To date, we have witnessed two clear rounds in the evolution of electronic commerce: Round 1 saw the rise of e-commerce taking on brick-and-mortar incumbents. Round 2 witnessed the arrival of modern commerce brands that carved niches into e-commerce while pushing customer expectations forward.
Now a third round is on the way. In round 3, we will see a renaissance in physical space and a new paradigm for online shopping that merges intelligent technologies, hyper-personalization, and seamless cross-channel engagement--and only in the moments that matter.
Retail and e-commerce brands must reflect on each round to claim their place in round 3. To do so, they are well-advised to consider next-generation technologies as well as evolving customer behaviors and expectations to design upgraded value propositions.
Round 1: E-Commerce Vs. Brick-and-Mortar
In round 1, we saw the rise of-commerce disruptors, such as Amazon, eBay, Alibaba, and Rakuten, forever change the shopping landscape. While traditional retailers eventually embraced e-commerce after an initial dismissal, they did so with an analog-first mindset. This required significant and costly ramp-up time to gain expertise, build, execute, and learn. E-commerce competitors, on the other hand, were born digital. These startups had to learn how to build online retail models from scratch to be competitive, profitable, and scalable.
The effects of round 1 are still playing out. In the first quarter of 2017 alone, for example, brick-and-mortar anchors Sears, Macy’s, JCPenney, and 16 additional major retailers were estimated to close a combined 3,507 stores. This is just a small glimpse into the great disruption retailers are enduring as they fight for relevance in what’s currently referred to as a “retail apocalypse,” where American consumers how make the majority of their purchases online rather than in stores.
In a telling statistic, Amazon had established a commanding market value of $355.9 billion by the end of 2016, compared with a $297.8 billion combined market value of some of the largest brick-and-mortar retailers. By March 31, 2017, Amazon’s valuation had jumped to $424 billion, sparking debate as to whether it might become the first $1 trillion company.
Round 2: Modern Commerce Vs. E-Commerce Vs. Click-And-Mortar
While brick-and-mortar companies are still reeling from round 1, round 2 is already underway. We live in an evolving digital economy where e-commerce, in many ways, has become highly commoditized. Price, shipping, service, and return policies largely serve as everyday value propositions for online stores. This makes it difficult for existing and new players to compete without bringing something new or exciting to the party.
As such, we are witnessing the rise of the new disruptors. The rise of modern commerce brands prioritize “born mobile” business models where mobile devices, curated products/services, cross-channel engagement, and personalization are packaged into focused value propositions.
Stewards of modern commerce are quickly becoming household names, such as Dollar Shave Club, Gilt, One Kings Lane, and Warby Parker, among many others.
Whereas the “e” in e-commerce once represented “electronic,” modern commerce emphasizes customer-centric approaches that now also signify “everywhere,” “every way,” “and “experiential.” These companies build on three common pillars that foster loyalty while striving to drive greater lifetime value: personalization, convenience, and mobile.
Modern commerce companies are becoming the new normal, demonstrating how investing in customer experiences not only creates value, but also builds relationships with customers.
Round 3: Extreme Personalization
As round 2 plays out, modern commerce continues to evolve from “what’s new” to the “next-new” player on the block. To compete, every company--brick-and-mortar, e-commerce, and modern commerce--needs to perpetually innovate on every front.
Walmart, for instance, acquired modern commerce e-tailer Jet.com in 2016 for $3.3 billion. This month, it was reported that Walmart sales rose 63% YoY. Amazon continues to break new ground in multiple areas simultaneously, including drone and autonomous delivery, smart home automation, shopping via its Alexa intelligent assistants, and even the opening of next-generation brick-and-mortar retail stores. Other brick-and-mortar retailers are actively partnering with Curbside, Postmates, and other on-demand startups to facilitate instant online delivery services. This is just the beginning of incredible transformation.
As connected customers continue to evolve, so must the foundation of modern commerce. At a minimum, they’re always online, in control, and informed, demanding personalization, convenience, and valued experiences. True innovation will fuse next-gen technology and CX strategies to better serve and sell based on human empathy, science algorithms and artificial intelligence/machine learning.
Previously, technology not only scaled online sales, service, and marketing, it also scaled legacy-based approaches in doing so. But in round 3, the next disruptors will prioritize extreme personalization, empathy, and human-insights to drive intelligent technology platforms that scale compassionate, relevant, and value-added engagement.
Next-generation models will prioritize the true delivery of frictionless, one-to-one personalization across channels, at the right time with the right message in moments that matter--at scale. In fact, forward-thinking brands are already investing in strategies that help them get back to basics in three key areas:
1. Identify the moments that matter: Customers use their favorite devices for everything that’s important to them. As such, the windows when they’re open for engagement are only open in intervals. More so, each period, place, message, and format is different for different people. This is why intelligent technology platforms will help you scale personalization efforts by automatically building bridges between brands, people, channels, value, and time.
2. Engagement, not reach: In rounds 1 and 2, brands relied on reach to drive views, clicks, and, ultimately, conversions. AI and machine learning is advancing engagement tools to scale cross-channel, personalized messaging in the moments that matter in the channel customers prefer.
3. Extreme personalization takes intelligent technology and empathy: In round 3, customers expect extreme personalization where every consumer is treated as an audience of one. AI helps brands respect the pace at which consumers want to be engaged by serving up only the right message at the right time and on the right device. But without knowing who they are, what’s important to them, as well as their behaviors, preferences, and frustrations, AI is limited in its ability to help you effectively engage convert. To win in the moments that matter, design content and customer experience strategies based on the “5Ws of modern marketing:”
- Who do you want to engage with?
- What is important to them right now?
- Where and when do they prefer to be engaged?
- In what ways do modern customers prefer to be engaged with your brand?
In round 3, customer experience, user experience, and humanity become competitive advantages in modernizing modern commerce. It’s disrupt or be disrupted. What’s next is already in motion. Modern digital leaders who invest in intelligent technology to scale humanity will win. Meaningful CX will prioritize personalization, engagement, and the right messages/stories in the moments that matter to not only convert one-time transactions, but also to cultivate value-added, trusted relationships that dramatically improve customer lifetime value.
The clock is ticking.