June 4, 2020
Warehouse robotics, social commerce and flexible purchasing models are driving transformational change, according to members of Protocol's Braintrust.
Managing Partner at Revolution Ventures
The tectonic forces of technological innovation and shifting consumer expectations started transforming commerce long before coronavirus.
Already consumers have been "Amazon primed," and are now accustomed to ordering via mobile and receiving goods within a short shipping window. In a busy world, consumers increasingly value their time. They don't want shopping for necessities, or even luxuries, to come at the expense of time they could be spending working, traveling or being with family and friends.
And it largely doesn't have to. Advances in AI and warehouse robotics are allowing for more precise product selection and faster fulfillment and shipping. While fast shipping was once the domain of Amazon, today it is table stakes for all online retailers. The best retailers will use technology to innovate at Moore's Law rates as consumer expectations evolve just as rapidly.
But as online shopping grows, a few areas of traditional offline retail have remained strong, particularly where proximity is an advantage (offline is faster than online), where supply chains are not well-matched to online shopping (perishable, bulky or living things), or where experience outweighs efficiency (the recreation of shopping outweighs the utility of purchasing). Yet, even these areas of offline advantage will generally succumb to online pressure as technology overcomes such limitations (delivery networks get faster, AI and logistics improvements enhance supply chains, and augmented reality and online social replace physical experience with virtual community).
CTO and Co-Founder at Riskified
The fuel driving innovation in ecommerce is access. Access to new markets, new customers, new ways of fulfillment and new ways to shop. It's easy to forget, but ecommerce is still young, and merchants and customers are still figuring out what it can do. That's where the innovation is happening: mobile apps, delivery to lockers, curbside pickup and more.
That growth creates expectations that lead to more growth. It wasn't long ago that consumers paid for shipping and often selected a cheap, slow option. That certainly still happens, but many consumers now view two-day shipping as the norm, and merchants continue to innovate new ways to get goods to people even more quickly. Fulfillment is one example, but improved rewards programs, return policies and mobile apps are all ways that merchants are working to better serve their customers.
It's great news for consumers, but it's a challenge for merchants. These innovations create new avenues for fraudsters, who quickly attack and take advantage of merchant inexperience. Merchants often respond by increasing security, adding friction to an experience that's designed to improve shopping.
Artificial intelligence helps solve this dilemma. Machine-learning models can look at millions of data points and make a decision about the legitimacy of an order instantly, without causing delays or wrongly declining the customer. Solutions such as Riskifed can link orders across merchants and recognize the work of bad actors.
With this approach, risk-management systems can be turned into growth engines, approving more legitimate customers and improving the shopping experience. Ultimately, this type of tech will allow more people access to ecommerce and help merchants safely grow their businesses.
CEO and Co-Founder at Chicory
Ecommerce innovation in the grocery space is being fueled by more shoppers moving online. Now that online grocery adoption has skyrocketed, retailers and CPG brands need to replicate online the multibillion-dollar industry that is in-store grocery marketing. With such small margins on grocery sales themselves, so much of the growth for grocery retailers comes from marketing spend from these CPG brands. Since this is where the money comes from, we're seeing tremendous innovation in this area.
In order to replicate in-store grocery marketing online, retailers and CPG brands are turning to shopability. Pinterest, Instagram and, most recently, Facebook have all experimented with social commerce, or making social posts shoppable, which has become a major trend, with promising results. Shopability also allows brands to market their products to shoppers in alignment with a specific retailer, something that traditionally was done in-store with things like coupons or end cap displays.
While shopability is a direct method of reaching consumers, it's a tricky play for grocery and CPG. While consumers move online for most of their shopping, most still buy groceries in brick and mortar and prefer to pick out their own chicken and avocados. So, commerce-enabling content for food and grocery brands must contextualize the purchase to take consumers from inspiration to checkout. Offering shoppable recipes or one-click product bundles (like marshmallows, chocolate and graham crackers for s'mores) means that retailers can charge brands for various sponsorships, which promise to influence shoppers closer to the point of sale online. We're seeing a ton of innovation in this space, with retailers exploring various ways to market to consumers and then sell that to brands for a hefty price tag.
CEO at Olivela
The pandemic has undoubtedly instituted change and spearheaded much-needed innovation that would normally take years. However, traditional consumerism changed long before the pandemic, and the retail industry has been playing catch-up in order to digitize themselves and capture consumers in a meaningful, authentic way — while keeping pace with the rise in ecommerce companies. No different than an in-store experience, customers expect the virtual online experience to mimic that of in-store.
Customers want to feel engaged and that each virtual experience is curated for them. More importantly, customers are more informed than ever, and they deeply care about causes and reflect their passions in their purchasing decisions, which is the very premise Olivela was founded on. Customers hold brands to a higher standard, and ecommerce companies that know how to integrate social good into their ethos, while weaving it into the virtual experience, will prevail in today's competitive landscape.
CEO at Ecwid
Over the past decade, Ecwid has developed technologies to produce a seamless ecommerce experience for SMBs. In the midst of the global COVID-19 pandemic, we've witnessed how vulnerable businesses are without a sophisticated online presence. As retailers begin to reopen stores, ecommerce providers are looking to meet two crucial needs: offering both a convenient and interactive shopping experience.
Demand for grocery and food delivery services has not decreased as stores reopen. Why? Consumers have grown accustomed to convenience. The pandemic challenged long-established consumer behavior, and it will have a lasting impact on how we shop.
Chatbots and social media platforms have emerged as key ecommerce sales channels. The recent launch of Facebook Shops is just one validation of this trend that allows SMBs to consistently engage their networks in a unified approach to omnichannel commerce.
Advances in computing power with IoT data will make neural networks more effective, and will certainly remove the mundanity of everyday shopping. Imagine how artificial intelligence will automate routine purchases in your life's periphery— so you can stop keeping tabs on your trash bag supply.
VR and AR will soon allow businesses to provide experiences that are currently reserved for the showroom. Breaking this barrier will signal another nail in the coffin for retail real estate. For thousands of years, much of trade and commerce has remained unchanged.
People still love quality products at fair prices. What is changing is where and how merchants engage with shoppers.
CEO & Founder at Zuora
The best retailers understand that the long-term game isn't about ecommerce versus brick and mortar. It's about those who build and maintain meaningful relationships versus those who don't.
While COVID-19 has accelerated the need for retailers to evolve beyond an in-store purchase, the old model of retail was on a rapid decline for years. 2019 was the peak of an imminent downfall as more than 9,300 stores were closed.
We're witnessing "the end of ownership." Customers expect flexibility, convenience and consistent value out of their purchases, and crave the ability to consume whenever and wherever they want. This is driving incredible innovation across the industry, prompting retailers to flip the script on traditional business models, meeting consumers where they are.
Take Patagonia. They were one of the first retailers to close amid COVID and could be the last to reopen. Why? Because they can afford to be cautious. They've been focused on building lasting relationships with customers for years, and are continuing to do so today.
With that said, the most innovative retailers are focusing on their customers by:
- Building the right membership models that don't rely on flashy rewards, but on delivering ongoing value via recurring services (Costco, Amazon Prime).
- Creating a digital ID — something Starbucks has mastered as over two-thirds of customers use its app (roughly 17% of its orders!).
- Leveraging physical stores as showrooms, distribution centers and drop-off locations. Think Target, which turned 1,900 stores into fulfillment centers (fulfilling nearly 80% of digital sales in physical locations).
See who's who in Protocol's Braintrust.
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Kevin McAllister ( @k__mcallister) is a Research Editor at Protocol, leading the development of Braintrust. Prior to joining the team, he was a rankings data reporter at The Wall Street Journal, where he oversaw structured data projects for the Journal's strategy team.
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