Despite the cascade of store closings, liquidations and bankruptcies, there are strong indications that pure-ecommerce, not stores, may be the endangered model. 13D Research This was an article I highlighted in my weekly ecommerce newsletter and this quote from 13D Research has been sticking in my mind. We are in a new phase of commerce in which a combined online and offline strategy will determine who are market leaders. I don’t believe this as being the moment for omnichannel (I despise the word as it is a buzzy concept that could mean a thousand things) but rather the first time in history that commerce is an experience on and offline.
The dot.com thinking
Retail has been dead since 1999 according to startup founders and ecommerce investors. Every purchase should have gone through ecommerce and physical retail should have not existed according to these subjective individuals. The simple truth for me is that we are beginning to see the creation of integrated commerce. Amazon, Walmart, Alibaba and JD.com are investing in retail locations as well as their online efforts to grow market share and leave their competitors extended financially and at their mercy.
Retail is ultimately at a tipping point and their is no turning back. If you are a pure play ecommerce business your customers are going to walk into physical locations of your online competitors. The real story is that we have 4 horseman in 2 large geographies that have large balance sheets we are a point of innovation and change.
The final indicator of this change was Amazon acquiring Whole Foods Market out right and making it a subsidiary. Jeff Bezos always said that Amazon would open stores when it made sense.
The simple truth is that we are beginning to see the creation of integrated commerce. Amazon, Walmart, Alibaba and JD.com are investing in retail locations as well as their online efforts to grow market share and leave their competitors extended financially and at their mercy.
— Forerunner Ventures (@ForerunnerVC) August 28, 2017
By merging offline and online together. ecommerce businesses are able to spend less on digital advertising and thus become less dependent on Google for the future. The emergence of commerce in my mind is also about the power of good customer service and creating an experience that leads to the customer returning organically without the need for advertisement. Being able to organically collect email addresses from customers on them entering a store leads to less investment into building a base of customers who are interested in purchasing product.
By having a consolidated experience commerce businesses are able to recreate discovery for customers inside their stores. Lets be honest, ecommerce in its current form has almost killed discovery and impulse buys due to the influence of Amazon’s personalization on the entire ecommerce industry. Walking into a physical store provides the customer with the ability to see and touch products which are important in categories in which there are still growth opportunities (Fashion and Furniture).
The consolidated commerce experience provides an opportunity to generate revenue on assets that have already been invested in. A popup shop provides a one time investment into the location that can be used to generate multiple sales from one customer. When I was in the US in October 2016, walking into a M.Gemi, Everlane and a Birchbox popup lead to an ability to purchase products that have already been created but are only available via a delivery. The lack of sales pushing made me able to enjoy the experience and I have continued following these brands and their progress even though the interaction was months ago.
We are seeing different interpretations on when the customer receives their purchase – be it at home or being asked to collect their product in store. Generating this interaction is yet another way for brands to stay top of mind for customers without the use of online advertising. This also creates less focus on last mile logistics which has not been solved by anyone bar Amazon. Being able to walk into a retail location and experience a store and its staff provides a personal touch which has always been a part of retail but has become less of a factor due to ecommerce.
Consolidated commerce provides businesses with more negotiating power when dealing with multiple brands when the business is a multi-brand seller like JD.com, Alibaba or Walmart. Being able to package online advertising as part of the advertising offering for potential partners is going to become a factor that will determine commerce survivors.
Commerce is evolving
The most interesting thing for me to note in the death of pureplay ecommerce is that new business models are able to be formed which businesses can use to generate revenue. eCommerce businesses who have added physical locations to their business have required additional capital but I believe that in the long term it leads to lower customer acquisition costs (CAC) and higher Lifetime value (LTV) for these businesses. I suspect that this post will become something I update as new concepts are created.