Ecommerce and the On-Demand Economy

Waynette Tubbs, Senior Manager of Marketing Communications

If you’ve heard of companies like Uber, Airbnb, Amazon Prime Now and PostMates, you’re at least slightly aware of the emergence of the on-demand movement. According to Scot Wingo, Executive Chairman of ChannelAdvisor and yesterday’s Bronto Summit keynote speaker, these types of businesses are growing – nearly half of all US consumers have tried at least one on-demand service. Wingo shared his thinking on the implications an on-demand economy (ODE) can have for ecommerce and gave tips for preparing your business to take advantage of the shift.

Scot WingoThe shift in consumer expectations began with adoption of the Internet and handheld mobile devices. And, according to Wingo, adoption of new technologies is becoming more and more rapid. For example, it took consumers about 25 years to fully adopt the microwave oven and Microsoft’s Windows application. It took 15 years for full saturation of the cell phone, 12 years for Google search, only 8 years for the smartphone and just 6 years for Facebook. And Uber has been fully adopted in only 4 years!

This increasing speed-to-adoption means we need to be more flexible, nimbler. “What this means in our business is that changes are coming so fast that you don’t see them,” explained Wingo. “And you need to be able to react to them very, very quickly.”

Wingo shared four key changes in consumer behavior that have contributed to this acceleration of ODE adoption: mobile, social, bifurcation and zero-friction. He strongly advises businesses to consider these in yearly planning and strategy-building exercises.

The Shift to Mobile

Last year, Google announced that for the first time, mobile search traffic surpassed desktops.

Wingo reminded the audience that mobile has dramatically increased the amount of time people are online. Ten years ago, ChannelAdvisor could track spikes in online shopping to the first hour or so after people got to work, around lunchtime and then after work hours.  “Now, it’s 24/7,” he said. “They wake up at 6 a.m., and they’re online shopping. And at 2 a.m., they’re online shopping.”

Smartphone penetration has definitely changed the way people shop. Smartphone ownership has increased every year by around 10%. “We’re now at about 77% in the US right now. So, we’ll be at 100% saturation in a year or so,” explained Wingo. And PC ownership will continue to erode, and “that’s a reality you need to prepare for as a marketer.”

The Rapid Advance of Social

Remember the birth of social? Users didn’t yet see the value, so their interactions were mostly status updates – “Having blueberries for breakfast with my peeps,” or “Going to party on the beach!” But the evolution quickly moved to sharing pictures and selfies (Instagram has more than 1B users today).

And the evolution continues. The fastest growing social application today is chat (WhatsApp, Facebook Messenger, Snapchat and WeChat). “I recommend you all start following WeChat. WeChat has developed an interesting infrastructure that includes ChatBots. There’s ChatBot for banking, weather – every kind of app that’s out there, there’s now a ChatBot for it,” says Wingo.

In fact, WeChat has more than 600M monthly users. And you can literally chat with apps and brands. It’s all connected – payment, preferences, your address, etc. This is huge in China but just catching on in the US – “This is why Facebook paid $2B for WhatsApp and hired the head of PayPal to run Facebook Messenger,” he explained.

Next: Livestream, Augmented/Virtual Reality. It’s more than just gaming applications. Imagine that you could virtually put a couch in your living room and walk around it to decide whether or not it’s the right fit. “In the next three years, the retail implications will be huge,” says Wingo. “Retailers should definitely keep an eye on this – this is where social is going.”

Bifurcation of the Consumer: Value vs. Convenience

Research from Deloitte and Forrester shows that consumers are splitting into two groups – value-oriented consumers and convenience-oriented consumers. Value-oriented consumers are always thinking about getting the lowest cost/best value, while convenience-oriented consumers want a low price but weigh the price/value balance as it relates to convenience.

“I think the 2008 recession may have caused this bifurcation,” explained Wingo. “It really scared a huge portion of the population, and they hunkered down. The other subset felt that the recession made them realize how much their time is worth and that they’re willing to pay a little extra to save time.”

For a convenience-oriented consumer, you need to evaluate your product and your shopping/purchasing experience to remove friction.

The Demand for Zero Friction

Wingo says that everyone in the retail and services industries is really raising the bar here by asking themselves, ‘How can we make it easier for the consumer?’ Think of the Uber experience, for instance. You walk off the plane or out of the restaurant, open the app, hit a button, a car appears and your bill is paid – all within minutes.

And think of Zappos – with free shipping, free returns. Or Amazon Prime with free 2-day shipping. These frictionless experiences are raising the bar and increasing consumer expectations.

What Does ODE Mean to You?

Ecommerce is products, and ODE is services. Where is the intersection? According to recent research, 42% of the US population has tried an on-demand service. “They love the fact that they have an app, don’t have to talk to a human, and can pay through the app,” he explains.

“If a consumer can get services immediately, then the three- to seven-day wait for a product will seem glacial.”

Wingo predicts a natural intersection of ODE services and products. For instance, it’s more profitable to deliver multiple products than a single person to the same location. And some ODE services are already taking advantage of that.

“It remains to be seen where these things are going, but these services are answering consumer expectations. These guys are experimenting, and so should you,” says Wingo. He also gives some tips for how retailers can get in early on the on-demand economy.

Four things you should do now:

  1. Try the services, and get a feel for them. Ask yourself, what they do well and what they could do better. Test a variety of services, and think about how the ODE services could transform your business.
  1. Find partners now. Develop partnerships that will help you get to same-day delivery. Partner with delivery services such as Instacart, PostMates, Google Express, Uber Rush and Amazon. “Stick with the bigger guys, if you can,” Wingo advises.
  1. Explore BOPUS (by online, pick up in store). If you are going to do that, think of ways to make the experience frictionless for the customer. For instance, how about a pick-up window? Don’t make them hike from your parking lot to the back of the store and then wait in line to get their stuff.
  1. Challenge your view of your product. Is there an ODE service you can offer? For instance, if your customer buys a carburetor, is there a service provider you could partner with to schedule an on-site install?

And This is Just the Beginning

“In the last 10 years, consumer behavior has changed more than in the previous 100. We have mobile, social, the bifurcation of value/convenience and the desire for zero friction in our lives,” says Wingo.

The on-demand economy is services-related now, but there is a feedback loop that will inform ecommerce changes as well. “It is a reality, so start thinking about the possibilities for your brand,” advised Wingo. “Start formulating a plan now, even if you can’t immediately execute on it.”