February 12, 2013

How Will I Know If Mobile Is Crushing E-Commerce?

Let's go old-school, way back in 2001?  Remember 2001?  Pink topped the charts with "Get The Party Started".  By the way, there was a ton of chatter about e-commerce.

My boss was President of the e-commerce / catalog division at Nordstrom.  He believed that call center sales could continue to grow, in spite of e-commerce.  The data did not support his belief.

To support his hypothesis, he asked me to run a query for him.  He wanted a segment of customers that were "identical", and I mean "identical" in historical quality ... like 4 historical purchases for a total of $600, all generated via the call center.  Then he wanted customers in this segment to make a decision in, say, December 2000 ... half decided to purchase via the call center ... half decided to purchase via e-commerce.  Once this audience was defined (about 2,000 customers out of maybe 1,500,000 twelve-month buyers), he wanted to measure spend across channels in the next twelve months.

His hypothesis:  The call-center buyer who switched to e-commerce would go back to the call-center.

The results:  Not so much.
  • Call Center Buyer Switching To E-Commerce = $35 at Call Center, $85 via E-Commerce, in the next 12 months.
  • Call Center Buyer Staying With The Call Center = $110 at Call Center, $10 via E-Commerce, in the next 12 months.
This told us that the call center was dying.  It did not mean that catalogs were dying ... though our mail/holdout tests also proved that catalogs, too, were dying.  Mail/holdout tests showed that when the customer switched to e-commerce, the customer started buying without needing a prompt from catalogs.

You should have seen the faces of the old-school folks in the room (many of whom were former Lands' End executives who had catalog marketing in their blood) when these two facts were presented, in tandem:
  1. When a customer switched from the call center to e-commerce, the customer spent the majority of future revenue via e-commerce.
  2. When catalogs were not sent to e-commerce customers, e-commerce customers purchased anyway.
It's one of those "I can see the future, I don't like the future, therefore, the messenger of the information must be fired" kind of looks.

Few people embrace a message that leads to the logical conclusion that the job that they do is being eliminated by technology.  What would you do if somebody told you that your job, as currently configured, would not exist in a few years?  You might not feel terribly comfortable about the message, right?

This brings me to e-commerce.

In the next five years, there are going to be two camps, each fighting for the future of commerce among Jasmine's generation.  Here they are:
  1. E-commerce is part of a complex ecosystem called "omnichannel".  Without e-commerce, omnichannel, and mobile, fall apart.
  2. Mobile will reinvent commerce, and may obliterate e-commerce.
You can understand which camp is winning among your customer base by running the query I was asked to run way back in 2001.  Take customers who were loyal e-commerce buyers, segment them, and choose customers who are very equal.  Split them into those who continue to buy via e-commerce, and those who switch to mobile.  Then measure future spend by e-commerce or mobile.  For the moment, ignore all of the pundits who tell you that all e-commerce channels influence mobile and therefore cause you to not be able to run this query ... you're running this query to understand if the physical channel preferred by the customer changes.

If you find that the customer goes back to e-commerce after a mobile purchase, then your business is leaning to the "omnichannel" view of the world.

If you find that the customer stays mobile and doesn't spend a lot via e-commerce, then your business is leaning toward "mobile will reinvent commerce".

By the way, the results of this query change as time progresses.  What we saw at Nordstrom in 2001 did not become apparent to many catalogers until 2005 or 2006.  Keep running the query.  Multichannel was a concept that was temporary ... it only mattered while customers were making a transition, and was apparent only when the transition started.  Almost nobody talks anymore about the critical importance of having a catalog in a multichannel strategy, because the transition is complete.  This pattern of renewal is likely to happen again with e-commerce ... it is currently being labeled "omnichannel".

Don't let the pundits tell you what "will" happen.  Let your customers tell you what "is" happening.