Roundtable: E-commerce in 2020

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We like to brainstorm at Custora. It’s how we’ve come up with great ideas like building human-sized ROI calculating robots and sending baby garden snakes to prospects.* I sat down with Corey Pierson, Custora’s CEO; Jordan Elkind, our Head of Product; and David Stychno, our Head of Design to chat about how we envision retail and e-commerce changing in the next few years.

The warm up

Me: How do you see the e-commerce industry changing by 2020?

Dave: Local, mobile, social. virtual. Lomosovir. Like the gymnast.

Corey: Omnichannel.

Me: Personalization. Okay okay, no more buzzwords. Seriously.

Dave: I think television is going to be a much bigger e-commerce channel. It’s a bigger and more communal shopping experience. I’m loving my Apple TV. Never shopped on it though. Other than apps.

Corey: Programmatic TV ad buys. The ads I see will be very different from the ones you see.

Jordan: Traditional TV media buying is very old-fashioned. Planners actually buy media against blocks using schedulers…

Dave: Broadcast media still makes a ton of money compared to digital. It’s a slow transition, but every year streaming gets better and better, especially for live sports. The line between Internet and TV feels pretty blurry already.

Jordan: I think there’s a trend around experiential.

Corey: More subscriptions!

Jordan: Virtual reality will still be in its infancy, but I imagine you’ll be able to see things in three dimensions, and interact with digital objects that mimic the store experience. Interactivity is part of it, and a related theme is the ability to interact with media. Imagine you’re watching TV and you can pause and shop things on the TV screen.

David: Or virtually step inside the paused scene and walk around and shop things. Whoa.

Me: So instead of traditional ad formats, more like native advertising?

Jordan: Product integration, native advertising. A productization of entertainment.

On brick and mortar versus e-commerce

Corey: I don’t see traditional retailers going away anytime soon. SKUs may shrink a little bit. Right now e-commerce is about 15% of traditional retailers’ revenue. You’re still gonna have brick and mortar in five years time.

Dave: Brick and mortar retailers are reducing their footprint and these digital brands like Bonobos, Warby Parker, and Rent the Runway are opening retail locations. Over time, it will flatten out. Seems like there’s some sort of calibration taking place to accommodate e-commerce.

Jordan: But they’re redefining what it means to be brick and mortar. Brick and mortar is a tangible way to interact with the brand, a gateway, but not for product discovery necessarily. It’s the experiential component.

Dave: Discovery is an interesting thing. The value is all about making it easier to find stuff. An example is Amazon’s bookstores. Retailers might shut down more large stores and open tiny footprint stores. That could make returns easier.

On the in-store experience

Me: How else will brick and mortar change?

Corey: Only a matter of time before, for stores that have salespeople, you get a more personalized sales experience. They should have access to what you’re interested in buying.

Jordan: I bet the use of biometric data is gonna rise a lot over the next few years. Not to the level of ‘Minority Report,’ but if your computer were able to sense your measurements, or if it were able to read your vitals and recommend certain products.

Corey: What if there’s an iPad in store and you type in your email address and it shows you items that are in stock that they think you’ll like?

Dave: I don’t want to talk to a salesperson. I like the discovery. The fun of going into a store is discovery.

Corey: Type in your email and you get 10% off.

Me: I can imagine people who don’t like shopping would like that.

Dave: Self-checkout. If there’s some sort of incentive for you to get a promo. Automated self checkout will become more adopted in retail experience.

Jordan: Also, redefining the fitting experience. Right now it’s terrible. The lighting is bad, and you have to wait in line for everything. You would stand in front of a mirror and instantly it scans your body and enables you to virtually try on any item.

Dave: Pick items in an app to try on and you show up and there’s a basket for you. Go to a locker and try it on. Quick service food seems to be figuring this out. I think Panera and Starbucks offer this type of thing.

On shipping

Corey: More crazy rapid delivery.

Me: For me a big issue is returns; that’s a big hurdle. Returning is still such a huge pain.

Jordan: I wonder if a bunch of retailers will band together to build universal return boxes. You drop it and it gets sorted to the retailer.

Dave: There’s a cool article about Amazon’s drones. Probably happening sooner than most people expect. Drone lockers on building tops. Wonder if Amazon starts offering Returns as a Service. Man returns are a pain. Drone lockers. Easy.

On subscriptions

Jordan: Corey mentioned subscriptions – I think that will continue to grow in ad-hoc businesses, especially with commoditized products like razors or something where discovery is too much so you want a curated collection.

Corey: Meals. That category’s growth might have peaked, but that business doesn’t seem to be going away.

Jordan: It feels like only a matter of time. What happened with airline deregulation, the best way to cement loyalty is through these massive loyalty programs which are trying to create the subscription dynamic.

Me: Would traditional retailers offer a subscription service?

Corey: They could do a subscription for certain products.

On the online experience

Corey: Will e-commerce websites change?

Me: Maybe more content. More and more, before people make a purchase they want to learn all about it and feel cool.

Jordan: Part of the brick and mortar experience is seeing other people looking at the products you’re interested in. Drawing inferences about the level of cool, seeing what kind of people are there. I wonder if the social element of shopping will become more of a focus of e-commerce websites. Heatmaps of where certain items are popular, or who else in your network has browsed an item or carted it.

Dave: I wonder if there will be more personalization. I feel like retailers should know more about my browsing behavior. There’s still a long way to go. Weekly, or daily, that stuff should change.

Jordan: There’s also a theme around mass customization becoming mainstream. All of these retailers are struggling with SKU proliferation, they have 10 zillion varieties of everything when in reality people want to customize their thing. They want to choose their toothpaste size and choose the color and fabric they want in a sweater. Footwear companies like Nike and Reebok are have been doing this for a while now.

Dave: I wonder if that will be commonplace outside of apparel.

On payments

Dave: How will payments be different?

Me: You won’t have to type in your credit card information every time!

Corey: Why don’t I just memorize it…I never make the effort. I need to sit down with flashcards.

Jordan: I have like 6 cards, for different things.

Dave: Like with food apps, it’s so easy to order. Press this magic button to reorder!

On promotions

Corey: At a certain point, incessant promotions will have to stop.

Me: Maybe we can get a government regulation like in France.

Jordan: I was thinking of that too, actually. The government has already taken an interest in promotions, because if something is always promoted, it discredits the list price. If you’re a vertically integrated retailer, what does a list price even mean?

Me: Two times a year, retailers are allowed to put things on sale.

Dave: Why haven’t we done that?

Jordan: We’re America – if we want to give an 80% discount, we’re damn well gonna do it!

Dave: What if brands start doing it on their own? Doing away with sales.

Jordan: I wonder if we’ll see mass collusion among retailers. It’s like the prisoner’s dilemma.

Me: The dominant strategy!

Jordan: I wonder if they’ll create alliances similar to airlines. Everything from high-end to low-end, and maybe even spanning industries. You see the beginnings with the Plenti loyalty program. Cross-industry coalitions, where all consumption needs can be met.

*These never actually happened. But that doesn’t mean they won’t.

Download Custora’s Q2 2016 Pulse Report

Every quarter, we release a report recapping the state of US e-commerce based on data from over 500 million anonymized shoppers and $100B in e-commerce revenue from over 200 online retailers. Check out this report to learn more about the top e-commerce trends of Q2 2016. For real-time updates, sign up for the Pulse here.

If you have any questions or comments regarding the report or this data, we’d love to hear them. Feel free to comment here, or email us at info@custora.com.

If you’re curious about the statistical methods we used to produce this report, check out this blog post about a previous report, which used similar tools.

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The Retail Tipping Point

David Stychno creative

Sculpture by Isamu Noguchi

 

Growing retailers often place companies like Amazon on a pedestal, strategizing about the hurdles necessary to overcome and place themselves amongst the upper echelon. But let’s be honest, comparing yourself to the Amazon of today is simply unrealistic – and will likely only frustrate you.

Every company reaches what I like to call a “tipping point.” Some hit it at the $20 million mark, some at the $50 million mark, others much later. This “tipping point” forces a company to evaluate their strategy and make a crucial decision: continue with the status quo, or adapt and dig in to their customer data to move that revenue needle forward. If you are like most growing companies, you are probably leaning more towards the latter, devising a plan to move beyond optimizing one-time transactions and entering the realm of sustainable revenue through retention.

We’ve all heard the cliche that “it’s 5x more expensive to acquire a customer than to retain one.” Regardless of what statistic you hold true, acquisition is simply the more costly marketing strategy. But let’s not be penny wise and dollar foolish: growing retailers need to continue focusing on acquisition. The key is in optimizing your acquisition investment by ensuring you have a strong retention net in place.

Acquisition and retention are two vastly different animals that require their own unique tools for customer insights and campaign deployment.

There’s a very common mistake made within these “hyper-growth” organizations when they hit this transition: the unnecessary tendency to stop the presses, rip everything out, hunt for the silver bullet and replace it with tools that further over-promise and under-deliver. This is commonly referred to as “re-platforming.”

Believe it or not, you can significantly innovate your organization to drive the revenue needle forward by enhancing what you currently have in place. Before making significant changes to your current marketing stack, take a step back and assess how you can simply fine tune your existing engine to optimize for retention. Frequently, a complete system overhaul can be avoided by introducing a solution that sits on top of your current tools to multiply your efforts.

The sheer purpose of the above ramble isn’t to provide you with an answer, but to simply challenge you to question your status quo. You just need to dig in. Are you truly preparing your rapidly growing organization to join the enterprise elite, or, are you simply on an endless hunt for the perfect solution?

Insights from Shoptalk, where retail met tech

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Custora’s Chief Revenue Officer, Tim Bryan, attended the Shoptalk conference last month to listen to innovative retailers…well… talk shop. Shoptalk bills itself as the “nextgen ecommerce event” and brought together leaders from the e-commerce, venture capital, and retail worlds.

To read about Tim’s take on how customer experience, loyalty, and omnichannel marketing are front and center in retailers’ minds, and how this means good things for their customers in the coming years, head over to CMO.com.

 

Custora E-Commerce Pulse Report: Q1 2016

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Shhh…Hear that?

It’s the sound of marketers across the country cheering for yet another strong quarter in the world of e-commerce. Online revenue was up 8.6% in the first quarter of 2016 compared to the previous year. Online orders increased 7% and Average Order Value (AOV) was up 1.5%, indicating a less promotionally-driven quarter.

Mobile shopping continued to grow with nearly 30% of orders being placed on mobile phones (19.9%) and tablets (9.9%).

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Of those purchases made on mobile devices, 24.5% were placed on devices running Google’s Android operating system and 75.2% were made on devices running Apple’s iOS.

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Search was still the primary marketing channel driving online sales; organic search brought in 21.8% of orders while paid search made up 20%. Email marketers will be pleased to hear that their efforts paid off big in Q1 – 18.4% of purchases were driven by email, up from 15.5% during the same timeframe in 2015.

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Check in for monthly e-commerce stats and analysis at custora.com/pulse. To keep up with the latest industry analysis, interviews with e-commerce pros, and meaningful case studies, subscribe to Custora’s blog.