E-commerce 3.0 And The Overlooked Other Half

Hiroshi Mikitani has a pretty good view on e-commerce. As the CEO of Rakuten, arguably the closest competitor to Amazon internationally (and in some countries even more successful), he obviously knows what he’s talking about. He’s recently been sharing his view on the future of e-commerce with his most recent book Marketplace 3.0.

In essence, his view of e-commerce in the future is one of more personalization, community and “discovery” shopping.

I think he’s got it half right.

In my mind, e-commerce has come a long way from the old days of Amazon circa 1997. I agree with Hiroshi that the “vending machine” approach of choosing what you want, entering your credit card details and popping out your purchase to be delivered is a little outdated (not to mention soulless) and misses a larger opportunity of customers who aren’t yet at that stage of intent to purchase. There is clearly an opportunity and a need to bring customers along the shopping journey and nurture and encourage that purchase intent and interest. More personalization, content customization and three way-communication between the customer, the merchant and the community is definitely the right direction to go in.

Judging by the VC activity, blogosphere chatter and general attention on this subject -it’s clear both the startup community and established players have also caught on.

Where I disagree or think Hiroshi and most everyone in the e-commerce space seems to be overlooking is that the future of e-commerce is not just on the front-end half of the cycle but also on the latter half of the e-commerce cycle which is: production and fulfillment.

E-commerce is a tale of two halves. Front-end, pre-purchase, intention marketing — call it what you will but there is a massive industry and number of players involved in helping influence you and get to the purchase point. From mobile wallets to social shopping and big data it’s clearly a hot space.

However, having a more personalized, relevant marketing experience holds much less value to me if the output of all that sophistication is still the standardized, one-size-fits-all product being given to me in the standardized, one-size-fits-all way. Sure, an e-commerce site can capture and nurture my interest in their products on offer but if that product is the same product that’s sold to millions of other people – is that really personalization?

In my mind- the other half of e-commerce (production and fulfillment) has severely lagged the attention and innovation that its counterpart half has received. Why? Because it’s just so damned hard and expensive. Most of the innovation and effort poured into production and logistics has been cost-based. Find lower cost, find more efficiency, eliminate wastage. All very well and good but the downside to all that is standardization, mass production, offshore price competition and well… general blandness of end-product.

However, new players like CustomMade and Indochino are started to prove that there is a significant demand and opportunity for customization of end-product. 2013 is being touted as the year of the Makers. There is a growing public buzz around truly customized, made-to-order product. Now that is Personalization. It’s not about finding relevant content and presenting it to your user. That’s just targeting. True personalization in e-commerce is both presenting relevant content and creating relevant product.

Incredibly expensive and difficult to do today but new disruptive technologies are starting to emerge. 3-D printers and detailed scanning techniques are increasingly becoming more available and cheaper. It’s only a matter of time before you’ll start to see the next wave of startups take advantage of these tools to crack the personalized production challenge.

Logistics is also another space ripe for disruption. Google themselves are starting to pay attention to the opportunities presented in this space. Their purchase of BufferBox and the announcement of Google Shopping Express indicates that they are getting serious about logistics and supply chain. All those product managers and engineers at Amazon are no doubt also cooking up something up in Seattle.

True E-commerce 3.0 in my mind is end-to-end personalization. Not personalization to the purchase confirmation but personalization down to the actual product that’s delivered to your doorstep (and how it’s delivered to your doorstep).

So the next time you’re evaluating e-commerce opportunities or talking about the future of e-commerce – don’t overlook the disruptive changes coming to the often overlooked other half.