How Do You Compete Against Amazon? Experience-driven Commerce
If You're Selling Other People's Goods, Watch Out
It's no secret that digital commerce is booming. But a rising tide doesn't lift all boats. Gone are the days when simply having one or more digital commerce channels (website, mobile, etc) was enough to generate double digit quarter-over-quarter growth. Much of today's new retail spend is going to mass market general merchandise retailers like Amazon.com, Walmart.com, Alibaba, etc or to the brands directly like Nike, Apple, Lego, etc.
In short - if you're selling other people's goods through a digital channel, you'll struggle to remain competitive in retail. Amazon.com and many of the large digital retailers have made deep investments in logistics that allow for free, timely delivery. Roughly 46% of all U.S. consumers have an Amazon Prime membership, offering free two day delivery. Many Amazon.com customers are getting free same day delivery.
If you're selling a few hundred million dollars a year, you can't match the many billions of dollars of investments that Amazon.com and the other giants have made in their supply chain. Selling other people's goods without superb fulfillment is a losing value proposition that you won't win. You'll always lose to someone else with faster fulfillment and lower cost.
Success = Adding Value to the Customer
To succeed against the mass market general merchandise retailers, you need to add value. But "value" is an elusive term. Let me try to define a few forms of value:
Appeal to Values
Non-commoditized products are rarely bought on a price/feature tradeoff. Instead, they're a reflection of the customer - the values, the socioeconomic status, their taste. Them. Products are often purchased, whether consciously or not, to show to others that people "belong" in a specific group. Yoga practitioners spend hundreds of dollars on expensive yoga pants when $10 sweat pants will perform the same function. Successful executive spends thousands of dollars to buy Rolex watches, when a $50 timex will do just fine. It's often not about the price or the function of the good.
For example, The Renewal Workshop reconditions clothes that factories made mistakes in producing. Normally these products would go to landfills but The Renewal Workshop reconditions and sells these products. Their pitch is an emotional appeal to environmentalists who care about waste.
Appealing to values requires top-quality content. You won't be able to show value in a traditional cookie cutter digital shopping experience where you list the products and a few sentences about each. Images, text, videos, etc are all required to demonstrate a product or brand's values to an end-customer.
Entertainment
Many non-commoditized products are entertaining to shop for. Buying a new handbag, pair of shoes, watch, or electronic gadget can be fun for connoisseurs of those goods. Brands, especially luxury brands, have turned to various forms of entertainment to de-commoditize their products.
For example, Selena Gomez is paid to pitch Coach products to her 113m followers on Instagram:
Many fashion retailers and brands regularly publish look books, whereby they show people entire looks that can be purchased as bundles of products.
Seeing what products a celebrity is using, or shopping for looks is a form of entertainment. With conversation rates often in the low single digits, many customers are shopping as a form of entertainment.
Pre-product Selection Information
Value also takes the form of education, by offering extended pre-product selection information. Ratings and reviews were the first and most prominent. But this material also takes the form of enhanced descriptions, images, video demos, and other features that are specific to the products being sold.
For example - Netshoes.com is the largest online seller of athletic apparel in the world. They've built an innovative shoe fit engine, where you can enter in the model/size of shoes that fit you well and you can then see how the shoes you're looking at fit in comparison to the shoes you have that you know to fit well:
This type of innovation can offer real value to customers, often in ways that you cannot get in a physical store. Nobody wants to try on 100 pairs of shoes to see which one fits best.
Again, this extra value is offered through original content and original functionality.
Post-purchase Support
Many products require post-purchase support. Electronics must be installed and configured. Garments and leather goods must be cared for. Tools must be sharpened. Value for these products is providing post-purchase support at the time of sale. For example, Nest offers numerous installation videos.
This content could take the form of videos, but also instruction manuals or even on-site support. Again - this requires the creation of original content and wrapping it with an experience.
What Do These Examples of Value Have in Common?
All of these forms of value have one thing in common: a content-driven experience. An experience with a brand is what makes people spend $500 for a handbag rather than the $20 it would cost for a perfectly functional equivalent. Content is how customers become emotionally attached to your brand, your products, and the lifestyle that it represents. Content helps to sell value through pre or post purchase support. A content-driven experience de-commoditizes your brand and your products.
How Do You Build Experiences?
Building content-driven experiences starts with the understanding that marketing should own the experience - not IT. Marketing owns the brand. Marketing owns the relationship with your customers. Marketing produces content. Marketing should own the entire digital experience.
Historically, technology has been so complicated that IT has had to own all digital commerce capabilities. Content and experience management-related technology was baked into the commerce platforms, which often resulted in IT departments making every pixel change. Very few marketing departments have the ability to change the layout of a page, upload a new image, or even change product copy without IT directly making the change themselves.
This is what you end up seeing - a marketing-driven brand experience and a totally separate commerce experience.
A Technology Revolution
Two changes have occurred in the past few years that are transformational to digital commerce.
The first change is that standalone content and experience management solutions have become matured to the point where business users can fully use them in production without IT being involved. IT doesn't have to worry about marketing breaking the UIs. Marketing can own the pane of glass, just as they should.
The second change is that there's a new category of API-based commerce platforms, as I've written about in the past. These platforms expose data (products, categories, customer profiles, orders, etc) and functionality (add to cart, log in, calculate price, etc) as discrete, individually consumable APIs. Think of them as lego blocks that can be used to build whatever you want.
Gartner’s IT Market Clock for Digital Commerce, 2016 reaffirms this trend by stating:
“Digital commerce is rapidly evolving and the future landscape will include API orientation at its core. Gartner has introduced a vision for this evolution toward commerce that “comes to you”, and commerce platforms with a full API are best placed to lead this evolution.”
With a time to next market phase of two to five years, Gartner states that “Businesses embracing this approach will be well positioned to embrace the future API economy, conversational interfaces and other new capabilities that could confer business advantage.”
With a rich content and experience management solution and an API-based commerce platform, there can be a clear separation between the two functions. Marketing owns the experience while IT owns the commerce data and functionality.
It's a clear separation of responsibilities that allows each product to do what it does best.
About commercetools
commercetools is a next generation software technology company that offers a true cloud commerce platform, providing the building blocks for the new digital commerce age. Our leading-edge API approach helps retailers create brand value by empowering commerce teams to design unique and engaging digital commerce experiences everywhere – today and in the future. Our agile, componentized architecture improves profitability by significantly reducing development time and resources required to migrate to modern commerce technology and meet new customer demands.
The innovative platform design enables commerce possibilities for the future by offering the option to either use the platform's entire set of features or deploy individual services, á la carte over time. This state-of-the-art architecture is the perfect starting point for customized microservices, enabling retailers to significantly reduce time-to-market for innovative commerce functionalities.
With offices in Germany and the United States, B2C and B2B companies from across the globe including well-known brands in fashion, E-Food, and DIY retail trust commercetools to power their digital commerce business.
Visit www.commercetools.com for more information.