The Future of Commerce

It’s now possible for you to maintain a reasonable diet and lifestyle without stepping outside your home.  You can ship in digital entertainment, and place orders for all your needs ranging from electronics to food to clothes to furniture to personal care.  You can call folks through the phone or websites to come home and give you a full spa treatment or just a haircut.  Heck, you can even order swatches to check out your new ‘season moodboard” if you feel like redoing your interiors.

Just 10 years ago, going to the bank was a weekly affair.  I rapidly see my visits to grocery stores headed in the same direction.  Will shops be replaced by e-commerce portals? Not immediately. And not all of them.  But many, yes.

Let’s see which are the categories most susceptible to being “e-commerced”:

1. Anything that can be delivered digitally. And watch out for the rise of digital printing as that’s going to create a whole new category of items that can be e-shipped.
2. Big ticket items – 10% off on a product valued at Rs 10,000 is worth the hassle as opposed to one valued at Rs 100
3. Personalized items.  If I can get something customized I’m quite likely to buy it online and wait for delivery. 
4. Unique products.  Capturing the long tail of customer desire – along axes as diverse as religion, region, sexual orientation, literary tastes, and fashion choices

So what this actually leaves for all those big fat malls we’re putting up is:

1. Things which have a tactile experience
2. Small value items where the cost of delivery will make it prohibitive
3. Items you need at very short notice

Most things are going to be bought online.  

The question remains as to from whom – the manufacturer, a trader, or a brand owner?

Most e-commerce aggregators today are founded on a price discount.  But generally, brands like to control their pricing strategies and dislike discounting.  Traditionally, brands have used shops as distributors and relied on the consumer’s desire to buy all their stuff in one location.  Salespeople are also an extended advisory network for the brand and could be used to educate customers on new products and appropriate usage methods.  Through a national retail network brands could ensure that their products were available whenever and wherever consumers want them.

A website with online commerce enablement and a good delivery network could take care of the whenever and wherever question. Yes, today many of these aspirants haven’t figured out fulfillment and customer experience, but that’s just a matter of time.  This is what happened in the travel world – most airlines and hotels now offer the best prices on their own sites.   Offline travel agents are struggling for survival, and the successful online travel portals are now sophisticated comparison engines and inventory managers – but there isn’t room for many of those.

With increasingly perfect product information and delivery coverage the golden age of the trader will come to an end.  

But what about the other roles played by the stores? Product discovery, education and advice? Not many brands or retailers have made a start in addressing this issue.  

Let’s take product discovery.  Sure, ads work in driving awareness.  But often when you shop in a store you pick up new products you’ve never heard of and try them out. There’s a certain amount of serendipity in finding a new author, or biscuit or cellphone.  This is why offline shopping is often therapeutic and entertaining.  A lot of people like to touch and feel stuff before they buy.  So there is an opportunity for brands and retailers to create ‘showrooming’ experience centers.  These venues can have limited stock – you pay a premium if you want it right now, or it can be delivered/collected later after an online order.  This allows retailers to turn their existing brick-and-mortar presence into an advantage for their online sites.  

Product education:

The neighbourhood shop – and in India that still outsells organized retail – has traditionally been a great source of consumer feedback.  The shopkeeper will tell you that his other customers are very happy with the product and often name your neighbour.  While shopping you might ask someone buying the product what it’s for and whether it really works.  How do we recreate this experience?  Some, like Unilever and P&G and Johnson & Johnson run excellent community advice sites.  But it isn’t as good as a person standing by your elbow as you decide to buy something.  Cracking this problem is going to be very important, particularly for new brands and products.  On the other hand, it gives an innate advantage to incumbent brands as many online buyers will take the less risky option of sticking with their current brand basket. From a retailer perspective, perhaps there is an option to charge a premium for showcasing new products in their physical locations, given that this will deliver returns through online purchasing in the future.

Many buyers will still prefer to buy all their stuff in one spot, providing an opportunity for the store platforms.  Owners of long-tail, niche products in particular will avail of these ready-to-use store platforms to retail their products directly to consumers.  This is Amazon.com’s sweet spot.  eBay.in functions much in the same way, with the added twist of the auction function.  And Flipkart.com is eyeing it too.  

Amazon.com though a late entrant in India is already proving to be a big competitor. 

But what about the others?  There is a lot of room for another strong player to emerge from the large trading houses that exist.  How about the Tatas, Reliance, Future Group? Don’t they have a few millions to invest in the future? A future with “brand experience centers’ not shops?

The internet saw the gradual demise of Encyclopaedia Britannica and even newer entrants like Microsoft’s Encarta.  They were replaced by Wikipedia.com which relies on crowd sourced information with all its potential flaws.  As delivery and payment systems get  stronger and more ubiquitous, the shops-of-everything are more likely to be run by a user community rather than a corporation.  Facebook realizes this and is busy gearing up to be the first entrant here.  Google seems to be testing a delivery network too. If you can find your stuff through a network, get advice from friends and then assure delivery and returns, sounds like a win-win. 

I’ve always advocated that firms focus first on creating mindshare, then acquiring market share, and then finally monetizing these assets to get a high profit share.  That requires a lot of staying power.  Makemytrip.com is one of the few Indian startups that followed this route, and it continues to reap the benefits of that.  But I also think that there is a window of opportunity for existing brands to make the leap into the world of online commerce and that will be the next battlefield.  Yes, it didn’t happen in US, but the structure and buying preferences of that market are different.  Moreover, India has the luxury of learning from that experience.

Now, let’s go shopping!

This article first appeared in Marketing Booster magazine

“Image courtesy of [sixninepixels] / FreeDigitalPhotos.net”.