I have a clear vision of how I see eCommerce playing out over the next 5 to 10 years. The last decade has been an incredible time in eCommerce however it has been centered around online commerce with transactions taking place via the web browser however I firmly belive that the next wave of growth in eCommerce will come from offline commerce, facilitated by frictionless electronic payments in the real-world.
We’ve seen a fundamental and structural change in the retail landscape globally and bricks and mortar establishments have suffered as the internet has fragmented their businesses and shrunk the globe into small retail village. We can compare prices from our desks or phones and find the cheapest price from any vendor, anywhere on the planet within seconds. We can order anything from any corner of the earth for delivery to our doorstep within a few days. Ecommerce sales have risen from $42bn in 2002 to $197bn in 2011.
However while this number might seem large, it is in fact a pitance when put into perspective. Apples 12 month revenue run rate based on last quarters sales is $184bn. Thats right – if they keep it up, this single company will generate the same amount of revenue as all US eCommerce sales combined, including Amazon. Total US retail sales (excluding food and motor vehicles) in 2009 amounted to $3.6 trillion.
This puts things into perspective and shows that $197bn is peanuts compared to the 3.6 trillion dollars of US retail revenue generated offline in 2009.
The future of eCommerce is not going to occur in the web browser. It is going to occur outside of the web browser and the boundaries between online and offline are going to become unrecognisably blurred. Successful eCommerce companies of tomorrow will unlock value from the $3.6 trillion dollar market ($10 trillion+ globally), not the $197bn market. Offline commerce will force us to rethink the paradigm of eCommerce. The term eCommerce and commerce will be used interchangeably because we’ll be intiating transactions in the offline world via devices that are processing payments electronically. This will happen via technologies such as NFC and virtual wallets. A good example of a company that has achieved success in this space is Square. They are tapping a large, but low volume market – but they are the tip of the iceberg. Other technologies and business methods will arise shortly which will further bridge the online and offline divide, and you’ll be amazed by the simplicity and accessibility of such solutions.
This shift is a huge opportunity. Value will be unlocked from mediums that could previously not be monetized and consumers will be empowered to transact with zero friction.
A combination of three forces will enable this change:
- Mobile - The Catalyst
- Frictionless payments – The Accelerator
- Social Platforms - The Facilitator
Mobile
The catalyst of this movement is Mobile. Over 2 billion consumers now have connected smart phone devices within arms reach 24/7. These devices are capable of facilitating transactions in the real-world quickly and easily. Furthermore consumer behaviour has already adapted. We all know how to text, email, download apps and use these devices.
Frictionless Payments
The accelerator of offline payment will be fast and frictionless payments. Platforms will turn shoppers into impulse buyers by enabling the to transact in seconds. They will put consumers within one click from a completed transaction wherever they are – in the real world. Shoppers will transact more frequently simply because it will be easy to do so. This might occur at arms length via NFC, with swipe via Square, or via a greater than arms length purchase using new technologies. Buying in the real world will be as frictionless as buying from the Apple App store, regardless of your physical location or proximity to a payment terminal. Your phone will be the payment terminal.
Social Platforms
There are over 1 billion people connected to social platforms. Social platforms will facilitate transaction flow and transaction initiation. Purchase intent will still be captured by the search engine, however after an influencer makes a purchase, followers will buy as well – and these sales will come from the social graph. Over time the viral nature of the social graoh will apply to transactional purchases. Mobile + frictionless payments will make it easy to buy the same stuff as the social influencers that you follow will buy. Brands will pay hundreds of thousands of dollars to celebrities to promote new products via social networks. There will be no better way to spread the word of a new product release. And the word will spread like wildfire. Transactions will occur in real-time.
Virtual Shop Fronts
Another trend that we will see over the next 10 years is the convergence of brands, currencies and companies selling via virtual stores within physical proximity of their local counterparts. What I mean by this, is that Amazon.com will have a virtual store (powered by QR codes or similar) next door to a book store that has real inventory and high rental costs. The Amazon store might be in a retail strip in Sydney Australia, but the prices will be in US dollars. They might display their top 20 books however the books will ship from a different continent and arrive 3 or 4 days later. Shoppers will compare virtual store prices to physical store prices and decide they are happy to wait a few days to save some money. If the purchase is urgent then the physical store will get the sale. Physical stores will exist for the purpose of offering convenience to shoppers who need something at that exact moment and cannot wait for delivery.
This is the kind of retail change that is on the horizon. The dynamics of retail shopping via the internet has occurred inside the web browser for the past decade, at our desks at work and home, however this behaviour will extended into the real world in ways you never thought possible.
This is the future of eCommerce as I see it. I’d love to hear your thoughts.