The great e-commerce acceleration

Of 2020?

I’d like to fast forward to the future, say to 2040, and see if we refer to current 2020 events not as the second coming of the Great Depression but as the rather more optimistic Great Acceleration. This e-commerce market penetration graph can help illustrate why: 

In my own extremely online household, the e-commerce share of wallet is routinely in the high 90%. We only seem to have shopped in physical stores extremely occasionally and when away from home (those were the days!). If you’re in a similar cohort it may be hard to keep reminding yourself that we’re such a minority and that the bulk of commerce still happens in store and in person. Or at least it did till roughly 8-10 weeks ago. 

There is a quote, attributed to Lenin, that readily comes to mind: “There are decades where nothing happens; and there are weeks where decades happen”. It’s perhaps ironic to quote Lenin in a piece about modern commerce, but wisdom out of context can come from the most unlikely sources. This week was one of those weeks when decades happen. 

On Tuesday, Facebook announced the rollout of Shops in partnership with Shopify. Within a few easy taps, everyone can be a (online) retailer now. 

Almost poetically on Wednesday Walmart announced that they’re retiring the brand. When Walmart bought Jet back in 2016 for a seemingly sky high USD 3.3 billion price tag, that was the kind of acquisition (and amount of money) a traditional retailer needed to spend to signal both internally and to the market that they were approaching digital commerce seriously (Unilever’s USD 1BB acquisition of Dollar Shave Club served a similar purpose). A mere 4 years later, the ‘we bought a fancy e-com company’ brand name is no longer needed because one thing is abundantly clear: e-commerce is here to stay.

And that just got us to the middle of the week. 

Why should you care: 

Seeing e-commerce as the future could have been nearly impossible until very recently. For most traditional retailers with well-honed distribution networks selling online seemed like a hard sell: it usually involved a 12+ month long, expensive project to deploy new tech and business processes, all for what would effectively be a rounding error of net new revenue for at last several years (and that is only if everything goes well). To successfully execute as an e-commerce retailer you essentially had to build and own a parallel commercial stack (across people, processes, partners, and technology). It’s a great example of the Innovator’s Dilemma: substantial investment to get e-commerce efforts off the ground could instead go towards shoring up existing operations and maximizing revenue (and everyone’s bonuses) in the short- and medium-term. 

Things have gotten dramatically better in recent years thanks mainly to the combination of three factors: the proliferation of always-with-you mobile devices, easy ways to market directly to the consumer (hello, Facebook and Instagram ads), and the SaaS-ification of an e-commerce stack’s component parts (from the marketing tools, through your merchandise management system, to on-demand packing & shipping services).  How many projects can say they’ve launched in 7 days?  

While certain parts of the transition to e-commerce have gotten easier, new complexities arise. 

On the marketing side, how do you effectively acquire users for your online stores if most of your marketing efforts (and budgets) to date are aimed at getting folks to a retail location? How do you track the acquisition budget? Then we get to juicier topics of proactive revenue and customer management: now that online and direct is an option, are there regular customers whom you’d rather move to delivery vs other channels, as the direct ones may offer better margins? On the downside of this, new threats arise, too: the shoemaker Birkenstock famously had to pull their products from Amazon out of concerns that counterfeit products were being sold on the third-party marketplace which gave a whole new twist to online brand safety. Curiously, they didn’t cease to offer their products on Amazon-owned Zappos, which more readily resembles a traditional distribution partner (that just so happens to be online rather than a physical store). 

Rather than look at digital commerce through the lens of (new) revenue when evaluating if it’s worth the investment, I have a different proposal for traditional retailers: consider it as a measure of organizational resilience and agility. As we’ve seen over the course of this pandemic, it’s not difficult to imagine a world in which fewer and fewer people go to stores for extended periods of time. Whether that means spending big to rapidly acquire expertise/signal internally that you’re serious about this (like Walmart and Unilever) or a more gradual, iterative approach to building up unique features on the direct commerce side (like Nike) it’s clear this e-commerce mandate needs to be on the roadmap for the majority of retail verticals. Consumer shopping habits are moving to their phones - especially if you’re selling in countries and regions where digital and mobile commerce is the default, not the exception. 

Perhaps Hemingway is a better closer than Lenin here: to paraphrase from The Sun Also Rises, things in e-commerce happened in two ways: gradually, then suddenly. The Great Acceleration of 2020 hopefully gives us all the license to aggressively invest in this transition over the next 12-18 months. 

One question:  

Now that everything can easily become a store, how do we approach discovery? The main mode online is still pull: we expect users to search for the things they want among the hundreds if not thousands of variants of deodorants, striped summer dresses, and a very specific type of running shoe. Where are the curation engines that turn that into a push: based on my previous shopping habits and interests, where’s the recommendation engine that won’t show me 10 other outdoor grills after I’ve just bought one?

Dig deeper:

Some interesting recent CPG direct store examples: 

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