By Pontus Kristiansson
With online sales predicted to break records this season, the ecommerce sector is set to grow ahead of earlier expectations in 2011.
So with consumers attempting to spread the cost of Christmas by shopping online, retailers are looking to the latest technologies to ward off competition and to make their ecommerce offering convenient and relevant to customers.
Even though this is probably the busiest time of the year in retail, many will already be drawing up their strategies for 2011. I’ve outlined three key areas that are likely to receive a lot of attention next year.
The smartphone has revolutionised both retailer and consumer behaviour alike.
Before 2009 it was unclear whether or not m-commerce would really take off and so many retailers let their mobile sites drift as demos. Success of the iPhone and Android family of devices changed this fundamentally, marking the start of a new smartphone era.
In 2010, retailers rebooted their mobile strategies, hurrying to launch new m-commerce apps into the market. Still, m-commerce has been treated largely as a showcase, with a heavy emphasis on technology as a marketing tool.
Next year, successful brands will move beyond standard apps and fully exploit the potential of mobile to create a much richer shopping experience. They will treat it as a retail channel in its own right and instead use technology to make mobile sites deliver significant revenue streams.
2011 will see the arrival of more tablet (iPad) apps, as these browser-friendly formats become more popular with consumers. Shopping on tablets is much like browsing a fashion catalogue. This leisurely way of browsing will allow companies to employ more emotionally engaging merchandising techniques and start to make real money from having a presence on their customers’ mobile devices.
Smartphones, however, are more about customer convenience, so buying on a mobile has to be quick and simple. With less opportunity to cross-sell here, retailers will need to be more sophisticated about the way they use behavioural data to increase relevancy for customers shopping via mobile devices and give them exactly what they want.
Several technologies are coming together to create the foundation for a wave of innovation within personalised retailing. They have been maturing over the last decade, but 2011 may mark the year they finally reach critical mass.
The accelerating adoption of behavioural merchandising technology is one part of this mega-trend. Many retailers have already invested in this area already.
However, there is still much more retailers could be doing to increase and improve their usage of it. I expect we’ll see personalised product recommendations become common in many new contexts, including advertising, emails, call centres - even direct mail and in-store.
Another interesting use of personalisation is FitsMe, which employs technology to show shoppers what an item of clothing might actually look and fit like on them as they weigh up whether to buy the garment online.
Companies such as Threadless and Garmz base their business model on ecommerce sites where customers can vote on the upcoming designs they would like to be produced. The items with the most votes then get manufactured, allowing customers to become involved in the way the company is run. A similar personalisation tactic has also been employed to great success by Nike, which lets customers design their own Nike ID trainers on the website.
From having been two largely separate markets, bricks-and-mortar retailers and e-tailers are now increasingly competing for revenues. Rather than one business model defeating the other, we will see them mix, and new combinations emerge.
We should see more online retailers opening up physical stores or pop-up shops. Apple has experienced enormous success with its flagship stores, which are used purely as marketing tools and a way of encouraging further engagement with the brand.
Popular etail sites, such as Amazon, could use physical stores to highlight different product ranges and allow customers to experience items in person, adopting the same business model as Apple to drive traffic back to the primary ecommerce site.
In a similar vein, online retailers are looking at different channels through which to reach customers and generate more web traffic, as seen with ASOS’ customer magazine.
We will see successful e-commerce concepts migrate back into the bricks-and-mortar stores. Electronic shelf labels could be used to discount items instantly to stay competitive with competitors. Digital displays could be used to make store merchandising more dynamic and personalised. Mobile apps could provide in-store search and rich product information.
Retail is becoming increasingly competitive, as the amount of options outgrow the growth in spend and distribution monopolies disintegrate. A better shopping experience that invites shoppers to spend more is one of the few differentiators that remain to retailers, if they wish to avoid a race-to-the-bottom in margins.
M-commerce, personalisation and multi-channel convergence are all pieces to this puzzle. From having been too expensive or complex, new business models are now being enabled by technology innovation. Keeping pace with these trends continues to be a necessity for retailers.
However, retail success - in 2011 or beyond - will not be defined by technology alone. The winning brands will be those that understand how, where, when and what their customers want to shop, and put all their resources – technological, organisational, and strategic - towards building a customer experience to match.
Pontus Kristiansson is CEO and co-founder of Avail Intelligence