In the industry I work in, it’s easy to get overly passionate about all of the new sites emerging every day that fit into this Web2.0 classification the industry has created. The majority of these sites are willing to trade short term revenue for the prospect of building up a user base. New users have become a metric that seems valued among these sites more highly than revenue. I’m not arguing with the facts – recent events have certainly proved that getting bought out can be a viable business model, and reaching a certain threshold of new users is no small feat in a crowded marketplace. But just in case you might think that this is the new business model to watch, don’t forget about online retail. Since the mid-nineties, consumers have been increasingly moving a share of their purchases online, and online retailers are the largest beneficiaries. And they have not stood still. Here are just a few trends that are shaping the future for online retailers, and demonstrating that while Web 2.0 social networking sites might have more sex appeal, online retail is still going strong:
- User Experience 3.0 – If you want to really look that future of user interfaces and how streamlined they can get, there are several online retailers that are worth a look. Netflix certainly has won it’s share of rewards (though some might disagree and call that a social network), but one of the top sites that I recently visited was Endless.com, Amazon’s new entry into the shoes and handbags category. The site has a brilliant browsing and sorting navigation structure, easy tools to read about products, and seems to have corrected every criticism the more fashion conscious might have made about Amazon’s tendency to overwhelm consumers with it’s overcrowded product pages. The result is a site extremely easy to use, with great prices for designer products, and even a killer promotion with their current promotion selling consumers with the promise of "negative $5 for overnight shipping."
- Affiliate Marketing Fever – The ease of publishing your own site is driving more and more people to see their online efforts as a moneymaking source. As this area explodes, it’s not just driving huge profits for Google’s Adwords, it’s also driving a rapidly growing affiliate marketing craze online. Ad:Tech in San Francisco this year was filled with Affiliate Marketing Networks that seemed oddly disconnected from the rest of the event – but were there recruiting hard and partying hard nonetheless. There’s no doubt the rise of affiliate marketing mirrors the growth of online retail, and will likely get even bigger and crazier as time goes on.
- Promotion Code Shopping – It’s common knowledge for most online consumers that it’s ridiculously easy to find promotion codes and discounts to apply to just about any online retailer. While most may not have as easy of an experience as I recently had by finding instructions to get a discount on filing my taxes through TurboTax from their Beta Community of users answering tax related questions, the ready availability of these codes is tapping into the sale oriented consumer that was profiled in the book Treasure Hunt. Shutterfly is one company that has figured out how to use this to its benefit. The site allows users to collect online promotion codes and save them in their account to use at any time before the expiration date. The result is an ongoing brand experience and a high likelihood that consumers will return often for multiple orders.
- Reinventing Retail Categories – The most often quoted examples of online retail in this category are sites like Priceline or eBay that turned traditional retail in their categories upside down. Letting consumers set their own price for a hotel room or airline flight was a huge transition for the travel industry. Today there are sites like www.bagborroworsteal.com that are finding similar ways to reinvent retail categories. You might wonder (if you think about these things) that if Hollywood celebrities can just "borrow" brand name accessories for big events or momentous "one time only" occasions, why can’t the rest of us? As more new sites approach traditional businesses with an eye for innovation, online retail will continue to be a hotbed for new ideas.
The open question worth asking, I think, is how these lessons might be applied to the slate of social networking sites that may reasonably merge with online retail experiences. Purists would claim that creating an online community and selling products or services in a retail sense should be mutually exclusive. For now, they largely have their wish, but this will likely start to change. That’s a good thing. As for me – I remain as passionate about finding new social networks and Web 2.0 sites as anyone … but when it comes to where I would invest or choose to focus my business, online retail is really the force of the future.
Rohit,
Very well-presented and thorough piece. I was wondering where you were headed and when I reached the conclusion, I thought “Yes!”
While I carry no ads on my blog, I’m writing with an eye to the future when I believe a “3.0” model will emerge in a way that satisfies the desire for professional content and a more elegant way to generate revenue.
Always enjoy your writing, Rohit…
Well said. I agree with many of your points.
Threadless is doing some really interesting work at the intersection of these two trends, social networks and ecommerce. Etsy too. I’d even argue that Amazon and eBay are social community sites. I think we’ll see a lot of innovation in these areas over the next few years.
Rohit –
Hey. DJ from Bronto. Great article. Very timely for our industry.
Thanks for writing.
You’re right about Endless. Just about every time I see that ad I click on it to see if there are any shoes that interest me. I’m anti-only-shoe-buying, but they’ve got quite a hook.
Hi Rohit – just stumbled across this piece in a search. I think you’re dead on in your analysis and would suggest one more trend for you to consider: the blurring boundary between online and local shopping. We’re finding (at Judy’s Book) that consumers are using online search to shop for brand and price information (e.g., “gap deals”), and are moved to purchase by the best available combination of convenience and price – whether that’s online or in a local store. In response to this trend, most major retailers are working hard to make their local inventory data available for online distribution, and Google, Microsoft and Intuit (among other) are running equally hard at enabling small merchants to do the same.
(As a side note, we also noticed the promo code trend and released a vertical search engine – couponlooker.com – specifically to address the ‘mainstreaming’ of that behavior).
Thanks again for a great pieece – I’d welcome your comments / feedback on what we’re up to here at JB.
Hi Rohit,
This is obviously one great post. The information are very insightful and helpful. Thanks for sharing all of these. 🙂