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10 Real E-commerce Predictions for 2011

February 1, 2011

What do you think, will social "harvesting" outperform search?   Will people be buying products the same way today as they will in 2014?

What happens in e-commerce in the next few years is going to be a reflection of some of the big trends going on in 2010.

2010 was a busy year for e-commerce.  From new SaaS offerings being announced by our friends over at Magento, new mobile offerings coming fast and furious and e-commerce acquisitions like Diapers.com being announced.  It was even the year that wasn't, with Groupon getting a sky high valuation and saying “no thank you” to a massive acquisition offer by Google.

I think I did pretty well against my 2010 e-commerce predictions.

Candidly, one of the big drivers for that success was that I only called out some big trends and didn't really take a stand with the overall direction of e-commerce.  In fact, some of my main trends around direct selling (cutting the middleman and globalization) will continue to accelerate in 2011.   This year I've decided to be a bit more bold. Consider it penance for launching this in late January.

As we leave 2010 behind and look forward to 2011, what do we have to look forward to?

More Consolidation in the international e-commerce market

The global market and many of the large domestic players are flush with capital. And the U.S. Market alone is forecasted to grow to over a Quarter of a Trillion dollars by 2014. Amazon's holiday 2010 results seemed to indicate that the sales growth was there; they just took a stock hit for reminding investors that it's going to cost some investment now to see growth in the future. The big players have proven they are hungry.

  • Alibaba snapped up everything from eBay auction partners (Vendio and Auctiva) to warehouses in China. They have also announced a massive investment fund and intentions to spend billions on building fulfillment centers in China.
  • eBay made a couple tactical buys to reinforce product listings on the website (Milo) and search (Redlazer).
  • Big retailers are buying vertical specific retailers that have excelled at a niche market (Zappos last year, Diapers.com this year).
  • Oracle bought ATG in the enterprise IT market.
  • Rakuten (Japanese Market) bought Buy.com,
  • The Groupon revenue engine and subsequent valuation raised a lot of eyebrows for services based e-commerce. Groupon reminded everybody that most purchasing globally is for local food and services and they monetized it massively.
  • E-commerce Times keeps a list of e-commerce investment deals.

Mobile E-commerce Shoots for The Moon”¦or at least Visa and Mastercard.
E-marketer has some interesting numbers for the influence of mobile on e-commerce.  Saying mobile commerce will be huge is a slam dunk!  Or at least an undefended layup. As all of our phones turn into mini-computers an impulse buy is now only a click away.  I know I for one am already buying everything from apps to movies on my phone.  We”re going to see more and more traction with mobile e-commerce; but, there will also be a few twists.

  • Mobile payment systems are the rage. Startups and established companies alike attempt to take costs of credit card acquiring to gain a bigger stake of the Visa and MasterCard pie. At TechCrunch Disrupt last year, there were a few startup ally competitors in this space including MobilePayUSA.  Square is getting lots of traction.  If you went to PayPal Innovate you would have been blown away by the number of mobile apps that are going to ride on top of PayPal's payment infrastructure.
  • Mobile is a lot about discovery and then buy.  Think about Shazam. Just point your phone at a speaker, discover what the song title blasting at you through the speakers is (to the remix sometimes)s and then decide if you want to buy it or try and find it on Soundcloud.  eBay bought RedLazer for discovery and buy reasons. Same could be said of Milo.com (more on that later).
  • Convenience and access.  PayPal and eBay are both seeing massive traction with their mobile offerings. Shopping carts are madly launching mobile interfaces to allow merchants to manage orders and customer issues via their mobile phone.

"IN" Video Sales (Video will be the new landing page)
Lets look a bit deeper into the crystal ball.  All the metrics seem really ripe for this.  There is a massive quantity of video and video viewing platforms.  E-commerce companies that focused on video display of product increased conversion rates.  People are spending more and more time watching user generated video [Whether you like the Demand Media model or not, the IPO raised a bunch of cash].

The big media companies have tried a few times in the past to accomplish e-commerce on TV shows; with limited success.  And AsSeenOnTV.com is really after fact puchasing based on brand.  I”m not talking about the advertising value of video, YouTube is demonstrating that this will slowly and steadily increase.  Nor am I talking about the product demonstration videos and late night promo TV.

Keep an eye out for the next generation e-commerce automation tools that operate as a layer over video to do targeted placement of buy buttons. Think about video as a landing page that could be better optomized for conversion. Google gives users some pretty simple editing and layering capabilities now. If it isn't in labs already, it's only a matter of time before Google figured out how to tag all those YouTube videos and starts auctioning links to buy a skateboard inside a skateboard video. Here is another company also trying to do in video e-commerce.

"In" Mobile/Social Video Game sale of Physical Product

All the pieces are here for this and we are already starting to see this a bit.  People spend mountains of hours with mobile video games and the mobile payment systems and in game payment systems are already in place and evolving quickly.  The gaming companies have had a huge success selling virtual products and they will continue.  They love digital sales because it is pure margin.  If there is virtual currency involved there is practically no cost of sale.

But, as every fanboy or ComicCon attendee knows, there is a huge market for game accessories and limited production products.  There is a natural market and the gaming companies know that successfully completing various aspects of the game can trigger a response in the user for celebration.  What better celebration than buying a limited production item to celebrate your conquering a game level.

To date, the game companies have had so much success with virtual goods that many haven't wanted to hassle with physical inventory and Shipping. Forrester is calling the mobile e-commerce market size at $11B by 2015. And they are just measuring the virtual goods piece.

The game licensing companies know there is gold in physical goods. Not taking into consideration some terms of service restrictions that can depend on channel. This is a massively growing captive channel to market product to. In-game physical goods sales look ripe. Paired with outsourcing services like Shipwire that eliminate most of the hassles of inventory storage and global distribution; I hope to see this trend accelerate in 2011.   Just check out Shipwire and Shopify customer Angry Birds.

Social Search Overtakes SEO “Search” for Inbound leads

Switching topics here a bit; what is more valuable — A Google page 1 spot or a post/product going viral on twitter?

Google Instant made page 1 harder to get and much more accurate, so the bulls-eye for search got a lot smaller and further away.  There is a pretty good argument that the long-tail of search seems to have gotten longer and thinner.  But, the cost metrics for search haven't gotten much cheaper.

On the other hand,  companies with lots of Facebook fans and twitter followers have a locked in viewership for ideas and offers.  Some of the fans are rabid, meaning they do pay attention by responding, commenting and retweeting to push offers to friends (viral).  I can't even begin to count the number of Groupon offers that I”ve seen in my Facebook News feed; much less tweeted.

What is the cost of all this additional cross-selling capabilities to customers you have seen before? Other than getting fans and followers, pretty much nothing.   Coupon codes and special offers were tweeted left and right over the holidays.  So much so, that I actually look for them before I make a purchase.  I think it's safe to say that for repeat purchasers, Social is the winner.

But, for new lead/buyer acquiring, I think Social is going to be seen as more valuable than Search in 2011.  The reason for that is the trust factor and cost.  A Google keyword buy is expensive.  Getting on natural search page 1 is time consuming and expensive; and page 1 search results only carry so much trust from the buyer.  On the other hand if a friend of mine retweets an offer from a company they love, that offer gets a big trust boost at a critical point in the purchase decision.

Facebook will “get” e-commerce in 2011
This may take more than a year to execute; but, Facebook will get interested in E-commerce in 2011.  E-commerce has taken a back seat to advertising at Facebook because the ad market is huge and the application fairly obvious.

That being said, the Facebookers are probably watching the success of some of the shops going up on Facebook and services like Payvment.com and BigCommerce.com are laying a broad foundation for businesses that want to sell through Facebook.  It's seems to be general understanding that social is the optimal buying experience and greatly accelerates e-commerce (BigCommerce CEO article on the Social Graph to e-commerce).  I know that I enjoy it when I”m shopping and see that a product that caught my eye has a bunch of “like” thumbs-up for the particular product. It helps me trust (there is that trust theme again) the product when I can't see or touch it, especially with Apparel.

When will Facebook want to take a toll for selling through Facebook?  So by “get”, I don't mean that Facebook will push it's own e-commerce engine; rather, like they are doing with games, expect tollbooths to go into effect sooner rather than later so that Facebook can bring some of that social e-commerce revenue onto their books.  They apparently have a team dedicated to looking at this.

Commerce Goes Crazy Local

This isn't so much a hidden trend as just pointing out a tree when you”re in the forest.  Local commerce was an exploding success in 2010 when you think of Groupon and Yelp Offers. Facebook launched Local in 2010 and local checkins and coupons are all the rage from companies like FourSquare.  Where e-commerce has gone national and global over the past few years, I think a lot of the focus will be brought back to “local”.

The order fulfillment impact of this trend is really around the big population centers and high-value buyers getting instant gratification.

Now Shipping, “more fast and more free”
Any reader to this blogs knows one of my favorite buyer facing offers is “fast and free shipping”.  I”ve posted countless ways to market those words with offers that match your business.  2010 saw free shipping offers go crazy during the holiday season.  This will continue for sure.  Amazon is testing same day "delivery" in select cities using courier services (“more fast”) in an effort to eliminate the delayed satisfaction of online buying.  While it is insanely expensive today; it will soon be another tool to convert high-value customers that "want it now".  Buyers are getting ever more savvy about free shipping offers, so expect more and more post-buying support and returns to get included with these sales.

Here is our release of free same day order processing for all customer orders!

"Niche Product Sellers" Flex Their Muscle To Costly Marketplaces
I've enjoyed watching this trend develop over the last couple years – "the rise of the multi-channel seller".  The company that has a great product is being recruited by the marketplaces that are awash in the same products. The marketplaces want variation.  Here is a prior blog post I wrote on multi-channel selling.

I recently wrote about the value of the product catalog and even “product catalog outposts”.  Multi-channel sellers have for years understood the value of inventory feeds to get their products in front of buyers; and this will continue. Further reinforcing this is that eBay bought Milo, which was a giant inventory feed system.

I personally think that if you have a product that isn't generally available, then you have something of value for the marketplaces. So much so, that some sellers shouldn't be forced to pay exorbitant listing fees for access to your product to fill out their catalogs.  You can sell outside the marketplaces on your own and if buyers want your product; why the heck shouldn't the marketplaces not give you a discount on listing fees to flesh out their product catalog with your product and brand.  It has value.

The pre-requisite is being able to grow your off-marketplace (direct) volume.

The Death of EDI
I”m going to write about this every year until I get to go to the funeral.  EDI is a legacy protocol that is unduly expensive and living far past its years. Even the enterprise players don't like it and translate it's communications to something readable like XML using expensive translation software like Microsoft BizTalk Server.  XML and web credential systems seem to completely eliminate the need for EDI and expensive VAN networks for retail compliance.   To me,  EDI is like a tax on the supplier/manufacturer levied by the major retailers so they can pay down their initial investments in EDI.  It won't die this year; but, it should.

Drop-shipping and Inventory “light” distribution models will continue to grow.  If a retailer can sell a product without having to buy inventory in bulk, they will.  Vendor Managed Inventory (VMI) and consignment distribution are utilized for the consumer products industy. Dropshipping (manufacturer/supplier ships to buyer on behalf of retailer) features have proven a huge win for suppliers and manufacturers that can offer the systems to do it.  In an era where “cash is king” and the party that owns the buyer relationship can call the shots, drop shipping will always have a place.  Especially for new products (without proven sales) or products with little differentiation (ahem, how many iPad/iPhone accessories do we really need).

Bonus: A Return of Local, handmade and Custom Manufacturing
Custom manufacture goods are on the rise. It's easier to find them via Etsy. People's tastes are starting to shift towards personalization, fashion trends bridging into custom designed health and beauty products. It's also impacting the accessories market. TheGlif.com is an iphone tri-pod that is manufactured in the U.S. Shapeways, helps individuals build their own product dreams on the cheap. In the accessories market, Dodocase.com hand makes every ipad case in the U.S. using traditional bookbinding techniques.

We launched Shipwire Anywhere last year to help these businesses run their shipping departments automate the shipping pieces while they maintain their manufacturing and shipping in-house.   One of our favorite locations that a customer is shipping out of is "a red barn" in Seattle.

Nate Gilmore

Nate is the Vice President of Marketing & Business Development at Shipwire. He oversees channel development and the developer network, as well as our marketing and public relations. Previously, Nate spent six years at Concentric (acquired by XO Communications), where he ran product management, sales, and marketing. Nate has also held various legal positions in intellectual property and business law. He holds a B.A. in History and a J.D. from Santa Clara University.