The promising future of e-commerce

By Walid Al Saqqaf on May 25th, 2012

The difference between high-street retail and e-commerce couldn’t be starker than during this recession. On the one hand, it seems that, every day, we hear of new retailers calling in the administrators, while on the other, e-commerce continues to grow. The e-commerce market grew by 16 per cent last year and hit a new sales record high of £68.2 billion. This shouldn’t come as a surprise when considering the convenience and lower prices that provided through e-commerce.

Yet, in spite of this strong growth in challenging economic conditions, e-commerce still only accounts for 17 per cent of total UK retail sales. There are numerous reasons.

The main issue to consider is that despite all the bells and whistles of e-commerce sites, most of them are still essentially just glorified electronic catalogs of products. Customers still have to do most of the legwork in order to find the right product to meet their need – products that are personalised to them.

Ten years ago, Amazon was one of the first e-commerce players to try and fix this by offering recommendations to similar items you have purchased and suggestions on what other shoppers who bought certain items had also purchased.

Amazon remains a pioneer. Its integration with Facebook is a good example of why: it enables the company to further enhance its recommendations engine and, as a result, to increase sales. Customers can link their Facebook profile to their Amazon account directly, allowing Amazon to provide recommendations based on their Facebook activity and interests. This integration also gives its customers the chance to pull in their Facebook friends onto Amazon. In turn, they can then shop for whatever kind of gifts their friends might like, by browsing their Amazon wish lists and pulling in information from their Facebook profiles.

Other sites have taken a different approach. Some have launched stores on Facebook, also known as Facebook Commerce, to reach out to the millions of potential customers. However, to date, the results of such an approach are inconclusive.

While personalization is key to providing a good user experience, it isn’t worth much if customers can’t discover your site on Google to begin with.

This is the year that Google unleashed its Panda and Penguin updates, bringing many e-commerce sites to their knees. In Google’s eyes, this is owing to their lack of a compelling user experience, which is underpinned by an absence of unique quality content. All those sites whose products carried only manufacturers’ descriptions were slapped with duplicate content labels and their rankings crashed. Even those that carried some user-generated content were hit if the content was only of a few lines and judged to be of poor quality (think mass produced content outsourced to third parties like Mechanical Turk).

What we’re seeing evolving is an e-commerce world where sites not only have to provide a personalised experience but also quality, unique and better curated content. Sites like Pinterest, Wanelo and Svpply use their customers for social curation of their content, while others, such as Etsy, have created a platform where individual merchants curate their products for a specific customer segment.

This form of professional and social curation ensures that customers can cut through the noise of product search and poor quality content. They offer a different experience for customers to connect with products, where the emphasis is on the journey of discovery instead of one involving endless searches.

Recently, e-commerce companies have adopted gamification as a new additional tool. Historically used by Foursquare, Zynga and many other online games, gamification provides e-commerce sites with the opportunity to increase engagement and loyalty.

By offering their customers a system of rewards (eg free products, discounts, and badges) they are effectively transforming them into repeat customers, marketing channels and content creators. Furthermore, smart e-commerce sites can design their gamification platform to learn more about their customers and, in turn, encourage them to create quality content and social curation. In this scenario, gamification closes the loop by helping e-commerce sites reach their personalization and quality content objectives.

According to the Office for the National Statistics, 45 per cent of internet users used a mobile phone to connect to the internet in 2011. This is expected to increase and even ultimately surpass the number of internet users connecting through a PC by 2015.

To stay connected to their customers, e-commerce sites have had to extend their offerings to mobile devices, to capitalize on this growth in what is ultimately known as mobile commerce. Mobiles enable e-commerce sites to bridge the online to the offline world and bring the dimension of location to their offering.

Imagine a scenario where a customer in a retail outlet is testing out a product and is almost ready to buy it. First, however, the customer scans the bar code with their mobile device for a price comparison to online shops. Meanwhile, e-commerce sites can tap into the GPS module of the device to find the customer’s location and deliver them an offer that is more competitive than the one in the shop. This gives e-commerce sites a competitive advantage over retail shops by dynamically adjusting its prices based on location.

This kind of future will accelerate the growth in e-commerce over brick-and-mortar retailers, as the mobile device gives them a presence right in the heart of those retailers. In turn, brick-and-mortar retailers will have to rethink how they can re-invent the shopping experience they offer customers, perhaps by using an online doppelganger of themselves.

The next few years are going to be a very exciting time for e-commerce companies. The challenge that the Google Panda and Penguin updates have created has given sites the opportunity to re-think their content strategy and customer value proposition by offering something that is truly unique and valuable to customers.

Additionally, social media sites are offering them an unprecedented insight into their customers’ tastes and preferences. This allows them to offer truly personalised experiences and extend their reach into customer social relationships. By seizing the opportunity to integrate gamification into company DNA, e-commerce sites can not only increase sales, customer engagement and loyalty but also ultimately ensure that they produce quality content and a further personalised user experience.

Finally, the rise of the use of mobile devices will ensure that e-commerce sites are omnipresent whether it is in the comfort of their customers’ own homes or right into the heart of high street shop floors. It’s truly as exciting a time to be in e-commerce as it is to be a customer.