5 Trends Influencing the Future of Ecommerce, According to Bill Gurley

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In recent years, there has been a meteoric rise and growth of ecommerce startups disrupting traditional retail models.

Companies like Zola are changing wedding registry. Casper is reimagining how we sleep. Boxed is making wholesale accessible for all. Once online-only companies like Rent the Runway, Birchbox and Bonobos have aggressively been building out their brick and mortar outposts. And this is just to name a few of the key players on the rise.

All the while, traditional retailers like Target, Sears and Abercrombie & Fitch have been closing shop at hundreds of locations across the US.

It’s become very clear that the tides are changing in the world of commerce. Digital retailers still have a long way to go and huge opportunity to evolve, while more traditional retailers are challenged to meet the demands of the modern consumer. So, what’s next?

The Future of Ecommerce

Understanding and defining the future of ecommerce is something everyone at Sailthru is passionate about. And few industry leaders have a better grasp at identifying market shifts than legendary Venture Capitalist of Benchmark, Bill Gurley.

Bill has built a career on growth, innovation and disruption, and is an investor behind a few little companies you may have heard of including Uber, OpenTable, Zillow, GrubHub, and Sailthru.

We hosted a fireside chat in San Francisco with Bill and Emily Chang, correspondent and tech journalist of Bloomberg West, to talk through what the future of ecommerce looks like, where companies should focus, and a whole lot more.

While the chat was covered all over the media, we’ve put together the 5 key trends influencing the future of ecommerce from this interview every retailer needs to know. Want to hear it in Bill’s own words? The full video is at the bottom of this post, and you can use the timestamp for each section to jump to each trend covered in the interview.

Trend 1: Retention is king (18:25)

When faced with daunting questions like, “How could a company compete with the likes of Amazon or Google?” Bill brings up something many companies are challenged with: the push and pull between customer acquisition and customer retention.

“We spend so much time on acquisition, and are not focused enough on retention. You have to focus on improving the relationship with your current customers, and if you pull that off you can then be way more effective at finding new customers.”

While most marketers know accept that more than 80% of future revenue comes from 20% of customers, at Sailthru we’ve found that up to 95% of future revenue will come from just 5% or less of your existing customers. And while you shift some of your acquisition budget to maintaining existing relationships with your customers, many marketers also find that the quality of customers increases in parallel.

“People seem to have unlimited budgets for acquisition. You cannot keep acquiring customers who are going to churn. In essence, it comes down to quality. Are you developing a relationship with your customer that is based on quality and understanding?”

Trend 2: Apply a “moneyball” mindset to data collection in ecommerce (16:35)

Time and time again, Bill is shocked by how few retail companies have visibility into purchase behavior on the customer-level as part of their data set. He went on to explain that the lack of focus in tracking something as simple as a customer’s purchase history diminishes the marketer’s ability to serve customers a personalized experience in the future.  

This is why companies need to acquire a moneyball mindset. The term refers to the Oakland A’s use of Sabermetrics, the statistical analysis of baseball records.

When applied to business, the idea is that if you have the ability to analyze the history of your customer’s actions and preferences, you can build meaningful brand experiences based on that data. And, of course, maximize revenue potential.

Trend 3: Build true customer relationships to stay ahead (34:00, 36:00)

Being that Bill is 6’8”, he is one of Rochester Big & Tall’s top customers. But according to his experience with the brand, they don’t seem to know anything about him, no matter how many times he shops there. This is a great example of a missed opportunity to foster a deeper relationship with one of their valuable customers.

As Bill says, this relationship mindset is going to be the very future of retail, while areas like SEO may be fleeting.

“I would argue SEO dependence is temporal. It’s just not a long-term thing. These other things we’re talking about, about deep understanding of your customer and retention and personalization, those things are going to be way more long-term equity value building differentiating than being good at SEO.”

There is no doubt the markets are moving fast — Bill has seen it happen time and again. In order to stay ahead of the pack, retailers need to prioritize customer relationships and retention.

Trend 4: Remove customer anxiety and blockers from the equation (24:45)

There are very few things brands can control when it comes to customer behavior. Consumers can be fickle, and unless you are marketing to “the herd” then you have your work cut out for you. But, according to Bill, removing customer anxiety from the experience entirely is a step in right direction towards a stellar customer experience.

For example, when Uber was designing their app, they chose to remove the option to offer a tip which eliminated the anxiety of determining the tip amount from the experience. It made a sometimes stressful experience seamless. Many brands have caught on to this idea with the rise of on-demand services like Everlane same day delivery and Amazon Prime.

The idea of removing customer anxiety should bleed into various areas of the experience. Practicing good shopping cart strategies including no hidden fees, easy checkout, free shipping, and post-purchase streams are vital to the consumer. I know that my anxiety skyrockets after I make a purchase online, but do not receive that email right away from the brand confirming my order!

Be encouraged in your own strategy to seek out opportunities where you can remove as much friction as possible so experiences feels easy and fluid.

Trend 5: The traditional purchasing funnel is being flipped (03:50)

While talking through the many startups that have come to pass or been acquired, Bill cites one concept that can be applied broadly, or to your own company, called reversal of funnel.

“For many years, Google was considered the very best business model possible because they are top of funnel. And the advantage to being top of funnel is you do the least amount of work and take the most amount of money. Google has gone from being the starting point to being the search of last resort.”

The way consumers use search to find products and services is changing. This is challenging Google’s powerful hold on the top of the funnel. Bill points out something key: with the funnel becoming inverted, brands have an opportunity to better own the user experience and create stronger, longer-lasting relationships with their customers.

VIEW THE FULL VIDEO OF BILL GURLEY’S FIRESIDE CHAT BELOW