So here’s an idea. Transactional-based ecommerce is dead. Well maybe not dead, but at least about to become past tense.
You know, the type of ecommerce that organisations have spent years and millions of dollars fine-tuning, where you effectively search, find and buy a product in an online store. Sure over the last few years increasingly sophisticated and personalised user experience have helped to make it easy for us as customers and have helped corporations to monetise their investment, but I believe those types of benefits will be increasingly difficult to find as a new ecommerce model becomes pervasive.
So my hypothesis is that we are at the beginning of a new ecommerce model – a model based on value, not purely on transactional efficiency. A model where solutions, services and multiple touch point across multiple platforms determines the loyalty of customers, who seek increasingly contextual information and insight. It is a world where the new currencies are time, value and information and products alone are not enough to sustain a company’s online revenues. Indeed it is a world where the term “online” looks passé as increasingly the interaction happens away from the website.
For the last 15 years as the web has grown-up, it has gone through a classic S curve adoption model. Early adoption and hype (those heady dot com bubble days), followed by a cooling off period, which itself was then replaced by a steady growth curve of adoption. And now I contend, there is a new S Curve beginning – one that most organisations are blind to, unprepared for or naively waiting to see what others do first. Which of course favours those companies with vision, innovation and flexibility as their core competencies.
In the Transactional ecommerce S curve, the web came of age. I don’t think that anyone would argue now that the web was not a viable business channel. The “ I told you so” wisdom of those traditional off-line sages who predicted the dot com bubble have been replaced by a whole new generation of analysts and evangelists.
As technology, processing power and storage became ever cheaper, and the software more sophisticated, so eCommerce became a more central channel to market that companies felt was mature enough to require significant investment, drive higher margin and expand their sales footprint, As it scaled, the costs of implementation increased, and the ROI models focused on monetising that investment. The model was traditionally a store based push model. You could buy what was available in a corporation’s online store. Slightly more sophisticated variations have ensued, but transactional ecommerce was basically characterised as a world of an online store. Hence the focus on transactions.
But now, with social media, more sophisticated software, increasing user centricity and increasing commoditization of transactional ecommerce, we are ready for a second stage of evolution. Value based ecommerce. My next post will discuss this in more details but here are the reasons why I think we are at this tipping point.
Customers now need more contextual information to make decisions. There is such a mass of data and information (increasingly exponentially with user generated content), that finding information that they believes is credible and helpful to their decision making process is becoming increasingly complex. There is a need therefore to shift how we look at information and data. In the next iteration information/insight/knowledge is the product, not the actual product itself which is almost a commodity
Consolidation within industries on standard software has already happened – even if you look at a B2B sector like electronic distribution, 12 out of the 14 top distributors all use the same search software, Endeca. This is the classic big company habit of buying the best of breed product and trying to do a best practise implementation. Of course what this does is increase standardisation – the exact opposite of what the companies buying the software are hoping to achieve through their purchase. It actually lowers competitive differentiation, and it is the customer that suffers as the online offers become less differentiated. Think back to the 1980s and the whole focus on best practise implementation of SAP or Oracle or JD Edwards. Very few companies achieved the promised best practise nirvana. Ironically competitive differentiation was caused by differing degrees of implementation failure to achieve best practise. In Transactional ecommerce most websites now deliver personalisation, merchandising, guided navigation etc. Any differentiation is being caused by those companies already on the new S curve, taking advantage of new paradigms like social content and taking the functionality beyond the browser into widgets, gadgets and apps.
The software industry itself is consolidating. Autonomy buys Interwoven, Omniture buy Mercado and in turn are bought by Adobe and there are more similar deals in the pipeline. This means that the market for those companies’ core products is finite and so these companies are increasing revenues through acquisition, not organic growth. This suggests that they too are ready to explore new areas for products and that in itself will drive different opportunities and behaviours.
The rise of social media, the establishment of new marketing models and channels (mobile, twitter, facebook etc) have a dramatic approach on how and why we engage with a company. The battle for customer loyalty and share of wallet is even more complex in this new world and this demands a fundamentally different approach from companies to meet the ever-changing customer demands and expectations.
The growth of web technologies into a web architecture and the convergence of operating systems, interfaces enabling increasingly dynamic (mash up) of functionality and data to create a new services and solutions based paradigm,
So, those companies that spot the opportunities to shift to the new S Curve are those most likely to evolve and succeed. In my next blog I’ll explore what some of the changes and challenges for those companies might be and what typically he characteristics of that new S curve will be
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