2015 - The Year of Local e-Commerce in Trinidad and Tobago

The report that over $1 Billion was spent on foreign e-Commerce, over the last 2 years, will hold the attention of many in 2015. This may result in more decisive action to establish the foundation for a local e-Commerce industry. With an annual market size of over $500 Million no one can argue that e-Commerce in Trinidad and Tobago is not big business.

The $1 Billion spent on e-Commerce does not represent consumer purchases only. Trinidad and Tobago has a large distribution industry that imports goods for retail. Also, businesses purchase goods and services online for their consumption. Hence, it stands to reason that this figure is a combination of consumer purchases and purchases by businesses. That is, P2B and B2B transactions. 

Many businesses use credit cards to purchase from foreign suppliers. Credits card payments are faster and cheaper than wire transfer payments. In addition, many B2B transactions are conducted online.

E-Commerce sales to foreign sites in 2013 and as at November 30, 2014 were $530 Million and $570 Million, respectively. This increase is expected to continue in 2015, especially as delivery charges fall. Skybox couriers are expected to eliminate the fuel surcharge in the wake of falling oil prices. 

The $1 Billion has caused many sleeping giants to stir. Over the Christmas season one major local retailer was advertising lower prices, compared to buying online and paying shipping charges. This could have been the first open admission of what has been taking place for a long time. Local retailers are losing sales to foreign competitors. Now the situation is becoming more acute. For example, many persons are now buying all their Christmas gifts online. In the past, that money would have been spent at the local stores.

Over the past few years, there has been a slow recognition to the impact of online sales in the form of price adjustments. When the barrier to purchasing from abroad was high there was a big difference between the local and foreign cost of the same good. Now that the barrier has fallen with online purchasing, the difference has dropped significantly for some goods. In some instances, the local prices are comparable when one considers shipping charges and the convenience of getting it now. Personally, I know of one item that is cheaper to buy locally than on the internet.

The stark reality of this propensity to shop online is that retailers will have to change their business models in order to compete. Notably, will be lower markups, better service and greater efficiency. To boost sales, many may have to offer online shopping as an additional revenue segment. At least two major retailers have done so already.

If large retailers fail to command the online shopping space then the smaller retailers may seize the opportunity. As suitcase traders had once undermined the market of many large retailers, small retailers that sell online may do likewise. Many small retailers already have an online customer base, for example, on Facebook and on their websites. Many do brisk business using these channels and only sell online. In this way, they have first mover advantage online over many brick and mortar retailers. 

As businesses look with gapping mouths and wide eyes at the $1 Billion many are wondering how can they get a slice of the pie. As they begin to see e-Commerce as the way of the future, 2015 could certainly be the tipping point for local e-Commerce in Trinidad and Tobago.

Why Local Ecommerce is Underdeveloped

Ecommerce is booming in Trinidad and Tobago. In 2013, $530 million was spent via credit card transactions. As of November 2014, the figure was $570 million. All purchases were made from foreign sites. As a country, we have embraced the concept of online purchasing. It is a mainstay of how we make purchases. Despite the escalating spend on foreign purchases the local ecommerce industry is still underdeveloped.

Several factors can explain the situation. Firstly, locals are motivated to make foreign purchases online because of value (higher quality and lower prices compared to local options). Secondly, and most importantly, trust. Locals have a higher degree of trust in foreign sellers than local merchants. This is a consequence of high quality service from the foreign vendors compared to poor service experiences, locally.

Apart from the motivation of customers there are infrastructural issues that constrain the local eCommerce industry. The eCommerce value chain has 3 distinct stages. Order processing, payment management and delivery. All foreign sites have state of the art shopping carts. These have been refined to a science with ease of navigation, top quality imagery, product reviews and detailed product information.

All sites have fully integrated payment systems. These include popular third party systems like PayPal, Google Checkout and Stripe. Some major online retailers have developed their own payment systems like Amazon. These payment services are trusted and credit cards are the primary means of payment. More importantly, customers shop with confidence knowing that they have easy redress to responsive vendors, if not, the payment processor. 

Last but not least is delivery. Delivery systems in the US are state-of-the-art. These services invest heavily in technology to provide superior service and on time delivery especially during peak periods. Over the last 20 years, local sky box services have popped up to extend U.S. deliveries to Trinidad and Tobago. While most US retailers only deliver to U.S. addresses there is an increasing number of retailers that provide direct international deliveries.

This value chain for US based eCommerce is well understood and trusted by the local population. Hence, the increase in foreign purchases and the proliferation of sky box services.

On the other hand, the local eCommerce situation is quite different. Lets look at delivery first. Locally, delivery is the most developed of the three stages. TTPOST has a domestic service. The local skybox services have the means to make local deliveries. International couriers like FedEx and DHL can also provide local delivery. In fact, UPS has a door-to-door domestic delivery service for just $30. 

Next, order processing. Many local sellers use Facebook as a marketing and sales channel. However, the use of shopping carts on Facebook is low despite the availability of well established and easy to intergrate shopping carts like ECWID and Shopify. More education is needed for retailers to adopt these easy to use tools and enhance the quality of their storefronts.

Several local online website have shopping carts. However, at the end of the checkout process some point customers to a bank account or COD. Others have integrated third party payment systems. For example, the major brick and mortar retailers like Courts and Excellent Stores have opened full online stores. Other established retailers are yet to follow their lead.

A major drawback to local ecommerce has been the absence of a payment mechanism for the local industry. In the eCommerce value chain the payment system underpins the industry. Without the payment system there is no integration of the phases.

There are several drawbacks to the use of foreign payment systems. These include high cost, delayed access to cash and the low penetration of credit cards (15% as reported by the World Bank in 2011). For the larger companies these factors are mitigated by their resources. However, for the smaller enterprises these factors can result in daunting barriers. 

The final consideration in the development of the local eCommerce industry is trust. Even if all the value chain components were in place, a lot still has to be done, by local retailers to build trust in the handling of returns, refunds and after sales service.

The most significant drawback to local ecommerce is not the infrastructure but the changing of attitudes.