From Consumers to Collaborators: The New Pillars of Commerce

Within the dynamic landscape of modern commerce, where relentless innovation is the norm and consumer expectations are constantly evolving, it’s more important than ever for brands to anticipate and adapt to emerging trends.?

However, as brands navigate this ever-changing landscape, the breadth of strategies and technologies at their disposal can be overwhelming. The quest to remain at the forefront of innovation, while still delivering tangible ROI, requires strategic focus and decisive, and often courageous, action.?

By introducing what I believe are the new pillars of commerce, I aim to offer a guiding light for brands seeking to carve out a distinct competitive advantage in the market.

Looking Back to Move Forward

As we turn to what lies in store for 2024 and beyond, we must first acknowledge that several significant developments and challenges have reshaped the industry in recent history, setting the stage for transformative shifts in how businesses engage with consumers and drive growth:

• The End of Third-Party Cookies: The decision by Google to end support for third-party cookies by Q3 of 2024 sent shockwaves through the digital advertising industry, forcing businesses to rethink their approach to targeting and personalization.
• The Continued Rise of DTC Brands: The proliferation of DTC brands online over the past 5 years has led to over-saturation in many markets, driving up customer acquisition costs and intensifying competition for consumer attention and loyalty.
• Privacy Concerns and Regulation: Apple's introduction of iOS 17 in 2023, which removed click IDs from ad links, continues to make tracking even more difficult for marketers and retailers, providing much less visibility into the customer journey and further complicating the digital advertising landscape.
• Media Waste-Land: The concept of "media waste" – that is, the percentage of digital advertising spend lost due to poor targeting or fraudulent activity – has become a pressing concern for brands that are already desperately seeking to optimize their marketing dollars. Online, 40% of brands’ advertising budgets immediately evaporates due to media waste, a number that’s growing 22% YOY.
• Return Rates: Additionally, high retail return rates and a lack of efficient processes to manage the return supply chain continue to erode margins for retailers, highlighting the need for more sustainable approaches to customer servicing and more intelligent product information management systems (PIMs).
• Impact of the Global Pandemic: A list of challenges wouldn’t be complete without mentioning the COVID-19 pandemic, which accelerated the shift to digital channels, prompting businesses to adapt rapidly to changing consumer behaviors and preferences, particularly in the areas of e-commerce and contactless transactions. But as the pendulum swings back, we see hints of the great 2018 “IRL vs. URL” debate resurfacing yet again.

Despite these tensions, there are signs of optimism on the horizon. Recent data from the U.S. Department of Commerce indicates a promising rebound in e-commerce sales that has held steady since Q1 ‘23, signaling growth and recovery in the retail sector and with it, the promise of opportunity.

Every Brand Must Become a Hospitality Brand

The evolution of marketing strategies we’ve seen over the past two decades reflects an interplay between technological advancements, shifting consumer behaviors, and emerging market dynamics, many of which we just reviewed. As we stand on the cusp of a new era, it becomes imperative for brands to reflect on past trends of what worked, in order to chart a course for the future:

• The 2000s were driven by ad-led marketing, until acquisition costs became untenable.
• The 2010s were driven by content-led marketing, until social channels became oversaturated with influencers and DTC brands.
• Now we’re in the heart of the audience-led movement, where the audience itself has become a brand’s most valuable growth channel.?

The unprecedented explosion of social commerce in 2023 (hello, TikTok Shop) serves as a strong signal of what’s to come in the audience-led growth space, and quite frankly, we believe brands aren’t ready for what’s in store.?

During this transformative shift in power, brands must adopt a servant-leader mentality, recognizing that they must now come down from their ivory towers and not only engage with their customers like real people [clutches pearls], but serve their customers with a high-end hospitality mindset. They must anticipate their audiences’ needs and desires in a whole new way, early in the funnel and through the point of the transaction itself. This shift marks a dramatic departure from traditional top-down approaches, necessitating a fundamental reevaluation of how brands interact with their customers.

Audiences Want More?

Within this new paradigm, audience members have also changed. They are no longer passive consumers but seek to be active participants in the brand experience. They endeavor to find meaningful connections and social opportunities through the brands they love, craving authentic relationships beyond transactional exchanges.?

• They’re looking for social opportunities through the brands they love. 85% of consumers feel a deeper connection with brands that encourage and facilitate community interaction, and 78% of consumers believe that companies should focus on building relationships rather than pushing products.
• They want to have a voice in shaping the products, services, and values that brands stand behind. And empowered by technology, consumers expect brands to actually listen and act on their input, driving a shift towards more inclusive and participatory business models.
• They want to play. After everything they’ve been through in the past decade, consumers want (for the love of god) to have fun. In fact, 72% of consumers are more likely to engage with a brand if it offers interactive experiences, such as games or quizzes, and 65% of consumers say that interacting with a brand's gamified experience makes them feel more connected to the brand. And happily, brands that incorporate gamification into their marketing strategies see their average conversion rate 7X’d.

As brands navigate these complex and rapidly evolving consumer expectations, it’s clear that thriving in this new future will be dependent upon the strategic adaptation to this shift in power, and the implementation of technologies that harnesses it.

Now let's explore these three key themes — Community, Co-Creation, and Play — and offer insights into how brands can not just survive, but win, during this forthcoming age of audience sovereignty.

Community

In recent years, the concept of community has emerged as both a critical driver of success in commerce, and as an overused and often misunderstood buzzword. As traditional social hubs like the malls of the 80s now lie all but vacant, the need for public “third places” has become more pronounced. We’ve all heard the sobering statistics by now – that loneliness has reached unprecedented levels – but we haven’t quite acknowledged just how widespread the “loneliness pandemic” has become. Studies have shown that the neural pathways activated by physical pain are actually the same pathways that activate from loneliness, and social isolation can be as physically damaging as smoking 15 cigarettes a day. And of course, the pandemic has only intensified this critical need for connection.?

But while there seems to be no lack of social hubs for the affluent, as high-end options like Soho House continue to scale internationally, there are surprisingly few for the average consumer, especially those with minimal disposable income. Out of frustration and desperation, young women have resorted to posting friendship applications on Facebook in the hopes of finding a pal, and 30% of young people say they don’t know how to make new friends at all.?

Against this somber backdrop, a unique bright spot awaits for brands: The opportunity to step up and create a new kind of social spaces, both digital and physical ones, for the rest of us to truly commune in. For example, what if Gen Z’s favorite handbag brand, Coach, took on the responsibility of helping their audiences find new BFFs? Coach could lean into the demographic’s affinity for both community and for shopping secondhand by hosting a speed-dating style bag swap (BFF = Bag Friends Forever?). Coach’s customers would walk away with a new-to-them bag, a handful of new local friends who share their interests, and an affinity for Coach that traditional marketing activations just can’t buy.

Investment in community offers other valuable benefits, too, and the brands fastest to adapt to this emerging consumer demand will win big:

• Community increases traffic. Brand-hosted IRL experiences generate online and offline traffic, and we typically see a 30% lift in online traffic in the geographic region where a brand opens a new store or showroom.
• Community increases revenue. Consumers who consider themselves members of a brand’s community spend up to 40% more with the brand.
• Community increases profits. Acquisition decreases due to word of mouth. Customer LTV increases due to community devotion over time.

But where does a brand begin when stepping into this new territory? Identifying consultative partners for both the strategy and the execution is critical, as it’s imperative that brands design authentic experiences that reflect their core values – values that hopefully resonate with their target audiences deeply.?

Once core values are identified, brands can leverage their owned and earned channels to implement new tactics to drive community building. One such channel that we’ve seen serve this need exceptionally well for brands are none other than brick-and-mortar stores, and the demand for in-store experiences is only gaining momentum with consumers, too:

• 60% of consumers expect more space in stores to be devoted to experience rather than product by 2025.
• 60% of people in digital communities (like gamers in Discord groups) want more places to convene in real life. Brands that exist in these niche markets (like gaming brands) are uniquely positioned to own brick-and-mortar counterparts for the communities to convene in.
• 80% of Gez Z prefer to shop in stores vs. online. They see it as a social excursion.

The result: Today over 50% of Gen Zs are already attending brand-hosted events once a month or more. It’s not hard to see why: These events are typically free; they often hand out free swag; they provide a feeling of being an “insider” with the brand; and, of course, they’re a low-risk way to meet like-minded new friends.

Activate locally. Amplify digitally.

A brand’s work building community doesn’t stop once the last guest has departed the event or activation. It’s also critical that brands amplify the in-house content and UGC collected through its other channels to raise awareness of its efforts, create momentum for the next community initiative, and strengthen the connections made during the event itself.?

We strongly believe that in the future, IRL community will be the go-to retention strategy, and IRL spaces will be the breakout new media platform.?

In 2024 and beyond, the store is a social club.

Co-Creation

If community is a brand fostering connections among its audience members, co-creation is fostering a connection between the brand and each audience member herself. Co-creation represents a paradigm shift in how brands collect feedback from their audiences, empowering consumers to play an active role in shaping brand experiences and offerings. By soliciting input from their followers and audiences, brands can collect valuable zero-party data and foster a sense of loyalty and – sometimes literally – ownership among their customers.

Many of us have long-heard the statistics that 89% of consumers say they are loyal to brands that share their values, or that 87% of consumers are more willing to buy a product or service based on a brand's advocacy concerning a social matter, but if we look deeply we see that these statistics reveal a more human insight:

Consumers gravitate toward brands that reflect themselves. We want our favorite brands to be mirrors and megaphones for us, not the other way around.

Consumers crave authenticity, personalization, and a sense of ownership in their interactions with brands. Co-creation initiatives offer pathways to fulfill these desires by empowering customers to contribute their ideas, preferences, and feedback directly into the creative process. From asking their followers who should host their next event, to publishing a survey to determine what colorway to launch their next product in, by inviting customers to co-create brands can tap into a wealth of diverse perspectives, insights, and innovations that traditional in-house teams may overlook.

Moreover, co-creation fosters a sense of collaboration between brands and their customers. It strengthens brand loyalty, as customers feel valued and invested in the products and experiences they help to shape. This collaborative approach not only enhances the overall customer experience but also cultivates long-term relationships built on trust and transparency.

Brands can leverage a variety of technologies to facilitate co-creation and integrate it into their business models effectively. One approach is to establish online platforms, digital communities or fully owned applications where customers can actively participate in brainstorming sessions, provide feedback on prototypes, and vote on product features or designs.?

Blockchain technology also holds promise for enhancing transparency and trust in co-creation initiatives, sometimes even allowing a brands’ customers to own a stake in the brand itself. By leveraging blockchain-based platforms, brands can securely record and authenticate customer contributions, ensuring proper attribution and recognition for their creative input. Smart contracts can automate the co-creation process, facilitating fair compensation and incentives for customer collaborators based on their level of participation and contribution.?

Other emerging technologies such as AR, VR, and 3D modeling tools offer innovative ways to involve customers in product customization and design. Brands can empower their audiences to customize products in real-time, allowing them to tailor their purchases according to their unique preferences and specifications. Through immersive experiences and interactive interfaces, co-creation technologies enable customers to co-design products that resonate with their individual tastes and preferences.

Play

My last thesis area is play, and it is certainly not least when considering core emotional drivers for today’s consumer. Incorporating elements of play, and its sub-categories of gamification and surprise-and-delight, into brand touchpoints online and offline has become absolutely imperative for brands seeking to stand out in a crowded marketplace and drive consumer engagement.?

Gamification techniques offer brands a powerful tool for incentivizing desired behaviors and fostering brand loyalty. By incorporating elements such as points (or crypto coin), rewards, challenges, collectibles, and competitions into their digital platforms and physical stores, brands can create compelling incentives for consumers to interact with their products and services.?

The data doesn’t lie: Research indicates that consumers are increasingly drawn to brands that offer immersive and interactive experiences that evoke a sense of playfulness. According to a study by Accenture, 65% of consumers express a desire for more engaging shopping experiences, with 57% indicating a preference for brands that offer interactive shopping journeys.

The options for gamifying a brand’s commerce channels are seemingly endless. For instance, loyalty programs that offer tiered rewards, exclusive perks, and personalized incentives encourage repeat purchases and drive customer retention. Similarly, interactive games, quizzes and contests hosted on social media platforms or brand websites provide opportunities for consumers to engage with the brand in a lighthearted way, while also earning them rewards like VIP experiences or NFTs for their participation (or co-creation!) As the a16z investor Chris Dixon famously said:

"The next big thing will start out looking like a toy." - Chris Dixon

Brands can also leverage data analytics and AI-powered algorithms to anticipate customer preferences and proactively offer personalized recommendations or surprise gifts based on past behaviors or interactions, also tying back to the need for adopting a “hospitality” mindset. Additionally, interactive in-store experiences, such as AR-supported hunts for hidden easter eggs or immersive pop-up installations, can captivate shoppers' attention and create buzz, driving foot traffic and generating social media engagement.?

Surprises Should Feel Serendipitous

Surprise-and-delight initiatives also play a crucial role in enhancing the retail experience and fostering positive brand associations. By delighting customers with unexpected rewards, personalized offers, or memorable experiences, brands can create moments of joy and excitement that leave a lasting impression on consumers and differentiate themselves from competitors. In fact, studies show that surprise can intensify emotions by up to 400%, highlighting the potential for surprise-and-delight strategies to foster brand affinity and recall. The emergence of new initiatives like Digital Product Passports (DPPs) presents exciting opportunities for brands to gamify their offerings and engage with their audiences in innovative ways. The practical uses of DPPs are at least two-fold: To provide a source of truth about a product, its geographical history and its materials, but also to provide brands with massive opportunities to connect with their audiences in fun new ways.?

For example, a brand can implement a DPP into a winter jacket through an embedded NFC, which allows their audiences to collect points every time they walk into that brand’s store. By incorporating DPPs into their products, brands can provide consumers with interactive experiences while also collecting valuable data on these product interactions, plus gain more accurate visibility into their supply chain. It’s truly exciting to think of what even the leaderboard of the future might look like for brands with tools like this at their disposal.

By infusing elements of play into the commerce landscape in these ways, brands can create memorable and enjoyable experiences that capture consumer attention, foster emotional connections, and enable consumers to engage with products in fun and innovative ways, driving curiosity, exploration, and ultimately, purchase intent.

A Closing Note: Loyalty

In today's digital landscape, many brands view loyalty as a checkbox item, launching standalone, cookie-cutter programs in the hopes of securing customer allegiance. However, true loyalty is not merely a program but a sentiment cultivated through meaningful interactions and experiences. It is the culmination of a brand's efforts in fostering community, encouraging co-creation, and infusing elements of play into its offerings.?

Loyalty, therefore, cannot exist in isolation; it must be intrinsically linked to a brand's broader commerce strategy. While loyalty programs provide a mechanism for tracking and incentivizing customer behavior, they are but one component of a larger ecosystem of engagement.

In the future of commerce, brands must recognize that loyalty is not a destination but a journey — one shaped by the intentional, ongoing cultivation of authentic community; the vulnerability to invite their audiences behind the curtain for co-creation; and the integration of playful elements into the brand experience, both online and offline. (Things get even more interesting when you view loyalty through the lens of the younger consumer – more on that over here.)

By prioritizing these new pillars of commerce and fostering authentic connections with their audiences, brands can cultivate lasting loyalty that transcends transactional relationships, fosters genuine affinity, and drives unprecedented growth in their businesses.?