The Future of eCommerce

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:

  1. Mobile - The Catalyst
  2. Frictionless payments – The Accelerator
  3.  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.

Online Retailer Roadshow

Next Monday I’ll be kicking off on a 1 week roadshow starting in Brisbane (5th March), followed by Melbourne (7th March) and Sydney (9th March).

The Online Retailer Roadshow is an extension of the Online Retailer Conference & Expo which is always a great event. I’ll be on a panel with Daniel Jarosch of BrandsExclusive, Mark Rowland of StyleTread and Lucas McEntee of OHKI and we’ll be discussing the following topic:

Raising capital and prioritising investment

As online retail in Australia becomes increasingly competitive, finding capital to stay top of the game is essential. Working up the chain one widget at a time won’t cut it when competitors are out securing significant cash injections. What are investors seeking from an online retail enterprise? Where and how do you source capital? How do you determine investment priorities? What are the top business models attracting investors’ attention? How should a board of directors look?

If you’d like to come along, you can register at the link below.

http://www.onlineretailerroadshow.com.au/registration/

Hope to see you there!

Iterate, iterate, iterate


I’ve learn’t a lot in the last few months about design. I’ve designed and built 95% of the front end of the BuyReply platform including the marketing site, mobile site and web app UI/UX. During this process the site has gone from something that a photoshop amateur might have come up with, to a design that has a strong brand identity and style guide which will be instantly recognisable as “BuyReply” once you’ve seen it a few times (FYI our style guide has changed entirely since we put the teaser site up).

Going from concept to a polished marketing site does not happen overnight. It is a highly iterative and cyclical process that involves feedback from stakeholders within the team that leads to new designs being drafted, edited, re-drafted and edited again. The more this happens, the closer you get to a highly polished result that just feels right. We’ve changed things hundreds of times and have experimented with various colour schemes, layouts, fonts, background shades and so forth.

If often think with design, “You know it when you see it” and in order to arrive at a design that feels right, you need to keep going in circles and iterating. You also need to give you mind time to rest in-between attempts so that you can approach the problem with a fresh energy the next time around. Creativity runs out after a few hours then and thats when its time to walk away and refresh.

If you are building a web product then you should be constantly iterating on your designs. Polishing them and looking for new inspiration everywhere. You’d be surprised how much better you can make your designs by iterating further. This means looking at other peoples work that “pops” off the screen and trying to reverse engineer the effects that they have used to achieve this look and feel.

A lot of the time you can jump into Google and search for terms such as “make icon shine photoshop tutorial” or “make groove lines photoshop”. These kinds of searches usually give you step by step answers and make your website look awesome.

Something else I’ve learn’t is that strong brands use very few colours. For example Facebook is mostly blue and white. Twitter is blue and white. Coca-Cola is red and white. Amazon is yellow, grey and white. Using few colours and creating a strong identity is not easy. It takes discipline and creativity to make something look good within the constraints of a brand.

Having said that, while I’ve been building the front ends the rest of my team has been working on the development of the platform. It’s easy to get caught up in making things look great however with limited resources we need to ensure time is spent where the most value is derived and at the early stages of a product it is important to ensure that there is a focus on pushing features, not pushing pixels. Design matters but getting it working is more important.

Ship then iterate, iterate, iterate.

 

Startup Sperm

Online2Offline – The Megatrend

O2O is a term that was coined last year which refers to the mega-trend of Online2Offline commerce. It refers to the fusion of using the internet to drive real world commerce activity or using the internet to facilitate transactional behaviour in the real world. Perhaps the most successful example of Online2Offline commerce is Groupon. They managed to grow revenues to $2b in less than two years. How did they do this? They facilitated experiences in the real world which were initiated online.

I see this as a massive opportunity and feel that Groupon has just touched on what might be possible if someone really solves the online2offline problem in a broader sense than just coupons.

This is the problem that our latest project, BuyReply, has set out to solve. Our mission is to bridge the online and offline divide by facilitating eCommerce and payments outside the web browser. Think of us as PayPal for the real-world.

To put things into perspective the Internet accounts for, on average, 3.4 percent of GDP across the large economies (which make up 70 percent of global GDP). That means, that on average, 96.6 percent of transactions are still taking place in the offline world. With that in mind, there are now over two billion people connected to the Internet via desktop and mobile devices, and almost $8 trillion exchanges hands each year through e-commerce. However that is only 3.4 percent of GDP!

Companies such as MiloRedlaser, Yelp are bridging the online2offline divide at various levels. Some are enabling consumers to use the internet to make purchasing decisions via mobile devices when they are in store or looking for a recommendation or review. Milo for example, has a technology that enables offline retail stores to list their products on eBay via a simple integration with Quickbooks. Others such as Redlaser allow shoppers to scan barcodes to compare prices in real-time while shopping.  Foursquare bridges the online and offline divide by offering loyalty and rewards for checkins.

However the real value is going to come from the company that solves the problem from a payments perspective. Square has come close but not close enough.

As Ron Conway explains:

“The closer a company is to the actual purchase, the bigger the opportunities. Thus, companies in the payment space have had the highest revenues, profits and valuations.” via Business Insider.

Other tech heavyweights seem to agree:

  • “It’s a $10 trillion opportunity” John Donohoe (CEO, eBay) via ZDNet
  • “It’s easy to see a world where O2O commerce dwarfs traditional (stuff in a box) e-commerce—simply because offline commerce itself dwarfs online commerce, and O2O is simply shifting the discovery and payment online.” Alex Rampell (CEO, TrialPay) via TechCrunch
  • Google’s executive chairman Eric Schmidt believes mobile payments could be a “trillion dollar” industry for advertising and retail,  via SiliconRepublic

BuyReply is a few months away from launch (we are aiming for early May) however we feel that we’ve solved the O2O problem to a large extent, and that our platform will invoke a reshaping of eCommerce at a fundamental level by enabling eCommerce outside of the browser by facilitating payments via mobile devices in manor that is smart and accessible to anyone with a connected device. Stay tuned!

Create your own luck

I am lucky to be living in Australia, however as we all know, luck eventually runs out.

Australian’s are lucky in that our country has incredibly rich reserves of natural resources.

However if the country is to remain a sustainable economic powerhouse, we must look forward into the future, 20, 30, 40 years to a point in time when these resources might lack supply due to our record high consumption rates, or a time in the future where demand from China has levelled off or declined.

We cannot rest on our laurels with an outstretched arm.

We must build, innovate and create. We must grow the knowledge economy so that we are insured against the inevitable demise of the natural resources boom which has labelled us as lucky. It is up to the people of Australia to create their own luck, not by digging rocks from under the ground but by using our minds to bring new ideas to life by being innovative and by building businesses that deliver long lasting value that can be exported and sold globally, just like our resources are.

Rocks are finite. Innovation and knowledge is not.

The Internet and mobile technology has made such innovation possible and the speed, scale and capital efficiency in which big technology ideas can gain traction is far more efficient (and environmentally friendly) than that of the mining sector. It does not matter that we are on the other side of the world. The internet makes the globe one big village. What’s more is that Australia is an amazing test market for businesses with global potential.

So get out there and create your own luck.

 

It’s in the DNA

‘Investors Fallacy’ @ Twitter

I’m not sure if Twitter is cashflow neutral or not, however I assume they are not considering their only real revenue comes from promoted tweets…

I view Twitter long term as a necessary public service of the world, not specifically as a business. In a similar way to that we need certain utilities in our lives, whether it be phones for communication, electricity, gas, garbage collection etc… They are essential elements of everyones lives.

Television got around this by governments launching state owned, opinion neutral television stations. In Australia we have ABC. I’m not sure what the equivalent is in the US.

Being state owned has its own issues but life without twitter would be worse than life with twitter for many people, and therefore it should continue to operate regardless of its financial position.

Twitter has a serious utility value at a global level as proven through the STOP SOPA effort + Arab Spring, therefore there needs to be a realistic way to sustain its existence.

The problem is that its operating costs are so high (900 people). Reddit was able to be run by Conde Nast with 1 developer. Twitter is a simple service however it now has a huge valuation and therefore investors are expecting a huge return. Had the valuation stayed low and/or realistic then they would be an excellent takeover target for a company that can do what Conde Nast did with Reddit (obviously with a lot more people).

It’s almost as if Twitter is plagued with an “investors fallacy” which has caused it to meet expectations which are just simply not possible within the contraints of its simple, yet useful offering.