Exploring the potential impact of private 5G in E-commerce

Introduction

In 2021, retail e-commerce sales amounted to approximately 4.9 trillion U.S. dollars worldwide. As per Statista sales forecast, it has been forecasted that this figure will grow by 50% over the next four years, reaching about 7.4 trillion dollars by 2025 i.e., 23.6% of total global retail sales. This growth can be attributed to increased personalization, higher productivity, and faster turnaround time. With the rollout of a private 5G network, e-commerce companies can get the seamless network connectivity needed to realise the true potential of digital trends such as social commerce, mobile commerce, AR & VR, etc. that can go a long way in revolutionising the digital customer experience.

5G enabled use cases

Virtual retail stores 

As per a recent survey, approximately 40% of shoppers would be willing to pay more for a product if it offered an augmented reality experience. 77% of consumers would like to use augmented reality to see any available product colour or style options. AR can take measurements of a customer and process them in real-time and suggest fitting clothing size and colour resulting in increased customer satisfaction. Powered by the speed of 5G, e-commerce companies can set up virtual stores where users can experience products replicating the experience of a retail store.

Personalized offerings at scale

With the plethora of options available, customers spend hours browsing e-commerce websites searching for the right product. While this significantly increases customer engagement, it also leads to frustration. Real-time data gathering & processing using technologies such as eye tracking and behaviour analysis can provide significant customer insights facilitating personalization for customers. This can help companies customise their website product page to suggest items relevant to specific customers increasing customer satisfaction.

Reduced frauds due to improved network security

As per a recent study by LexisNexis Risk Solutions, e-commerce retailers deal with an average of 206,000 web attacks per month. Successful monthly fraud attempts increased by 43% to 48% for mid-to-large retailers and 27% for smaller retailers in 2020. This requires better authentication algorithms and faster pattern tracking to identify & eliminate fraudulent transactions. With the support of the ultra-high speed of 5G, providing robust data security with minimum transaction latency is possible.

The impact

Productivity increase

The use of technologies such as drone-based delivery, real-time customer analytics, AR/VR, etc. can lead to better product market fit and faster delivery. As e-commerce companies collect & process more information about individual customers, they can efficiently plan their SKUs ensuring faster movement of products off the warehouse. For industries such as fashion & lifestyle, private 5G enables 3D printing can help companies deliver personalised offerings in a scalable manner thus reducing dead stock and optimising the cost of design & production.

Revenue/cost impact

A recent Adobe Digital Insights report claims that 5G will boost eCommerce revenue by $12 billion by 2022. This can be attributed to the improved customer experience that e-commerce companies will be able to offer through virtual retail stores. The power of AR & VR can help customers in getting a realistic buying experience which can reduce the cost of returns drastically. Also, 5G can enable significant cost reduction in logistics. As per logistics company easyship.com, drones are expected to save online retailers $50 million in costs with delivery costing less than $1.

Customer satisfaction

With increased personalization, customers are quickly able to find products that seem to be matching their specific interests. Such an experience can improve the satisfaction of a customer who finds his spent time to be more productive. This can also lead to lower returns. According to the National Retail Federation, the average return rate in the e-commerce industry is 18.1%. Lowering your return rate can give e-commerce companies a competitive advantage by reducing return costs, eventually leading to lower delivery charges & lower prices for customers.

The challenges

The total cost of ownership

Though the ROI for private 5G for enterprises is improving, the cost of implementing private 5G, which includes components like RAN, spectrum, and orchestration, can be rarely offset against this improvement for small-scale enterprises. However, this cost can be justified for applications where ensuring seamless connectivity is paramount for gaining customer trust & stickiness. For example, in a healthcare-based startup providing connected ambulance or drone-based medicine delivery, investment in private 5G can ensure credible service in life-threatening situations. This can lead to faster customer acquisition and high retention.  

Network deployment & management

Private 5G deployment must be preceded by a meticulous assessment of the enterprise landscape, density and coverage needs. For this, enterprises require a team of skilled professionals who can provide an accurate estimate of the resources needed and the expected ROI. Also, enterprises need a dedicated team for network deployment & management. With no technical expertise, enterprises are dependent on tech. consulting firms or private network providers to provide end-to-end consultation & tech. support for realising the expected ROI.

Technology Infrastructure

The technology infrastructure for 5G networks is still evolving with limited devices, applications, and skilled resources available in the market. The success of private 5G is dependent on successful integration with advanced technologies such as AI, ML, etc. which are yet to reach the level of maturity to take full advantage of the capabilities of 5G.

Regulatory concerns

The pace of development of 5G infrastructure is different across countries due to which there is inconsistency in 5G regulations globally. Thus, the private 5G stakeholders must diversify their offerings to comply with the rules of maximum possible geographies ensuring easy expansion. For smaller private 5G companies, this can limit the opportunities available globally. Similarly, for young e-commerce startups looking for private network providers, such restrictions can limit the available options which can result in higher network costs.

The bottom line

With the capacity to deliver 99.99% network reliability and 10 times faster speed than 4G, private 5G looks promising to minimise the gap between retail buying and e-commerce by providing an in-store personalised experience to customers. Given its immense benefits, implementing private 5G is a necessary step to compete in the e-commerce space. But investment in private 5G requires a comprehensive strategy that ensures flawless connectivity at optimum cost and with minimum interruption to core business.

At Tata communications, we are leveraging our expertise as a global network provider and our global ecosystem of partnerships to provide end-to-end connectivity solutions for enterprises. We provide private network consulting & planning, implementation support and managed services for our clients thus assuming full responsibility of ensuring flawless connectivity while enterprises focus on their core business.