriers to enter the market, tax incentives or robust credit systems are the major indicators of the current situation. The key players on the market are Alibaba, HC360, or Cogobuy which make up to 57% of the total market suggesting quite high concentration on the top of field (Statista, 2019).

There are two different models that companies choose when operating on the B2B online market. The direct model refers to scenario when a company sets up an own selling platform and offer the products directly to the buyers. On the other hand, the marketplace model compare companies and their products against each other on the same place (Statista, 2019).

The uprising trend on the current B2B market is the rise of the vertical or specialized marketplace. It offers wider range of products within a special category and other value added services included on the same portal. Additionally, companies nowadays rely on usage of big data to deliver unique customer experience together with the rising popularity of the mobile online shopping. It is expected that customers will demand even better experience, therefore companies now heavily invest into omnichannel strategies, which will allow them to get even closer to their customers in every stage of the purchasing journey (Statista, 2019).

1.1.5.2 Business to consumer (B2C)

The B2C type of e-commerce refers to straight forward exchange of the goods and services between retailers and end-users and therefore it is less complex than the B2B segment. While the online retail covering the direct sales generated in 2019 total around $3.5 trillion USD, the B2B was valued much higher at almost $12.2 trillion USD (Young J. , 2019). As previously mentioned, some of the most favorite product segments on the B2C level are fashion &

clothing, consumer electronics, or household appliances (please see page 14). Another B2C level services include digital travel sales, online payment providers such as PayPal, online deal sites like Groupon, streaming services that are led by media giants Netflix, Spotify, iTunes,

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and E-Services. In the upcoming section, there will be provided a deeper look on each of these services.

• Digital Travel Sales

The definition of the digital travel sales include three different aspects which are hotels, air travels and online travel agencies (“OTA”, e.g. Expedia). In 2016, the global travel services totaled for almost $570 billion USD and it is forecasted to hit almost $820 billion USD by 2020. The whole industry is largely dominated by two main online travel agencies.

Booking.com generated more than $14.5 billion USD and Expedia.com was not far away behind with roughly $11 billion USD in 2018. In terms of global market share, Booking captured 41% from the whole industry, whereas Expedia held 32% percent with a large gap in front of TripAdvisor and Trivago which both of them had between 3% to 4.5% market share (Statista, 2018).

• Digital Payments

Topic of the digital payments or in other words, the digital wallet is a vital component for the field of e-commerce. As mentioned earlier in the thesis, the introduction of PayPal enabled the rise of online retail back in the 1998 (see page 11). To put the size of PayPal intro better perspective, there were almost 3.5 billion transactions made through this online system in the fourth quarter 2019 (Statista, 2020). Contactless payments and near field communication (NFC) that we can currently experience in our daily activities when we go shopping and use our smart phones to pay at the cashier are some of the most useful and convenient gimmicks that make our daily routines much easier. Previously, people were used to mainly PayPal and Google Wallet, however the fast-developing technology gives the opportunity to the new players to enter the market. The names of some other providers than can potentially challenge PayPal worldwide popularity are for example; Due, Stripe, Dwolla, Apple Pay, Amazon Payments, Square or Venmo (Toren, 2016).

• E-services

This particular sector of B2C e-commerce is consisted of the online services including food delivery, event tickets, fitness and dating applications. The overall revenue in 2020 is estimated to amount above $210 billion USD with the expectation to increase in the following years. On the other side, the total growth rate is forecasted to drop from current 13.22% to roughly 4.5%

by 2024. The market largest segment is the online food delivery with estimated market volume of $122 billion USD in 2020. In terms of global regions, China generates the most revenue in 2020 with around $61 billion USD, right in front of the United States and India, which has a bigger revenue gap compared to the U.S. (Statista, 2020).

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• Digital Media

Digital media is qualified as an audiovisual media content and applications distributed directly through the internet. It includes the video-on-demand content which are mostly Netflix, Amazon Prime or HBO GO. The strength of this field could be seen from the number of households subscriptions that is expected to hit 450 million by 2022. The other part of this sector is the digital music, which is represented by Spotify, Apple iTunes and other music streaming services. E-publishing includes e-books, e-magazines or e-papers and lastly there is the online video gaming sector, which generated the biggest revenue over $83 billion USD in 2019. The total sales in this B2C e-commerce segment amounts to $161 billion USD in 2020 with an increase to $180 billion USD by 2024. (Statista, 2020)

1.1.5.3 Consumer to Business (C2B)

The following e-commerce business model refers to the online transactions when an end user develops or creates a product or service which is lately offered to a business that uses this tool to complete their processes or gain competitive advantage (Techopedia, 2012). Consumer to business is not as established as the other two segments, B2B and B2C, however the high speed of the development in past years allowed consumers to offer products services to the bigger corporations and businesses. One of the most common type of this service is when blog owner sells commercial space on his or her website to other business. The most beneficial scenario for both sides is, when the content created on the blog or website highly corresponds with the values of the business and the visitors of that particular website can relate to that content. Some examples of the most typical C2B freelancer platforms are Upwork, Fiverr and iFluenz (Laurinavicius, 2019). These platforms exploit the new term in online marketing, the Influencer Marketing which by definition refers to a connection between a brand and online influencer. There is a plethora of different online channels that are used to provide these services, however the most popular is surely Instagram. We can take a very successful business case of Lyft which is an American based car hailing company and direct competitor of Uber. The company has skillfully chosen wide variety of different celebrities ranging from Snoop Dogg, Zyan Malik, or representatives of smaller influencers which in total made up more than thousand individuals that helped to reach almost 6 million online engagements with this brand in 2018 (Talkwalker, 2018).

Using these platforms allow influencers to benefit from their reach on social media and offer their accounts and media space to promote certain products or services. On the other side, it gives businesses an easy access to many different types of individuals with high marketing value and choose the right fit based on the preference and the values of the company. Moreover, there are cases when new ideas on how to improve a strategy of a company came from people outside of the industry or the company itself. Based on the research done by Harvard Business Review, bringing different fields together such as makeup and surgical infections or inventory management and robot games could have a high potential to innovate current business status.

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Another example could be drawn from taking the roofers and inline-skaters together to gather ideas about carpenters’ safety gear. It resulted in greater amount of innovative solutions than survey done with carpenters only (Poetz, Franke, & Schreier, 2014). This theory can be applicable to the benefits coming from a connection of business and online influencers that do not necessarily come from the same industry.

Going back to the influencer marketing, let’s take the platform iFluenz as an example to describe the C2B business model in more detail.

• iFluenz

Firstly, it enables business owners to visit the website and start their campaign on their own.

Secondly, it offers the ability for influencers to create their profiles and connect with the brands or businesses. The next step is to receive proposals from influencers which gives the members of the platform the option to either accept, deny or negotiate conditions of different proposals.

Lastly, the launch of the campaign is progressed which enables an additional variability of options to track the performance of the campaign in real time, review the influencers or edit further decision about buying extra online content. The success of the platform can be observed from several factors, such as the speed of acquiring the customer which is twice as fast as the regular way of marketing. For instance, 94% of shoppers trust influencers or the ROI (Return on Investment) of $7 per $1 spent (iFluenz.com, 2020).

Figure 4: Case Study of Marketing Campaign on iFluenz.com

Source: (iFluenz.com, 2020)

1.1.5.4 Consumer to Consumer (C2C)

C2C e-commerce business model facilitates online transactions directly between end users themselves. There are two main types of C2C marketplaces and those are auctions and classified advertisement where the third-party provider, which are usually websites such as Craigslist, eBay, or Etsy. They provide the online platform and facilitate the transactions between other two parties. The main reason for users to use these websites is the safety that the

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neutral party provides for the exchange of goods and services, and very convenient access to supplementary options that the platforms offer. The above mentioned websites are briefly introduced in the following section (Tarver, 2019).

Craigslist is an e-commerce platform that not only provides a space for buying and selling goods and services, but also promotes classified advertisement such as job offerings and property listings. However, it requires sellers to ship the items directly to the buyers.

Etsy is an online platform which allows a business owner to create a website on which he or she can market their products. It also has additional features that manage shipping, orders, customer queries and other guidance which forges very eligible and handy environment for unexperienced business owners.

eBay is the third main option of C2C type of e-commerce business model which focuses on two types of products; fixed price and auction items. Customers can purchase fixed price items by simply clicking on the buying option, whereas the auction products are sold to the highest bidder who is willing to pay the bidding price. The time for the auction is usually predetermined in advance.

Amazon is a strong player across almost all different business models but mostly is known for its presence on B2C and C2C platforms. It allows private sellers to use this platform for selling their products to the customers as well as direct selling of their own labels as an online retail.

The most common way of generating revenue for these types of e-commerce websites is by charging a commission fee to the sellers of listed items, providing some additional promotional space on their websites, and facilitating the payment transactions. The rising popularity and relevance of these types of e-commerce models can also be seen from the net annual revenues of eBay which hit almost $11 billion USD in 2019 or Etsy annual revenues of more than $800 million USD in 2019 (Statista, 2020). Additionally, the overall cost of using third-party providers is decreasing and together with the rising popularity of social media which showcase the products directly to the shoppers, retailers realize that it is crucial to sell their products through C2C platform providers (Tarver, 2019).

The overall trend of C2C is expected to gain even more traction in the future as more smaller startups decide to enter the game and offer niche products to the unique customers’ needs. One of the biggest marketplaces in Indonesia called Tokopedia, gives small and middle size entrepreneurs the option to start their own online business using the website’s special features for free. In May 2018, the website counted for more than 140 million visits. Even other smart concepts of products offering like Letgo or Offerup that allows to sell items to peers shows the potential of serving a niche market customers. Moreover, there is the Facebook Marketplace which is now being used by more than 800 million users in many countries worldwide. It mainly provides the option of selling goods or services to the close by users. Nonetheless, there are still some uprising areas of business that have potential to be offered to websites such as

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tutoring lessons or personal coaching offered by the local experts in a vision of specialized

“Tinder” (Schroeder, 2019).

1.1.5.5 Other possible types of E-commerce business models

Besides the traditional models of conducting e-commerce business, there are governmental- type business models that are called G2C (government to customer), G2B (government to business) or even more unconventional G2G (government to government).

G2C describes the relationship between the government and the customer on example of United States Postal Services or Indian utility provider Oil and Natural Gas provider which are subsidized by the state and offer online services to the citizens of these countries (Rakshit, 2019). On the other side, there are examples of G2B businesses in a financial sector such as State Bank of India which is government corporation and was listed as one of the Fortune Global 500 biggest corporations in 2018 (Rakshit, 2019).

1.1.6 E-commerce Growth and Future Trends

As previously mentioned in the “part 1.1.3 Current Status of E-commerce”, the expected CAGR of online retail is predicted to be around 15% and make around 22% from the overall retail market by 2023. The global digital buyer penetration is expected to grow up to around 65% which is highly supported by the increase of mobile retail e-commerce² which will experience even higher popularity within a couple of years. More precisely it is predicted to rise up to almost $3.5 billion USD in sales. Moreover, the worldwide mobile commerce³ expenditure is expected to increase from $2.37 trillion USD in 2017 to more than $6 trillion USD in 2021 (Statista, 2018). It is highly expected, that the digital penetration of the internet and higher affordability of the smart mobile devices will enable faster growth in the emerging regions like South East Asia, Africa or South America.

1.1.6.1 Rising Emerging Markets

It is expected that there will be around 3 billion consumers in countries like China, Brazil, Russia, and India with expected level of $3.9 trillion USD digitally influenced purchases which will account for 3 times more internet users than in developed countries by 2022. Some of the variable factors that influence these numbers are cheaper smartphones, more women in workplace, rising middle-class, better developed infrastructure and delivery services, higher financial stability with more stable banking system or encouraging startup culture (The Economic Times, 2018). Altogether, it is predicted that online retail in these emerging markets

2 Mobile e-commerce – stands for electronic commerce, where shopping is done over the internet

3 Mobile commerce – implies the use of mobile devices, so people can execute any business transaction by using mobile devices (Quora, 2018)

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will take up to 20% from all the retail sales in 2022 which represents a lot of potential sales (Roach, 2020).

1.1.6.2 Augmented & Virtual Reality

According to research by Gartner Inc., there will be more than 100 million online shoppers in 2020 which will use augmented or virtual reality to purchase products and enhance their shopping experience (Gartner, 2019). It is very difficult for online stores to provide the physical appearance of the goods for the customers however, the augmented reality will have tremendous impact on getting closer to the actual visits of the mortar and brick stores.

Additionally, 46% of retailers would like to establish AR to their offerings and elevate experience of their customers to the next level. For companies like IKEA or Burrow, which are furniture and home décor brands, usage of AR and virtual reality apps enables their customers to visualize different products by special 3D true-to-scale models and place these items directly to their current households. This could also lead to decreasing the cost associated with designing new products and enrich the understandings of information through the advance simulations. Some other examples of fast developing approach can be Alibaba’s full virtual shopping experience, virtual tours by Tesco, Adidas’ video to promote their new line of clothing and eBay’s partnership with Myer to create personalized stores. This new VR and AR retail options will be very much connected after the deployment of faster 5G mobile internet technology which will enable a quicker adoption of these technologies. It will not only improve the customer’s experience, but also have a positive impact on the product management cycle, warehouse resources and analytics of in-store traffic (Gartner, 2019).

Figure 5: Example of Burrow AR/VR Mobile App (author’s processing)

Source: (App Store, 2020)

Hlavní práce72060_hont00.pdf, 9.1 MB Stáhnout

University of Economics, Prague

Master’s Thesis

2020 Tomáš Hons

University of Economics, Prague

Growth Strategy of iPrice on the E-commerce Market in South East Asia

Table of Contents

List of Tables

Introduction

1 Theoretical Part

1.1 E-commerce