I’ve been thinking a lot about what e-commerce will look like in 10 years, or even half that time…
E-commerce as it stands today isn’t some new breakthrough technology-enabled process that was never possible before. Its still pretty similar to the act of what buying and selling looked like forever.
Customer wants something, customer goes to store, customer adds to cart, customer pays for it, customer checks out and leaves.
Note, the above could apply to a brick and mortar, or to an e-commerce player (such as my current employer – Quidsi Inc)
So what is different about online vs offline retail.
i) Unlimited shelf space.
Positive :
The constraints of what you can and cannot show customers is different in an online store vs a brick and mortar store. You can theoretically have a limitless collection of items, and are not constrained by the limits of shelf space in your store. No matter how large a store it is (think Costco) this is a very real limitation in the brick and mortar space. E-tailers are only subject to what inventory they can afford to purchase – but even that there are ways around (consignment, drop shipping, third party fulfillment, affiliate relationships etc.)
Negative :
Shelf space is a scarce resource and like all good scarce resources, brick and mortar stores monetize it. This is harder in an e-commerce world, and so e-tailers create scarcity in order to have an asset that they can monetize. (Landing pages, brand pages, micro stores within stores, the images on the home screen etc.) Also, the more products you add, the harder it gets to discover the right product for the customer.
ii) Supply chain
Positive :
E-tailers no longer need to manage and deliver product to stores across the nation. The complexities involved in keeping track of inventory per store, and its delivery is not trivial.
Negative :
The e-tailers cannot guarantee the same delivery experience across the country to all its customers, especially if it has only a limited number of warehouses. Also they cannot deliver the same immediacy that a physical store on your block can. Want something fast – no matter how quick an e-tailer can ship it to you – they cannot beat walking down the street and buying it in the corner store.
iii) Shopping Experience
Positive :
E-tailers can guarantee the same shopping experience to almost every customer that wanders into their URL.
Negative :
That experience has no local flavor to it, or for that matter any real personal interaction. Its a very impersonal shopping experience. No sales people, no friendly clerk to help you understand what you are purchasing etc.
I could go on, but you get the idea – in every way that e-commerce differs from traditional retail, there are opportunities for companies to be created and to grow. Here’s a few examples.
Discovery – Several large companies already exist to help customers discover the right product whether by search, navigation, merchandising etc. Endeca, Omniture, and a whole host of new start ups.
Delivery – E-tailers are competing nationwide to deliver fast free shipping and comapnies like webvan, freshdirect show that it is possible to take what would have seemed impossible only a short while ago and transform it into an online activity. Others will follow suit and the concept of local delivery for fast moving goods will become commonplace especially in urban areas. While this doesn’t exist yet, I think e-tailers (on the backs of delivery partners like UPS and Fedex) will also eventually allow you to pick a time-slot you want your package delivered (like Freshdirect allows now).
Personalization – Baynote, Certona, MyBuys, and a host of others are in the business of attempting to make the shopping experience more personal by showing you products, content, and experiences that they think are relevant to you at the appropriate time.
While all these are great, and the innovation and progress in this field does exist – I can;t help but wonder if this is what e-commerce will look like in 5 or 10 years.
However, several things have changed online, and they do allow for behaviors that were rarely possible before.
i) Access to information:
Information arbitrage is very difficult in a massively connected world.
ii) Access to similar people:
The ability to access a group of people that thinks and behaves like you is much more possible in today’s world than it has ever been before.
Why did I pick those two pieces to highlight? There are several other things that have changed, and are empowered by technology. However these two are going to do something interesting
Access to information includes price information. Eventually, customers will have total visibility across all products and categories. This will eventually drive prices to the lowest possible price as competition increases, and e-tailers will have to compete on something other than price. Alternately, they will create alternate streams of revenue and funnel the revenue into pricing.
Access to similar people is important because of the concept of the long tail. The minute I can find a large enough group of people interested in yellow doo-dads, I can afford to make, market, store, pick, pack and ship yellow doo-dads. The internet makes it easier and easier to find and/or create communities of people who are interested in something specific. This means no longer having to stock the products that will appeal only to the widest group of people. E-commerce will enable the carrying and selling of more and more niche products as communities pop up across the country that are willing to support and purchase such products. If you need at least 100 willing customers for yellow doo-dads, but they are spread across the country it will be impossible for a local store to carry them. Alternately, a huge chain of stores will carry one in every store in the hopes of finding the one person in that neighborhood who has a need for yellow doo-dads. However e-tailers with the ability to send the product to any corner of the country can and will move into such opportunities as they arise.
What does this mean for e-commerce? While I can’t claim to know the answer, here is what I think will happen.
E-commerce, or atleast parts of it – will be commoditized. Scale will become all important. The ability to buy something online and have it delivered to your house as a particular time and date will become commonplace. The price will be reasonable and well known.
As this happens, products will start to diverge from the lowest common denominator into ever increasing niche markets.
Discovery of products is going to become ever more important, especially as the number of products available online explodes.
Arbiters of good taste will be rewarded as e-commerce becomes a commodity, and ever increasing number of products show up online.
Good taste isn’t objective – but subjective, so it means whatever you think it means. Large amounts of computing power are going to be spent trying to win the race to become trusted sources of good taste for as many people as possible.
There are several changes coming – curation will become more important, supply and demand will not look like it does now, and e-commerce tomorrow will see major innovation.
Disclaimer : The views above are mine and mine alone and do not represent those of my employer in any way shape or form. I am currently employed at Quidsi Inc, which was recently purchased by Amazon.