1. Mobile and Internet users growth

2017 saw zero growth in new smartphone shipments and only a mere 7% growth in internet users, with more than half the world population (3.6B) now connected to the internet.

When it comes to internet usage, growth remains solid with an average 5.9 hours spent on digital media usage per adult . Whether this is good or bad depends on how this time is being spent — innovation and competition are driving product improvements leading to more useful apps.

2. Innovation and Competition

Our mobile Devices are becoming better, faster and cheaper. Access has only become easier with an exploding number of Wifi networks. An increased focus on better UX/UI Design has dramatically increased Simplicity of the apps. When it comes to Payments, the digital reach is expanding, with declining friction and emergence of digital currencies (cryptos). When it comes to Local, offline connections are being driven by online network effects (Nextdoor.) Extensibility of Messaging is expanding with bots. Mobile Video adoption is climbing, with new content types expanding rapidly (Twitch.) Voice has seen a technology lift off with Google’s voice recognition accuracy now better than the human baseline of 95%. Amazon Echo and Echo Skills have seen a product lift-off too!

Aggressive competition is driving investment in Research & Development (R&D) and increasing Capital Expenditures (CapEx), which in turn are driving Innovation and Growth. In the USA, 6 of top 15 “R&D+CapEx” investors are tech companies and the tech sector is the largest and the fastest growing here.

3. Personalization and Scrutiny

Personalization presents a Privacy Paradox: while data improves engagement and experiences driving growth, it also drives scrutiny from regulators. This includes Privacy (GDPR), Competition (Google Shopping fined in EU), Safety/Content: (Germany Network Enforcement Act) and Taxes (EU found Luxembourg gave illegal tax benefits to Amazon).

Product designers have to keep in mind that there are unintended consequences of products that connect us en masse. Regulators have to remember that there are unintended consequences of regulation, most importantly, that of stifling innovation.

4. E-Commerce

E-Commerce acceleration continues with a growth rate of +16% vs. +14% Y/Y (Year-over-Year) for the USA. E-commerce is now 13% of total retail sales. Amazon’s E-Commerce Share Gains continued at 28% vs. 20% in 2013.

Whether you are an offline store or not, it’s easy to start an e-commerce retail shop today: Set up a Point-of-sale Payment System (Square), set up an Online Store (Shopify), integrate Online Payment (Stripe), integrate Fraud Prevention (Signifyd) and Purchase Financing (Affirm), have good Customer Support (Intercom), Find Customers (Criteo) and finally, Deliver the product (UPS+FedEx+USPS).

Product Finding

Online Product Finding is going through an evolution, now being done primarily via search and social discovery.

Search leads the way with 49% of product searches starting at Amazon and 36% at other Search Engines (primarily Google.) Google has gone from being just an Advertiser to a Retailer with Google Home ordering stuff for you. Amazon, on the other hand, has gone from being just a Retailer to an Advertiser, with Sponsored Results in searches.

Social Discovery, i.e., Facebook/Instagram, is emerging and is getting more Data-Driven, Personalized and Competitive making the whole process more efficient. Facebook E-Commerce CTRs are rising, but eCPM is outpacing it leading to reduced ROIs over the years. LTV/CAC is an increasingly important metric for retailers/brands. So much so that Facebook’s own Ad Analytics Tools for Advertisers now come with LTV Integration. Facebook’s annualized revenue per daily user is $34 (Q1 2018), rising from $16 in Q1 2015.

Between the 1890s to 2010s, Commerce Drivers evolved from Demographic to Brand to Utility to now finally Data.

Product Purchases are evolving from Buying to Subscribing. Subscription Growth is being driven by Access, Selection, Price, User Experience, and Personalization. Free to Paid Conversion seems driven, in large part, by the User Experience (Spotify.)

Shopping+Entertainment is a highly potent combination: Mobile Shopping Usage has seen 54% Session Growth vs. average 6% Growth for other Session types. Product and Price Discovery is now often Video-Enabled (YouTube ads, Taobao), often Social and Gamified (Wish with Hourly Deals, Pinduoduo with Friend Referrals reducing prices)

Physical Retail is seeing Long-Term Growth Deceleration, but China’s “New Retail” (discussed in China section later) is very interesting. While Alibaba has Higher Gross Merchandise Volume (GMV), Amazon has Higher Revenue. Internet Retail Advertising is seeing growth continue with the shift to mobile @ 22% Y/Y, but Accountability is rising — P&G Cut $140M in Digital Ad Spending, Unilever Threatened to cut budgets. Google, YouTube and Facebook have to respond by pushing for Content Initiatives.

5. Consumer Spending

Household Debt is now at highest level ever and rising.

Personal Saving Rate has fallen to 3% vs. 12% 50 years ago.

Debt-to-Annual-Income Ratio is rising with the value now at 22%.