Trying to keep my head above the January deluge of posts on eCommerce trends for 2011, I thought it might be interesting to look back on previous years’ forecasts.
I found a post from eCommerce Times (published in 2002) called “Five E-Commerce Trends” and have been reflecting on the issues from a 2011 perspective.
1. Multi Channel retailing arrives
Nine years on, has Multi Channel retailing actually arrived? While it is certainly true that most retailers do now have multi(ple) channels, they are still on a journey towards offering a truly joined-up Multi Channel experience. With the ongoing proliferation of channels and technologies, retailers are having to work very hard to figure out what is right for their customers and how to prioritise the huge number of possible initiatives. One of the key challenges in 2011 is cross-channel optimisation, both at the customer facing end of things and within back office systems and processes. Legacy product, stock and warehouse systems, designed to meet the needs of ‘old-style’ retail and manual processes that cut across traditional department boundaries, are a huge inhibitor to cross-channel success.
2. More satisfied customers
Hmm, an interesting one. It’s probably worth putting this one into the context of the time the article was written. In 2002, eCommerce was still recovering from the shake-out of companies that followed the ending of the dot com bubble and there were some high profile customer satisfaction disasters. The 2002 article refers to research showing that ‘eCommerce companies made consumers happier than offline retailers’. Interestingly, in 2010, internet pure plays again outperformed Multi Channel retailers in customer satisfaction (Christmas 2010 Online Retail Customer Satisfaction Index).
While still a key issue for all retailers, customer satisfaction is not normally headline grabbing compared to technology-related topics that typically feature in trend lists. Part of the challenge for retailers is that customer satisfaction is ‘only as good as your last order’ and it’s always relative. The impact of their customers’ ‘hyper-connectivity’ is a key challenge in 2011. Customers now expect much more than they did in 2002 and can share poor experiences quickly and easily with large numbers of people.
3. Consumers do their own thing
While there certainly are many sophisticated tools on the market to track and analyse online customer behaviour, it is still difficult for retailers to grapple with the vast quantity of data and translate it into meaningful insight. They are struggling with both the volume of data available and the challenges of making sense of data across channels. With the speed of technology innovation, it’s hard to predict precisely how customers are going to use each new device and how and when retailers should develop new services and offerings.
Personalisation has been talked about for a long while but still very few retailers execute successfully on this. The holy grail of a ‘single view of the customer’ is a long way off for most Multi Channel retailers. With the arrival of social commerce, consumers are revealing (consciously and sub-consciously) a lot more about their likes and dislikes, so this should enable retailers to make their offers more relevant. However, as humans we will always do our own thing – thank goodness !
4. Death of the mid-size e-tailer
Well, since 2002, we’ve certainly seen large e-tailers like Amazon, eBay and Play massively grow and develop their operations. As well as organic growth, they have developed their offerings in ways no one of could have predicted – via massive range expansion, as well as business model and product innovation (e.g. Kindle and eBay’s own brand fashion).
But there’s also been significant consolidation among online only operations, notably Amazon’s recent acquisition of LoveFilm. With the availability of open source and software as a service platforms, it is still possible for small-scale businesses to operate successfully in niche areas. However, for medium sized retailers, the middle ground is a dangerous place to be; lacking the scale of the large players to compete effectively, but with a higher cost base and less differentiated offering than the smaller (more agile) niche businesses. We’ve certainly seem some of the mid-sized Multi Channel retailers struggle and go under in recent years – e.g. Woolworths, Zavvi – and there will be further challenges ahead I believe. To be able to survive beyond 2011, it seems you need either massive scale or a distinctly niche offering.
The internet start-ups that have made it big since 2002 (Facebook, Netflix, Zappos and Nakedwines for example) have tended not to be traditional e-tailers (now there’s a phrase I never thought I’d use!) but have created brand new business models around social commerce, streaming media or a service culture.
5. More profits
This was very much an issue in the post dot com bubble days and remains an issue for companies like Twitter and Facebook, where investment to achieve operational scale still runs ahead of profits. However, for Multi Channel retailers it’s becoming increasingly difficult to separately measure profits from online sales. With the eCommerce market still growing, channel usage and technology still evolving rapidly, online success needs to be considered across a range of key performance indicators, including the contribution made to the overall business. With the growth of cross channel transactions (e.g. Reserve and Collect) this should become easier to monitor and report. However, in the current economic climate, strategic investments with long payback periods will be difficult for mid-sized retailers to justify.
So, what does this all mean for merchants today? Three thoughts stand out from my brief journey back to the future. Firstly, while the detail may have changed the topics are still relevant nine years later.
Secondly, so many elements of 2011 eCommerce that seem important today just weren’t on the radar in 2002.
And thirdly, a question: what will happen in the next 9 years that doesn’t feature on any of the 2011 trend lists?