Consumer Psychology for a Digital Age

Probably the Smartest Thread You’ll Read on (Social) E-Commerce…

…is over at Chris “Hunch” Dixon’s site.

It’s the smartest discussion we’ve seen on the future of e-commerce, with 117 comments from industry thought leaders – including the CEOs of Fab (Jason Goldberg) and Shoply (Liad Shababo).

So if you’re a business, brand or entrepreneur in (or considering) e-commerce, social or otherwise, and read just one thing this month, read this thread.

And for the time-pressed, here’s the speed summary of key insights/takeaways.  Brilliant.

  • The future is e-commerce; offline commerce will serve only two purposes: immediacy (stuff you need right away), and experiences (showroom, fun venues).
  • But immediacy may no longer a promise for offline commerce companies as both Amazon and eBay have announced same day delivery.
  • The role of offline lies in the value of the “showroom” and “entertainment” aspects to places like Williams Sonoma. The future of commerce is a hybrid model with (entertaining) showrooms + online fullfillment
  • The future of e-commerce is combining online and offline experiences in disruptive ways. (Chloe + Isabel, Warby Parker, Everlane, and Stylemint)
  • There is no such a thing as e-commerce any more. There’s just commerce. You can innovate in commerce with technology, but the e-commerce silo is dead/dying (mobile payments are disrupting/removing the online/offline divide).
  • The future of e-commerce is vertical integration in markets where there is significant markup in both wholesale and retail (think Shoedazzle, Bonobos, J Hilburn, Warby Parker, IndoChino).
  • Few successful e-commerce companies were started in the early 2000s, although a slew of recent new entrants appear to be getting traction – flash sales, social commerce, subscription commerce and other new “content + commerce” models
  • The first wave of e-commerce was about commoditization this wave online and offline is about being a “merchant” (point of view, authority, experience etc).
  • The key equation driving e-commerce is: profit = lifetime customer value minus customer acquisition costs
  • If it has a UPC code, Amazon will beat you.”
  • Before you enter the e-commerce game, visit an Amazon warehouse.
  • E-commerce is good for two things – price and exclusives. Amazon will beat you on price, so you have to beat it on exclusives.
  • The only way to escape commoditization and catalogue commerce dominated by Amazon is to a) sell used stuff, or b) make your own products (or provide a marketplace for those things), or c) (possibly) offer customisation
  • Be wary of e-commerce businesses based on customization – they’ve  existed for a decade (cafePress, Shutterly, Vistaprint) and yet none are thriving. Customers don’t want customization, they want great brands and great design, and they want to be told what they want.
  • The e-commerce opportunity is to contribute to the e-commerce ecosystem rather than sell directly yourself; four opportunities – 1) supply chain innovation, b) marketplaces, c) e-commerce solutions for small businesses, d) mobile payments
  •  There’s room for innovation in the space as long as the ecommerce company creates value for all participants – the retailer, the supplier and the customer
  • To make money in e-commerce, you need to sell in emerging markets where there are no huge incumbents
  • Compete in an industry with a grey market, where consumers are willing to pay higher prices for reducing risk, for authenticity, and warranties
  • The opportunity is to venture into segments where Amazon won’t go (adult, arms… !)
  • The opportunity for e-commerce success is a) sell to iPad owners (iPad owners are 10x more valuable than non iPad owners), b) mobile commerce (nobody owns this yet), and b) target your customers who use social features  (3 to 4 x more valuable)
  • You can’t sell to people who know exactly what they want – Amazon owns that; focus instead either a) ‘discovery‘ (“the best place to discover the stuff you don’t know you need”) or b) deep domain expertise
  • to succeed in e-commerce, you need to sell exclusives. You can’t sell stuff that Amazon sells, Amazon will crush you
  • Amazon is not a store, it’s the world’s best supply chain and logistics company. Amazon is transforming from a retailer to a marketplace+services provider over time.
  • Domain expertise, live assistance, and overall experience are the critical success factors for success in a market where price-competitiveness and scale rule
  • Necessary (but not sufficient conditions) for e-commerce success are a) remarkable,  unique and branded experience and remarkable, unique and branded service; do what Apple, Tiffany & Co., Coach, Lululemon do in bricks and mortar commerce, but online
[hr]
Today’s article is sponsored by Milyoni: The Leader in Social Entertainment
[hr]

Comments (21):

  1. Mark A Carbone

    August 21, 2012 at 06:47

    I loved this article! I feel smarter every time I visit your site.

    Reply
  2. Ed Brenegar

    August 21, 2012 at 15:26

    I don’t doubt at all this is probably true. But it also rings with sort of the in-house echo chamber.
    Is this really the whole picture. I don’t know. I don’t presume to know. I’m just asking the question.
    Are we now all locked in to an eco-system that is only driven by Apple, Amazon and Google?
    Just asking. I don’t know.

    Reply
  3. Peter Christensen

    August 21, 2012 at 19:13

    Great summary ! A must-read for any e-comm… commerce professional. Thanks :-)

    Reply
  4. Natasha Green

    August 28, 2012 at 11:54

    This is a brilliant article. I wouldn’t necessarily agree with the statement about ecommerce just being commerce nowadays – maybe in the future, but not at the moment because ecommerce is yet to capture the majority and in-store is still vastly important to the retail sector.

    Reply
  5. villanueva inmobiliarias

    August 28, 2012 at 19:23

    I wanted to thank you for this fantastic read!! I absolutely loved every bit of it.
    I have got you book marked to look at new stuff you
    post…

    Reply
  6. Jamie Burke

    August 30, 2012 at 08:23

    I think the only real challenge to the Amazon domination is Hiroshi Mikitani’s Rakuten whose merchants, unlike Amazons, are ‘designated their own ecommerce consultant with a specific brief to work with them over long-periods of time as partners’. Its allowed him to consume Japan’s ecommerce market and already he is heading our way.. was featured in this months (August) UK edition of Wired and its well worth a read.

    Reply
    • Paul

      August 31, 2012 at 19:46

      Hi Jamie, thanks for the comment – I agree Rakuten will be interesting to watch. Thanks for the heads up on the Wired UK article will search it now!

      Reply
  7. Chip Wilkes

    September 10, 2012 at 23:03

    Great article and on point!

    “We want your stuff online”

    @tweetstore.com

    Open and manage you own tweetstore today. Just a description, price, photo and submit.. gets your stuff online.

    Fast, simple, and free through 2013

    If you love #twitter and #square you are going love #tweetstore

    Help this bird get off the ground…list some of your stuff today!

    Best,
    ChipWilkes

    Disclosure: Co-Founder

    Reply
  8. Al

    September 28, 2012 at 10:26

    …or to summarise, sell exclusive home made porn and arms (without UPC codes) to grey iPad owners in emerging markets via mobile?

    Reply
    • Paul Marsden

      September 28, 2012 at 18:23

      ;-) yep, sounds like a winner!

      Reply
  9. Gareth Sear

    April 22, 2013 at 16:50

    Nice one Al. Will start looking into this.

    It does sum it up well. There is becoming less and less room for small on line retailers. Amazon will crush you. Sounds grim. But they will. Bricks and Mortar? Tesco will crush you. In fact as a nation of shop keepers (in the UK) we had a small boom with the internet for the last 10 years or so, but time has run out again. Run a small business? Good luck. You will be crushed. (Unless you do as Al says).

    Reply

Leave a Reply

Your email address will not be published. Required fields are marked *