Mike Mallazzo of Dynamic Yield, shares his views on the year ahead in e-commerce tech, from the need for vast amounts of data to gain ground in the machine learning era, to the idea of Patagonia as a target for Amazon.
Fifteen years ago, the existential threat to many major retailers was a small online bookshop. Ten years ago, the medium that drives 60% of online retail traffic didn’t exist. Five years ago, personalisation was a nascent technology experiment being conducted by a few enterprise retailers. One year ago, the term “retail apocalypse” didn’t even exist.
With the pace of innovation in e-commerce technology, predicting how retail tech will shake out in 2018 is the ultimate fool’s errand.
1. The golden age of customer experience will shine brighter
Today’s e-commerce professionals aren’t just thinking about changing colours on banners and buttons. The conversation has shifted to thinking about the entire shopper journey and how to optimise every element of it.
As barriers to entry in e-commerce crumble, there are scores of e-commerce start-ups in every category competing for your affection. Concurrently, there are thousands of marketing technology vendors trying to sell these companies technologies to help them deliver superior digital experiences.
The competitive landscape is fierce, breeding incredible innovations in every corner of retail from supply chain and logistics to in-app augmented reality. With smart people competing across the internet to capture our attention, the end experience for the end user will continue to get better and better.
2. Artificial intelligence will finally make a real impact, but with little glitz and glamour
With honorable mentions to “growth hacking” and “storytelling”, no buzzword was more abused in 2017 than “artificial intelligence”, or AI. It’s replaced big data as the new teen sex with everyone talking about it and nobody doing it.
However, the problem with adoption of AI in e-commerce has not been limitations of the technology itself. It’s been in access to data to help the machines learn. In order to meaningfully impact the customer experience, machine learning algorithms need to ingest vast amounts of data; machine learners are ultimately only as good as the school supplies you arm them with. However, even for tech-forward retailers, this data often exists across a myriad of software programmes and dusty basements of servers making it impossible for them to create unified profiles of their customer.
Low hanging applications of AI in retail lie in solving unsexy problems, such as which recommendations strategy to serve new visitors to an e-commerce website. While AI won’t upend retail anytime soon, practical applications of machine learning to common e-commerce problems will proliferate in 2018, benefiting brands that adopt the technology.
3. Retail’s middle class will face its toughest year yet
Already eviscerated, retailers and department stores that sell to the middle class will encounter even tougher market conditions in 2018.
All of the feel good articles saying that a lemonade stand can compete with Amazon leave out an inconvenient truth – most of the brands successfully competing with Amazon sell really expensive goods. The median household income in America simply can’t buy Away luggage, a Rent the Runway subscription or $150 shoes from Rothy’s.
Quietly, the retail apocalypse has also been a boom time for hyper discount retailers such as Dollar Tree, who can still compete with Amazon on the basis of price. Incredibly, one company, LA-based Hollar, has successfully managed to take the dollar-store experience online, blending competitive pricing with sophisticated supply chain and digital technology.
Expect Hollar to become a true household name in 2018 and beyond and a company that delivers real value to the e-commerce ecosystem.
4. Amazon will meaningfully enter fashion by way of acquisition
Last time Jeff Bezos couldn’t crack a niche e-commerce market, he simply bought out his competitor, Vito Coreloning diapers startup Quidsi. Look for Amazon to bring back this playbook in 2018 to finally break into fashion.
Amazon whisperer and NYU professor Scott Galloway predicts that Nordstrom will join the Amazon empire next year to plug this gap. An even bolder prediction from Gene Munster has Amazon buying Target in 2018 for about $40 billion. While Amazon has shown a willingness to swing big with the Whole Foods acquisition, I’d look for slightly smaller stores with high margins, nouveau riche clienteles and chic brick and mortar presences to be prime targets. Amazon can buy a retailer with less than $1bn in revenue with pocket change while avoiding pesky antitrust concerns.
Bold prediction: Amazon unites the South American topographies by making a bid for Patagonia. Bezos picks up a socially active brand beloved by millennials while Patagonia does the deal to lower prices and to provide financial cover for even more political activity
5. Brands will have less value than ever
While Amazon’s shadow looms everywhere, retail’s old guard is also being hammered by the fact that more shoppers every month are simply ambivalent about the logo on their clothes. For many millennials, the $12 black polo with no logo is just as good as the $70 Lacoste polo with a cute little crocodile.
Perhaps nothing is more telling than the fact that one of the VC darlings in e-commerce is literally called “Brandless”. In 2018, expect a lot more nice apparel from no-name brands to flood the market, increasing pressure on many iconic brands to win on the basis of customer experience rather than brand equity.
Mike Mallazzo is the head of content at Dynamic Yield, a personalisation technology start-up. His writing on the future of commerce, media and technology has appeared in Quartz, Entrepreneur, Forbes, The Next Web, MediaPost and the Chicago Tribune.