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Jul, 2021     

Etail Leadership – Horizontals lead but face headwinds

Etailing Horizontals are the distinct leaders while Specialists are lagging


1. Introducing our ELI (E-tail Leadership Index)

Based on our experience, we have chosen three core pillars through which consumers make a decision on which e-tailer to engage with.

  • Trust – This pillar includes player reviews and ratings
  • Value – This pillar incorporates price competitiveness and product quality
  • Experience – This pillar focuses on product purchase and post-purchase

E-tail Leadership Index (ELI), Building blocks and parameters

2. There are five internet business models used in our ELI analysis

We identified five business models (excluding cross-border trade) that are currently being used by players in the region:-

a. Etailing Horizontals refer to players that operate across categories on online channels. Examples include Amazon and Noon.

b. E-tailing Specialists are players that operate in a specific category only on online channels. Examples include Asos and Huda Beauty.

c. Omnichannel Horizontals refer to players that operate across categories on both online and offline channels. Examples include Carrefour and Lulu.

d. Omnichannel Specialists include players that operate in a specific category and have both online and offline channel capabilities. Examples include Apple and Zara.

e. Hyperlocal players operate in a specific category on online and offline channels but are limited to the immediate area around them. Examples include Careem and Talabat.

Internet Platforms for ELI (non-exhaustive), By Sector and Business Model

3. Etailing Horizontals are the distinct leaders while Specialists are lagging

Omnichannels perform relatively well on trust and value pillars as compared to their counterparts, possibly due to the consumer preference to purchase from players who also have an offline presence. However, they still show room for improvement in terms of delivery experience.This can be attributed to their still developing capabilities in technology and logistics.

E-tailing horizontals are leading e-tail performance primarily due to their sheer scale and usage. In contrast, e-tailing specialists do not currently have economies of scale in their favor as they struggle in the trust and value pillars due to a lack of awareness and usage.

Business Model Comparison, Experiences vs Trust + Value

4. While horizontals are the leaders at present, consumer preferences are changing rapidly

Horizontals leadership could be short-lived, as consumers are willing to switch from their preferred brands. Approximately 50% of consumers indicate that they are willing to switch, this is primarily due to pain points such as limited variety, product availability, and specific product needs.