The Future of eCommerce — Everything as a Service.

What are the most important trends in eCommerce and retail sector? I have done a little research and here are the results.

When we discuss the future of retail, we always hear the same terms: omnichannel, beacons, personalization, marketing automation, content marketing, VR, AR. Now, there are two new hot terms around: chatbots and machine learning, but most companies don't really know what to do with them. No doubt there is a great potential, but the technology is not yet there.

If I could make a photo of my room and say: “Hey, IKEA, what could I change or add here?”, and then receive an automated answer, that would be something. But it is still a science-fiction.

All these things seemed too obvious to me, or too ahead looking. Yet, I have discovered a trend, and the commonness and versatility of it took me by surprise. I think I could described it as:

“Everything as a Service” — digital solutions with aim to facilitate consumers’ lives by automation or outsourcing, sales integrated with personal advisory, focus on using instead of owning — all of this usually available as a subscription.

Subscriptions.

It seems that digital services available as a subscription (Spotify, Apple Music, Netflix, Playstation Plus, etc.) made this payment model so popular that it has become quite natural for users and made its transition to other areas.

Amazon Prime

Probably the largest subscription program in the world is Amazon Prime. It grows with amazing speed. In March this year it was used by 80 million people in the USA alone. And the most interesting is the fact that members of Prime pay the subscription fee and, additionally, their annual spending on shopping at Amazon is twice as high as spending of other clients.

Business Insider

The Starbucks „My Rewards” loyalty program is equally developed quasi-subscription program. Clients have their prepaid cards to make easy payments via mobile application and collect rewards for specified number of purchases.

9 million users make Starbucks earn hundred million of dollars per year solely by being interested in buying a coffee in its restaurants, even before the purchase is finalized.

Starbucks My Rewards

The subscription model is very beneficial for the business. But what benefits are there for customers?

The following table shows three groups of clients’ needs and the way they can be addressed.

Now, I will provide examples from many different sectors.

1. Automatic Refill: Don’t Make Me Think.

In case of some purchases, for instance everyday food products or household supplies, consumers select usually the same things. They have their favorite brands or products. These are not expensive things, and as much as the price counts, the time-saving and convenience are the priority.

It would be great to have such purchases made automatically without the need to think about them or remember them.

There was a lot of talk going last year around acquisition by Unilever of Dollar Shave Club for 1 billion dollars. Dollar Shave Club is a model e‑commerce service available as a subscription, where subscribers can receive the same shaving product every month. It is a very simple and attractive model as the consumer does not have to give his/her shaving problems any thoughts.

Dollar Shave Club

It is of course natural for the retail moguls, such as Amazon or Target, to offer automatic refill of favorite products. The subscription of many products makes their prices lower. Users may withhold the delivery at any moment or change parameters thereof.

Amazon Subscribe & Save and Target Subscriptions

However, it is not quite an ideal mechanism if we consider customers' perspective. Our preferences and use patterns are ever changing — we have better solution for that in K2 but I have to keep it secret for now :)

There is a quite fresh service, implemented by Carrefour Poland, that fits this model partially. The service is called SąSiatki and it makes shopping easier and less time consuming. It is not about subscription, but it allows to outsource shopping to other users based on so called “sharing economy mechanism”. We participated in this project designing the Carrefour mobile application.

2. Dedicated Offers: Surprise and Personalization.

Sometimes consumers’ expectations are not the same as always. On the contrary. They would like to discover new products, gain new experiences, based of course on some pre-defined parameters. This is the union of surprise and personalization.

You have probably heard about surprise boxes available for subscribers. They are on the market for some time already. They are sent to subscribers on a monthly basis or less often, and contain different products, allowing consumers to discover new stuff and experience something new each time.

In Poland this market has not developed much, probably because big brands neglected to make serious investments in it. However, it looks quite differently in United States. Target, for instance, offers a monthly subscription of books (idea as old as the hills), sets of cosmetics or home decorations. There are also a lot of start-ups in this area, such as BirchBox with cosmetics, Graze with healthy snacks, or Stich Fix in fashion sector (you are free to send back what is not your style from the set composed by the stylist). There are even subscription aggregators of different boxes from different companies.

Target, Birchbox, Graze, Stitch Fix

The service of Bark company is an excellent example in this category. The company sells dog toys in its BarkShop and by way of subscription as BarkBox (boxes sent on monthly basis).

There is also the “Destroyers Club” . It associates owners of dogs that are able to destroy any toy in no time — the more your dog destroys the more discount on the next shopping you get.

BarkShop

There are also weird ideas. Like Lufthansa Surprise. It is the offer of plane tickets to some randomly selected destination but with a guarantee that the surprise will be sold for good and fixed price. A few airlines have similar category in their offer. It surely helps to fill empty seats.

Lufthansa Suprise

Moreover, there are products-services that may be developed iteratively, adjusting them to your preferences.

IntelligentX Brewing Company is the first company in the world claiming to sell the beer brewed by the Artificial Intelligence. How does it work? The client writes down his/her expectations filling the special form and later, after drinking the beer, provides feedback in another questionnaire. Was the beer good, maybe too bitter or too sweet, how about the flavor, etc. The feedback is used by the algorithm to learn and modify the recipe so next time the client could receive new and better product, more to the client’s liking.

IntelligentX Brewing Company  —  world’s first beer brewed by artificial intelligence

Alpstories — the startup that sells personalize cosmetics — has adopted a bit similar modus operandi, offering the option to improve product iteratively.

Alstories

I have noticed certain trend with regard to surprises, personalization and recommendations. I even gave it a name: u-commerce (like from “you” — and I do hope it will root. :) This is a shopping experience fully concentrated on the user. The user does not look for products, instead, he receives recommendation of products selected for him/her.

I have an example from the fashion industry: Shoedazzle (along with their other websites, such as JustFab and FabKids). During the registration process the client writes down her preferences, choses the type of products she is interested in, preferred style and provides shoe sizes. Then she can see selected products. The main view in the shop is the personalized “showroom”, where the products change periodically. The service is also available as a subscription.

Shoedazzle  —  configuration tool and personalized showroom

I also see some similarities in recommendation area in the Nike mobile application.

3. Making decision easier: reduction of entry threshold, better information and advisory services.

How to make shopping easier if the choice is hard and time-consuming, and the decision may be painfully risky (with regard to finance, self-image or possible disappointment)? Like in case of buying a car, flat, or a holiday trip. But it can also be smaller things, like image-related products, for instance clothes. The consumer expects risk reduction, better information and a bit of advice.

Subscription fee may help to reduce entry threshold for clients. Access economy is a business model where clients pay for access to the product (as long as they need it), not for owning it.

Let us start with cars. Care by Volvo service enables use of a vehicle against monthly payment without the need to bear high purchasing costs. The user doesn’t have to worry about periodic maintenances, technical tests, tires replacement or insurance. It is all done for him/her.

Then, we have Porsche Passport. It is a subscription for access to any Porsche car available in the company’s offer. Ordered vehicles are delivered door-to-door. The user may freely change models using mobile application and drive different car almost every day. Right now this service is available only in USA.

Care by Volvo and Porsche Passport

Audi on demand is a similar offer of the German car company. “Own the experience. Not the car” — says the ad.

Audi on demand

Previously, the service was called Audi Unite and had even more interesting form, as the subscription fee could be divided between a few people. The mobile application enabled you to use a car together with your friends — you could reserve the time to use a car or check where it was parked lately.

The leasing program of Polish Getin Bank — Happy Miles, is a bit similar in concept. The client pays for the distance covered and not for actual use of a car.

Now about other sectors. Swivelfly — the American company offering furniture for offices as a service. Instead of buying desks, chairs, sofas and all remaining office equipment you can simply rent it against a monthly fee. You can rent more or less, depending on your company’s needs. This solution can prove convenient especially for start-ups, as the duration of their existence is hard to predict.

Swivelfly  —  furniture as a service

You can easily set up your order using online creator.

Then again, there is Rent the Runway. The company in the USA that offers subscription for... clothes. It is a really complicated and huge technological undertaking if we consider the logistics (dispatches, returns, washing and cleaning).

Rent the Runway

And what about combination of selling and advisory services? Worry not! There is a whole group of companies from the fashion sector offering subscription for services of personal stylist who will make us look (and then of course we can buy all things). These types of services are usually directed to men. Hmm... We know the name and face of the stylist, we can talk to her/him and give our feedback regarding selected items. Of course the work of people is supported by the recommendation algorithms.

The Cloak Room, The Chapar, Thread and stylist recommendation

The similar idea drives the operation of Havenly company from house décor sector. You can use the advice of the professional designer who will tell you what kind of furniture, decorations and appliances fit your house the best. And then you can buy it all together. The basic and free of charge version offers quick consultation, while the more advanced version includes a few weeks of online consultations with an architect, ended with 3D visualization.

Havenly

To be continued...

I have tried to show you different ways of thinking about business models in e-commerce. We can end with a totally fresh vision of business if we really focus on the needs of customers.

If you want to know more and get a grip on our ideas for innovative solutions in various e‑commerce sectors, please contact me: maciej.lipiec@k2.pl. We will help gladly!

Creating products. 15.05.2018.
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