The New Face of Commerce; Local, Social and With a Unified Experience

December 6, 2010
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Twice this year Google has attempted to buy a leg up in the local commerce arena and twice they have failed. Last January they made a run at Yelp and last week the target was Groupon.

Twice this year Google has attempted to buy a leg up in the local commerce arena and twice they have failed. Last January they made a run at Yelp and last week the target was Groupon. Google, it would seem, is convinced that the small business local market is the next source of growth for them and they really haven’t come up with an effective way to get a piece of the local ad business. They do have some assets that could be useful in the local commerce battle, specifically maps and places but certainly those assets aren’t enough to get the big gun engaged, the Google ad platform. Anyway, the point is that Google once again validated that local is one of the important trends in the new world of commerce that is rapidly gaining momentum and I’d say validated in a “big” way considering the almost $6B offer Google made for Groupon, a company with somewhere between $500M – $2B in revenue (depending on who’s report you believe).

I started talking about the new world of commerce in this post a few weeks ago and it’s getting clearer to me just what trends are coming into play to create a new approach to commerce. The first trend is the move to a hyper-local approach to business as evidenced by Google’s attempts to get engaged somehow in the local ad business. Here are what I believe are the key technology and behavioral shifts that are driving “new” commerce:

  • Local: which of course includes location as a part of context to the shopping experience. Groupon and Yelp have both cracked a part of the local market. Yelp combines community with crowdsourcing and user generated content to gain influence which it then leverages to sell ads and ultimately get customers in the door. Groupon is similar in that it also is focused on getting customers in the door although it does that through managing promotions / offers. According to Hitwise Groupon generates 79% of the group buying business (it’s closest competitor is Living Social, at 8%) and according to Comscore saw a ridiculous increase in traffic of 657% year over year (based on October traffic).
  • Social: connecting your social networks to your commerce experience is a big opportunity to change the shopping experience. Enabling the use of trusted filtered networks for recommendations, validation, etc. makes for a much richer shopping experience.
  • Mobile: Yes this is very obvious but mobile and the resulting hyper-connectivity is key to the new connected shopping experience. Things like QR codes on items, bar code apps for research (including sustainability information) and price comparison, mobile payments, managing loyalty programs and promotions (including location triggered offers), video and photo sharing and connecting in real time to social networks make mobile a critical component.
  • Internet of things: Extending connectivity to things in addition to mobile devices opens up some interesting possibilities. For example what if stores could provide connected inventory maps to your mobile devices? So all I’d have to do is tell my phone I want some 1/4″ bolts the next time I’m at the hardware store and the phone would know that I’m in a hardware store, it would know where things are in the store and it could provide a map to guide me to what I need…
  • Converged or unified experience: I think the boundary between online and offline shopping is eroding. Putting the Internet in your pocket opens up all sorts of opportunities for better experiences, and add in the other trends and you start to see a very rich and new experience is possible.

Converged experience is the complicated part and currently doesn’t exist. Pieces of the puzzle are coming together though, but as always hooking different technologies together is the complicated part. This new converged commerce experience is rapidly coming together though, with pressure from both merchants and customers and a lot of incentive for tech vendors to sort out their offerings.