Ready for Change?
Before e-commerce, consumers were starving for information about products, even as they forked over their personal data so that marketers could better target them. Brand advertising failed them by not feeding them real information. Before the emergence of today’s read-write web, the brand’s message — what the advertiser said about the brand — was the only information consumers had. Where the advertiser said it ‘washes whites whiter’ – that’s what we all believed. Ecommerce has now shifted – online merchants now offer more to augment one-sided brand marketing; perhaps comparison-shopping (of their own products); Facebook and Google+ ‘likes’; and feedback mechanisms such as Bazaarvoice reviews for customers enrich to it with their own experience and opinions.
However, even the consumer enriched brand-advertising model will not be enough for tomorrow’s markets. Sites like Epinions, Flyertalk, and Angie’s List are augmenting customer feedback and comparison shopping, and even replace the official brand marketers’ messages with reality – “this one didn’t get my whites white”. The convergence of Social Commerce, the Semantic Web, and Cloud Computing is creating a new generation of consumer-facing applications that we know as Social Shopping.
To succeed in e-commerce, retailers and aggregators will need to develop their capabilities to sell to tomorrow’s customers. These are individuals who’ve grown up with rich information at their fingertips, who can see every product available, compare every price and feature across every vendor, then swap notes on those products with people they have never met. And they can make their purchases with a single tap or mouse click from anywhere in the world at any time of day or night.
How do tomorrow’s shoppers, the Digital Natives, think and behave? How have aggregators emerged to fill the information need and how they are maturing to help consumers make better decisions. How will they evolve into marketspaces — the virtual markets with minimal friction between consumer and vendors?
Behavioral Shifts of Digital natives
Today’s teens are tomorrow’s shoppers, and they are fundamentally different than today’s personas modeled by retailers as their target users (a.k.a. customers). To define a new consumer value proposition, it is vital to understand how tomorrow’s consumers will behave.
Digital Natives were born into the social aspects of the web. Sites like Yahoo, eBay, YouTube and Craigslist, were destinations created to fulfill a need, but once that need is fulfilled, the user drops off. Digital Natives already spend far more time interacting and socializing on TurntableFM, Facebook and Twitter. The difference is the ability to “hang out” and remain on the site — TurntableFM, Facebook and Twitter provide the virtual stage for their lives – there is no ‘drop-off’, it’s a choice to step off-stage in between acts in the virtual performance.
Digital Natives are also different in how they share knowledge and intelligence. Consider legacy services such as Consumer Reports, Encylopaedia Britannica and Rand McNally, which are static knowledge sources curated by a few experts. Digital Natives are drawn to new services like Epinions and Quora and Inrix, where knowledge is crowd-sourced and dynamic. More importantly, these services are fundamentally designed for the ongoing real-time revision of knowledge.
Interaction and Privacy
Digital Natives appreciate a higher level of interaction and understand the lack of privacy implied by such a level of participation. The value of World of Warcraft, Google+ and GroupMe is fundamentally based on the interaction between users that almost never physically meet. The level of interaction that Digital Natives expect has no relation to how well they know each other in the real world. In World of Warcraft I have no idea who you are, but there is a first-person relationship between us. In Google+, I might be a friend of a friend or friend and we sit at a communal table. GroupMe seamlessly blends the virtual with the physical. With this higher level of interaction and participation, the barriers to privacy are breaking down and new standards are emerging between pubic and private.
A Peek into the Future
There is a trust model between a site and its consumers. Amazon could not be Facebook despite its purchase of PlanetAll. Microsoft could not offer Twitter Connect, despite its attempt with Passport. Consumers will trust a service to do something well and will struggle to accept it doing something else. Who the players are in this future we have yet to find out, but that future is taking shape with the technology of today.
Super Sad True Love Story, a novel by Gary Shteyngart, offers a believably prescient satire of the use of personal technology in a future just around the corner. In this world of instant gratification, success is measured by instant credit ratings; attractiveness is calculated by personal informatics; and books are digitized not to be read, but to be scanned for information. The novel adds color to the behavioral shifts of new technology, and is well worth reading to begin to understand the emerging market of Digital Natives. The fundamental rules of the real world are changed in the virtual world and the rules are being rewritten in real time.
Emergence and Maturing of the Aggregators
Over the last decade, a number of aggregators have emerged as infomediaries between the retailers and the consumers. Sites in the retail space such as Nextag, Shopzilla, Buy.com and Kelkoo, and sites in the financial services space such as Money Supermarket and Confused.com, have taken on the basic role of providing a single point where the consumer can “shop around”.
These aggregators built their businesses on the commission model; the products they promote are essentially pay-per-click advertisements from the retailers. Their technology platforms are tuned to maximize traffic and conversion, and therefore revenues. Their successes are undisputed; most major retailers participate in affiliate programs and provide direct product catalog feeds to these publishers.
But what comes next? How will one aggregator find competitive advantage over the next? What differentiates an aggregator from a marketplace? Approximate SKU counts have Amazon’s marketplace at 25 million, Ebay at 16 million, and Sears at 20 million. Trends point to deeper consumer functionality and highly-available merchant technology that may remove any advantage among the aggregators.
Value Added Aggregators
An opportunity is emerging for a new type of aggregator that offers a better value proposition to consumers: helping them to make more intelligent buying decisions. Some of the initial new aggregators will flourish in niche markets — for example, Match.com, Elance and Monster help consumers match their needs intelligently. Others will attack the problem indirectly, such as Zaarly, which lets customers make requests for things; TaskRabbit, which lets consumers place requests for assistance; and Siri, which helps consumers refine results using information available from multiple sources. The new aggregators will need to take on the role of conduits or agents — adding value to the simple comparison model offered by their predecessors.
The key idea is to match rather than advertise. Rather than assembling an inventory and enabling the consumer to search it, the new aggregators first examine the need the customer is looking to satisfy, and then search the inventory over time to find the products, services, and bundles that match the need. Because the potential selection is infinite, the aggregator’s role is enabling intelligent reduction: To help customers state their needs and reduce the set of possible matches to a useful list that customers can manage.
Intelligent reduction can even help consumers with needs that have no solutions yet. If enough requests come in for a uniquely customized dress that people saw in a movie or game, the Value Added Aggregator can aggregate these requests as an inventory of demand, and then prove the demand to vendors who can manufacture it. Tomorrow’s market will be different because it will be a pure market where needs and products are matched — no matter which came first.
Mechanics of Adding Value
The Value Added Aggregators will intermediate between an infinite inventory on the web and the time-constrained consumers. They will be able to draw from different semantic descriptions of published products and combine them so that the consumers can read different flavors of descriptions and reviews, such as these descriptions of a washing machine from Sears, BestBuy and Amazon, and customer reviews of the same machine. They will be able to add social media comments and opinions into the product information in real time, so that consumers can see who favors one product over another similar one, and why. They will be able to effortlessly refine their searches by using published consumer profiles or even derived profiles from their social networks.
The technology employed by Value Added Aggregators will allow a complex consumer request to be split into bundles of requests that can be optimized. For example, many travel intermediaries let me book a return flight, plus a hotel and car. But even if the return flight suggests that the trip will take a week, today’s travel aggregators can’t accommodate my need for a hotel for two nights in one place, and then a car and a hotel in a different place for the next five nights. A complex request should be intelligently broken down into smaller requests that can be more easily satisfied and recombined into a solution.
Value Added Aggregators will also recognize that some consumers won’t want all of their requests to be serviced electronically, and will create routing processes that work with people or machines depending on the request. A continuum of responders would range from Only Friends and Trusted Networks through Expert Agents and finally Merchants — depending on the customers’ request, response, and privacy requirements. Not just a merchant, but another consumer would equally service a consumer’s request. And that when a request is created, a solution for it may not exist today, but might exist tomorrow — or a solution may even be created in response to a volume of similar requests.
From Marketplaces to Marketspaces
The ClueTrain Manifesto reminded us that markets are places where buyers and sellers meet to converse and transact.
In bricks and mortar retailing, the retailer controlled the marketplace by bringing goods from various suppliers together, breaking bulk and setting prices, and then attracting consumers to the location. Today’s online model is essentially an electronic version of the same model — even Amazon and Ebay are working that model.
However, social media offers consumers interactive online environments where they can interact and transact on a personal level. Why go anywhere else to satisfy product needs? Social media sites like Facebook, Google+, Twitter — and even in SecondLife and MMPORG — can be more than venues for product placement and advertising. They can evolve into Marketspaces — places where all manner of interactions can take place simultaneously.
An interesting use case is buying a car: When looking for a new car, I need to my friends and their friends to help me decide by offering their stories and recommendations. I then want to state my needs to potential dealerships and have them solicit my business — under my control and on my timescale, disclosing only the information I want to disclose to help me make a purchase. I want to see all available alternatives in a form that easy for me to compare them, and to bundle in service contracts, insurance, and accessories. I want to compare prices and financing options, and then obtain advice from experts in online communities. I want all of the data to be delivered electronically, or routed to human representatives when it makes sense to do so.
The grand idea of the Marketspace is that the information is accessible to all of the actors on stage and can be marshaled and presented appropriately at every stage of the consumers’ decision process. To succeed in tomorrow’s Marketspaces, retailers and aggregators need to use new technologies that really help consumers make better decisions.
These technologies will allow them to build a more useful online market:
- Engage at a deeper level with the customers and to offer retail services in the virtual world that consumers will inhabit, without polluting the experience, yet still respecting the consumer’s privacy
- Facilitate the sharing of experiences and opinions between consumers in real-time and using that to enrich the consumers purchasing process
- Draw from the universal set of available products that can address and service a consumer’s need, then present a reduced and relevant set of products to help consumers buy smarter
- Facilitate consumers to explore their needs in broader terms that the current product set or attributes that are available and help create new products and solutions
First Retail is building a highly scalable semantic technology platform upon which such Marketspaces can be created by retailers, merchants and aggregators brave enough to rise to the challenge
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- Aggregate Knowledge raises $5M from Kleiner, on a rollVenturebeat, December 2006
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- How Amazon Controls Ecommerce (Slides) TechCrunch, May 2011
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- The Shopping Mindset of the Mobile Consumer ShopCoffeeTable May, 2011