Why the Futures of E-Commerce and Media Are Intertwined

From industry titans like Amazon and Walmart to small startups, smart companies are figuring out ways to shake up the e-commerce experience. Here’s what the future may hold.
Headshot of author Doug Stephens
Doug Stephens
Expert Contributor
April 13, 2021
Updated: April 16, 2021
Headshot of author Doug Stephens
Doug Stephens
Expert Contributor
April 13, 2021
Updated: April 16, 2021

This might come as a surprise, but Amazon actually lost market share in the e-commerce market during the pandemic. The reason for that is simple. Other retailers finally began putting their online games together. In a remarkably short time, businesses everywhere finally got the memo. If you can’t sell fluidly online, you can’t sell. Period. And with that, the industry as a whole accelerated its online selling and fulfillment capabilities, closing the gap with Amazon substantially.

e-commerce-future
Image: Figure 1 Publishing

The problem is that what many retailers were catching up to is an e-commerce convention already 25 years old. Amazon, Alibaba, JD.com, and Walmart — all are operating their business using an e-commerce format that is more than a quarter-century old.

So, just as each of these brands has, in its own way, reinvented the modern concept of retailing, look for them to do it again by reinventing how we shop online. Within a decade, the systems and interfaces we use to shop online today will seem as outmoded and nostalgic as a Sears catalogue.

Order Doug Stephens’ BookResurrecting Retail: The Future of Business in a Post-Pandemic World

 

Goodbye to the Grid

In 2018, I was contacted by a venture capital fund to see if I had an interest in speaking with the founder of one of their startups. These sorts of calls from venture capitalists aren’t uncommon and are often just a means of pressure testing the concept by putting the founder in front of industry people to gauge reaction, gather information, and ultimately bridge introductions to potential customers. Often, they go nowhere, but for some reason, this one piqued my interest.

The company was called Obsess and claimed to be pioneering an entirely new online shopping experience. A few days later, I was on the phone with founder Neha Singh. A computer science graduate from MIT, Singh had spent five years working as a software engineer at Google. Despite her tech education and background, she confessed that she had always had a love of fashion design and so began studying in her spare time at the Fashion Institute of Technology in New York City. Singh’s interests in technology and fashion converged when she took a role building a luxury e-commerce platform for a startup in the fashion industry.

In a later interview I had with her, Singh shares that through this job experience, she came to a realization: “The e-commerce front end interface has really not changed. Amazon created this interface originally to sell books 25 years ago, and all the e-com platforms today, they have innovated so much on the back end, but the front end has pretty much stayed the same.”

The same standard grid interface, says Singh, was the starting point for almost every retail brand. Furthermore, for brands that wanted to break free of that mold, costs of development were usually steep.

These early observations were further confirmed when Singh took a role with Vogue and began working more closely with brands as Vogue launched its digital platforms. She was seeing firsthand how undifferentiated most brands were when it came to the experience on their websites or mobile apps.

Then, something happened that would change Singh’s perspective and the course of her work moving forward. “I tried on a VR headset, at some point,” she said, “one of the Oculus DK2s, the early versions and it was just like: ‘This is how I would want to shop. Yeah, this is going to be the future.’”

It was then that Singh began building that future with her company, Obsess. Obsess works with brands to build engaging and immersive online shopping experiences. Singh and her team are in the business of creating online environments that can take any imaginable shape or form, unlike conventional brand or marketplace websites, which tend to use a typical grid format.

Using Obsess, customers can navigate these virtual spaces with their mobile devices as well as desktop browsers. Experiences may take the form of more conventional store environments or be entirely unconventional. One brand Obsess created shopping experiences that took place in exotic environments: one on a distant planet, one in a desert, another in a futuristic city and even one that’s completely underwater. The only limit, says Singh, is the client’s imagination. She tells me that, before the pandemic, she enjoyed early interest from brands like Tommy Hilfiger, Ulta Beauty, and Christian Dior, to name a few. Once the pandemic hit, however, her phone lit up and inbound inquiries increased by 300 percent over the same period in 2019.

But does it work? According to Singh, early signs are affirmative, with brands seeing sizable increases in those most sacred of digital commerce metrics: session time, conversion rate and average order value. All, according to Singh, are significantly higher.

Obsess and platforms like it offer several potential benefits. First, they add elements of discovery to online shopping that don’t involve search terms and static product pages. Shoppers can literally move, so to speak, through the space, encountering products and media experiences along the way. Second, such platforms open up the possibility of shopping socially, with friends, for example, from within the same experience.

Singh brings up another interesting possibility. What if, eventually, many of the actual “products” we buy are, themselves, virtual. If more of our work and social lives are being spent online, is it conceivable that we could begin buying virtual apparel or accessories, for example? Virtual Estée Lauder cosmetics, or virtual Chanel glasses, to go with your virtual Prada jacket? And instead of waiting for the doorbell to signal delivery, you just download your new products and wear them virtually!

So, if we’re crossing into a world where virtual products could replace real products, could online experiences ever begin to replace the social value and immersive nature of real-life experiences? In fact, could we prefer an online world free from friction, out-of-stock issues, service issues and crowds? In other words, will virtual stores soon replace the need for real stores? From a distribution standpoint, undoubtedly. From an experiential point of view, nothing is out of the question.

What is perhaps most interesting is that when you review the list of venture funds that have put a stake in Obsess, you find Village Global, a fund that includes the likes of Bill Gates, Mark Zuckerberg, and, you guessed it, Jeff Bezos.

Speaking of Jeff Bezos, it would be naïve at best to assume that Amazon will just sit back and watch the entire global retail industry catch up. He won’t. Just as 25 years ago, Amazon became the global reference point for the online shopping experience, I’m convinced that Bezos and team will see this moment as time to raise the bar once again.

 

Shoppable Media

Video and music platforms, as well as advertising media revenue, provide significant opportunities for continued growth and expansion for apex retailers. Media is a category that both Alibaba and Amazon have cultivated with success. In 2019, Alibaba funded the production of 23 films, which combined to represent 20 percent of China’s total box office receipts that year.

But the real strength of Alibaba’s media arm is its skillful integration of media and commerce. In 2017, for example, in the lead up to China’s Singles Day shopping holiday, the company launched See Now Buy Now, a live, shoppable fashion show, featuring an A-list line-up of celebrities and a range of popular brands. It’s this sort of acuity with technology and willingness to forge new experiences that makes Alibaba so appealing to global brands.

For its part, in 2018 Amazon drove $1.7 billion in revenue on its Amazon Prime Video platform. Only a year earlier, that figure was $700 million. Even before the pandemic, it was estimated that Amazon would grow revenue for Prime Video to $3.6 billion in 2020. The lockdowns around the world only swelled that number with Amazon reporting that Q2 viewing had doubled compared with the prior year’s quarter.

Amazon isn’t just changing how we access entertainment; it’s changing how we consume it. In the second quarter of 2020, the company launched what it calls a Watch Parties feature, which allows Amazon Prime members to chat with one another while watching Amazon’s movie or TV programming. It also took a page out of Netflix’s playbook, debuting Prime Video Profiles, giving Prime members the ability to manage up to six profiles in one account, with recommendations tailored to each individual user.

Finally, Amazon too is embarking on merging its media and commerce efforts. In 2020, for example, the company launched the series Making the Cut, hosted by Heidi Klum and Tim Gunn. The weekly reality TV format follows 12 fashion designers vying for a shot at launching a global apparel brand and a cash prize of $1 million. Immediately following each new episode, the featured designs are available for purchase on Amazon.

Not to be left out of the media game, in August of 2020, Walmart revealed its designs on acquiring a stake in TikTok, a short-form video app created by Chinese app developer ByteDance. Comprising over 800 million active monthly users, TikTok has proven a sticky platform, with a never-ending stream of shareable, user-generated content, and one that lends itself well to commerce. Moreover, TikTok’s audience demographic breakdown shows that almost 90 percent of users are under the age of 34. It’s a marketing gold mine.

The deal, should it receive approval, would give Walmart a few things, including 7.5 percent of TikTok Global, as well as commercial agreements to provide e-commerce, fulfillment, payments, and other omnichannel services to TikTok Global.

Whether TikTok proves to be the boon that Walmart is hoping for remains to be seen. Social media platforms can be flashes in the proverbial pan. But the subtext is what really matters: Walmart clearly realizes that if it’s going to run with the apex predators, entertainment and media channels will be essential.

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Gaming the System

In September of 2020, during the height of the pandemic, luxury brand Burberry held a unique fashion show with 40,000 attendees. No masks, no hand sanitizer, no social distancing. How, you might ask?

The show was broadcast on Twitch, an Amazon-owned social gaming platform and e-sports destination. Burberry, which was the first luxury house to broadcast a virtual fashion show in 2010, also happened to be the first brand to broadcast a fashion show on Twitch. Using Twitch’s unique Squad Stream functionality, the brand was able to stream multiple perspectives of the live show out to a global audience.

While that may be surprising, what is perhaps more surprising is that it’s taken this long for brands to awaken to gaming platforms as a viable channel for commerce.

In 2017, Amazon began testing the platform as an e-commerce channel when it made video games available for purchase through the platform and incorporated Amazon Prime-like benefits for Twitch users. Today, the platform boasts approximately 140 million unique monthly users across 230 countries. In all, it’s estimated that there are almost three billion video game players worldwide, who as a group watched 2.72 billion hours of live-streamed content through the platform in the second quarter of 2019 alone. Moreover, because Twitch allows for commentary between users, when something is happening, word can spread rapidly.

Today, most of what is bought and sold on gaming platforms consists of in-game, virtual goods — a new superpower, weapon or character adornment of some kind. But the leap to real-world goods seems close. After all, games have all the right ingredients: a highly engaged, global audience using a platform that offers interaction, social discourse, robust processing power and users with high-speed connections.

It’s a future that companies like Scuti are rapidly helping to shape. The brainchild of veteran marketer Nicholas Longano, founder of Massive Incorporated (an in-game advertising platform sold in 2006 to Microsoft), Scuti allows game makers to add online stores directly to their games, creating a new G-commerce (gaming commerce) revenue stream. Players are incentivized to establish a shopper profile outlining their interests and then are presented with products that meet those parameters.

 

The Zero Click Economy

We each have our passions and enjoy shopping for different things. For some people, it may be apparel, jewelry or electronics. For others, it may be furniture, art or automobiles. Yet there are also products we need that bring no such joy or interest.

In fact, statistically, about 50 percent of the food and household items we purchase are not things we consciously shop for but items we simply and routinely replenish. We’re not clamoring to visit our local grocery store to contemplate what kind of diapers, table salt or garbage bags to buy. We most often buy exactly what we bought last time, and, in many cases, we buy these products at exactly the same time each week or month. Sure, we may enjoy going to the grocery store to personally select some items, but a 20-pound bag of dog food isn’t one of them. This is just one of hundreds, if not thousands, of purchases that represent drudgery in our lives.

It is this half of our routine consumption that apex predators like Amazon are coming for. The means by which they achieve this are already being established.

While the retail industry has been working to wrap its head around omnichannel, Amazon has instead focused on creating omnipresence in the lives of its customers. The company has now sold more than 100 million of its Echo in-home assistants, which leverage the company’s Alexa Voice recognition technology — a platform that according to The Verge now boasts “more than 150 products with Alexa built in, more than 28,000 smart home devices that work with Alexa made by more than 4,500 different manufacturers, and over 70,000 Alexa skills.”

This habitual customer tendency is likely what propelled Amazon in 2014 to file a patent for a logistics system it called “anticipatory shipping.” In theory, Amazon was proposing that, at some future junction, it could begin shipping things to customers before they ordered them — perhaps even before they realized they needed them. This could be possible, according to the patent, through a sophisticated data analytics platform that would anticipate habitual customer purchase behavior and move products that were likely to be ordered closer to the consumer, similar to how JD.com has been anticipating demand on its platform. Such a system would allow Amazon to dramatically reduce shipping times from days to as little as hours, depending on the item and final destination.

Couple this with Amazon’s Subscribe and Save program — a program offering auto-replenishment of items its customers use most — and it becomes clear that Amazon wants to lock down the 50 percent of our consumption that requires no consideration.

Meanwhile, Walmart appears to have other designs at getting even further into the lives and the homes of its customers. In 2017, the company filed a patent for the design of a store that is fully automated. What made the filing particularly unusual, however, is that Walmart proposed that these stores would be built directly into the customer’s home!

According to the patent, the step-in, pantry-like structure would allow customers to simply take what they like, have it billed to their account, and be replenished regularly by Walmart delivery teams. What’s more, the system, enabled with artificial intelligence, would actually recommend unique products based on the customer’s preferences.

For apex predators, every product ordered via subscription or auto-replenishment does two key things. It reduces logistics and shipping costs and provides one less reason for the customer to shop anywhere else.

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Excerpted from Resurrecting Retail: The Future of Business in a Post-Pandemic World by Doug Stephens. Copyright © 2021 by Doug Stephens. Excerpted with permission from Figure 1 Publishing. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.

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