E-Commerce in change

Back to the future

Milestones in Digital Commerce

Almost 40 years have passed since Michael Aldrich demonstrated the first online shopping system [1]. The system used the videotex system of a converted TV set and communication took place via the telephone line. About 10 years later, the company CompuServe made a major appearance with its "Electronic Mall" ([2], see video), a text-based shopping system. While these milestones can be interpreted as cornerstones for electronic commerce, the big breakthrough came when the internet became publicly available and the it was possible to launch sites such as books.com Amazon and eBay in the mid-1990s.

In addition to these early players that were exclusively online, more and more traditional retailers recognized the need for this additional sales channel: their own store on the internet. This was implemented as a separate IT system and was subordinated to the ERP system, which played the central role.

Early years: Orientation towards ERP

Even though the scene changed afterwards and the store software increasingly covered more requirements than ERP, both models are characterized by two extremely heavyweight monolithic systems. This IT architecture has so far worked well for many companies, especially since emerging trends can still be integrated or implemented, even though this requires a lot of effort.

Problems in the Present

In the long run, however, these architectures can also lead to systems that are difficult to maintain and expand. A symptom that can be observed is the continuously increasing time to market, i.e. the time for the introduction of new features. The same applies to the elimination of errors. As a result, competitiveness decreases and costs increase due to the additional work involved.

The use of monolithic standard software can also have a strong effect on the company itself or its internal processes. The reason for this is that these systems try to do justice to all eventualities and choose a path that is generally valid from their perspective. Ultimately, however, this approach is a compromise that leads to unchangeable peculiarities and thus sometimes the software ends up affecting the business processes. If business decisions are then made under the influence of such existing systems, these systems, which originally served as support systems, mutate into hard framework conditions or even stumbling blocks. And business decisions subsequently affect the technical implementation. In the technical world, the term "workaround" is often used - a word that describes the circumstance well: "Actually, this should be solved sensibly, but under the given circumstances, there is no other way. The more such standardized individual systems are in use, the more limitations there are in the decisions and specifications for development.

One reason for this development has been the different perspectives on the further development of the entire topic of digitization in retail. On the one hand, there were traders who - like politicians - probably considered the internet to be a temporary phenomenon. After all, German Chancellor Angela Merkel still formulated the memorable sentence in 2013: "The Internet is uncharted territory for all of us." On the other hand, relatively early on, there were also forecasts of a decline in the number of stores in the (still) busy city centers and shopping malls. Both led to a separation of the sales channels:

  • Stores that have POS systems, but lack the integration of customer data and order information for personalized advice.
  • Catalog mail order and orders by phone, letter or fax, where IT support was available relatively early on. Each sale was associated with a customer (natural or legal person).
  • Online stores, which are processed via an autonomous system, with separate data storage (customers, orders).
MultiChannel - Different data pots (e.g. for customers or products)

MultiChannel vs. OmniChannel

The use of multiple, separate sales channels is called MultiChannel and this is still common. Alternative marketing models focus on the interaction between the channels, so that customers do not notice any or only a minor break in their shopping experience. When all sales channels are fully networked, this is referred to as OmniChannel. However, implementing such a strategy with the old structures can be very costly. It is also clear that predictions regarding changes in consumer behavior are very uncertain. But companies must be able to react to developments and should therefore remain flexible.

New Challenges

Not only the observation of the development of sales (see [3]) shows that there is a lot of movement in the market: on the one hand, some companies are strongly driving digital trade with new technology and thus changing the parameters for success. The integration of the relevant marketing channels or the personalization of content are standard features today.

Gartner analysts (see "Magic Quadrant for Digital Commerce", [4]) see two major developments in the coming years:

  • Commerce Everywhere: Digital commerce is moving closer to the customer. The topic gained momentum early on through the use of cell phones / tablets and the associated use of mobile versions of stores or native applications. Amazon currently has two applications in this area that are designed to make the shopping experience much easier: the "Dash Button" makes it easier to re-purchase a particular product at the touch of a button, while "Amazon Echo" is a versatile system consisting of a microphone and loudspeaker. Using voice control, shopping lists can be filled and ordered - a very advanced version of conversational commerce, which has its origins in interaction through Messenger (WhatsApp and Co.). Today, such small IT systems are found in a large number of devices and their use for shopping purposes will likely grow rapidly.
  • Artificial intelligence: The goal of using artificial intelligence is to be able to offer better personalized content in the future. These include conversational commerce solutions such as messaging bots or voice-controlled devices such as the above-mentioned "Amazon Echo". Even the self-ordering refrigerator could be used in reality and generate shopping lists based on recipes and existing ingredients.

Rethinking Is Followed by Restructuring

Due to the increasing digitalization of humanity and the greater use of social media, the focus of loyalty is shifting. The classic customer loyalty towards retailers is decreasing. Due to the large number of online retailers, the customer is in a very comfortable situation. Customers are no longer restricted by local proximity (as in pre-Internet times) or a small selection of eCommerce dealers (as in the early days of online trading). One has the free choice and searches for the dealer of trust according to various parameters. Some very successful merchants already meet customers in their comfort zones. This promotes customer loyalty - as in the case of the Commerce Everywhere solutions we have presented. Behind this is a new approach: moving away from optimizing individual sales channels, which are often mapped one-to-one as corporate divisions.

The new orientation is called customer centricity and focuses on the needs of the customer. This is confirmed by the trend towards even more individualized offerings (see [5]). However, customer centricity then requires not only a rethinking but also a restructuring of the company. A proven tool is the alignment based on the customer journey. The term describes the travel route of customers or defined target groups and marks the points of contact with the company, brand or product. A positive perception at these points of contact creates prestige and trust. This is an important basis for a long-term business relationship, which should be maintained even after a purchase. In this model, IT is no longer a service provider within the company, but an accepted part of the value chain.

Links & Sources:

  1. http://www.aldricharchive.com/internet_online_shopping.html
  2. https://www.youtube.com/watch?v=k-oBJml1mL0
  3. https://de.statista.com/statistik/daten/studie/3979/umfrage/e-commerce-umsatz-in-deutschland-seit-1999/
  4. https://www.gartner.com/doc/3877477/magic-quadrant-digital-commerce
  5. https://www.kanal-egal.de/e-commerce-strategie-was-unternehmen-2018-beruecksichtigen-muessen/