Editorial note: this article was last updated Jan. 29, 2019
Author: Editor in Chief of Shopify Plus, Aaron Orendorff
“No industry,” wrote Harvard Business Review at the close of 2018, “is failing faster than retail.” At risk of contradicting the Crimson: bullshit. Sweeping proclamations make for great sound bites and (scholarly) clickbait. But the truth? Not so much.
At the opposite extreme lay headlines trumpeting “voice-search buying,” “Instagram-worthy pop-ups,” and “VR-enabled O2O experiences.”
What the data shows — and what the leaders we spoke to from brands at the forefront said — isn’t that retail is failing nor that success is tied to innovation for innovation’s sake. Instead, it points to the now unignorable center of commerce: customer choice. What is the future of eCommerce for 2019 and beyond? 10 insights offer the answer:
1. Ecommerce v Retail: The Dichotomy Ends
For all its enduring hype — physical versus digital, offline versus on — the old war is over. In fact, it’s always been a lie. Choice, not location, is commerce’s greatest opportunity and its most-looming threat.
In defense of retail’s “apocalypse,” brick-and-mortar losses are mounting; the four-year bankruptcy count now sits at 57 once-landmark chains. Manufacturing market share and in-store sales for consumer packaged goodsare flat or declining. Born-online “microbrands” have devoured the lion’s share of growth. And ecommerce’s gains continue to trounce retail as a whole.
Here’s the uncomfortable twist: brick-and-mortar still dominates online sales by over $20 trillion. And the gap will widen. After a quarter century, ecommerce’s spread is slowing, 80% of 2018’s gains belonged to Amazon, and (in the U.S.) the top five online retailers own 64.7% of sales:
“The brands that are winning,” says Fab Dolan, Head of Marketing at Google Canada, “are the ones that understand and own the fundamental interplay between experiential and transactional. If we were to believe that retail is dead, then we should be spending all of our money doing online ads and guiding people to our website. And yet, what we’re seeing time and time again is that building anticipation and an appreciation for the magic of our products happens in the real world even though most people buy online or through call centers.
“Will retail look fundamentally different and maybe unrecognizable in ten years? Yeah. But it’ll always depend on how you navigate the interplay between offline and online worlds, how you — the brand — interlock customers and products.”
The future belongs neither to legacy giants nor pure-play ecommerce. Instead, it belongs to direct-to-consumer (DTC) models, often referred to as digitally native vertical brands (DNVB). Just don’t let the name fool you.
2. DTC Emerges as Commerce’s Future
Vogue’s late 2018 feature, “These Are the 50 Digitally Native Brands You’ll See Everywhere in 2019,” blew the mainstream doors off what many in the industry already knew: the worlds of technology and commerce are undergoing a revolution. At the forefront are brands like Outdoor Voices, Warby Parker, Allbirds, Glossier, Hims, and home-goods companies like Casper, Brooklinen, Purple, and Leesa.
What unites these verticals is a focus on “brand equity” and “brand purpose.”Both terms describe the value of a brand. Owning their customer relationships, DNVBs run on value — elevating people and products over price and place. The centrality of selling something worth buying isn’t replaced but augmented. As a microcosm in 2018, numerous DTC leaders offered either no holiday discounts, minimal discounts, or charity-based incentives:
Does this mean price and optimization are things of the past? Hardly. DNVBs who did host holiday discounts delivered them in ways that drove conversion rates and average order value (AOV) without sacrificing brand value:
In-cart upsells for “Mystery” items or bundles
Sold-out merchandise fueled by influencer marketing
Tiered discounts via spending thresholds, without coupons
Installment plans for high-ticket purchases rather than “Pay now”
Countdown timers, customizable free gifts, and subscription incentives
All built seamlessly into the onsite and check-out experience. The question is: are those techniques enough?