The Unbundling of eCommerce

Consumer purchasing behavior has changed dramatically as a result of the pandemic and subsequent stay-at-home protocols. Almost in an instant, the world shifted to moving most of its purchasing behavior online – this was obviously necessary given the circumstances, but consumer purchasing behavior effectively aged in dog years in 2020. The hockey-stick chart below reveals multiple years of growth being pulled forward into a single quarter. It’s unlikely this trend reverses itself post-pandemic given (i) younger generations are quickly becoming the dominant demographic for consumer spending, & (ii) the length of this pandemic has been more than enough time for new habits to become engrained behavior

e-Commerce Evolving

The origin of e-commerce is pretty straightforward: take goods previously sold offline and bring them online. Amazon & Ebay (both 1995) are the clearest and most well-known examples of this. Of course, there wasn’t much online purchasing going on (relatively speaking) during the decade after their inception. Most companies didn’t have the resources to develop an online footprint at the time; keep in mind Shopify didn’t come around until 2004. The first real evolution of e-commerce began around that time – smaller merchants and retailers could now afford to bring their products online. Not only was it becoming more accessible and feasible to develop an online footprint, but the distinction of online vs. offline also began to disappear. It was no longer an either/or question. Warby Parker and Bonobos are just two examples of companies that launched exclusively online before adding pop-up shops, and then ultimately building a brick & mortar presence. At the same time, traditional big box retailers such as Walmart, Home Depot, and Target had already established their own e-commerce platforms.

Next-Step Evolution

We’re now on the precipice of the next wave of innovation for e-commerce – it’s no longer enough to just be online. Consumers increasingly expect their purchasing experience to be seamless regardless of whether it’s through online stores, mobile, social media, live video, or text. The problem is that very few companies today actually provide this seamless integration across mediums because their systems don’t communicate well. The norm for e-commerce is a rigidly connected front and back end, limited by a central database or content management system. That’s about to change out of necessity. Consumers now expect that every interaction they have with a company, regardless of the medium, is being relayed real-time to all touchpoints. A few concrete examples:

• Customers communicating via SMS text about an item return expect that they can go to the nearest brick & mortar store and have a frictionless interaction
• Customer tweets about product experiences should influence email marketing
• Viewer interactions on Twitch should be reflected in targeted ad campaigns when browsing on mobile or YouTube

This unbundling creates a host of different verticals that are ripe for innovation, but I’m interested in focusing specifically on the marketing vertical. Millennials, Gen Z, & Gen Y have become the dominant demographics for consumer spending, and with that comes higher expectations for frictionless shopping. These consumers have come to expect one-click purchasing thanks to companies like TikTok. At the same time, traditional advertising doesn’t resonate nearly the same with these groups as it does with Gen X and Baby Boomers. We need only look to China for some insight into what we can expect in the coming years; live shopping has already become the top source of revenue-per hour, ahead of mobile gaming, television, radio, and online video. It’s clear being in front of consumers via live video is critical, and Twitch is by far the dominant live streaming platform in the world right now: 72% of all hours watched live on the internet happen on Twitch. Brands cannot afford to ignore this cohort – while Twitch users skew toward a more male-dominant demographic (65% identify as male; 35% identify as female), that gap has shrunk significantly over the past two years (previously >80% identified as male). The problem is how brands reach Twitch influencers today: they reach out to individual streamers, negotiate contract details, and sign agreements with most communication done via email. This is incredibly inefficient, makes it difficult for smaller influencers who may be a better fit for campaigns to connect, and is often expensive and time-consuming.

An interesting company trying to solve this problem is NYC-based startup Powerspike. It’s a platform connecting brands with micro-influencers to drive frictionless ad campaigns that form deeper connections with targeted customers. The company, which has raised ~$2 million thus far, (investors include Techstars Atlanta, Dorm Room Fund & Sixers Innovation Lab) matches brands with Twitch influencers and e-sports organizers to remove these inefficiencies and allow for deeper customer engagement for both sides.

Value Proposition for Brands:

• Efficient targeted advertising with engaged customer bases
• Clear and detailed reporting metrics to track campaign performance (impressions, clicks, conversions, engagement, etc.)
• Seamless negotiation based on budget and marketing goals

Value Proposition for Influencers:

• Better brand alignment for viewers
• A significantly larger pool of readily available sponsorship opportunities
• An easy-to-read metric dashboard to track performance
• Guaranteed timely payment

The most common Twitch promotions are giveaways, unboxings, and shout-outs but because Powerspike enables quicker and better ad-influencer fit, there’s a lot more room for promotion creativity based on the intended audience. The data reveal just how receptive Twitch users are to the streamers they watch: 80% of users approve of Twitch streamers using sponsorship, 70% of users donate to support streamers and 64% of users purchase products recommended by streamers. Those figures are even more revealing when you realize Twitch has more than 15 million daily active users, who spend an average of 44 billion minutes each month watching streams on Twitch. The narrative that Twitch is just a gamer streaming platform is a bit misleading as it continues to see more focus being put on music, do-it-yourself, creative and lifestyle content. The most popular Twitch category as of Q3-2020 is Just Chatting, with average views at any one moment of ~278,000 – this trumps even the most popular games like League of Legends (~218,000 views) and Fortnite (~120,000 views).

2020 saw some clear trends emerge in customer behavior, including an increased openness to new digital offerings and increased value placed on digital experiences. Independent businesses selling on Amazon saw historic demand during Black Friday this year, with 60% y/o/y growth – just under $5bn of sales occurred for these businesses from Black Friday through Cyber Monday. There’s no question the pandemic has changed the way people shop and it’s also forced advertisers to focus on media spend where it can demonstrate sales outcomes. Marketing budgets as a percentage of overall budget (and as a percentage of revenues) increased over the past year so it’s more evident than ever how important customer acquisition and retention is. As e-commerce begins to unbundle, it will be interesting to see how marketing dollars get spent and whether more bottom-up, guerrilla marketing initiatives reap greater benefit per dollar spent.

Sources Used:

McKinsey & Co. *Adapting to the Next Normal in Retail. *https://www.mckinsey.com/industries/retail/our-insights/adapting-to-the-next-normal-in-retail-the-customer-experience-imperative

BigCommerce. Ecommerce Trends That Are Powering Online Retail Forward. https://www.bigcommerce.com/articles/ecommerce/ecommerce-trends/

Influencer MarketingHub. Ultimate Guide to Marketing on Twitch in 2021. https://influencermarketinghub.com/twitch-marketing/

Learning Hub. https://learn.g2.com/sms-marketing-statistics