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Insights / Blog / Business

Why isn't E-Commerce in retail growing faster?

February 13, 2015
Alain VeuveAlain VeuveManaging Director, AOE Switzerland

The endeavors of companies to advance the cause of E-Commerce in this country are rather restrained. On the one hand businesses are investing and generally implementing omnichannel-, multichannel- and touch point concepts – all with the aim of providing customers with a continuous user experience. These are all noble efforts that generally improve E-Commerce, of course. On the other hand, this still is, with all due respect, a way of thinking in very narrowly defined business silos.

Since E-Commerce first came on the scene some 15 years ago, I've often asked myself why it is considered to be its own sales channel. Do people not understand the term “sales channel”? Or was it something intentional? Why, for instance, don't we then have the sales channel “fax”? The online industry has gratefully adopted these terms and points-of-view, as this way of thinking promoted project growth. As of late, however, many have come to a better understanding of the subject and are promoting the idea of “just commerce”. This is definitely a step in the right direction, albeit a late one.

The web industry has done itself and its customers a gross disservice by propagating this narrow way of thinking, as customers never thought this way and never will. They also don't act in this narrowly defined manner. I still have to listen to the fairy tale of online- and offline customers when I speak with clients. But, a vast majority of customers is generally indifferent and doesn't care whether its transaction with a company occurs on- or offline. Customers do what is simplest for them or that which gives them the biggest kick at any given moment. Sometimes online, sometimes offline – and if there were more offerings, very often a combination of the two.

The boundaries between online and offline commerce should disappear completely, for the customer doesn't know these boundaries.

Meanwhile, website operators, consultants and companies offering implementation services continue to cheerfully build online shops in the traditional way (myself included, of course), and implement existing concepts while optimizing and improving like crazy. Nevertheless, growth rates are failing to keep pace with the digitization of society. I assert that there are two reasons for this:

Current E-Commerce concepts meet only a fraction of the customers' needs

The traditional online shop is pretty helpful; I shop like this almost exclusively now. It suits my needs fairly well. However, for much of the population this is too complicated. Based on the number of people that own smart phones, mobile shopping is vastly under-utilized. In my opinion that's because it's simply too complicated and cumbersome. Shopping should be easy and enjoyable, whether on- or offline. Many online offerings might be far simpler than in the past, but only a very few actually enable an enjoyable experience. Current E-Commerce concepts often fail to consider this.

Thinking in narrow business silos prevents solutions from combining digital- and offline components to meet the needs of the customers

As long as a company consists of separate teams for online- and traditional marketing, for marketing and sales, for online- and offline stores, and as long as reporting is separated into online and offline areas (and this is a key point) – as long as these factors exist, it will be hard to establish overarching solutions. The naturally promoted competitive atmosphere within the company is simply too strong. This is wrong and damaging to businesses. Basically, it shouldn't make a difference to an executive whether revenue is generated on- or offline: His employees are tasked with creating the best possible and most economical service for the customers, given existing resources and taking current market conditions into consideration. Whether the resources are defined as on- or offline, is irrelevant in this case. It's actually quite simple.

What do we really need in E-Commerce?

First, we need to mentally get rid of E-Commerce, that is, we need to shed thinking in those narrowly defined business silos described above. I know that this belongs into the category of “Wishes posted to the Universe” and will probably not happen in this way that fast.

Second, we need appropriate action by the providers in that they act as if there were no online shops. Instead, they should ask themselves how to create a shopping experience for their customers that is as simple and as fun as possible. All of this under the premise that more than 80 percent use the Internet several times per week and of those, 40 percent access the Internet using mobile devices.

What we need is a retail revolution as with Duttweiler

Gottlieb Duttweiler was the founder of the Migros  chain of grocery stores and the man who brought the modern supermarket concept to Switzerland. Duttweiler was among the first to utilize the new technological and societal possibilities to revolutionize the industry. In my opinion, what we need is a fundamentally new retail concept that takes the “Zeitgeist” into consideration and is aligned with the technological and societal possibilities. This concept would, similar to Migros in the past, turn the market completely upside down, lower costs and provide customers with a far simpler and friendlier shopping experience.

My question is if this new retail concept, as other ideas, must again be copied from the United States or whether the European continent has the courage to be a pioneer in this area. If I take a look at the local VC scene, I don't harbor much hope, though.

What would such a completely new retail concept look like? I have some specific ideas that I would like to share with you in a separate post. If you have ideas of your own, please feel free to offer your insights, which I would then be happy to integrate.