I was in the U.S. for the Black Friday sales, a traditional day of discounted sales and shopping frenzy in the American Thanskgiving holiday period. We bought some real bargains over the weekend and hit the restaurants to celebrate with a lavish meal on Monday. Walking into a swish eatery to find it deserted I was informed in hushed tones… “it’s Cyber Monday. Everyone’s at home looking for bargains on the internet”.
Cyber Monday this year broke all records. American shoppers have been conditioned to expect deep discounting online on the Monday after Black Friday and in a virtuous circle retailers have learned that if they provide discounts on the day they can expect large volumes of online purchases. But beyond all that, it has created an engine that is rapidly teaching consumers that shopping online is good… after the frenzy has died down we’re left with the base figures: according to comScore a 26% year-on-year increase in online sales revenue for the weekend (effortlessly breaking the $1 billion mark), and over 50 million Americans shopping online (up 35% on the previous year). There is no reason to expect that this is anything other than a fundamental and irreversible change in customer behaviour.
Three players in particular stand to make the most of this new world and are busy laying out their strategy in something akin to the heady days of the first internet boom. Each is a seasoned survivor of those early days and each is coming at the ecommerce marketplace from different angles.
Firstly, there’s Google. They understand the power of search and have built a business on the back of monetising eyeballs through their ad service. They need to be at the start of every purchasing path to ensure those eyeballs don’t end up somewhere else. Google Shopping is their key play here; its main aim is to acquire and aggregate rich product data from as many stores as possible to facilitate the widest search. It’s interesting that they have also just announced that they will be releasing a next-day delivery service for retailers to tap into, leveraging their relationships with courier and express shipping companies. A third plank is Google Wallet which, integrated with the Android mobile platform, has the potential to turn every mobile into both a shopping device and a wallet. However, it’s difficult to see quite how these threads weave together for retailers and shoppers, even leaving aside the question of which elements are U.S.-centric. The killer app here will be whether Google succeeds in getting a rich product feed with inventory accurate to store level across a wide enough range of retailers. Turning up in store with a Google Checkout coupon on your mobile phone to take home there and then the product you already pre-purchased would be compelling, certainly.
The next player is Amazon, who have signalled intentions to encroach ever further into the traditional realm of bricks and mortar retailing. The purchase of Zappos demonstrates a clear direction towards moving more of the high street spending online; their feed integration infrastructure and APIs are also heavily geared towards letting retailers come onboard the Amazon platform as fulfilment partners, integrated through the Amazon checkout process (this is also the model that Westfield, broadly speaking, employs). This model lives or dies on the quality of its retailer interfaces since there is a heavy reliance on getting good product feeds, accurate inventory and timely fulfilment. This can be a hard nut to crack.
Then there is EBay. In retrospect, it looks like they have been heading steadily in one direction for quite some time but it was only with the recent XCommerce launch that their pitch for the future face of ecommerce became readily apparent. They have an urgent need to be known as more than just an auction house for garage sale items, an image that will be holding many retailers (for whom brand positioning is their prime asset) back from integrating with EBay; without a feed of quality, new items from respected brands EBay will have a hard time shaking their current image and grabbing a share of the e-tailing pie.
But let’s look at what they now have under their roof. Firstly, Red Laser to scan barcodes and launch a product page on the shopper’s mobile phone right there in the store. Then there’s PayPal (and its mobile-optimised express checkout) to collect the money. But that’s not really enough… they have brought Magento (an open source ecommerce site engine, poised to do for shopping websites what MySQL did for databases a decade previously) and GSI into the fold. This offers the retailers the prospect of transferring onto ecommerce platforms that run shopping sites, support checkout including PayPal, handle inventory management and other back-of-house functions with a small cost footprint. This provides the kind of cradle to grave shopping path that has Google worried, but their approach goes further with the introduction of the Fabric, an internet-scale service bus that allows all the potential players in ecommerce to tie together to provide pluggable services to retailers such as fraud management modules, warehouse management systems, payment gateways, etc. It goes without saying that PayPal, Magento, etc. are part of the fabric from day one and thus already providing sufficient Lego blocks to build a viable ecommerce business upon. If they succeed in building up an interoperating ecosystem of ecommerce modules, EBay could quite possibly become to online shopping what Facebook’s app universe did for social networking.
So, we have the underlying barrier to be overcome: all the product feeds, smart searches, payment systems, slick checkouts and value added services in the world are useless without the retailers’ ability and willingness to fulfil. Amazon has the edge here, being an integrated retailer already with deep experience across the entire supply chain. But the model can only scale so far before it meets the likes of Walmart and Tesco coming the other way with their deep, world-scale logistics experience, all battling for top spot in global consumer sales.
The bigger (but tougher) pie is all about clipping the ticket on purchases made with other retailers rather than seeking to act as the retailer directly. Google has many of the required elements and a track record of bucking conventional wisdom to achieve the apparently impossible, but creating an integrated supply-chain-as-a-service could be a stretch even for them.
This leaves EBay. Their apparent strategy of supporting systems and integration points to help the various players in the ecommerce space come together to service the customer means less revenue for them per sale. It has potential to be a lot more sales though. Out of the three, they may be just nibbling around the edges of the pie.
But that particular pie is vast.
No comments yet
Comments feed for this article