Future of Ecommerce: How Mid-Size Retailers May Change by 2022

Future of Ecommerce: How Mid-Size Retailers May Change by 2022

Technology plays a primary role in how retail and ecommerce function today. What once took up excess time for consumers to travel to a store, navigate aisles, and compare item-by-item based on what is on a package has been replaced by a few Google searches and reading aggregated reviews. Now that emerging technology like virtual reality, beacons, and voice assistants are finding their way into more consumer homes, what role will these play in the future of ecommerce? Not only is hardware improving and creating new ways for consumers to buy goods, but the software such as artificial intelligence is also improving how products directly correlate with needs and wants.

Over the next five years, mid-size retailers such as L.L. Bean, Hasbro, and Wayfair will see large impacts and face the most challenges. While we may not have a crystal ball, industry experts have a direct tap into the changing landscape of retail, so we asked them how they see mid-size retail and ecommerce shifting over the next five years. From emerging technology to shifts in how consumers receive their goods, there are a lot of iterative changes that our industry is likely to see.

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How Will Mid-Size Retailers Change Over The Next 5 Years?

Magento Commerce VP of Strategy Peter Sheldon

Many brick-and-mortar brands are going to see continued pressure on their brick and mortar business with flat or declining same-store sales and continued margin pressure. Conversely these same retailers will continue to see growth via their digital channels. This is going to set a precedence in terms of investment, with a willingness to divert budgets from stores to online and to omnichannel programs that drive foot traffic to stores after digital engagement.

There have been no shortage of brick and mortar casualties in 2017. Women’s’ apparel retailer Bebe announced in April it is to close all of its stores and shift to an online only model to stave off bankruptcy. There will be many more stories like this over the next 5 years, however many of these retailers will survive and even thrive as they adopt to the new reality of operating either primarily or exclusively in the digital realm.

Bronto Senior Commerce Marketing Analyst Greg Zakowicz

I don’t expect we’ll see drastic changes from many of them. I think retailers will do more behind the scenes to integrate data sources and sharing. We might see retailers put more emphasis on improving the overall value they provide to customers, by providing more personalization and value-driven loyalty programs, for example. Of course, much of this requires accurate, integrated data. Without that, marketing programs likely will fall short of expectations.

Blue Acorn iCi Founder Kevin Eichelberger

When I think about how retail will change in the next 5, 10, or 20 years, I think about consumer expectations. Then it’s just chasing whatever the expectation is at the time. If there is a driving expectation in five years, I’m assuming, mobile first will be well underway. That assumption aside, there will be more personalized experiences across mediums.

Today we are see retargeting ads for something you just bought, it’s kind of stupid. They use email marketing and retargeting on people who have already bought the item or may not even be interested in it. It’s the mass marketing approach that got the industry to this point, but it must be replaced by more personalized one-to-one marketing. Next, experiences. Every interaction you have with that customer should be tailored. It may not be a one-to-one state in 5 years, but more one-to-everyone or smaller groups. People will gravitate toward tailored experiences.

Windsor Circle VP of Business Development Gautham Pandiyan

These are the companies with the biggest potential for explosive growth, especially if they truly harness the power of technology the right way. Depending on how much these retailers/brands master the use of technology to truly connect with customers, they will either have seen this growth or faded away in a crowded landscape. Some of them are new to direct-to-consumer marketing, so it will be sink or swim for us.

AddShoppers Cofounder Chad Ledford

I believe mid-size retailers need to be broken into different categories – those that have their own brand of products and those that sell other brands. The retailers that own their own brands will continue to be competitive by offering unique products and product education to their brand communities. The retailers that sell other brands will need to acknowledge the fact that they’re competing directly with Amazon.

The only way to beat Amazon is to offer something unique. Offerings like:

Which If Any Emerging Tech Will Become Widely Adopted Within The Next 5 Years?

AddShoppers Cofounder Chad Ledford

Yes, this goes back to the unique experience concept. Customers enjoy doing new things and experiencing new emotions. Anything that drives that emotional connection and emphasizes a customer’s belief is going to drive loyalty. Simply having these technologies (VR, AR, etc.) won’t enable emotional connections that build on individual beliefs but they will offer a unique hook for brands to entice customers.

Peter Sheldon VP Strategy at Magento Commerce

No. Each of these emerging techs will play important roles in niche segments of the market, but none will see widespread adoption.

VR for example will likely see investment from car, boat, furniture and kitchen manufacturers as a means of providing immersive discovery experiences for high consideration purchases where the comfort of visualizing and “virtually” using the product in the comfort of the consumer’s home will elevate the need to engage with a “pushy” sales rep in a physical dealership.

Augmented reality will remove discovery friction in the store environment, allowing consumers to “augment” reviews, competitive pricing and product specs in an almost real-time basis by simply pointing their mobile camera at a product on the shelf.

Bronto Senior Commerce Marketing Analyst Greg Zakowicz

In some cases, yes. In most cases, no. I believe virtual reality will be more prominent but I don’t think people will be wearing headsets to do the majority of their shopping. For brick-and-mortar stores, beacons will probably become more mainstream than they are today, but it will take some time for retailers to figure out how to use them to provide value to their shoppers. They need to make sure they get it right – almost from the start. Otherwise, consumers won’t adopt them readily over time. Again, it’s all about value for the consumer.

Some online retailers will likely rely on some technologies more than others. Looking at ways furniture retailers can help people picture items in their house is a great example. How much more can this be improved than what we see today? Who knows. Does it need to be improved drastically? I am not sure it does.

Voice assistants are an intriguing topic, because that technology puts us at the front end of “browserless commerce.” No one really knows what the user’s experience will be. Will we be able to shop using voice commands? Already, we can purchase items on Amazon using our voices. But will our daughters use it to purchase a prom dress? I don’t think so. I don’t think anyone can predict this, but the run-of-the-mill ecommerce retailer will not be using it on a day-to-day basis the way Amazon users do now.

As with any technology, simply implementing it does not improve the shopping experience. If the technology makes the experience better then it will be adopted. If the experience is about the technology, ultimately, it will fail.

Blue Acorn iCi Founder Kevin Eichelberger

A lot of people think it AR/VR will become standard, but it won’t be widely adopted in five years. People are moving toward it, but I also tend to think that technology that fundamentally change a person’s life takes a long time to be adopted. AR and VR have been around for at least five years, and they will take a while to become mainstream. Just look at smartphones: They have been around for 10 years, and are just now adding native mobile-payment features. Investment made in it today will be a longer term ROI, aside from maybe specific product segments.

Windsor Circle VP of Business Development Gautham Pandiyan

Alexa? In five years, voice-driven systems will become more adopted by the mainstream, and it will be integrated with your phone. If you look at purchasing channels today and the largest growth, voice activated would probably grow the most in the next five years. The barrier to entry is low, but for AR and VR it’s high. Consumers need special devices, equipment, and there is the isolation of people, and people still want social experiences.

Voice assistants have the most potential of mainstream adoption in commerce. They are already in extensive use (Siri, Alexa, Cortana etc.), and AI like Watson is already powering shopping experiences on-site for The North Face. Many of the other technologies might find it a bit harder to fit in widely (think 3D TV anyone?). However, virtual reality could have a good play in apparel, luxury, sportswear and related verticals

How Will Shipping Change In The Next 5 Years?

Windsor Circle VP of Business Development Gautham Pandiyan

Given our exclusive partnership with FedEx for predictive marketing technology, we have some unique perspective on this. Customer expectations continue to rise (with Amazon setting the 2-day standard), so I expect in 5 years this will continue to be so, with perhaps same-day shipping being the norm. Maybe Amazon’s vision of floating distribution centers & drones will come to pass (unlikely), or if 3D printing becomes more ubiquitous, it might do away with a lot of shipping needs.

AddShoppers Cofounder Chad Ledford

It will get faster. There will be closer distribution systems. Amazon will take market share from UPS, Fedex, etc., and brands will begin moving logistics to Amazon’s full-service model because of cost savings. The cost savings will come by eliminating human labor and replacing it with automation. The time to delivery will come from a more efficient delivery process which could be self driving vehicles, self driving drones, etc. The key here is “self driving.”

Peter Sheldon VP Strategy at Magento Commerce

Delivery/shipping is rapidly becoming the frontline of the ecommerce battleground. As consumers continue to embrace programs like Amazon Prime and leverage same-day delivery options, one of the remaining advantages of physical brick and mortar (fulfillment immediacy) will erode. To compete with Amazon, other major retailers like Walmart and Target as well as the incumbent carriers will double down on experimenting with new forms of fulfillment convenience.

One great example is Walmart’s recent announcement of a trial to leverage employees to deliver online orders. The idea is simple, employees on their way home from work will deliver online orders (using inventory from the store they work in) to customers that live close to the employees commute route. For Walmart, this simple idea allows them to leverage a unique asset – their 1.4m US employees to drive delivery innovation with very little upfront investment and at a very low cost.

Delivery is set to become consumerized, meaning the consumer will determine the terms under which they expect the delivery to occur. Not only will this be the SLA of the delivery in terms of timescale (I need it today), but also the timeslot of the delivery (I want it between 2-4pm) and the location (please leave it in my backyard).

Bronto Senior Commerce Marketing Analyst Greg Zakowicz

Wow, great question. U.S. consumers already expect free shipping, and their tolerance for longer shipping windows, even with free shipping, is lessening. We will likely end up in a place where free shipping in 3 or less days is expected. There will always be exceptions for custom products. However, I would not be surprised to see a slow revolt against the “big guys” where consumers purposely choose to wait the extra day, or pay a little more so they can buy from a smaller retailer. People love the underdog, and when mass consolidation happens, many times consumers have pivoted in the opposite direction.

This is all predicated on domestic purchasing. As more consumers participate in the global marketplace, they might be willing to wait a little longer for their product to be delivered. This could help train people that immediate shipping is not needed, and their tolerance for slightly longer shipping windows or cost could be expanded.

For brick-and-mortar retailers, I think we will see a bigger push to drive people in-store. These retailers may stick to a shipping charge or longer shipping windows for at-home delivery, while quicker and free delivery will happen for in-store pickup. This would provide consumers the option to receive fast and free shipping, while providing retailers what they want – in-store traffic.

Blue Acorn iCi Founder CEO Kevin Eichelberger

The challenge retailers face today is that the online delivery and returns model is not sustainable. The cost of free returns is astronomical. While digital first-companies are funded, they operate at a loss in this department, which makes it hard to operate profitably. Technology will lower the cost structure and make it more sustainable. Logistically, remove yourself from the ecommerce world and just think logically. If I’m going to ship you a cup that costs $20, pay someone to wrap it up, have a truck drive to that location, have it picked up, a person then puts it in distribution center, then a delivery driver brings it right to you, only to then decide you don’t like it and have to return it… for a $20 cup, it’s not a sustainable model.

That whole delivery infrastructure will be essential for change to be sustainable. In the past, this was done through distributors. The whole flattening of that model has come at quite an expense, but it’s still probably cheaper today. The biggest cost is the shipping providers. If you want to reduce cost, you’d have to eliminate them in their current form. Drones could be a big solution for that.

If you’re interested in how ecommerce will change over the next 20 years, read more from our Future of Ecommerce series.