I’ll never forget the joy and relief the first time I did all my holiday shopping online. No lines at the mall, no parking, no lugging boxes to and from the car. It took all the stress – and friction – out of the shopping process.
As the e-commerce industry has matured, innovation has focused on eliminating friction points for busy, stressed customers:
One-Click Shopping reduces the number of steps to put something in your shopping cart and check out
Same Day and Next Day Delivery satisfies immediate needs and saves time from running to the store or mall
Improved product search makes it easier to find items in a large ecommerce catalog and get just what you need (or want)
Improved site performance so online shoppers don’t waste time or deal with poor page performance
Mobile friendly sites engage shoppers on the go and to satisfy their micro-moment needs (which are typically driven by mobile interactions)
The net result is that e-commerce now totals $340 billion in spending and counts for more than 10% of total retail sales.
This is great for shoppers. For back-end business users? Not so much…
This innovation has been great for shoppers and consumers, but has also created a vegetable soup of technologies for business’s to manage – CMS, PIM, ERP, OMS, VM, AVS, POS and more!
It also means businesses have had to invest in staff and resources to become “technology shops” rather than focusing on their product category core competency or customer segment they serve. This technology fueled innovation has also come at a high cost thanks to traditional on-premise software with hefty licensing and implementation costs (not to mention hosting and ongoing support).
That’s why the cloud is the next revolution – to reduce friction on the backend
Over the past few years we have seen solutions come to market with platforms designed for smaller online retailers. But recently we have also seen the industry’s largest players “go all in” on cloud – including Oracle’s 2015 launch of the Oracle Commerce Cloud and Salesforce’s recent acquisition of Demandware.
Cloud based e-commerce is going upmarket and is about to become the most disruptive force since the first virtual shopping cart came online.
One of the key factors driving this transition is that the market has matured and the processes and software that enable companies to get online quickly and generate revenue have become standard best practices. This has enabled e-commerce software providers to take proven models and processes and leverage economies of scale to build solutions that help online retailers get to market quickly without the traditional headaches.
Some benefits of this new paradigm include:
Faster time to market thanks to a proven, scalable implementation processes
Common functionality and skill sets across platforms that enable rapid business user adoption
Standardized technology reduces the need for complex integrations or customizations
Configurations instead of coding make implementations faster and less dependent on technical resources
Robust functionality delivers traditional enterprise level features to a broader customer base
All of this means reduced friction for businesses that need to reinvigorate their e-commerce programs and compete in an ever increasing busy marketplace.
Reduced friction means a new focus on experience instead of tools
In the long run, this cloud driven e-commerce revolution is going to go full circle and come back to the customer by reducing friction for them too. In a future where back-end users and business managers have access to flexible, scalable e-commerce technology, it means they can return to their core focus and brand value promise – their customers.
It’s a premise that once the tools are easy to implement and use, you can focus on your core purpose and differentiating your products and content in the market rather than trying to figure out how to use the technology.
An e-commerce revolution is coming. While technology is the driver, it will change how online retailers run their e-commerce businesses and will drive new skill sets. Early adopters will ramp up quickly to compete with established market players.
And thanks to this revolution that will reduce back-end friction, we will see continued growth throughout the entire e-commerce marketplace.
This week is the 2016 Internet Retailer Conference and Expo (IRCE) in Chicago – probably the most important gathering of the retail and e-commerce industry. This year’s conference convenes in the midst of disruptive changes that are transforming how companies and brands reach customers and conduct their e-commerce business. Let’s take a look at just a few of the biggest industry shifts:
Last year, Oracle released Oracle Commerce Cloud which takes the most powerful features of the industry leading Oracle Commerce with its ATG and Endeca foundations and made it available in an always up-to-date cloud platform.
But those are just on the platform and software side. What about on the consumer side? What trends are most important for us to pay attention to?
It is timely that the Code Conference was last week and Mary Meeker of Kleiner Perkins Caufield & Byers presented her annual Internet Trends Report. While each year’s report is always full of important nuggets for internet marketers to remember, this year’s report highlights trends that are especially important for internet retailers and and e-commerce marketers to consider.
Global Economic Growth is Slowing
Yes, this isn’t specifically an internet trend but it shapes the internet and online commerce.
Globally, we are seeing lower than average GDP and growth is starting to slow in some of the largest economies including China. We are also seeing a decline in commodity prices and interest rates, which all indicate the global outlook on the market potential. We are also seeing other trends that shape the economy including increased debt and the lack of population growth in some key markets.
However, there is a bright spot and opportunity in this shift.
As Oracle CEO Mark Hurd has repeatedly pointed out, when revenue growth stalls the only way for earnings to grow is through cost cutting. And although IT spending has been declining worldwide, the push is on to move resources to the cloud so IT can focus and grow the core business rather than spending time and resources on running old infrastructure.
Against this backdrop Mary Meeker points out that the days of easy corporate growth are behind us. But this is where nimble, disruptive internet companies can make their mark and transform their businesses and industries.
We are in the Midst of a Generational Shift
You’ve heard it before but just in case… “The Millennials are coming!!!”
Mary Meeker points out that millennials now count for 27% of the population in the United States and are reshaping everything they touch. Thanks to this generation, everything is being transformed from the ways companies go to market (more on that later) to media consumption (have you tried Facebook Live or watched a Snapchat video) to how they communicate directly (the phone is dead… long live messaging. Check out slides 97 through 107 of her presentation for more details).
And don’t forget – Millennials’ spending power is only going to grow as they evolve in their careers and have more disposable income.
These shifts are driving how Millennials (and the rest of us) consume media and our expectations for the brands and companies we buy products and services from.
Brands and Commerce Are Rapidly Morphing in this New Mixed up World.
Mary says it best in her presentation:
Products become brands, brands become retailers, and retailers are becoming products and brands.
Need proof? Look at some of the hottest e-commerce brands out there:
Casper found a new way to build a different type of mattress and have built a unique brand promise along with a great product. Products become brands.
Warby Parker started with the promise of affordable, fashionable eyewear. Now they are opening their own stores in addition to samples they ship to your home to try on. Brands become retailers.
Amazon is rolling out their own private label products for everything from diapers to groceries. Retailers become products.
Of course this trend is going even one step further as retailers are also now coming into the home with new “brand services” such as Stitch Fix and Trunk Club.
The foundation of this shift is data that these companies and brands have about their customers. For example, if you stop and realize that Stitch Fix is really the “Netflix of clothes,” you can quickly understand how customer data drives sales. So much that their CEO reports that 100% of their sales are driven by recommendations.
So what is one to take away from all of this and think about as we start IRCE 2016?
Start by looking for efficiency. If global growth is declining, marketers and retailers need to look for ways to maximize your IT investment and realize cost savings through technology and services that allow you to focus on your core competency and leverage partners’ expertise and economies of scale.
Consider what modern engagement means and select platforms that will grow to meet those new challenges. Your next customers are engaging in ways you never thought of. As you consider new business tools, look for platforms that will grow with market changes and offer new, innovative solutions to engage customers wherever they are.
Don’t be afraid to rethink business models and implement technology that helps you do that. As competition shifts around you, you are bound to ask questions about your business model and how you deliver. Are you a brand to product? Or a product to brand? Or something else? The key will be technology and partners that understand those shifts and help you navigate the waters.
It’s sure to be an exciting week as we consider these trends and we reconnect with partners, clients and colleagues for invigorating discussion. Because in a world where change is constant, you can see how the timing of IRCE is the perfect opportunity to address these trends and chart a path forward.
What do you think? Do you have a different opinion? Be sure to visit McFadyen Solutions at booth 1707 in the Expo Hall at the 2016 Internet Retailer Conference and Expo to share your thoughts.
For more of Mary Meeker’s presentation, be sure to check out her original slides and the video of her presentation.
View the original Slides: 2016 Internet Trends – Mary Meeker, KPCB