Practical Ecommerce

The Commerce EvRolution, Part 2: Channel Trends

Editor’s note: This is “Part 2″ of a three-part series on how the mobile revolution is affecting ecommerce. “Part 1: Shopping Trends” we published previously.

In my previous article, I introduced the term “EvRolution,” where mobile devices and applications are revolutionizing commerce. Retailers are rapidly evolving their strategies and technologies to keep up with the shift in consumer shopping and buying.

This article will examine how global retailers, brand manufacturers, and pure-play online retailers are responding to the mobile consumer.

Global Retailers

This group includes businesses like Walmart, Target, Home Depot, Lowes, and Costco. These retailers have thousands of physical stores in many countries. They have highly sophisticated ecommerce sites with millions of SKUs. The term omnichannel — i.e., delivering a seamless experience regardless of where or how consumers interact with a company — is usually associated with these retailers. Here are some of the current trends within this enormous distribution channel.

  • In-store pickup. Consumers can order online and pick up merchandise at a local store. This addresses the need for speed and ensures a product is in stock before driving to the store, making consumers happy.
  • Free delivery. If a local store does not have an item in stock, retailers are offering free delivery to online shoppers, to reduce the chances of buying from a competitor. This is also frequently offered to brick-and-mortar shoppers when an item is out of stock.
  • Seamless inventory fulfillment. It used to be that a store would say it could order from another store and have it in a few days for a pickup. But consumers don’t really care where it comes from. They just want it quickly without any further actions required on their part. Nordstrom and other global retailers now simply offer online customers to have it shipped to a local store or directly to the customer’s residence. In Nordstrom’s case, it will actually ship from other stores to the consumer if the item is not available in a distribution center. This will soon be the norm.
  • Price matching in store. Best Buy is now offering price guarantees to reduce showrooming and intense price competition that is being caused by pre-purchase online research.
  • Omnichannel customer experience. Stores are striving to deliver a virtually identical experience regardless of a consumer’s touch point — in-store, online, mobile, via phone, or in kiosks. This usually means consistent messaging, pricing, descriptions, promotions, imagery, and so forth.
  • Virtual stores. Andy Hoar of Forrester Research recently described a store in Korea that has deployed a touch screen grocery in train stations. The inventory is presented like a physical grocery store isle on walls in the station. Consumers can shop in the virtual store and pick up their goods at their destination stop. Brands are experimenting with this concept in their physical stores as well.
  • Dynamic pricing. Many retailers are using dynamic pricing aggressively in their online operations, though this is not necessarily extended to their physical stores, yet. If you shop for a washing machine online, the price of that product likely fluctuates throughout the day retailers compete on pricing dynamically. I’ve spoken with pricing automation vendors who say that some products change price hundreds of times during the day on Amazon and other marketplaces. Daily price fluctuation also occurs in retailers’ own online stores.
  • In-store mobile merchandising. In the near future you could wander through a physical store and receive promotions on your mobile phone.
  • In-store checkout. Physical stores are aggressively adopting the use of tablets for checkout by their customer service representatives. In an Apple Store, you can check yourself out using its mobile shopping app. Look for more of this in the future, once stores address security. Grocery stores will likely not be far behind.
  • Adding marketplaces. Sears was among the first to add third-party products to its online store, creating a marketplace. Amazon has benefitted greatly from its marketplace, as revenue grew from $467 million to $4.172 billion in just four years.

Large Web-only Retailers

This channel includes Amazon, eBay, Rakuten.com (formerly Buy.com), TigerDirect.com, Fab, and other large online retailers. It also includes many smaller merchants that don’t have a physical store.

  • Opening physical stores. Web only retailers are opening physical stores. It’s happened mostly with brand manufacturers so far, but the pressures to be omnichannel are forcing web only retailers to rethink their strategies. Will Amazon open physical stores as it expands distribution to support same day delivery?
  • Same day delivery. This could be coming soon to larger cities. Order by 10 a.m. and have your package delivered by 5 p.m.. No need to visit the physical store. Look for Amazon to aggressively get into this space. Others could follow.
  • Adding marketplaces. Web-only stores are adding marketplaces.
  • Personalization. This also applies to global retailers, but web-only retailers began personalization. The concept is to know the demographics of your shoppers and where they come from. Then deliver a personalized experience that will result in a higher order value and conversions rate. Mine your data to offer the most likely sales to your customers and visitors.
  • Massively optimized. Web-only retailers invested in A/B and multivariate testing almost from the day they launched. They are always testing to optimize the customer experience to improve their sales and profits.
  • In-house brands. You’ll see more web only retailers adding in house brands to improve their margins. Fab and other similar high flyers could source more of their own items to improve profits.
  • Acquisitions. Many large retailers likely will acquire niche, web-only companies. Amazon once again is leading the charge in this area.

Brand Manufacturers

Brand manufacturers are seeing the highest online revenue growth of any channel. According to Forrester Research from a Shop.org 2011 study, this sector saw 40 percent annual growth in online sales in 2011. They have gotten over the fear of competing with their channel partners. For most, selling in their own branded physical and online stores in addition to their distribution channels is almost a given. These manufacturers include Nike, Apple, Levi’s, Adidas, AT&T, and TaylorMade.

A new ATT store in Chicago features lifestyle categories and digital point of sale iPads for different apps and devices.

A new AT&T store in Chicago features lifestyle categories and point-of-sale iPads. Photo by the author.

Many of these companies are following the Apple lead and repositioning themselves as lifestyle brands. I visited a new AT&T store in Chicago recently and hardly knew I was in a mobile phone outlet. This presumably helps AT&T differentiate the shopping experience in its physical stores from its distribution partners. In most cases, pricing from manufacturers’ physical locations is full list price — no discounts. An exception I’ve see to this is TaylorMade, the golf company. I regularly receive 10-to-20 percent discount offers on new, current models directly from the company.

Here are some other likely trends from manufacturers.

  • More physical stores. More brands will open physical stores. It allows for direct interaction and feedback from customers. It’s also high margin sales for them, so they can afford the investment.
  • Experimentation. I was recently in a Nike store that offers custom made shoes that are assembled while you are in the store. The shoes can have custom bottoms, tops, laces, stitching, logos, and more.
  • Social media and social selling. Brands are the ones investing the most in social media. They are building up Facebook Fans, Tweeting, creating Pinterest Boards, and using Instagram. These are proven tools to create awareness, get customer feedback, and initiate viral marketing through key influencers.
  • Kids’ play area. Almost every store has a kids’ play area with touch screen computers and actual products for kids to interact with. The area is likely monitored to see what the kids are drawn to. Hence, appeal to the kids because it’s fun and do research at the same time.
  • Lifestyle branding. Big brands are learning from the Apple marketing model. “It’s not a computer, it’s Apple and it makes your life better.” The new AT&T store is modeled around departments like “Family Life” for home security and “HVAC” for your mobile device — rather than the devices themselves.
Nike store featuring a “custom build it” shoe category as well as a kids computer play area.

Nike store featuring a “custom build it” shoe category as well as a kids computer play area. Photo by the author.

New Channels

New channels are being created because of mobile devices and related technologies. Payment tools like Square turn any smartphone into a payment system for only 2.75 percent of the transaction: No more merchant accounts, delays in payment, or onerous credit card statements to understand.

Mobile apps allow restaurants to further develop their take out or delivery businesses. The list goes on.

  • Popup and mobile stores. Buy a trailer, set up merchandise, and go to a show. It’s never been easier to move goods around. We will likely see a Renaissance in physical marketplaces. Look at all the upscale mobile restaurants launching in major cities. No more day-old burritos in foil. They make them fresh in their mobile kitchen.
  • Virtual stores. I previously mentioned the used of touch screens to create virtual stores. Think of an isle in a store that is represented digitally rather than with physical products. Companies could offer this for certain categories rather than stocking slow-moving inventory. You’ll have the same experience you do online — product descriptions, reviews, zoom images, alternative images, and videos — only it will be online in a store, or in a train station or a lobby of an office building
  • Kiosks. Kiosks have already made a huge impact in malls. Expect them to take even more advantage of the virtual store concept and expand the products they offer.

There are rapid changes occurring in all the various channels. Smaller online merchants will need to adapt too. In “Part 3,” I will examine that in more detail.

Dale Traxler
Dale Traxler
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Comment ( 1 )

  1. Ydeveloper August 31, 2013 Reply

    The trend is positive for better ecommerce and for marketing it is also great way.

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