/>
X

Enterprises likely to scrutinize digital commerce, delivery platforms in 2021

Digital platforms across fulfillment, supply chain, and e-commerce saved the day for multiple businesses amid the COVID-19 pandemic. But build or buy evaluations are likely to follow in 2021.
larry-dignan-eic.jpg
Written by Larry Dignan, Contributing Editor on

If 2020 was the year of digital commerce, touchless payment and reinvented retail, 2021 will be about businesses increasingly at the mercy of platforms. 

Products, retail experiences and serving customers are going to matter, but how profits are maintained amid dependence on new platforms remains to be seen. Platforms usually win. That is why every company wants to be one. 

Yes, retailers and small businesses that were digital survived, but many of those quick transformational technology efforts were powered by platforms. Just like media and advertising became beholden to Facebook and Google, businesses are going to depend on companies ranging from Instacart to DoorDash to Square to Shopify. These commerce enablers were business savers, but enterprises of all sizes are going to struggle to find the balance between costs, digital reach and profits. 

The 2021 turbulence between businesses and platforms is just starting. Consider: Supermarkets are wrestling with Instacart, which enabled delivery networks during the COVID-19 pandemic but are passing along service fees in many cases. DoorDash and Uber are providing competition as is Target's Shipt service. 

Walmart, Target, Home Depot and Lowe's: How their digital strategies paid offBest web hosting in 2021: Find the right service for your siteBest POS systems in 2020: Get the right one for your businessBest credit card payment processors in 2021

But are businesses going to pay a cut of already thin profit margins once the COVID-19 pandemic clears for fulfillment, point-of-sale analytics and other tools. Will these businesses choose to build their own delivery networks and fulfillment operations to keep more of the profits?

Make no mistake that these technology and commerce platforms saved many businesses. Mastercard SpendingPulse data illustrates how quickly retail and broader businesses went digital. For the 75 days of Christmas from Oct. 11 to Dec. 24 total retail sales were up 3%, a tally below National Retail Federation projections. E-commerce sales were up 49%. 

But now everything is digital, enterprises of all sizes are going to think about their own margins and the cut platforms take. 

DoorDash flagged how merchant partners are also competitors in its IPO filing:

In the United States, we compete with other local food delivery logistics platforms including Uber Eats, Grubhub, and Postmates, chain merchants that have their own online ordering platforms, pizza companies, such as Domino's, other merchants which own and operate their own delivery fleets, grocers and grocery delivery services, and companies that provide point of sale solutions and merchant delivery services. As we continue to expand our presence internationally, we will also face competition from local incumbents in these markets. In addition, we compete with traditional offline ordering channels, such as take-out offerings, telephone, and paper menus that merchants distribute to consumers as well as advertising that merchants place in local publications to attract consumers.

Shopify, which has delivered stellar 2020 financial results, flagged that its customers are price sensitive. Not that those small businesses had much choice as Shopify's digital services and platform kept them running in 2020. Going forward, small businesses may be more likely to listen to rival bids. 

Shopify said in its 2019 annual report:

Pricing decisions may also impact the mix of adoption among our plans and negatively impact our overall revenue. Moreover, SMBs, which comprise the majority of merchants using our platform, may be quite sensitive to price increases or prices offered by competitors. As a result, in the future we may be required to reduce our prices, which could adversely affect our revenue, gross profit, profitability, financial position and cash flows.

Square also has highlighted potential pricing pressure:

Competition may result in the need for us to alter the pricing we offer to our sellers and could reduce our gross profit. In addition, as we grow, sellers may demand more customized and favorable pricing from us, and competitive pressures may require us to agree to such pricing, further reducing our gross profit. We currently negotiate pricing discounts and other incentive arrangements with certain large sellers to increase acceptance and usage of our products and services.

Ultimately, 2021 and the emergence from the COVID-19 pandemic may result in more build vs. buy debate among businesses. In 2020, building capabilities was not an option if a business did not have investments in place. Look for the power of platforms and the impact on profits to be more closely scrutinized. 

ZDNET'S MONDAY MORNING OPENER 

The Monday Morning Opener is our opening salvo for the week in tech. Since we run a global site, this editorial publishes on Monday at 8:00am AEST in Sydney, Australia, which is 6:00pm Eastern Time on Sunday in the US. It is written by a member of ZDNet's global editorial board, which is comprised of our lead editors across Asia, Australia, Europe, and North America.

PREVIOUSLY ON MONDAY MORNING OPENER:  

Related

The 5 best Peloton alternatives of 2022
2019-09-24-at-3-08-09-am.jpg

The 5 best Peloton alternatives of 2022

Fitness
The 5 best burr coffee grinders of 2022
Coffee beans being poured into a coffee grinder on a kitchen counter

The 5 best burr coffee grinders of 2022

Kitchen & Household
The 9 best TV deals at Best Buy right now: June 2022
walmart-black-friday-early-sales-deals-samsung-chromebook-laptops-tablets.jpg

The 9 best TV deals at Best Buy right now: June 2022

TVs