Where Do You Fit in the New Retail Web?

What's This?

By Graham Cooke2013-08-16 09:00:30 UTC

Ecommerce has been around in one form or another for nearly two decades. It began when retailers first put their offline catalogs on the web — and, while there have been many advances in areas such as technology, payments and fulfillment since that time, the basic rules of selling have remained surprisingly static.

However, the retail web is now changing, as new types of online stores emerge to challenge the dominant paradigms of internet retailing.

With the rise of a new wave of online retailers, there are two clear models emerging in the online retail space:

Utility Commerce

The traditional form of web retail, utility commerce is the online equivalent of "big box" discount retailers, piling it high and selling it cheap.

They maintain massive product ranges retailed at paper-thin margins, giving consumers quick, cost-effective and utilitarian retail experiences. This model only works at enormous scale, with the minimal margins only creating value at huge volumes.

Experiential Commerce

The exciting new model that’s emerging is the experiential retailer. A new generation of web retailers are rebelling against the restrictions of the utility commerce model. They’ve recognized the challenge of competing head-on with Amazon, and have taken a new slant on web retail.

The likes of Net-a-Porter, Topshop, Farfetch.com and Fab.com have recognized that, just as in the offline world, retail isn’t just about utility. People want to enjoy a retail experience as well as fulfill basic shopping missions. These players are changing the ecommerce game, and are creating a destination and social experience for their customers. What’s exciting for retailers in this approach is that a more engaged customer can support a better margin model, meaning that Amazon-like scale is no longer a prerequisite of a retail business.

The fight between utility and experiential commerce promises to be one of the hottest yet seen on the web. The question is, what are the keys to success in each model?

Top Tips for Utility Sites

Speed is king. On a utility retail mission, speed is everything. Customers know what they want and they want it fast. Everything from technical infrastructure to site navigation and payment options must be focused on getting the customer through to checkout as fast as possible.

Ratings and reviews are vital. Customers don’t want to hear from you about your products; they want to get short and sharp reviews from other customers, helping them choose from the wide range of products on offer.

Search and navigation need to be effective. A utility shopper wants a service that lets them find what they want simply and intuitively, so effective navigation and intelligent search are musts. If you don’t offer this, consumers will rapidly defect to the competition in a market where brand loyalty is weaker than price or convenience considerations.

Merchandising should be straightforward. You want to help your buyers complete their focused shopping mission in the smallest number of clicks, so personalization should focus on predicting their missions, rather than delighting them with serendipitous suggestions. Giving them related products or "people who bought this also bought that" can help shoppers fill their baskets more quickly.

Consumers should have a wealth of choices. A utility site needs to cater to every possible retail journey so that product lists can be effectively endless and uncurated. Utility shoppers look at the site as a utility provider, not as a trusted guide, so product curation should be minimal.

Top Tips for Experiential Sites

Content is king. On an experiential retail mission, shoppers want to do more than just click, buy and leave. They want to be engaged with rich content, media and blogs. They want to feel like they’re having an editorial experience as well as a retail experience. This gives the experiential retailer a much greater opportunity to build relationships with its customers, giving it greater differentiation, and therefore margin opportunity, than its utilitarian counterparts.

Be social. An offline experiential shopping journey is often social, with friends or partners visiting boutiques together to share a special retail experience. The same is true on the web, as experience shoppers want to share the products they’ve viewed and bought or the editorial content that they’ve consumed. The growth of Pinterest is proof of this. Giving customers the ability to integrate their social media lives into your retail experience will build further loyalty.

Merchandising should be intuitive. Unlike on the utility web, experience shoppers are looking for guidance from the retailer — they actively want collections to be edited and curated. Therefore, merchandising can be more creative and inspirational, giving shoppers "editor’s choices" or "look books" to help guide their purchases.

Provide rich retail tools. Experience shoppers want to take their time over their retail missions. They haven’t arrived at the site with a specific purchase in mind, so tools such as virtual fitting room Fits.me can help them choose brands and products. There will be a huge growth in these rich retailing products over the next couple of years.

Build for the long term. Purchase cycles can be longer on an experiential site because shoppers consider a range of different options, share their possible purchases with their friends and compare different features. Sites should therefore be constructed to cater for multi-visit customer journeys, taking the purchase stage into account when presenting personalized pages.

Which Site Will Win?

The winner in the utility versus experience war is not, and may never, be clear. Indeed, some might argue that the teams are fighting on different fields, targeting different groups of consumers. Alternatively, you could argue that they’re addressing the same consumers, but in wholly different shopping modes — doing the weekly shop on the one hand, versus shopping for a dress on the other.

Either way, the rise of new retail models is not only an indication of the increasing maturity of the ecommerce market, but also that online retail marketers can still look forward to many years of change and excitement.

Image: Valery Hache/AFP/Getty Images