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Four Trends for E-commerce in 2018

17 April 2018

Introduction –

E-commerce is a sector that has seen massive growth in India with the industry poised to hit an unprecedented $200 billion by 2026. With an annual CAGR of 30%, retailers are seeing a massive shift in consumer purchasing behaviour, with 14% of India’s internet users (60 million in 2017) already engaging with brands solely on e-commerce platforms.

Lower data costs, a rising middle class and higher penetration of internet users in rural areas of the country are some of the primary reasons for the growth of this form. What are they doing to innovate and what are the trends that will dictate the futures of players such as Flipkart, Amazon and an imminent Alibaba in the country?

Flipkart has made its strategy clear as they revealed their plan to invest more in AI-related tech to tap into their vast repositories of customer data to pull out insights. Sachin Bansal, their co-founder, is spearheading the movement.

“We have many complex and interesting problems to solve using AI, and that is very unique to Flipkart. But then again, e-commerce is still less than 2% of India’s retail. While the opportunity is huge, so is the scale of problems that must be solved to expand the e-commerce pie,” he said during a Live Twitter Q & A at Flipkart’s #AIForIndia event.

With 2017 seeing tremendous growth in digital advertising (close to Rs 8202 crores were spent) with E-commerce seeing the most significant increase, contributing to 19% of all digital spends.
(Source: DAN Report).

Formats such as Flipkart Ads, Flipkart’s advertising own advertising platform, have already seen tangible and proven results for many of their clients.

Companies are starting to invest heavily in target-based advertising with personalisation being the key driver. By creating these targeted advertisements towards a particular consumer, backed by insights based on parameters such as previous purchases, intent and likelihood of return, e-commerce ads are poised to grow multiple folds over the next few years.

2018 is touted to be the year where AI and Machine Learning will lead e-commerce trends, pushing consumers to make purchases based on multiple dynamic parameters. Other patterns, such as specific ad strategies for a mobile-only audience are also being talked about for the year. Here’s a look at the four most prominent trends in E-commerce this year:

Trend 1 (Primary) – AI and Machine learning to solve India-centric problems:
Using Artificial Intelligence for marketing is a challenge but what’s more significant is using the same for a country as diverse as India. India has its very own idiosyncrasies – multiple languages, different social strata and diverse geography to name a few.

Sachin Bansal put it clearly, “Even before AI came into the picture, we’ve seen that you can’t just apply global solutions to Indian problems.” He elaborated, “You have to think of Indian problems from first principles and then come up with solutions, whether they are visible — like Cash-on-Delivery and payments — or in the background — like warehousing and logistics.”

While marketers found it a challenge, Machine Learning has emerged as a key to solve this issue: Take incomplete addresses for example; Flipkart has created a Machine Learning model that identifies incomplete addresses that improved the rate of successful deliveries and reduced product return rates.

India has a problem with addresses wherein the hierarchy of certain locations are not broken down to suit conventional address protocols, as is the case in the West. This makes it harder to locate a particular customer in a remote location because certain addresses have PIN codes that encompass an area of 50 sq.km.

The data scientists at Flipkart solved this issue by innovating with non-conventional approaches to their research. Probabilistic separation of compound words, data-dependent machine learning-based dictionary models as well as detecting and eliminating fraud addresses for future deliveries were all considered and included.

The team was able to develop a robust system that reduced last-mile logistics and delivery problems – A very crucial facet that contributes to the e-commerce revenue model. The machine can now correctly classify and identify Indian addresses and reduce inconsistencies with an accuracy of 98%, thus benefiting Flipkart massively.

Similar usage of machine learning has also helped the e-commerce giant reduce the occurrence of products being bought by resellers – A problem where mainly small business owners pose as online shoppers.

These “shoppers” purchase products on a discount off e-commerce websites and resell them at slightly higher prices offline or through their marketing channels. Tracking down such fraudulent individuals is a challenge, but Flipkart has developed a system which can identify and blacklist fraudulent sellers through Machine Learning.

Trend 2 – Chatbots and browserless commerce:
While digital shopping is mostly a visual experience, 2018 will see the emergence or at least the nascent stages of browserless shopping and a vast improvement in e-commerce website chatbots. Chatbots have already begun taking up more responsibility by acting as a substitute for an in-store representative.

Innovations such as browsing suggestions, providing answers to specific queries such as size regulations, delivery time and many more are lined up. Customers will feel more empowered once they’re equipped with the right knowledge of products (provided by chatbots), and this increases the probability of a purchase. 2018 will lay down the marker wherein e-commerce will begin seeing lesser human intervention.

Even browserless shopping can be done to purchase FMCG products for home and personal retail. You can ask your voice assistant to buy your groceries, medicines and more. With these digital assistants being used most significantly at home (72% of Indian users used them at home as opposed to 40% at work), shopping for products you regularly purchase every week or month could become just a couple of commands away.

E-commerce companies must look at possibilities where they can innovate marketing strategies to leverage browserless commerce. By beginning the process of integrating this tool, they can increase brand recall to this particular, ultra-fast form of shopping.

Trend 3 – Personalised ads and labels led by fashion retail:
When a company like Flipkart, which has been around for a decade now decides to tap into their customer data, they know the advantage it possesses. Customer data provides unique insights on customer shopping patterns and behaviour over the years that it can be used to target personalised ads at them.

Personalised ads target their audience base based on products they’ve purchased before, demographics and even factors such as the probability of return rates amongst others. This is the biggest weapon that e-commerce ads have over other marketing methods, and 2018 is the year it will get elevated to another level.

The best example of this is the manner in which Flipkart was able to create private labels itself based on the shopping data of their fashion customers. In five years, Flipkart was able to capture 35% of the market share for e-commerce in fashion, and this was no fluke. By dipping into their gold mine of data, they were able to pull out impactful insights into customer behaviour and then used the same to target specific bases.

Three private labels focused on women’s ethnic and fashion wear along with a unisex fashion and accessories label. All of their clothes are retailed online after delving into their sales insights in the first years of existence. This was echoed by Rishi Vasudev, the VP of Flipkart Fashion. He said,“We understand what goes into making a seller product — what prices, what prints, what colors… we have the advantage of knowing that very quickly and picking up on that trend.”

This approach to e-commerce advertising also led to the development of Flipkart Ads, which is an e-commerce advertising platform targeted at brands. By creating a strategy tailored to demographics, sale period and image placement, Flipkart Ads successfully increased the sales of brands like Skullcandy, Samsung and many more.

The biggest advantage of e-commerce ads is the availability and implementation of A/B testing to hit the right target audience and then using those insights to develop more digitally-driven marketing strategies. Consumers will be shown products only that appeal to their tastes and sensibilities and this could prove path-breaking in the future of e-commerce advertising as shoppers can enjoy a more seamless experience.

Trend 4 – Mobile-phone and video-based ad formats:
Mobile phones and in particular, smartphones have become the norm for many an Indian, regardless of strata. With affordable smartphones having made its foray successfully into India, brands are seeing a broad acceptance of consumers purchasing solely through their phones.The numbers back this up as well – Video ads, a direct consequence of this, has seen a growthof 14% from 2016, and is now up to 54% of all digital penetration. (Source: DAN)

Mobile phone marketing was at 43% in 2017 compared to the 57% that desktop enjoys. 2018 will see mobile phones eating into that pie with more individuals spending more time on phones than desktops. Marketers will have to look at ways to integrate visual storytelling for their brands in ways that appeal to this mobile-friendly audience.

By creating strategies centered around stunning graphics and visual representation, brands will be able to increase sales through e-commerce ads on mobile devices. It’s all about identifying the right channels to advertise on mobile and selling to them based on data analytics and advertising.

2018 will be the year where a lot more locally-targeted advertising will also take place, as consumers get more acquainted with OTT platforms. By smartly navigating this challenge and creating a plan that engages both non-English and native speakers, brands can see their fortunes change drastically.

Conclusion – Thus, 2018 is the year for e-commerce advertising to leap into the next generation of technology-driven strategies. With capabilities such as machine learning, AI and customer insights amongst others, India will be able to emerge as a significant player in the global e-commerce market.

Marketers need to be sharp and keep an eye out for changing trends and accommodate or adjust their strategies accordingly. With more data-driven and proven results paving the way for the future, e-commerce is going to transform the way people shop. Those who can foresee changes in purchasing and content-viewing trends will be able to gain the major insights which will help them grow and succeed.

However, a word of caution that goes to all advertisers in the data-driven, personalised future that we are about to enter is to understand the limitations of privacy. By drawing a line that demarcates what is personal information and what is information that can be used, the scope of inviting trouble or disgruntled consumers will lessen.

Future shoppers in the country will make informed purchases, so do not discount the possibility of them gaining information on sellers as well. A good e-commerce seller who can use the right mix of digital tools that are future-proof will sail through the year and set themselves up for the next few years as well.

By breaking down the purchase journey into distinct stages of ‘awareness’, ‘consideration’ and ‘purchase’, Flipkart Ads is able to give marketers specific ad solutions to optimise through the shopping funnel. Thus, customers are able to capitalise on intent based purchases in a way that keeps the buying experience on Flipkart organic and uninterrupted.