The Future of Ecommerce
Five trends shaping the future of retail
It might be counterintuitive but it’s actually easier to predict long-term trends than it is to predict near-term. This is apparently true for weather patterns as well as stock markets. This is what I thought about when asked to participate in a discussion about the future of ecommerce. I don’t think anyone really knows how this holiday season will be for ecommerce retailers but it’s likely that prognosticators probably have a good sense for what online shopping will look like in a decade. I might not be one of those but I do have some ideas. In fact, I have five trends that I think are worth watching over the next 5-10 years for ecommerce. These are GenAI, the continued importance of data, omnichannel retail, long-term customer relationships, and visual commerce.
GenAI is all the rage thanks to ChatGPT-4, Bard, DALL·E 2 and others. For those still confused, Generative artificial intelligence or GenAI is artificial intelligence capable of generating text, images, or other media, using generative models. These models are trained with massive amounts of existing text, images, etc. and they learn the patterns and structure of this data in order to generate new data that has similar characteristics but is unique. For ecommerce, GenAI will begin replacing search this holiday season. Almost every ecommerce retailer and marketplace that I know of is launching or has launched a conversational search engine based on GenAI. This allows customers to have a much more human-like conversation about what they are trying to find. Longer term, GenAI is likely to replace what we think of today as search. If you haven’t enabled Bard for Google searches, give it a try and you’ll likely find that the GenAI search results are all you need to complete your query. However, GenAI’s capabilities go well beyond search. The real long term play here is that GenAI will replace not only search but recommendation and personalization engines. These bots/implementations will through conversations gain a much better understanding of our styles, price ranges, must-haves, etc. and make much better personalized recommendations.
The next question beyond GenAI replacing search, recommendations, and personalization engines is will there be a single bot that we each interact with, à la the “point fives” in Ray Nayler’s The Mountain In The Sea, or if each ecommerce/marketplace will have their own. I think the latter for quite some time. I think it will be beyond the ten year timeframe before we see single bots that know enough about all the different aspects of a human to be our single interface. Until then, Amazon’s bot will know about my commodity purchasing habits, Etsy’s bot will know about my hand-made gifting purchasing habits, etc.
All of these AI engines will need to be stoked and the fuel that drives it is data, lots and lots of data. One of the earlier versions of ChatGPT was trained with over 570 GB of data from books, web texts, articles and other pieces of writing on the internet that in total exceeded 300 billion words. Brand and data are already the biggest strategic differentiators for Web 2.0 companies and this will only grow. Not only is the inventory data, that is now public on most sites, important but its value is growing. Even more value, however, is the user behavior data. What did a particular customer click on, like, add to their cart, etc. This data is what is really differentiating for ecommerce sites and is going to be heavily used to train GenAI models.
The next trend is Omnichannel Retail. This trend emphasizes providing a seamless shopping experience across different channels, both online and offline. It includes integrating the customer's experience from physical stores to online platforms and vice versa. Most of us want to support our local shops but we also love the convenience and wider selection that comes from online. This boundary is going to continue to blur. We will begin a shopping journey online, walk into a retailer whose systems can pick up on that journey for a sales staff to help us, we might try on products via augmented reality, purchase the item, and then have the delivery arrive at our house later that same day. Flowing back and forth seamlessly between online and offline will be as easy as moving a facetime call from your iPhone to your Mac. Companies like Nike have been at the forefront, integrating online and offline experiences to provide a seamless customer journey. Nike already offers some of this functionality to transition between online browsing and in-store purchases through its app, ensuring a consistent shopping experience across all channels.
Long-term Customer Relationships are going to be of growing importance. The focus for online retail is shifting towards nurturing long-term relationships with customers by providing personalized shopping experiences, on-demand customer support, and faster order fulfillment. This will all be facilitated by AI (see above). Long-term customer relationships have already become a priority for many online retailers. Amazon's Prime membership is a prime example of nurturing long-term relationships by offering benefits like faster shipping and exclusive deals. Similarly, Chewy has been focusing on providing personalized customer service and recommendations to build long-term relationships with pet owners, demonstrating a shift towards more personalized, customer-centric approaches in online retail.
The last trend is the growing use of Visual Commerce and Augmented Reality (AR). Enhanced shopping experiences through visual commerce and AR can help customers visualize products before making a purchase, improving customer engagement and potentially increasing sales. Many apps currently use AR to help see what a piece of furniture or wall art would look like in our homes but this will become more and more ubiquitous. Stand in front of a mirror with your phone and see different clothing sizes and styles on your reflection. Even today, Sephora’s mobile app allows customers to try on makeup virtually, and its stores provide a continuation of this digital experience. Additionally, clothing retailers like ASOS and Zara are exploring AR to provide virtual fitting rooms, enabling customers to try on clothes virtually from the comfort of their homes.
The future for ecommerce retail and marketplaces is exciting and laden with technological advancements that are set to redefine the shopping experience. The integration of GenAI, the emphasis on data, the blend of online and offline retail channels, the focus on long-term customer relationships, and the advent of visual commerce and AR, are trends that are not only reshaping the ecommerce landscape but also the way consumers interact with brands. As these trends evolve and intertwine, they will foster a more engaging, personalized, and convenient shopping journey, setting a new standard for what consumers expect from retail experiences. As retailers adapt to and invest in these trends, we can anticipate a future where ecommerce is more intuitive, interconnected, and consumer-centric.