Five E-Commerce Trends To Watch

The seeds of the trends now taking hold in e-commerce were planted in the industry’s early days, long before the shakeout began, according to experts. But only now, as the dust settles, are those trends starting to point the way clearly toward the future of e-commerce.

“What we have is the continuation of a lot of trends that began a while back,” Giga Information Group analyst Andrew Bartels told the E-Commerce Times. “And most of them are good for e-commerce.”

1: Multichannel Retailing Arrives

Shoppers are hopping back and forth freely among catalogs, retail stores and Internet sites, Harris Interactive director of e-business intelligence Lori Iventosch-James told the E-Commerce Times. And they expect a seamless transition.

“We now know there aren’t going to be these standalone silos anymore,” Iventosch-James said. “Companies that spun off their Web operations are bringing them back in because they realize they are better off presenting the customer [with] a seamless experience.”

An interesting corollary of this trend, according to Bartels, is that many brick-and-mortar chains have not taken the Web by storm as they might have wished. He cited Walmart.com and Sears.com as examples of e-commerce efforts that have “done okay, but certainly not what those companies would have liked.”

And he pointed out that Toys “R” Us long ago realized it did not have the skills to be an e-tailer, and partnered with Amazon to get it done right. Likewise, Iventosch-James noted, most pure plays have reached out to brick-and-mortar retailers for the same reasons.

2: More Satisfied Customers

University of Michigan researchers who track online customer satisfaction on a quarterly basis said recently that e-commerce companies made consumers happier than offline retailers during the do-or-die fourth quarter.

“Consumers know what to expect from e-commerce now,” Iventosch-James said. “A year or two ago, companies didn’t know what they were doing online. You had a lot of failures for that reason.”

In that sense, the shakeout may have helped, she added. Online shoppers came back despite some horrific customer service experiences, particularly during the 1999 holiday season, when Toysrus.com and others left shoppers in the lurch just days before Christmas.

“Most came back and gave the Web a second try,” Iventosch-James added. “Now, people are feeling a lot more positive about the whole online experience.”

3: Consumers Do Their Own Thing

For retailers and their marketing departments, the Web held special promise. It allowed them to know where customers came from and went online, what prompted them to buy, and what made them abandon a shopping cart and leave the store.

But despite that sea of data, consumers are still almost impossible to predict and even harder to change, professor Peter Fader of the Wharton School of Business at the University of Pennsylvania told the E-Commerce Times.

“Consumer behavior itself is amazingly static, and the Web hasn’t changed that,” Fader said. “Shoppers are going to do what they are going to do.”

The rush by online retailers to collect consumer data for its own sake may be slowing, he said, as offline retailers such as L.L. Bean and Lands’ End, which took a more measured approach, begin to show success on the Web.

Fader likened the early practice to “drinking from a fire hose” because retailers were bombarded with data and did not know which metric to focus on as they tried to improve performance.

Of course, companies probably will never stop cajoling shoppers to buy with sales, shipping deals and other promotions. But the bottom line, according to Fader, is that “even on the Web, the old rules still apply.”

4: Death of the Mid-Size E-Tailer

This is actually two trends in one, according to Bartels. While the number of large e-commerce companies shrinks rapidly through consolidation and shakeout, there is a growing legion of niche firms operating on shoestring budgets.

“The top sites like eBay and Amazon continue to take a disproportionate share of the income, yet there is still room for specialists and very small sites,” Bartels said.

Indeed, many dot-coms that have checked out through bankruptcy or acquisition fit the mid-market mold.

Companies like Egghead, which had its bare bones acquired by Amazon, and Outpost.com, which was bought by Fry’s Electronics, faced many of the same expenses as the big names but never captured a large enough market share to survive.

“Mid-tier sites, the ones in between, are having trouble making it,” Bartels said.

5: More Profits

The number of profitable e-commerce companies continues to grow and has almost, but not quite, reached the point at which a profitable dot-com is no longer a major news story, Bartels said.

In recent months, Amazon attained profitability, joining a club that includes auction giant eBay; job board Monster.com; travel sites Priceline.com, Travelocity and Expedia; online brokers; and specialty sites like FTD.com and 1-800-Flowers.com.

A year ago, Bartels said, Giga surveyed the e-commerce landscape and found that about one-third of the top 40 sites in terms of sales volume were profitable.

“We haven’t updated the numbers yet formally, but the level of profitability is probably much closer to 60 or 70 percent now,” he said. “That’s a trend that will continue simply because it has to.”