E-commerce has been reshaping the world of retail for two decades. Until now, online retailers, from Amazon through eBay, have done their business via a web browser. But things are changing. Fast. Today we live in a world that is radically changing on all fronts and e-commerce is not immune either. We are moving to an internet in apps and platforms into what Steve Jobs called the Post-PC era.
Chinas lack of a significant installed base of PCs means it leapfrogged the western world and went straight from offline to mobile (‘mobile only’ more than ‘mobile first’). But the change is happening here as well. The first data is already coming in suggesting that more people prefer going online using smartphones and tablets rather than laptops or, god forbid, their desktop PCs. Even if one might argue that in western civilization we haven’t reached the tipping point yet, the whole world is clearly moving in this direction.
That changes things. But it is only part of a bigger change.
The ways the internet, and with it internet based businesses, can reach people increased dramatically. Besides those little pocket computers every adult on the planet will carry a few years from now, there is an increasing amount of connected devices, the ‘Internet of Things’, being put on the market. These smart devices are bringing with them a whole new world of potential business models. The German kitchen appliances company Vorwerk is building the Thermomix (German) that in its newest version is combining recipes from its online community with the recipes function of the device. Services on top are easy to imagine. Amazons Dash button, a single purpose “order more of these” device, is as technically trivial as it is brilliant from a business stand point. Amazons Dash, a scanner for products in the kitchen, and Amazon Echo, its smart home voice interface, show the range of possible devices as enablers for as much and more business models. Also, imagine the variety of delivery models becoming viable to Amazon once it manages to eliminate friction for a significant amount of its customers.
All this potential leads to new complexities. Platforms emerge. And alongside the question arises for every market player how to position themselves in relation to these platforms.
Are they going to participate (think Amazon Marketplace merchants), even going as far as optimizing for these platforms that it comes close to or even is manipulating them (think black hat SEO)? Or are they going to try and build their own platforms, become their own destination sites, knowing full well they are going to play a game of kings?
And what if at certain distribution points you are the destination, the platform, while at the same time in other areas you are ‘just’ an app, a player having to play according to the rules of someone else?
Consider Amazon’s digital media offerings. Amazon’s Kindle e-book platform is available through its own e-reader hardware. Here Amazon really owns everything: The hardware with which the content is consumed. The shop behind it. And with its several publishing offerings even the publishing side. In the most extreme cases there are essentially only three parties involved: The person writing the book, Amazon, the person reading the book. There is no one else at the table. Of course that limits the addressable market to people buying Amazon hardware in order to buy content from Amazon. To limit yourself to that market size would not be a wise decision on Amazon’s part. So of course Amazon is offering Kindle reading apps for all popular operating platforms. These apps are adding the necessary reach while also adding a very convenient user experience. Seamless syncing allows readers to switch between their reading devices and their other mobile devices as they see fit. Add to this Echo’s ability to read your Kindle books to you and you get a unique offering.
Amazon employs various strategies to get there: From own end user hardware (the deepest of its vertical integrations) to ‘simple’ mobile apps for one offering: E-books. Is it worth it? Amazon has created an offer that is especially attractive to hardcore users, e.g. people who read a lot. Its e-book offer can hardly be replicated by say Barnes & Noble. This can not be overstated. Amazon is not only the biggest seller of e-books but also has a far superior user experience. This position is one reason for the tensions between Amazon and publishers who rightly fear the further growing asymmetry.
In this context you also need to consider the news about Amazon stopping to sell Apple TV and Google Chromecast because of ‘issues’ with Amazon’s own Instant Video streaming service.
This intermingling of positions which used to be clearly defined is going to intensify. It is an expected and to be honest necessary next evolutionary step. Don’t emulate the retail of old but rethink what retail can mean in a world where the ways of reaching your customers and the costs involved have changed dramatically. You can see this mantra at work most clearly at Amazon today but more and more players are successfully joining the game.
The complexity of the market, and with it the number of questions and topics for analysts to understand, grow larger as we are shifting towards a world where everyone has a computer with them at all times and more devices are interconnected. And in this world services and platforms will blossom.
- What will happen to logistics when an Uber-like service can offer autonomous cars comprehensively?
- What kind of services will make sense on top of such a platform?
- Where will be the value and where will be the commodities?
- Can an online merchant thrive on just the smartphone?
- What about TV? Can you just exist on a Smart TV platform like Apple TV? Do you have to be on Amazon’s Fire TV as well? What will Amazon allow? Where will it integrate itself into the app offerings?
- Can you exist on only a platform that itself is just a smartphone app? Think WeChat.
- Who is in a position to successfully get connected devices into the homes of people? How do these devices connect to the net and to other devices (and to present smart home platforms)? Will the device makers be platform providers, enabling services for commerce, and/or will they be retailers themselves?
- What does it mean for the competitive position of one company if it is present on one platform but not on the others?
- How is the relationship between merchants and manufacturers going to change?
None of this is too far off in the future. In fact most of these questions should be addressed today by affected companies, which is to say by everyone who wants to have a future in retail. Technology, and with it the markets it creates and changes by merely touching them, increases in speed and scope.
Global online retail players are emerging right now before our eyes and they start to proactively become or already are not just mere merchants using the internet instead of retail stores but genuine internet based companies redefining what we understand as retail and what customers expect. From Amazon through Zalando, these companies have tremendous potential to transform the industries they operate in.
So this, in a rather large nutshell, is what we are going to analyze and track here.