E-commerce is about to go through what I believe is one of the biggest shifts of profit redistribution that has ever happened and it comes from the rise of technology first companies.
I’d love if there was only one major thing happening as it would make this article much easier to write, but instead there are big changes happening in a few different areas.
The best way I can explain these different shifts is actually based on how and why consumers purchase the way they do now.
I’m going to start with the one that has the most competition today and then move through some of the others
Consumer Impatience
Consumer impatience isn’t really a word people use very often but it is one of the most important things to understand in the ecommerce industry.
What exactly is “Consumer Impatience” you might be asking, well it’s the reason you likely choose Express shipping options or end up buying a product even though it might not be the cheapest available price.
Impatience sounds like a negative word but it’s actually the human body wanting to feel happy, it’s your mind knowing that a happy event is coming and wants it to happen now rather than later.
The first happy event in e-commerce comes from the fact people love receiving new things, a delivery driver drops off a little present that you get to open and inside is a product that makes you feel ownership and pride. This event fires off a whole bunch of chemicals in your brain and you feel happy.
You then get all the happy feelings that come afterwards like showing off a new dress to friends, being able to watch sport on your new TV and the other endless array of good feelings that can come from the things you buy.
People love to feel happy and that’s why we have the feeling of impatience.
Now that we understand what consumer impatience is and why it’s so powerful, we can look at how tech companies are developing highly optimised solutions that take consumers away from shopping with brands and shopping directly with them.
Biggest Kid on the Block — The Marketplace Giants
I’m not going to go into too much detail on this one as everyone is already well aware of the dominance of Amazon.
I do however want to explain why Amazon is built purely on “Consumer Impatience” and almost nothing else. It’s why Marketplaces will continue to exist, capture more of the market and own a large portion of the entire ecommerce market but is also why there is room for other players.
Marketplaces only solve one thing — “I want to easily find something and I want it now”.
Amazon has won in the space by simply being the largest with over 300 million products and the fastest with Prime delivery.
The ability to overthrow Amazon as the dominant force here is simply a matter of having a larger catalogue and/or faster delivery.
This leads on to the first wave of new disruptors that are coming and they are going to make strong ground.
Fastest Kid on the Block — The Delivery Giants
You know them as Uber, DoorDash, Instacart, Postmates and so forth. These companies have come and taken 30% of revenue away from local restaurants and grocers by solving “Customer Impatience” to the extreme. Food creates that same happy feeling as receiving physical retail products.
Now you might be thinking well what does food delivery have to do with the future of retail ecommerce, like every company these businesses will need to continue to expand in to new verticals.
It’s not hard to guess what that next vertical is going to be, a nice little Shopping tab in each of their apps. Need a pair of jeans before you go out tonight, they will get it to you within 15 mins.
The reason these companies are going to succeed is they can solve “Consumer Impatience” far better than anyone else ever can, because they have the network of gig workers to be able to deliver within sometimes minutes when everyone else is busy shipping orders using overnight delivery.
They also have the upper hand when it comes to convenience, the main reason people don’t change how they shop is that there is friction to do so, luckily for these guys they already have the consumers delivery details, payment details and they have their app installed. The ability to take away consumers is basically frictionless.
Consumer Social Acceptance
Now that we have covered impatience, let’s move on to the more complex topic of social acceptance.
As much as people don’t like to admit it, everyone loves external recognition and validation. It is also one of the main reasons brands are either successful or they’re not.
A great example is the entire LVMH group. It is built on the fact luxury products make you feel socially rewarded. That Louis Vuitton handbag doesn’t actually cost that much to make, the price tag is purposely set to be something that most people can’t justify spending.
Another example is that Adidas is also highly capable of making 1 million pairs of Yeezy’s but that would kill the exclusivity and social recognition you would get from owning a pair. So they limit them to the exact amount that will sell out quickly.
The reason social recognition and validation works is that humans are social creatures. We love to be accepted, whether that be from the majority of people or the small network of friends we are a part of.
Now that we understand social recognition lets jump in to the second large disruption happening in the ecommerce space.
Coolest Kid on the Block — The Social Giants
I’m going to share a bit of a secret, the social media companies have been one of the most successful players in the ecommerce space for the last 10 years.
Hang on, what?
At first glance that statement doesn’t seem like it’s true as they neither make money from ecommerce sales and they aren’t an online store. The truth is ecommerce isn’t just about the moment you click add to cart and checkout.
One of the most important parts of commerce is brand and product discovery and this use to happen while walking through a Shopping Centre and seeing a nice window display.
However, the internet doesn’t mimic the real world and new brands and products are predominately first discovered on social media channels.
If you don’t believe me look at brands such as Gymshark, Kylie Cosmetics, Princess Polly or any other pure play retailer. These brands only exist because social media exists.
So as you guessed it the social giants are already the kings of social recognition and validation, however the time has come for the social networks to take their share of what this is worth.
Facebook and TikTok are leading the way and have both started to announce they are going to allow their network of influencers make their own commerce experiences and get paid for what they drive to other businesses.
This is only the beginning though and while these networks are giving out money left right and centre the day will eventually come when brands and retailers are paying these companies 20–30% on every sale.
Consumer Laziness
Let’s not fool ourselves we are all lazy in some form, maybe not every day but sometimes we just don’t want to do something.
While social acceptance and consumer impatience both extend from the want to feel happy, laziness actually stems from not wanting to feel unhappy.
Some of the above examples also actually come in to play with laziness. Think about why you might use Uber Eats, is it because it’s faster or is it because you don’t feel like cooking. I know for me it’s usually the latter.
Laziness causes us to find the path of least resistance, we don’t want to do any more work than we need to. We want things to be easy so we can continue to relax and do nothing, we deserve that don’t we.
Understanding that people like convenience leads us in to the third disruptors and although this hasn’t fully emerged yet, it will be soon enough.
Easiest Kid on the Block — The Hardware Giants
Whether it be the iPhone in your hand or the Voice Assistant sitting on your table, the hardware companies are making it easier and easier for you to not have to get up and go to another room to sit on a computer to do something.
The best example of the hardware Giants making their way in to the ecommerce space is the integration of Google Shopping in to Google Maps, Google Lens and Youtube. They know if they can put shopping closer to where you need it, in those lazy moments you will use.
Just like Facebook who announced no fees until 2023, Google has taken the same approach by making Google Shopping free, after all they don’t mind about making profits now, they just care about getting everyone to become reliant on their technology.
To be honest these companies don’t have to try too hard, they only just need to make things as convenient as possible.
The real traction will come when Apple and Google start to implement product detection in their standard camera and over existing camera roll applications.
Also the ability to ask Siri, Google Assistant and Alexa for anything you could possibly want will continue to expand as they add displays and new features to these devices.
But the real moment when you start to consider hardware might become the dominant force in ecommerce is when you realise they can actually charge everyone else downstream.
App’s can’t actually sell digital products in their apps without paying a 30% fee, so why is it ok for retailers to sell physical products in their apps without paying?
It’s an interesting topic and one I believe we will start to see come to fruition soon enough.
Consumer Protection
I wasn’t quite sure what the best name for this is and I’ll likely think of something better later but consumer protection should cover it well enough.
Humans have a strong need to protect their own interests, we do this so that like laziness we avoid feeling unhappy.
The most common form of this is when you spend more than you should have. You just bought a dress to find it was 30% cheaper somewhere else, you let convenience win and now you regret being lazy.
Maybe you try a new retailer because they had a better price but then you realise it’s going to take 2 weeks to be delivered and you needed it in 3 days. These bad experiences are why most consumers avoid trying new retailers.
This becomes even more important when you start to consider you have tech companies now highly optimised for speed, social acceptance, laziness and more. You can never have everything you want, so you need to start deciding which one is the most important.
This is where we start to lead in to a new emerging market of commerce players, the smartest kids on the block.
Smartest Kid on the Block — The Data Giants
Being the smartest comes from knowing more than anyone else, and in technology that means having the most amount of data.
Each tech company in this space has a speciality about what they know, Amazon knows what you buy, Google knows everything for sale and Facebook knows everything that is trending.
What they do with this information will change over time, we have already seen Amazon use sales information to start building out its own product lines to compete directly with the brands it currently sells, taking a bigger piece of the pie.
Google on the other hand is building a Product Graph so it knows how to answer product questions better than anyone else, meaning it can find that exact product you are looking for with absolute accuracy and confidence.
Facebook lastly is using this knowledge of everything it knows about you and others to show you products you didn’t even know you wanted but likely will as soon as you see it, after all they make it their business to know more than you know about yourself.
Obviously with great power comes great responsibility and it will be interesting to see how they use this data.
So where does this leave brands and retailers?
Although this all seems like tech companies are taking over the world, it isn’t the case. Without brands there are no products to ultimately sell to consumers anyway.
What this does mean though is brands need to start to get use to this tech tax that comes with playing in this new tech era.
Brands that build strong and unique brands will ultimately be in the strongest position as they get to own their exclusivity. A great example to this is actually Apple who provides minimal margin across the iPhone range as it knows it doesn’t have to.
As for retailers and department stores, I’m sorry but the future doesn’t look as bright, when the only value proposition is to consolidate brands under a single roof, you provide very little value when these tech giants are capable of doing that and more.
Where does Carted play into this?
To be honest the motivation of this article was never about Carted but just how I see the e-commerce industry moving in the coming years.
With that said though what we are building is based on this movement from commerce happening on online stores and directly with these tech companies.
We provide API’s to fill the gaps in making all the above possible, not only for these large companies but anyone who wants to compete in this new tech enabled commerce landscape.
If you are looking for a provider who can help do any of the above, feel free to reach out. We have more products than Amazon, more intelligence than Google and multiple solutions to enable commerce in any app.
All without ever needing to stock a single product!
