Triumph of the marketplace

Retail after the website

The top five most visited retail websites in the world as are Amazon, Aliexpress, eBay, Temu, and Walmart. They are all marketplaces. Regardless of retailers having to pay for the ever-increasing traffic acquisition costs, Gen Z's shopping habits, and the cautionary tale of Nike's DTC-first strategy, most retailers are still spend significant money, time, and effort on optimizing their websites. Websites are regularly political battlefields for corporate lieutenants, settings of misplaced strategic priorities, reflections of organizational power struggles, and confused expectations.

The promise of easy DTC margins is as attractive as it is false. In China, the world’s largest e-commerce market, brand websites are not where consumers shop. Chinese virtual malls, like Alibaba marketplaces (Tmall, TaoBao and Alibaba), JD.com, and Pinduoduo make up 83.6% of the retail e-commerce market, according to research firm eMarketer. The two key drivers of online sales are live-streaming (with 20% of shoppers buying directly from live videos) and instant messaging feeds like WeChat, with embedded mobile payment systems, which are used by 90% of Chinese shoppers.?

In the West, mobile app users spend an average of 20 minutes per session shopping on their apps, compared to 10 minutes spent on mobile websites. Mobile commerce comprised 72.9% of total e-commerce sales. Compared to mobile sites, consumers view 4.2 times more products per session in-apps, and they are also guided further down the purchase funnel, with higher sales conversion rate compared to mobile sites, at 3.5% compared to 2%. In-app shopping is especially prevalent among Millennials, with 58 percent mentioning it as their preferred mode of purchase.?

For Gen Z, with 98% of smartphone penetration, social media apps are the main source of product searches, brand engagement, product information, and purchase influence. Sixty percent of TikTok’s user base is Gen Z, and it is this generation’s preferred search engine, source of reviews, and discovery of new products to buy and places to go to. Gen Z is keen to visit a store based on a retailer’s social media posts; most of this generation visits a retailer they have never been to because of social media, according to Marketing Charts.

Nearly two thirds of Gen Z shops mostly in physical stores, according to Retail Touch Points, an online publishing network. Younger consumers perceive shopping as a social activity, entertainment, fun, and a pastime that - through selfies, photos, polls and product reviews - bridges digital and physical worlds. Shopping gives them the opportunity to showcase their taste, create social capital, and influence others.?

Entertainment, community and curation - not heavily branded experiences or long checkout paths - are the blueprint of modern commerce. Modern commerce is more like the digital version of going to a mall than scrolling through products on an e-commerce site. Modern commerce is rich in serendipity, product discovery, socializing, and entertainment. It looks more like a leisure activity than a transactional exchange that’s been over-optimized.

For this to happen, retailers need to stop treating their websites as hubs of their customer experience journey and as centerpieces of their sales efforts. It is strategically hard to justify taking customers from wherever they are to somewhere else in order to sell to them. Instead, sales need to happen where customers are. Just like TikTok and Instagram integrated e-commerce features to drive monetization, retailers need to integrate community and entertainment features to enhance customer acquisition, activation, and retention.

The idea of having one central destination that speaks to a mass audience is at odds with the consumer market as a collection of niches and taste clusters, aggregated around micro-influencers and TikTok algorithms. If a brand isn’t part of a customer niche, it doesn’t exist for them. To reach all of their customers, retailers need to invest in a decentralized network of POS (points of sale) that are wherever their customer communities are. Instead of having an overall annual marketing plan with seasonal campaigns that are released across multiple media and retail channels, there should be a bottom-up, always-on community dialogue. Instead of dragging customers through ever more elaborate funnels, retailers need to create short, mini funnels across their entire decentralized retail network.

As brand storytelling, selling, and service decentralizes, there are five strategic options for retailers to capture the future of commerce:

1. Collapse your homepage, category page, and PDP into one scrollable feed.?

Website design must mimic retail-app design, with a focus on the most popular items that attract a bigger audience, rather than every item in a retailer’s inventory. Traditional retailers mistakenly use search-based interfaces focused on multiple product displays. Feed-based retailers have scrollable “news feeds” that give exposure to a single product, making it easy for items to go viral. Zara, Apple, and Anine Bing have home pages that are simple, have a clear call to action, and prominently feature only a couple of hero products.?

Retailers should not be compelled to recreate the strong visual elements of Instagram and TikTok by suffocating their websites with imagery and videos. There is such a thing as over-branding, especially for brands that already have wide awareness.?

Instead, the goal should be a personalized, social, curated image feed that is serendipitous enough to be fun and entertaining enough to want to continue to scroll through. Instead of a massive menu of products, which puts the burden of search on the customer, retailers need a conveyor belt-like experience, with scroll options that are designed around anticipation, surprise, fun and impulse buys.?

2. Treat every page as a landing page.

A homepage designed for everybody converts nobody. In contrast, a purpose-built landing page is a destination that is designed, tested, and optimized for conversion, with a clear call to action and focused on sales, sign-ups, and opt-ins. For example, Spotify’s landing page for prospects that are brand-aware focuses on a free trial offer. For retailers, the most important landing pages are designed to receive traffic from social apps and email, and should be personalized for these referring channels.

3. Socialize and entertain.?

Community and entertainment boost retention, lower the cost of acquisition, increase monetization, and generate user segmentation. Benefits of integration of social components into the traditional online shopping process are twofold: social features optimize the feed based on consumers’ preferences, and they create opportunities for random purchases.?

In contrast to the traditional customer journey, community-driven customer journeys are short. The core assumption of the community-driven journey is not the progressive reduction of options, as is in the traditional e-commerce journey, but access to highly targeted and personally relevant options from the get-go. A shopping feed is overlaid with social information: it contains tags of things that one’s friends and influencers bought or liked or thought may interest the buyer (e.g. TikTok’s “gift this video” feature, which ). Consumers implicitly trust these recommendations because they come from their social graph, which helps to shorten the decision-making journey.?

To entertain your potential customers, you should attempt to contextualize products with live-streaming and short-form videos. Live streaming can include product demos, unboxing videos, creators’ commentary, constant inventory refreshes and endorsements, like FT’s Jo Ellison’s business attire on Arket or celebrity recommendations, like Lizzo’s grocery list on Instacart.?

4. Gamify your shopping experience.?

Gamification incentivizes, engages, and retains consumers by making shopping fun. It can take the form of leveling, check-ins, mini-games, or points, each of which adds an element of competition to the shopping process.?

Leveling is based on the World of the Warcraft party sync feature, which is used to synchronize quests and run dungeons. Check-ins refer to a check-in button in the feed that accumulates points for a user and unlocks no-minimum spend deals. Points are gathered by playing mini-games in the feed. All these activities are directed towards community and purchase benefits, also shortening the journey and eliminating the evaluation phase.

5. Make the online shopping cart social.?

The digital shopping cart is the next-to-last stop in the customer journey, followed only by a purchase. Retailers figured out how to make the digital shopping cart checkout as quick and seamless as possible. But an online shopping cart can also be a powerful community feature.?

Sharing one’s past and current purchases, grouping individual purchases, cart members adding their items and voting on which ones will be purchased, and creating a communal fund to buy. In the communal shopping cart scenario, buyers share the same Cart ID (this can be a QR code, a link, or a token). A buyer who initiates the purchase can invite others. Groups can be exclusive and intimate, or large and mass. Invites to exclusive groups are made privately (WhatsApp, messenger). Invites to mass groups are made on social media (on TikTok, Instagram, Twitter - like CashApp does every Friday). Group buying can bring a discount, or can bring other kinds of brand benefits, like membership access, product pre-launches, event invites or special prices. Group buying also brings to customers benefits of shared ownership and access to items as investments.

Websites continue to play a role in retail. They can feature new daily product drops, host special edition products, offer online-only collections and capsules, promote the icons and the bestseller, or they can host highly personalized membership portals. But they are neither brand hubs nor warehouses, collapsing under the weight of heavily over-branded product imagery and auto-play campaign videos. To support the post-hub era, supply, distribution, merchandising, communications, and sales all need to be decentralized. This is a good thing: it makes retail faster, nimbler, more data-driven and less susceptible to the whims of a panicked CEOs.?