Ecommerce market size and forecasts
Ecommerce has become a huge and important segment of the world economy over the last ten years. Large online retailers like eBay and Amazon, as well as smaller market players, keep increasing their turnovers and incomes. Current e-market trends and forecasts show that the global retail eCommerce sales will see a steady growth over the next years.
In 2015, revenue in the eCommerce market will reach over 280 billion U.S. dollars only in the United States and over 1,030 billion U.S. dollars globally. The number of consumers who shop via the Internet is expected to be more than 1,300 million in 2015 and over 1,700 million by 2018 (globally). Interesting tidbit, isn't it?
Consequently, lots of new businesses enter the eCommerce space every day. Existing companies also aggressively incorporate eCommerce solutions in their business workflows. This is specifically topical for such industries as traditional brick-and-mortar retailers, online vendors, banks, real estate and travel agencies. The technology helps them do not simply sell goods and services, but also to manage various business processes (e.g. content and order management, reporting and marketing), reach more customers and get competitive advantages.
An eCommerce business can't exist without website and/or mobile app. So, eCommerce software development market is growing respectively. According to the recent Global Digital Commerce Software Market (2015-2020) report, eCommerce software is one of the hottest growing parts of the overall enterprise applications software market. The Digital Commerce software market size is estimated to reach $4 billion in 2015 and is projected to double by 2020.
What to consider when starting an eCommerce website?
As we already mentioned above, eCommerce is more than just trading goods and services on the Web. Electronic commerce also involves such areas as online fund transfers, supply and inventory management, data collection and interchange systems, online marketing and many other things. It uses not only the World Wide Web, but also mobile, e-mail and other technologies. Any eCommerce application needs integration with various external services, e.g. mailchimp, zendesk, live chat, etc. Moreover, eCommerce is continuously changing and evolving.
How to not get lost in this diversity when starting your eCommerce website? The solution is quite obvious:
- Start small. Do not try to create a complete eCommerce solution with a lot of features at once. Instead, start from creating a simple version first and develop it gradually. This will allow you to enter the market earlier and then to expand based on the latest market needs and customer's requirements.
- Focus on main things. Concentrate on building the core features, that provide the greatest value to your customers and differentiate you from the competitors. Less important functionality may be added at a later stage.
- Listen to the market. Tie up your development efforts to the actual needs and wants of your customers. Understand which features your customers like/dislike, how they use your site, what they consciously or unconsciously want to get from it and find the way to make improvements.
- Choose the right tools. Find the technology stack and tools which will be able both to serve the current needs of your website and to provide enough space for the further development.
- Be on the right side of the market trends. The eCommerce sector is highly dynamic. New trends and fashions appear and disappear almost on a daily basis. You will not be able to follow all of them, so choose only those which are really necessary and beneficial for your e-business.
Let’s take a look at what is going on the eCommerce scene at present and which trends will rule the game in 2016. Here are some noteworthy eCommerce website development tendencies for the next year:
Mobile commerce is on the way up. M-commerce sales still lag behind the desktop purchases but mobile commerce is gradually moving up. According to eMarketer, the share of site traffic and ecommerce revenues coming from mobile devices are increasing. Conversion rates on mobile are also gaining ground. Forrester estimates that U.S. mobile retail sales will reach $31B by 2017.
Investing in m-commerce technologies may contribute to competitiveness of your online business. However, it is not enough to simply make a mobile version of your site. Appealing design, clear navigation and engaging user experience are crucial for the mobile users.
The growth of cross-border eCommerce. On the Global E-commerce Summit this year, it was reported that cross-border eCommerce trade is growing enormously (300% year-on-year) and projected to reach the huge number of $307 billion by 2018. It is an exciting time for eCommerce retailers to get new customers overseas and such eCommerce giants as Alibaba are already actively expanding the cross-border eCommerce initiatives.
Of course, building an eCommerce company across borders is challenging. But many national markets are already saturated by established local merchants. At the same time, there is a rising consumer demand for cross-border purchases and the logistics infrastructure for international trading is in place. So, any eCommerce startup may have cross-border aspirations today.
Live-streams and videos. The personalisation and transparency in eCommerce website design are going to reach the next level with videos and live streaming. "A picture is worth a thousand words," and a video might be worth even more. Videos, especially live ones, are more personal than static photos of products: they give a better idea of how a product will look like in real life and help to encourage people to buy online. With the modern cameras and web technologies, it is a good time to try it out. Many retailers, like Snapchat and Periscope, are already using live-streams and this practice is gaining popularity.
Well, we have reviewed the overall state and tendencies of eCommerce market as well as the main things to consider before starting an eCommerce business. Now, let’s turn to the technical side of creating an eCommerce website.
Using eCommerce website builders, why not?
If you decided to develop an eCommerce website, a question which will inevitably rise is "Which technology stack to choose?" There are two main options - to use an eCommerce SaaS platform or build a fully customized eCommerce site from scratch. Both of them may be right, depending on situation.
The eCommerce platforms, like Shopify, Magento and WordPress, provide a wide set of features and customization options. Such platforms allow creating eCommerce sites quickly and help handle the tech stuff, e.g. designing, hosting, payment gateway integration, marketing, etc. According to the researches, in 2013 SaaS platforms accounted for 44% of eCommerce software spendings and they are gaining traction. By 2019, this share will rise to more than 66%.
Our team has developed our own eCommerce website building platform - Getsocio and we know the inside outs of eCommerce SaaS systems. The capabilities of such platform are more than enough to create and run a conventional online shop or daily deal site. Furthermore, the contemporary eCommerce SaaS solutions go far beyond creating ordinary eCommerce sites. There are more elaborate platforms with advanced options. For example, NowShop (one more project our team was involved in) powers fully functioning online marketplaces. So, there is a good chance that SaaS-based eCommerce platform will perfectly match your needs and you can smoothly go with it.
However, the availability of low-cost software development resources has put down the barriers to entry the eCommerce market and created huge competitive challenges as the customer's expectations continue to rise. In combination with uncertain economy and increasing cybersecurity threats influencing the overall IT landscape in the recent time, this requires non-trivial, reliable and safe business ideas and solutions. Such initiatives not always can be properly implemented by means of eCommerce platforms.
It is also necessary to keep in mind that even if a SaaS solution may work well for your startup at an initial stage, one day your interests can spread over its limits. When you reach this point, you will have to re-build your website from the ground up. All efforts, time and money invested in the first site will be lost. Besides, when you deal with a SaaS platform, not everything can be done by simple drag-and-drop without actually writing code and you may have to hire developers to make all the adjustments with your site. You also usually have to pay various monthly and commission fees. So, the costs associated with running the website on eCommerce platform may be higher than expected.
If you have an ambitious development plans, if you want to offer your customers a unique experience and if you are going to scale your eCommerce business in the future, it can make sense to code it from scratch. In this case, if you do not have enough skills by yourself, you’d better go with a good custom web development company.
How to build an eCommerce website from scratch?
Here we come to the question of choosing the programming language. There are many alternatives - PHP, Ruby, Java, Python, ASP.NET - and, actually, any of them may do just fine. At the same time, it is a widespread opinion that Ruby on Rails is a perfect choice for eCommerce development. Let’s take a closer look why.
It is a matter of fact that RoR is one of the most efficient frameworks for building functional apps. In all, more than 800,000 live websites are using Ruby on Rails and it is widely used in eCommerce. Some major eCommerce websites built with Ruby on Rails are Airbnb, Groupon, Shopify and Yellow pages. Many eCommerce startup companies also choose this technology. A great example is eBookingServices, currently known as Tripaneer - a growing online portal for buying theme vacations (our team was actively involved in the development of this application and Ruby on Rails was definately the right choice for it).
What does exactly make RoR that good? Here are some benefits of building an eCommerce site with Ruby on Rails:
- Speed. Ruby on Rails is an open source framework with an active community and many things you need, e.g. authentication, forms and payment methods can be implemented by installing existing gems. And it is highly automated which allows developers to save time on routine tasks and focus on the actual business problems. This vastly simplifies and speeds up the development.
- Reliability. RoR services and automated testing always go hand in hand which helps to make sure that everything works correctly and deliver highly reliable applications. This is a critical consideration for eCommerce, where financial transactions and revenue are always on the line.
- Flexibility. The DRY (Don’t Repeat Yourself) and modular approaches, used in Ruby on Rails, reduce the code length and facilitate making changes. The agile nature of RoR-based software is highly beneficial for the future modifications and makes it easy to integrate eCommerce apps with various third-party services.
- Cost-effectiveness. Ruby on Rails is excellent for fast prototyping, which allows checking the feasibility of an eCommerce project without committing too much on it. The faster development and convenient modifications result in low up-front investments and overall cost savings.
Being quick, agile and with lowered costs is something the majority of businesses are looking for and this is where Ruby on Rails may come in handy. It allows rolling out customized and feature-rich web apps faster than other frameworks and adapt them to the swiftly changing eCommerce environment.
By the way, if you acknowledge the advantages of Ruby on Rails but still prefer to go with an eCommerce platform, you can try Spree Commerce. It is developed using Ruby on Rails, easily customizable and supported by the community. Tens of thousands of online stores around the world are using Spree, including Chipotle Mexican Grille and Bonobos.
Pros and Cons of outsourcing eCommerce web development?
When you selected the technology for your eCommerce site, you have to find developers who know it. In fact, the expertise of the development team is one of the major factors defining the smooth pace of development and the high quality of the delivered application. But it is not always possible to find suitable developers locally and besides having an in-house team of developers is associated with substantial financial overheads. That's why many businesses owners opt to outsource development of their websites to third-party companies.
Advantages of outsourcing an eCommerce site development:
- Professional expertise. When outsourcing development of your website, you can choose developers with a proven track record in building eCommerce projects similar to what you need and take the benefit of their past experience.
- All-round development. Building an eCommerce site requires not only implementing the functionality, but also creating a stunning design, integration with your existing business management systems (if you have any), deploying to your server, etc. A full-stack development company will take care of all that stuff.
- Controlling the budget. With the outsourced team you have convenient options for managing the cost of development. You may pay developers on hourly basis or request them to provide a fixed cost estimate for a certain amount of work. The payment schedule and rates can be negotiated before the project is started.
- Project-based services. The outsource service providers can create a dedicated team for your project. You will have full-time eCommerce website developers working on your project almost like your own employees but with the possibility to pause and resume work at any time. You will not have to pay full-time salaries during the breaks. You also will not have to worry that your in-house employee may resign and leave you with no one supporting your website.
Disadvantages of outsourcing an eCommerce site development:
- Communications. Language and cultural barriers may cause difficulties in communication and deviations in interpretations. Different time zones can also bring some inconvenience. So, make sure that the offshore developers understand your directions well, be clear how you will communicate and what the schedule is.
- Issues with quality. If you work with the overseas service provider for the first time, there is a risk to get the website that do not meet your quality expectations. That's why it is better to deal with established companies that have a proven experience in development of good quality web apps.
- Timing. The best software development companies usually have a busy schedules. They try to keep their devs occupied all the time. So, when you come up with fixes or updates to your site, some time may pass before they get to them.
How to choose and manage an outsourced development team?
Well, if the pros of using the outsource development team have overweighted the cons, you can start to search the devs for hiring. The easiest way is to ask people you know who already outsourced someone. Otherwise, you can google companies and development teams with the proper specialization or try one of freelance marketplace websites, such as Upwork, Freelance or FreeeUp.
Here are some things to consider when choosing an outsourcing service provider:
- Portfolio. Reviewing the examples of the live websites delivered by the devs you are going to hire is a great way to determine their skills and level of expertise.
- References. Look for testimonials or references from previous clients, e.g. many freelance marketplaces allow leaving comments in the profile of service provider or you may contact some of their former clients.
- Honesty. Over-promising and under-delivering is one of the issues you may face with the offshore software development. Stay away from providers who tell you exactly what you want to hear. Instead, look for partner who is honest with you and insists on realistic work schedule and budget even if it means that they may lose your project.
- Negotiation. Be sure to clearly state your needs and expectations. Discuss all collaboration terms, including initial development plan, reporting rules, payment terms, approach to communication and project management.
- Сonfidentiality. This is especially important if you have a unique business idea and do not want your competitors to know about it. Protect yourself by signing a contract and confidentiality agreement with the offshore development company.
One more important question is an efficient managing the outsourced team. Here are some tips:
- Stay involved. Do not expect that the software developers will simply take your project specs and in a few weeks or months will turn them into web app of your dream. No one knows your business better than you and no specs can reflect your full vision of how everything should work. So, be involved with your devs on a daily basis and ask for regular updates from them.
- Communication is the key. Do not underestimate the importance of putting effective communication workflow with your offshore development team. Make active use of Skype or other IM services, give preference to video conferences over voice chats and require the devs to be quick with the email responses. Choosing a good project management tool is also vital for smooth communication process, as well as for planning and management purposes.
- Practice agile approach. Start from building a MVP (or a rough prototype) of your eCommerce site and then set up frequent releases (even if only internal ones). Review the work done by the developers on daily basis, provide feedback (with pictures as much as possible), address problems early and ask for insights form the team on how to solve them. Make sure that the team has enough and clear information to carry on tasks for the next few days.
Just like any business venture, outsourcing eCommerce development may be challenging. It requires thorough planning, continuous monitoring and lots of enhancements until you get your website up and running exactly as you want. Hopefully, this article has provided some useful insight on how to succeed in this path.
About author: Dariya Lopukhina is an online marketer, tech enthusiast and writer. She is a part of the Anadea team where we help entrepreneurs, startups and companies digitally transform and grow. Connect with her on Twitter and LinkedIn.