e-commerce in a Multi-Channel World

Transcription

1 50 Years of Growth, Innovation and Leadership e-commerce in a Multi-Channel World How Cloud Computing Can Address the Increasing Complexities of e-commerce A White Paper by Frost & Sullivan and Financial Review Business Intelligence

2 CONTENTS ABOUT THIS WHITE PAPER... 3 Australia is Leading the APAC Region in Adoption of Cloud Computing... 3 e-commerce is an Increasingly Important Element of Business Activity... 6 However the Internet still Accounts for a Minority of Customer Interactions 9 Overall, the Internet will be the Fastest Growing Channel for Customer Interactions There is an Increasing Range of Digital Channels, but this Creates Significant Challenges for Businesses Use of the Cloud for Hosting Transactional Systems is Currently Undeveloped...14 However use of the Cloud to Host e-commerce Systems can Offer Significant Benefits for Businesses The Last Word... 16

3 ABOUT THIS WHITE PAPER e-commerce is transforming many industries as increasingly pervasive high-speed internet access, coupled with rapid take-up of mobile devices and increasing consumer confidence in using the digital channel, combine to drive its uptake. In industries from manufacturing to retail, and financial services to travel, the internet is accounting for a rapidly increasing proportion of customer interactions with their suppliers. This trend is not limited just to Business-to-Consumer (B2C) markets but is also stimulating a fundamental shift in Business-to-Business (B2B) transactions, as organisations increasingly use the internet as a mainstream channel for transacting with other businesses. e-commerce transactions in Australia are growing at over 30% annually and now represent over 12% of Australian GDP. Given the increased importance of the internet as a channel, a growing number of businesses are using e-commerce, either to place orders or to receive orders. Over 50% of Australian businesses now use the internet to place orders, and well over 25% are now using the internet to receive orders. But the ability of businesses to use e-commerce as a main channel particularly for selling to customers is becoming increasingly challenging as customers use an ever-increasing range of digital channels to access the internet and to interact online. This fragmentation of digital channels creates an increasing range of challenges for businesses, not only in terms of providing a common customer experience but also of maintaining a single integrated view of a customer, and of consistently implementing marketing and merchandising approaches across multiple channels. The cloud model of delivery of IT resources potentially offers a solution for businesses struggling with the increasing complexities of e-commerce. Cloud enables a business to quickly and cost-effectively provision an e-commerce transactional platform, optimised for multiple types of devices and which seamlessly integrates with internal business systems. To explore how Australian businesses are adapting to the emerging multi-channel world of e-commerce and cloud computing, Frost & Sullivan in collaboration with Financial Review Business Intelligence (FRBI) undertook a survey of 140 Australian businesses in August Respondents were drawn from multiple industry sectors and from organisations ranging from small to very large. The results of the survey provide interesting insights into how Australian businesses are adapting to the emerging multi-channel world of e-commerce, and the potential of cloud computing. Australia is Leading the APAC Region in Adoption of Cloud Computing Australia and New Zealand lead adoption of cloud computing in the Asia Pacific region, with well over 40% of organisations now accessing some IT resources via the cloud. This places Australia and New Zealand as the countries in the region with the highest adoption of cloud computing, well ahead of other developed markets such as Hong Kong and Singapore. frost.com 3

4 Figure 1: Cloud Adoption by Country, 2011 Source: Frost & Sullivan research, 2012, n = 100 per country Whilst there is a common perception that cloud computing is more appropriate for smaller organisations, in Australia it is larger ones (300+ employees) that are leading the way with usage of cloud services significantly higher amongst this type of organisation. Overall Australia has been at the forefront of cloud adoption in Asia Pacific as a result of several factors including: Relatively high level of server virtualisation which has created the right foundation for delivering cloud services; High propensity for IT outsourcing; Shortage and high cost of IT labour; and Challenging economic conditions which have led to a distinct shift from a capital expenditure (CAPEX) based to an operational expenditure (OPEX) based model of IT spending. Adoption of cloud computing will continue to grow, with over 70% of organisations in Australia planning to increase their expenditure on cloud services over the next year. 4 frost.com

5 e-commerce is an Increasingly Important Element of Business Activity The internet has had a transformative impact on the way in which businesses interact with other businesses (B2B) as well as consumers (B2C) by: Facilitating the rapid transfer of information; Reducing transactional costs associated with locating and purchasing supplies; and Enabling more efficient production and delivery of goods and services. e-commerce the use of the internet for transactions is an increasingly important element of economic activity, with e-commerce transactions now representing over 12% of Australian GDP. The value of e-commerce transactions in Australia has tripled over the past 5 years and now stands at well over $180 billion annually. At current growth rates, Frost & Sullivan forecasts that e- Commerce transactions will reach $300 billion in 5 years: Figure 2: Value of e-commerce Transactions in Australia Source: Australian Bureau of Statistics, Summary of IT Use and Innovation in Australian Businesses An increasing number of businesses in Australia are using e-commerce, either to order goods or services or to sell to customers. Slightly over 50% of organisations now place orders over the internet, an increase from 46% in 2009, with around 28% of businesses also receiving orders via the internet. frost.com 5

6 Figure 3: Proportion of Businesses in Australia using e-commerce Source: Australian Bureau of Statistics, Summary of IT Use and Innovation in Australian Businesses With over half of businesses now placing orders over the internet, B2B use of e- Commerce is more significant than B2C, with wholesalers (supplying retail businesses) and manufacturers (supplying retailers, distributors or other business customers) amongst the types of business with the highest usage of online ordering. The manufacturing and wholesale sectors are also those with the highest usage of e-commerce to receive orders from customers. Figure 4: Use of e-commerce by Industry Sector, 2011 Source: Australian Bureau of Statistics, Summary of IT Use and Innovation in Australian Businesses 6 frost.com

7 B2B e-commerce has many complexities that are not shared by B2C including; Authenticating customers; Customising products, prices and service to individual customers,enabling more efficient production and delivery of goods and services. Managing complex promotions; Driving workflows such as production; Scheduling delivery and fulfilment; and Generating invoices and linking to other systems. Additionally traditional B2B businesses are increasingly using the internet to channel offers directly to customers, i.e. they are evolving from pure B2B to partial B2C businesses, with many examples of brands now selling direct to customers in addition to using traditional distribution channels. The internet has created the opportunity for B2B players to effect this transformation without significant investment in bricks-and-mortar infrastructure. Use of the internet as a channel also offers businesses the opportunity to expand the reach of their operations in a highly cost-effective way for example by selling to customers overseas or by sourcing goods and services from overseas suppliers. However only 5% of Australian businesses that do sell over the internet are currently mainly targeting overseas customers, and only 27% currently sell to overseas customers at all. Selling overseas creates a number of complexities for businesses using the online channel, including the issues of pricing in different currencies, collecting overseas sales tax (where required), and product delivery and fulfilment. Figure 5: Main Customer Group Targeted by Internet Sales Source: Sensis e-business Report, Data refers to Small and Medium Businesses frost.com 7

8 However the Internet still Accounts for a Minority of Customer Interactions Despite the rapid growth in e-commerce as a channel, it still accounts for a relatively small proportion of overall customer interactions. Our survey indicated that amongst Australian businesses over 50% of customer interactions still come through bricks and mortar premises and field sales forces. However the internet has now overtaken the telephone and mail as a channel for customer interactions, accounting for an estimated 24% of all customer interactions. In particular, usage of the internet as a channel for customer interactions is greater amongst larger companies (500+ employees). Figure 6: Customer Interactions by Channel Source: FRBI / Frost & Sullivan survey of 140 Australian businesses Businesses that are not currently using the internet as a channel for customer interactions point to a number of reasons for non-adoption including concerns about security and the difficulty in integrating internet-based interactions with other channels and business systems. For example, when a Customer Relationship Management (CRM) system is in use, it can often be challenging to integrate customer contact and transaction data arising from internet-based interactions. The costs of building and hosting a transactional web-site for online transactions are also regarded as a significant area of concern. 8 frost.com

9 Figure 7: Main Reasons for Non-Adoption of e-commerce Source: FRBI / Frost & Sullivan survey of 140 Australian businesses Overall, the Internet will be the Fastest Growing Channel for Customer Interactions In our interviews with businesses in Australia, the internet is widely regarded as the channel that will see the fastest growth over the next few years ahead of other channels such as telesales, physical premises and sales forces. Almost 70% of businesses expect that customer interactions over the internet will increase over the next two years. Figure 8: Proportion of Businesses who Expect Channel Usage to Increase in next 2 Years Source: FRBI / Frost & Sullivan survey of 140 Australian businesses Over a third of businesses that do not currently use the internet as a channel for customer interactions plan to do so in the next 2 years. However many of these frost.com 9

10 businesses do not believe that they are fully prepared to implement the internet as a channel for customer interactions with 70% believing that they are only partially prepared, or not prepared at all. The degree of preparation is least amongst small and medium sized businesses. Figure 9: Degree of Preparation to Implement the Internet as a Channel Source: FRBI / Frost & Sullivan survey of 140 Australian businesses There is an Increasing Range of Digital Channels, but this Creates Significant Challenges for Businesses One of the major challenges that businesses face in adopting e-commerce is the increasing range of digital channels that customers are using to access the internet. Whilst a fixed line internet connection was traditionally the main and often only channel used, this is now being supplemented by a range of other digital channels; Increasingly mobile devices such as smartphones and tablets are being used to access the internet, and to conduct interactions with suppliers. Over 40% of Australians now have a smartphone, and over 10% have a tablet. Whilst traditionally consumer devices, these are increasingly being used in business contexts particularly by employees for whom mobility is critical; Smart TV s which provide internet access now account for 20% of TV sales in Australia and are increasingly being used as an alternative to PC s for homebased internet access; Use of interactive kiosks that deliver information or enable transactions is also growing significantly, with an estimated 5,000 installations annually in Australia. Standard or custom applications developed for information kiosks provide customers with information, the ability to participate in loyalty programs, and transaction capability; and Machine-to-machine (M2M) is also growing rapidly as a transactional channel, for example enabling automatic replenishment by vending machines. There are now an estimated 2.3 million M2M connections in Australia. This proliferation of digital channels can cause significant issues for businesses using e-commerce, particularly as customers may be using multiple channels for a single 10 frost.com

11 interaction. With customers frequently using multiple digital channels to interact with suppliers, integration of customer touchpoints is increasingly critical, with customers expecting seamless interfaces and a consistent user experience regardless of the channel they use, and suppliers needing to integrate an increasing number of digital channels. Figure 10: Digital Channels used by Customers Source: Frost & Sullivan This fragmentation of digital channels creates a number of challenges for businesses using e-commerce, including; Implementing a common customer experience across all channels; Implementing a single system that integrates all channels in real-time; Linking channel-based systems to central business systems such as ERP and CRM; Maintaining security across a diverse range of channels; and Addressing internet latency and reliability issues across multiple channels. As an example, businesses ideally need to optimise a mobile web-site for customers using mobile devices (either through an app or internet access), however only a minority of businesses that allow internet transactions have currently optimised their mobile web-sites. frost.com 11

12 Figure 11: Proportion of Businesses with Web-Sites Optimised for Mobile Devices Source: FRBI / Frost & Sullivan survey of 140 Australian businesses Additionally, the fragmentation of channels being used by customers creates a significant challenge for a business in giving a single integrated view of customer behaviour in real time. Less than half of organisations that are using the internet as a channel currently have such a system. Figure 12: Proportion of Businesses with Integrated Customer Management Systems Source: FRBI / Frost & Sullivan survey of 140 Australian businesses This lack of an integrated customer management system can cause significant challenges when businesses are dealing with customers across multiple channels for example integrating marketing approaches such as discounts, volume rebates, special offers etc that are dependent on a holistic view of the customer. Additionally, if transactional systems are not tightly integrated into business systems such as CRM, organisations are unable to benefit from a 360º view of a customer in real time. 12 frost.com

13 Use of the Cloud for Hosting Transactional Systems is Currently Undeveloped For many organisations, the complexity and cost of running a single transactional system that is optimised across all digital channels and integrated into internal business systems is overwhelming. Use of a cloud computing model for delivering such a solution is one potential answer but currently use of the cloud-hosting model to manage transactions is relatively undeveloped when compared to other applications such as and storage. Businesses generally recognise the overall benefits that cloud hosting of applications can offer, including reduced IT expenditure and reduced risk of disruptions, however less than one-third of organisations with customer transaction systems currently use the cloud hosting model. Figure 13: Use of Cloud Hosting for Customer Transactions Source: FRBI / Frost & Sullivan survey of 140 Australian businesses frost.com 13

14 However use of the Cloud to Host e-commerce Systems can Offer Significant Benefits for Businesses Frost & Sullivan anticipates that the cloud-based hosting model will continue to develop for e-commerce as it will allow businesses, particularly small-to-medium ones, to offer an integrated customer experience across multiple digital channels at a fraction of the cost of maintaining an on-premise system. The cloud model can support e-commerce businesses in offering; The ability to offer a device-optimised solution with a consistent user experience across multiple digital channels; Rapid implementation and integration with existing systems (CRM, ERP, etc); High levels of security and reliability; Reduced CapEx and operational expenditure; A single integrated view of the customer; and The ability to target overseas customers with relevant pricing, taxation etc With customers increasingly interacting across multiple channels and using multiple digital devices, business systems that provide a consistent user experience, optimised for the device in use, and which are integrated in real time to business systems will be critical. The cloud-based delivery model offers a solution to businesses challenged by the complexity and cost of integrating such a solution. 14 frost.com

15 The Last Word With increasingly pervasive internet access, the proliferation of mobile devices and greater customer confidence in the channel, e-commerce is an increasingly important transactional channel for Australian businesses. The total value of e- Commerce transactions in Australia has more than tripled over the past 5 years, and now accounts for more than 12% of total GDP. An increasing number of businesses in Australia, both in B2C and B2B markets, are using e-commerce as a mainstream channel to market. Although the internet still lags other channels such as physical premises and sales forces in terms of the volume of customer interactions, it is the fastest growing channel and is having a transformative effect on many industries. e-commerce also offers the ability for businesses to cheaply and quickly extend their reach well beyond what can be achieved with traditional channels such as physical premises, sales forces and even telesales. The global nature of the internet allows Australian businesses to potentially transact with customers and suppliers based anywhere. However to exploit the potential that e-commerce offers to reach a wider customer base, businesses need to adapt their transactional systems, which can be challenging especially for many smaller businesses. Whilst e-commerce is growing rapidly, it is becoming more complex to manage. Customers are using an increasing range of devices for e-commerce, such as mobile devices (smartphones, tablets, etc) as well as smart TVs and interactive kiosks. Machine-to-machine interaction adds additional complexity to the channel mix. In the face of this fragmentation of channels, maintaining an integrated and consistent e-commerce experience for customers is becoming more challenging. Additionally integrating the broadening range of channels through which transactions are made with internal business systems, such as CRM, becomes increasingly difficult. e-commerce is therefore becoming increasingly important, but also increasingly challenging, as the rapid increase in the number of e-commerce transactions, and the increasing number of device types that transactions are conducted on, continue to grow. For many businesses the challenges of maintaining web-sites and transactional systems optimised for different devices, and which seamlessly interface to internal systems such as ERP and CRM, are overwhelming. However the cloud computing model offers a potential solution, allowing businesses to quickly and cost-effectively optimise their e-commerce offering for multiple device types, address the complexities of transacting internationally, and interface with internal business systems. Put simply, cloud computing allows any business to easily exploit the growth of e-commerce as a channel. frost.com 15

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