The Candid Voice in Retail Technology: Objective Insights, Pragmatic Advice

eTail West 2016: Trouble In eCommerce Paradise?

Last week I attended eTail West, an eCommerce conference that has been held for years in Palm Springs. It has been several years since I attended eTail West — not since 2009, to be exact. To say that the show has expanded significantly since then is an understatement. But even the attendees who have continuously attended over the last few years seemed taken aback by the level of attendance at this year’s event. To say oversubscribed is an understatement. However, there were two big undercurrents to the show — a real good news/bad news dichotomy.

The Bad News: The Easy Days Are Over

I missed the first half of the first day while traveling to Palm Springs, so perhaps the earlier keynotes were more upbeat. But as soon as I arrived at the conference I headed into the keynote being given by Sarah Lacey, the founder (among other things) of Pando. Sarah spends most of her time dealing with venture capital types, and shared her perspective on how the VC community views etailing companies.

It was more a historical perspective on deals with a retail bent, and in the end raised more questions for me than it answered, but the gist of what she presented was that VC’s, burned by the downfall of unicorns like Gilt, do not believe that tech-driven retail is a good investment, and, in fact, much of the current run of unicorns is focused on global growth — companies like Uber and Lyft and DoorDash, which, Sarah notes, don’t actually sell anything. They just match demand with a willing source of supply.

But even these darlings of Silicon Valley have their issues — for example, how willing that supply really is, as all three of the disruptors mentioned above (Uber, Lyft, and DoorDash — among others) are involved in lawsuits from those suppliers — independent contractors who may or may not be so independent, and who are tiring of making low relative wages providing the heavy lifting of services while the platform company that connects them to demand rakes in almost pure profit in the form of fees.

And the companies that are currently poised to do well — Warby Parker, Bonobos, Honest Company, and the like — are niche plays. Category killers without much opportunity to scale.

Sarah didn’t really bring this to a conclusion, or provide any recommendations for how retailers should cope with this current environment. Rather, she left the impression — with me, at least — that the future of retail innovation is bleak. Even if someone has a great idea, VC’s aren’t going to fund it because they don’t want another Gilt or Zulily.

The next day at the event, this not-so-uplifting presentation was followed by Gregg Throgmartin, CEO of JustFab — one of those retail innovators that VC’s have become disillusioned with, according to Sarah Lacey. His message was even more stark and direct. In fact he put it on a slide in giant letters: “The best you’ll ever be is average.”

He was talking about technology. He argued that if retailers buy the same solutions as everyone else and use them in the same way, you’ll have no differentiation in the market. He also noted that there is a tendency to pile on, because of the historical tendency to buy point solutions in eCommerce, often based on the idea that it’s really simple to add more capability in the slick, modern eCommerce technology space.

But there are unintended process consequences. He shared an old version of his company’s process for creating an email campaign. It had 18 steps. And most of those steps did nothing to move the needle in terms of customer response. He summed up this process with this thought: “We never meant for it to be this complicated.”

For the primarily millennial, digital marketer audience at the conference, Gregg’s message was a swipe at their confidence. You can’t just go out and buy a bunch of stuff off the shelf and think this will make you successful. You have to be strategic about what is truly differentiating, and what about how you use that technology that also makes you differentiating.

For the grayer heads in the room (my own included), this is old news, but not good news by any stretch. When eCommerce emerged on the scene, some of us perceived it as an opportunity to create a fresh start for retail from a technology standpoint — a way to eventually corner and render obsolete all the old, inhibiting technologies that get in the way of retailers’ next business opportunities.

What Gregg effectively said at this conference is that this didn’t happen. eCommerce is just bad retail technology strategies version 2.0. And that’s not good news for the industry, at all.

Depressed yet? You shouldn’t be. Because it was not all bad news.

The Good News: The Technologies Behind Personalization

Personalization as a term has a lot of baggage, too much to cover here. Whether you see it as the future of retail — as many at eTail West seemed to believe — or whether you hate it as a pushy, privacy-invading method of making wrong guesses about consumers, it is increasingly built on a set of technologies that are important, sophisticated, and game-changing. And they’re increasingly delivered in ways that make them easily accessible to companies of any size, from the smallest retailer to the largest.

It’s interesting, because all of the technologies I’m referring to are based in analytics. Natural language processing, machine learning, cognitive learning, predictive analytics. For the first time ever, I heard retailers and vendors both — and vendors that are not just analytics vendors — talking about data scientists. This is very good news, because it demonstrates just how important data and analytics are becoming to the digital side of the business. And the smarter the digital side gets when it comes to using analytics, the more the traditional side of the business starts to look enviously at the kinds of insights the digital team generates.

And when you throw in all those slick connective technologies that live in the API economy, you get progressively easier ways to connect insights to actions.

For consumers, this will manifest as smarter, more relevant offers and recommendations. They won’t notice the change right away, and may never notice it at all, except in the vague sense of being less annoyed by the communications they receive from retailers.

For retailers, this will manifest as the dream that personalization offers: a way to provide a custom, tailored consumer experience that maximizes their lifetime value.

If retailers can really pull this off, then personalization will come to mean something important and valuable to both retailer and consumer — and that is good news indeed. Which goes a long way towards explaining why, even in the face of the bad news being delivered by keynotes, the retailers exploring opportunities with vendors in the exhibit hall next door were still quite optimistic.

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Articles & Opinions March 1, 2016
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