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The bright future of e-commerce

Yieldify’s CTO, Richard Sharp, considers 3 key trends that will shape customer experience over the next few years and, in doing so, the future of e-commerce.

In 2016 global e-commerce sales will surpass one trillion dollars. A huge market indeed, but growth is slowing: in 2013 the eCommerce market grew by 23%; in 2018 it is forecast to grow only 13%.

e-commerce market stats

And as growth slows we are going to see some major changes in the industry. Changes which I for one welcome wholeheartedly. For the last ten years, high growth rates have made e-commerce a land grab, the basic strategy is to establish your online presence and then focus like crazy on acquiring traffic.

But with growth slowing down the traffic acquisition game is becoming increasingly zero-sum and expensive. As a result, the smarter players are already realizing that higher ROIs are to be had by focussing on customer lifetime value – and that means improving the user experience.

There is a broad understanding of this trend: 89% of online retailers believe that customer experience will be the primary means of differentiation by 2017. But there is much less understanding of specifically what should be done about it. For example, only 3% of online retailers consider their ability to use customer data for either real-time website or mobile app personalization as a strength.

Now that’s what I call an untapped opportunity! And as a product and technology geek, I couldn’t be happier about this.

Firstly, I love designing and delivering innovative, new user experiences. So, from a purely selfish perspective, I’m banking on the 2nd phase of eCommerce creating some pretty interesting job opportunities.

But secondly, and more importantly, I believe that the increasing focus on customer experience is a trend that will make things better for everyone. In my opinion, it’s high time that some of that traffic acquisition budget was put to better use improving the quality of the customer journey.

So what innovative new customer experiences might we start to see becoming more prevalent in the next 2-3 years? Let’s consider some of the key trends in eCommerce and imagine how they might play out from the customer’s perspective.

1. Personalisation

Online shopping will become less transactional and more personal. Websites and apps will become less like catalogues and more like shopping assistants.

Not only will they learn users’ preferences and adapt accordingly, they will also become less about selling individual products and services, and more about meeting their customers’ needs and goals.

For example, imagine a grocery shopping app where instead of selecting ingredients one at a time you tell it that you’re planning a dinner party for 12 people. The app asks you questions about the food you’d like to serve (if it doesn’t already know) and comes up with a number of recipe options. Selecting your recipe results in the ingredients being added to your basket in the right quantities.

In addition to being more helpful for the customer, this app also learns facts about its users’ behaviour that are richer in semantic content. Knowing that the user planned a party for 12 and was prepared to spend £15/guest on food is highly valuable data, allowing subsequent interactions to be personalized more effectively. Apps that understand your goals can also serve to enhance the post-purchase experience, delivering real customer value at zero marginal cost.

To continue our grocery shopping example, our app could offer to walk you through the recipes step-by-step as you’re cooking, and pre-configure timers to remind you when the various dishes need to come out of the oven.

2. Physical and online convergence

This is one of the areas I find most fascinating. There is no doubt that the proliferation of mobile devices and continued innovation in last-mile distribution will eventually turn conventional retail on its head. It no longer makes economic sense to transport goods into busy city centre retail locations and store them in an inexpensive real estate, only to have customers drive through congested traffic to pick them up, pay with a plastic card and carry them home again. Technology will change this. Physical retail outlets will become more focused on experience goods – those that either has to be experienced through consumption or that consumers want to ‘try out’ before buying (restaurants, clothes, shoes etc.).

Nike brick and mortar display

Those products that are less experiential (a.k.a. search goods) will continue to move purely online. Checkouts will start to disappear. People will browse products in-store, buy them on their phones and have them delivered straight to their house in a matter of hours. Customers will no longer have to queue, retailers will no longer have to store stock inexpensive city centre locations. Win-win.

I believe that ultimately some stores will exist purely as ‘physical publishers’ for online retailers. Such stores will hold no stock beyond that required for browsing. And they will not sell anything directly. Instead, they will make money by driving purchases of products their customers have browsed to pure online retailers. Affiliates will expand into the physical channel in order to mediate these transactions.

If customers browse products they like but aren’t ready to purchase just yet, they will be able to scan them with their mobile devices and add them to their ‘favourites / wish-lists’. This data will be used to re-engage customers through pure online channels, making ads more relevant and providing the option of frictionless purchase well after the customer has left the store.

Phones will become mobile shopping assistants, guiding customers through stores to find products of interest, using BLE Beacons to detect proximity.

wifi infographic

As users increasingly pay with mobile devices, loyalty programmes will be delivered and administered purely through software and data, as opposed to inconvenient paper cards and stamps.

3. Machine learning

Recent developments in deep learning, combined with the ongoing exponential increase in raw computing power have led to the Googles and Facebooks of the world training neural networks like there’s no tomorrow. Ironically, Stephen Hawking thinks the world won’t be here for exactly the same reason! Either way, while we’re waiting for the apocalypse, one of the more benign but useful applications of AI will be in transforming online shopping.

Product search will get way better: In the next few years advances in speech-to-text and natural language processing will take the likes of Siri and OK Google from ‘almost there’ to seamless. SaaS vendors offering this advanced voice search technology will be embedded directly in retailers’ websites and apps, making the online purchasing experience much more conversational (e.g. “I want to buy a dress like the one I bought from you a couple of months ago.”)

A search will accept images as input. Apps like Asap 54 point to a future where taking pictures of your favourite celebrities’ outfits will be all you need to do to find and purchase clothes in a similar style.

There will be a rise of smart aggregators that develop a detailed understanding of your wants and needs, and automatically find the best products from across the web to fulfill them. These aggregators will get their product data from companies like import.io and diffbot, who are already using machine learning to automatically generate structured feeds by scraping web pages at scale.

Retailers will use models trained on your previous behaviour to predict your future desires, even before you are aware of them yourself. eCommerce will move beyond product recommendations based on collaborative filtering and start making more personal predictions based on behavioural signals from individual users.

In the ad space, Google has already demonstrated the economic value of using machine learning to predict customers’ desires based on their previous online behaviour. In the next few years, we will see the same sort of technology being increasingly deployed by B2C online retailers. Predicting what customers want before even they know it will afford the opportunity to deliver more seamless user experiences.

Final thoughts

The first wave of eCommerce is coming to an end. Establishing an online presence and focussing on traffic acquisition is no longer enough. The new war is for customer lifetime value; the battleground is user experience; the weapons of choice are technology and data.

Bring it on!