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5 essential elements of international e-commerce in 2020

wood, fire, earth, metal, water

Wood. Fire. Earth. Metal. Water.

Since the first century B.C., Chinese medicine, philosophy, music and military strategy have held five basic elements foundational to the universe.

In 2020, e-commerce businesses and partners see another version of these essential elements in five global trends.

Let’s take a closer look at how these modern elements will shape the future of e-commerce.

1. A rising middle class

The Brookings Institution reports that the world reached a tipping point in 2018. For the first time, the number of people categorized as “middle class” or “rich” — based on discretionary income — surpassed those labeled “poor.”

Some 3.8 billion people now can purchase goods for comfort and entertainment. Hundreds of millions of new consumers suddenly have access to products and markets, and they’re sparking tremendous demand surges in international e-commerce.

This mushrooming middle class will continue to grow, offering global business opportunities to those who can reach them … and challenges of an equally unprecedented scale.

“This mushrooming middle class will continue to grow, offering global business opportunities to those who can reach them … and challenges of an equally unprecedented scale.”

2. Urbanization

More than half of the world’s people — 55 percent — now live in cities, and two-thirds of the global population will do so by 2050.

This is already creating an increased concentration of wealth and connectivity in major cities. McKinsey research conducted for UPS predicts that half of global consumption and GDP growth up until 2025 will be concentrated in 164 cities.

As you’d expect, China accounts for many of these cities … but not all of them. Africa and Latin America will have more buying power, as will other Asian megacities.

Urban logistics poses an urgent problem, as city designers, supported by high-tech solutions and driven by a mounting sense of need, prioritize innovation to help urban areas function efficiently and comfortably.

3. Growth markets

The global e-commerce market will reach nearly $25 trillion by 2025, according to Meticulous Research, spurred in large part by more mobile devices and near universal internet availability. 

The democratization of technology means more e-commerce in growth markets. Watch for the development of burgeoning digital marketplaces with local favorites.

One prime example is in Africa, where Nigeria-based Jumia ranks among the largest online platforms in the world. In Poland, Allegro has emerged as a household name, eclipsing other online retail platforms, including familiar giants of the industry.

“The democratization of technology means more e-commerce in growth markets.”

4. Shifting trade flows

For the past two decades, the most active trade corridor ran between the United States and China. Now, as new megacities and growth markets emerge, different trade lanes are forming.

Intra-Asian corridors are blossoming between China and South Asia partners such as Vietnam, Thailand and Singapore. We also anticipate intra-European trade will create future shipping volumes exceeding those of today.

When disruption hits (think Brexit or trade tensions), these connections must swiftly shift to accommodate new realities. This means trade will be less linear. Businesses and partners will need more agile, responsive networks to keep pace with disruption.

5. Empowered small and medium businesses

We’re seeing policy changes in many nations — Japan, Thailand and Mexico, for example — that level the playing field for small- and medium-sized businesses.

E-commerce enables small businesses with customized products and solutions to compete with bigger players. If a small business crafts, sells and ships a widget for a competitive price or brings to market a differentiated product or experience, the empowered consumer will purchase it.

Urbanization and personalization mean speed, quality and geography will continue to matter regardless of the size of the provider. That’s a boon for businesses previously stuck in the shadows of giants.

“We’re seeing policy changes in many nations that level the playing field for small- and medium-sized businesses.”

The bottom line?

Watch for five elements — five trends — to recreate e-commerce and logistics in the coming decade. Each trend will interact with the other trends in much the same way the ancient Chinese elements (wood, fire, earth, metal, water) hold one another in balance.

This network of mutual interaction rings true for e-commerce businesses and partners. As five elemental trends reconfigure e-commerce and the delivery and returns support structure at its foundation, merchants will need to future-proof their businesses.

Winning organizations will:

  • Reach new markets with potential for growth.
  • Target the growth markets effectively with relevant differentiation and cost strategies.
  • Leverage logistics services that take advantage of urban density.
  • Account for global competition newly enabled by technology.

The time to take action is now — at the dawn of a new decade and the Year of the Metal Rat, the first sign in the Chinese zodiac.

The Chinese writer and philosopher Lao Tzu said it best, long ago: Do the difficult things while they are easy, and do the great things while they are small. A journey of a thousand miles must begin with a single step.

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