The (Short) Long-Term Horizon. Where Does e-Commerce Go From Here?

Forrester Research is predicting a 17% growth for U.S. e-commerce in 2008, to $204 billion, despite a drastically slowing economy. What’s behind this growth? An eagerness to embrace new ideas. Always pushing the envelope. Today’s standards in e-commerce were yesterday’s revolutionary experiments.

The pace of innovation will surely continue, driven by new technologies, new approaches, and rapidly escalating consumer expectations.

It’s always risky to make predictions. But let me go out on a limb and offer some guesses about where e-commerce is headed. There are 5 trends that seem inevitable.

1. New technologies. E-commerce will continue to evolve technologically. Perhaps the hottest new technology development in recent months has been the spread of the “widget,” a small piece of code that allows an etailer to extend its reach to any other website that cares to pick it up. The result? Widely dispersed storefronts. With widgets, you can easily open a store wherever your customers congregate online, without forcing them to come to your website first.

Look at Zazzle.com, a merchant of personalized apparel and gifts that encourages its customers to drop a Zazzle widget into their own websites—at MySpace, for example—and offer a custom line of products especially selected for their friends.

2. New marketing ideas. As the Internet develops, one of its most exciting features is the insights it give us into consumer behavior. Consider this. Internet marketers are now realizing that they can learn as much from a “failed visit” as they can from customers who stop by and actually buy something. So when a visitor doesn’t click, leaves a page, or doesn’t make a purchase, don’t despair—this is information worth looking at.

Analyzing failures can lead to new ideas on how to make the site perform even better. Questions marketers are now exploring include:

  • Are we actually attracting the audience we targeted?
  • Did they find what they wanted?
  • Which pages need what kinds of changes in copy or design?
  • What shoppers fell out of the checkout process and why?

3. New services. As e-commerce grows, etailers are recognizing the renewed importance of customer service as a key competitive weapon. In a recent survey by Internet Retailer magazine, web retailers are reportedly investing in service levels like never before. For example,

  • 92% provide customers with 24-hour service availability
  • 85% pay call center personnel wages greater than $10/hour
  • 52% provide employee incentives like referral bonuses and contributions to retirement plans
  • 44.7% provide 1-2 weeks of training to new call center employees before they get on the phones

4. New content. “Content is king,” long a rallying cry online, is still the word. Shopper interest in rich product information—video, detailed copy, multiple photos—continues unabated. EBags.com, for example, now provides 4-6 photo shots of each product, especially handbags and laptop bags. The company also produces its own videos of an employee walking around fashion districts in New York and Los Angeles to showcase little-known designers. Sales at eBags are growing 104% year on year, but the investment is huge. A 40-person staff is needed to support the content on 520 brands and 36,000 SKUs..

5. More investment. The bar rises every year. These improvements cost money. No etailer can sit back and relax—it’s just too competitive.

Leading the change these days are the large retail brands, like Sears, JC Penny and Wal-Mart, who are pumping up their Internet investments even as—in Sears’s case—their offline sales decline. So, smaller etailers must follow suit, investing in new products, functionality, and design, to satisfy increasingly demanding customers.

Next up? Mobile versions of e-commerce sites to support shopping from a cell phone. The investment never ends.

OK, so that’s the good news. But there’s a dark side that haunts the future of e-commerce, as well. Some looming threats:

  • Channel integration. Consumers expect the brand experience to be seamless, irrespective of channel. So etailers must figure out the IT, organizational, policy and cultural issues that will permit customers to be served as they expect.
  • How tobvg sell big merchandise? Domestic shippers will only accept a certain amount of weight or size. So if you want to sell larger, heavier products by e-commerce, delivery becomes a constraint.
  • Converting retail buyers. There has always been a large core of U.S. consumers who are uncomfortable buying remotely. The Internet has attracted some of them to move away from the comfort of touching and feeling the merchandise. But it’s still a small fraction of the entire retail sales opportunity.

However e-commerce develops, one thing is certain: the only constant is change. After a very rapid evolution over the past 10 years, etailing will continue to grow.

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