Which Technologies Will Drive E-Commerce?
Through a special arrangement, what follows is a summary of an article from Retail Paradox, RSR Research’s weekly analysis on emerging issues facing retailers, presented here for discussion.
RSR’s 2013 e-commerce benchmark survey had an interesting group of respondents this year, with half reporting annual revenue of under $6 million. Surprisingly, when responding to many of this year’s questions, the smallest and largest (over $1 billion in annual sales) retailers have very similar concerns and thought processes. They both race to keep up with the thousand pound online gorilla, Amazon.
What was far more notable to us was the difference in responses from Retail Winners and Laggards:
- Laggards are challenged to get consumers to engage with them online, while Winners are much more interested in the fundamentals that drive demand — gaining understanding of those same consumers. This is a fairly common difference between Winners and Laggards: one focuses on the path to a goal, the other tends to just want to get to the finish line.
- Amazon (and its "Prime" offering) has set an insanely high bar for fulfillment speed, and everyone else seeks that speed without sacrificing profits. Just as we saw in our cross-channel strategy report, getting more efficient at fulfillment and delivery is a key operational challenge for retailers of all sizes and shapes.
- Retailers are seeing opportunity to leverage their e-commerce platforms in interesting and creative ways, most especially in their stores. We’re not ready for full-blown e-commerce driven POS quite yet, but I’ll go out on a limb and say it’s coming. Sometime in the next three years, we’ll see convergence.
- Winners in particular, and retailers in general, are very interested in getting a "streamlined technology platform or infrastructure" to get out of the tangled technology mess they find themselves in. This is true (again) for retailers regardless of size. We could argue that the larger the retailer, the bigger the tangled web to be unraveled.
- Budgets are down, but appetites remain robust for new technologies.
The opinions about various e-commerce tech enablers from Double Digit Winners (those whose year-over-year growth exceeds 10 percent) vs. Laggards showed mind blogging differences.
You know it’s surprising when I’m forced to ask myself, "What business do these folks think they’re in, exactly?"
Discussion Questions
Which technologies do you see driving e-commerce over the next few years and even further down the road? How in particular do you envision e-commerce melding with the physical store experience over the next decade?
Social media: Interacting with consumers. An open dialogue that handles concerns while generating ideas.
Seamless: Creating a seamless, omni-channel shopping experience from brick and mortar to e-commerce.
Speed: Consumers want what they want, and they want it now.
By working to be relevant in each of these areas, retailers will meet consumer expectations. The technologies to successfully function in each of these areas are ever evolving. Retailers who master social, seamless and speed will be successful.
The same fundamentals exist: delivering the right product at the right place for the right price. It’s just that most retailers don’t pursue this with the same zeal as Amazon and there isn’t a retailer who is going to be able to reel Amazon in, given the head start they have been afforded (this comes from someone who was laughed out of multiple retailers in the mid 90s when trying to win their business for developing their first eCommerce site).
Of particular concern is this statement, “Budgets are down, but appetites remain robust for new technologies.” Retailers aren’t going to be able to close the gap by doing more with less. The rules of the game have fundamentally changed and to even think about closing the gap retailers are going to have to start investing in their technology infrastructure. Without a multi-year and ongoing effort here, the gap will continue to grow.
Mobile is going to be the bridge between eCommerce and brick & mortar stores. Again, Amazon has a significant lead in mobile, so retailers need to start hunkering down and increasing their investment here if they expect to close the gap. The challenge is, Amazon has this incredible technology orientation built into the DNA of the company that no other retailer I am aware of has. I don’t mean to be callous, but I don’t see a retailer who can keep pace with them and they aren’t going to slow down until someone effectively competes with them.
Ask a group of CIOs over dinner what THEY think will drive E-commerce, and they’ll tell you it’s integration with the many technologies that power the store.
When E-commerce systems can access only the merchandise in its own DC, and not merchandise in the store, sales suffer. I found this out myself when I attempted to buy $1,800 worth of merchandise from IKEA online, only to be told that they were out of stock, although those same items were available in the store. Customers don’t see channels and don’t care about the spaghetti of technologies retailers have. Until retailers’ disparate store systems can communicate effectively with their online systems, they won’t have achieved their potential.
E-commerce and traditional commerce may have many differences, but they have one central element of commonality: Customers.
Just as has been proven time and again with traditional retail brick and mortar retailers, knowing one’s customers will be the the critical enabler of success. Because of the nature of electronic retail, the bar on the “algorithmic” side of this mission will be high. Unlike the case of the brick and mortar experience, customers will know their e-retailer only through the distant, online experience. One of the few chances for differentiation will be to make this experience as customer-centric as possible.
The bar will be higher for the algorithmics also due to the increased opportunity. With the masses of data that will be available, and the customizable nature of the online store, there is the potential for “extreme personalization.” Recognizing the individual, and reacting in real time to his or her tendencies and preferences, must be taken to another level in e-commerce.
Because the potential for extreme personalization (e-personalization?) is there, it will be met by some, and those who meet it best, will be the ones that succeed.
1. The smartphone/wallet: This will merge the shopping and checkout experience, eliminating the final wait. (People HATE waiting!)
2. More accurate locational data, of the shopper and of the products. Those two have to get together or “no-sale.” Failure to manage the process for 100 years is no assurance that your competition isn’t going to eat your lunch in the next 100. 😉
The binary online versus offline view is already changing quite fast, with options around delivery or pickup-up creating a broader spectrum of options for customers. This evolution is also driving the need for stores and commerce sites to be (re)designed to make them effective across the multiple roles they now play in this mix.
I am not surprised to see ratings and recommendations so high. I believe that added value consumer engagement and services will be increasingly important differentiators (e.g. recipes or meal ideas linking to shopping lists and offers, or which accessories go with this dress? How would I look in this jacket?).
Clearly, mobile devices play an important role in bridging online, offline and direct consumer engagement. Linked to this, I can see digital payment and loyalty platforms further influencing the melding of bricks with clicks.
I think we tend to overlook competitive price intelligence as a key factor. Innovation is happening fast in this area.
Retail innovators are beginning to perceive the store boundaries dissolving. Those that view the enterprise as a single system will prevail. Signs of a winning approach include a shared, virtual inventory; investment in fulfillment; wrap-around shopper experience; and awareness of multiple moments of truth.
I am really struggling with this one because I am not sure that I understand the question. Paula mentions both the operational challenges for successful e-commerce as well as the tech that retailers believe will drive demand.
Without addressing the operational challenges, the rest of the question is moot. Right? Retailers must address fulfillment and that likely involves untangling the tangled web of existing technology platforms and software chaos.
The rest of it really depends on the brand. The technology that is going to drive e-commerce demand goes back to what the customer wants and expects from the brand. Retailers must figure this out and give it to them where, when and how they want it. Easy peasy!
When I need/want something in the future, I’ll use my mobile phone to get an answer on options, basically how best to accomplish my goal. I expect that in the next five years we will be blown away by the things done by leaders. But I believe it will be mobile.
Regarding the melding of physical store with e-commerce, you have to look at the phases related to commerce, from inspiration to disposal. Every phase will have an e-component so e-commerce will go away as a term, as will the idea of the physical store. It will just be retail again. That’s not a non answer, that’s design thinking; a customer doesn’t care about channel or mode, they will expect things to work just like Amazon.
Having said that, it will probably be something completely different as vast numbers of consumers, tired of being data mined and violated, search for stores with local goods and a cigar box. The used 4680 business will be huge!
There will be continued adoption of technologies that help understand the customer and customer behavior. Retailers who operate stores will also invest in utilizing their store assets better and bring in technology that will allow them to ship/deliver from stores. That is one advantage these retailers have over Amazon (although not as much as Mr. Glenn Murphy of Gap would like us to believe).
Grocery has been a laggard (especially in the US) when it comes to e-commerce and leading Grocers will look to change that (if only to counter Amazon). Retailers have made progress on omnichannel, but mainly on non-store channels. This is partly because many retailers operate stores almost as an independent company, but also because technologies haven’t really existed so far to truly integrate Stores. This however has begun to change and technology providers have started to offer products and architectures that can handle the huge shift in complexity that Stores will bring in for e-commerce.
Much of the above push will not come from retailers themselves. However, technology providers will lead this effort and offer technologies that addresses needs mentioned above.
The mobile pantry combined with a seamless order fulliment system that links home delivery with old-fashioned in-store selection.
There are two types of technologies to drive e-commerce; customer-facing and operational.
For customer facing, you need to consider the various channels of communication, apps that allow you to connect directly to the customer and website technology that makes the online/e-commerce experience easy.
Non-customer-facing technologies are operational and help drive the system. Technologies that will help control inventory, distribution, support for order fulfillment and more are every bit as important as customer-facing technology. You can’t have one without the other.
Finally, there is the in-store experience. Consumers will engage at all levels of retail experience; in-store, online with in-store pickup and a complete online experience. It will be interesting to see how stores support these concepts and adapt to the customers’ buying habits.
– Omnichannel integration (creating a seamless in-store, online, and mobile experience). Mobile will play a significant role in connecting the B&M and online channels. Consumers already use their phones in-store. Retailers will find ways to use that to their advantage rather than become victims of showrooming. Consumers are nearly as likely to check a store’s own website or app as a competitor’s so there is an opportunity there.
– Real-time dynamic pricing (price intelligence and competitor monitoring tools). Everyone wants some of Amazon’s secret sauce – the key is data: analyzing and utilizing it wisely.
Social. Mobile. Analytics. Cloud. These are the technologies that will drive e-commerce for the foreseeable future. Social business applications are driving real monetization of social channel activities for merchants. Mobile is the immediate trend, especially outside the U.S., and especially in developing nations. Analytics is making actionable decisions from big data. And, cloud makes it all more affordable for those with constrained budgets.
I can’t say much about the next decade, and I wouldn’t trust anyone who does. Change is happening far too quickly these days to make long-term predictions with any certainty.
The questions above divide the answers into two categories: technologies that drive e-commerce and technologies that drive cross-channel commerce.
To follow Shep’s framework, I’ll focus on customer facing capabilities.
Technologies driving e-commerce will be the ones that generate traffic and conversion. Traffic will continue to come from the perennial leaders: search, deals and marketplaces. Conversion derives from the chart above: reviews, chat, personalization, analytics. It omits search and browse code that is also high on retailers’ lists.
Tech that drives cross-channel commerce starts with CRM, which is a huge catch-all. More specifically, mobile technologies and platforms that connect to the point of sale will bridge the site-to-store environments.
Most of the Information Technology (IT) companies are still scrambling for their share of retailers willing to invest in “something” that will make a their e-commerce investment a solid step towards an omnichannel selling capability. The dollars needed to create and support this effort are well beyond the vast majority of retailers and manufactures.
The next generation of IT giants will grow from their ability to provide a retail solution including hardware, software and retailer/consumer support for seamless integration for any and all types of sales and customer support. The software will be, as one might expect, the key to delivering an easy to use with full error and transaction protection capability. What is missing for this to take place as we speak is the ability to merge different database file structures allowing for a single application software to task and report. The IT industry has created an ambiguous phrase called Big Data to disguise and sidetrack the market from the issues that are real to this dilemma. Nevertheless, someone somewhere will figure out a means beyond a software filter with check box to address this need just like they figured out RAID hard drive technologies.
As a retailer you should simply invest what you can to get the greatest return and not feel the pressure to expand beyond your means. A simple and secure web site of any affordable size is always the best place to start. Making transactions safer and easier is the best expansion you can put in place for you and your clients. Look at new technologies when you have the time and money for the specific goals or needs you have. And last but not least…always pay the electric bill on time.
Without question, price intelligence is fast becoming one of the most critical components of a successful e-commerce strategy and its importance is only set to grow.
This holiday season is on course to be the most competitive yet, with Walmart, Best Buy and others all vying to deliver the most competitive prices on the market in order to compete with Amazon.
With the web giant becoming increasingly dominant, it’s essential that retailers are constantly monitoring their online competitors’ prices to ensure they price right. The only way retailers can compete with Amazon is through the use of sophisticated price intelligence tools, enabling them to monitor and adjust their prices 24/7 – and increasingly, multiple times a day.
Dynamic pricing is the future and where the market is heading, with ESLs (electronic shelf labels) delivering consistency in prices, both in-store and online.
My votes go to the technologies that will underpin seamless omni-channel customer experience, personalized offers and pricing, and interactive shopping that enable consumers to purchase items they see in media with the click of a button right while watching or interacting with the content.