Randall Hounsell's Blog

Giant Opportunities in E-Commerce

This is a fascinating time for e-commerce, and I’ve been watching the space closely.  I believe Social and Mobile will disrupt commerce in an even bigger way than the web did a decade ago.  That said, we still haven’t seen much impact.  As Josh Kopelman pointed out in a 2010 blog, all but one of the top 15 e-commerce sites today were also on that list a decade ago.  I expect the leaders of e-commerce will change substantially over the next 10 years, and I believe the change will revolve around two giant market opportunities I see:

1.  Opening Up the Amazon Experience

Amazon has an incredible experience that gets users from shopping to consumption faster than any merchant on the planet.  That experience combines three primary components:  Product Discovery, One-Click to Buy, and Free 2-Day Shipping.  Today this is a closed experience that’s only available inside the walls of Amazon.   I think there’s a huge opportunity to open up these components so that consumers can experience them across all merchants.  Let’s look at each: 

• Product Discovery – No place on the web allows you to discover products as easily as Amazon does.  When you stay inside of Amazon you get a deeply personalized experience and great content discovery tools, which work across their enormous catalog of products.  But social media threatens Amazon’s advantage here.  Facebook is centralizing your taste graph and is opening it up for all sites to utilize.  Groupon has leveraged social to bring us new ways to discovery local deals.  And a new wave of startups, like Open Sky, are enabling users to socially discover products from curators like Bobby Flay.  This is the tip of the iceberg, and I expect lots more to come.

• One-Click to Buy – Once you’ve set up One-Click to Buy on Amazon, you find yourself buying everything from them.  They store all of your purchasing information, such as your credit card number and shipping preferences; and they apply it every time you click “Buy”.  I think the time is right to centralize this purchase profile and open it up to any merchant.  Google tried and failed to do this with Google Checkout, mostly because they present too big of a threat to merchants. But the forces of Social will prevail.  They’ve allowed Facebook to centralize your identity, and I think they’ll allow a newcomer to centralize your purchase profile.

• Free 2-Day Shipping – Amazon Prime is a subscription that offers free 2-day shipping on most products for $79/yr.  It represents a smaller portion Amazon's users but a big portion of their profits.  The value for shoppers isn’t about savings; it’s about convenience and certainty.  Each time you shop online you avoid the hassles of shipping decisions, and you know your product will arrive in 48 hours.  Once again, consumers have to stay in the Amazon world to get this experience.  However, the merchant world is fighting back.  Several large retailers including Dick’s, Petsmart, and ToysRus have already started supporting a third-party free shipping service called Shoprunner.  I'm eager to see how they do.  

2.  Connecting Online and In-store Shopping

In the current era of commerce, online and in-store shopping are largely either/or propositions.  I choose one or the other, then my experience is mostly online or mostly offline.  However, these parallel shopping paths were born in a world without smartphones.  Mobile will inextricably connect these shopping worlds and hugely disrupt both online and bricks and mortar businesses.   

There are two elements of mobile that should have e-commerce entrepreneurs salivating:

• Omnipresence of Mobile – with mobile, users can shop and transact online anywhere.  I envision this will this will bring online experiences deeply within in-store shopping.  For example, it should allow One-Click to Buy experiences within the store – inspect a product in the store, scan it, then simply press buy on your phone to have it shipped to your home.  It should allow me to find the computer accessory I need when I’m at Starbucks, then drive down the road to Target and immediately locate where it is in the store using a map on my phone.

• Embedded NFC Chips - these will connect physical store objects and mobile/online apps in the same way that the online world connects different web pages.   I should be able to check into a store by waving my phone in the same way I login to a web site.  Then I should be able to tap a product with my phone and pull up detailed specifications, lots of reviews, and which of my friends like it.  In effect, NFC has the promise to give us the same personalization, the same rich information, and the same easy purchase experience within stores that we get online.

The industry does seem to be inching forward towards this connected online/in-store vision.  Groupon makes it easy to buy coupons online, print out, and take to local merchants for redemption.  Apple makes it easy to buy in their stores and have receipts sent to my email account.  Just yesterday, I learned that Amazon is testing a delivery locker where customers can purchase online and pick up at local 7-Eleven stores.  All of this is nice progress but the real innovation here has yet to begin.     

 

 

 

 

 

The iPad Drives Old Media Distribution Lock-in?

John Battelle has been openly and vocally critical of the iPad.  He first criticized its "distribution lock-in model", then denounced its proprietary application development environment.  I follow his blog and I read “The Search,” but I’m really scratching my head on this.   This sounds like the interests of an independent blogger rather than the interests of mass consumers and the media ecosystem.

Battelle accuses Apple of returning to the world of old media, driven by distribution lock-in rather than content and intent.  A world where big media giants use their deep pockets to buy distribution and box out new players with great ideas.  He points out that the innovations of the web, search, and social were able to claim victory against the old media stronghold.  I think most of us agree with this and are thankful of the way we’re able to connect to content today.  But he suggests that somehow Apple has now defeated search and social against the greater good?  C’mon.

The native web today – with search, social, flash, ajax - has changed our lives forever, but it also has two limitations.  First, it doesn’t work well on connected devices beyond the PC.  Not surprising given that it was all built for PCs, where users have large screens, sit two feet away, and use a keyboard.  We all remember the crappy experience we had when we first used the Internet on our mobile phone, and we all remember the magic we felt when we first used our iPhone.  Frankly, no one wanted to search or tweet (assume for the sake of the point that Twitter existed then) on the first generation of connected mobile devices.  In fact, these problems are still ridden across the TV and radio devices we have in our homes.  The second limitation is monetization.  Despite 15 years of development, funding of thousands of start-up, use from hundreds of millions of users, monetization of content on the web is pretty pathetic.  And when there’s no money, there’s no investment.  When there’s no investment, consumers lose.

With the iPhone and now the iPad, Apple has come up with a paradigm that breaks through these limitations to connect new devices with an optimized user experience.  Apple knows that to crack a new paradigm they need to please end-users, potentially at the expense of developers.  They don’t wait for standards to emerge because consumers will lose in the mean time (the ecosystem loses too).  They understand the economics of devices, software, and media; and they know they all need revenue to drive sustainable innovation.  Apple  helped turn around the music industry, they compelled users to buy phones, and they’ve fueled a multi-billion dollar mobile application industry.  Now the iPad may get consumers to actually pay for newspapers and magazines online.  Sorry if they didn’t play by the rules of search and social.  Perhaps they simply played by the rules of innovation and value creation. 

Of course, this is a new pioneering category, and none of us really knows how it’s going to play out.  But I do know one thing - my iPad is shipping on April 3^rd.

The Next Decade of Streaming Music

The past decade was transformative for music consumption.  Much of the nation moved to digital music, where they could download songs with just a click and store thousands of them on a single device (oh, and they could easily steal digital music too).   The next decade looks to be equally as transformative, one where consumers will move to streaming music delivered from the cloud.  They’ll do so in order to easily listen to music on any of their devices.   

At the dawn of the last decade, the digital formats like mp3 were just emerging.  Early adopters saw the opportunity to better utilize their existing music collection and a better way to find and listen to new music.  Even before Apple’s iPod launch, these users were ripping hundreds of their CDs, downloading new music with peer-to-peer applications, and moving them to digital devices.  Apple saw a way to make the same behaviors easier and a way to monetize them.  And of course, the rest is history – most of digital music we consume today lives in the iTunes/iPod world.

While this was going on, a number of start-ups envisioned an even better way to consume digital music - to centralize it in the cloud and stream it to devices.  New ventures like Listen.com (now Rhapsody), MusicNet, and Pressplay (now Napster) built subscription music services that gave users rights to much more music, eliminated the hassle of managing music on their PC, and streamed it all directly from the Internet.  But there was one big problem.  Users couldn’t listen to music where they wanted it most – on their portable device, through their home audio system, and in their car.  We weren’t in a connected world then, so these streaming solutions were heavily tethered to the PC. 

At the dawn of this new decade, we’re moving swiftly into a fully connected world.  Within the home, Wi-Fi home networks have reached mass adoption.  Outside the home, smart phones have connected people to all of their favorite Internet applications.  For the car, OEM automotive suppliers like Visteon have already built connected dashboard devices via 4G.  The consumer electronic industry is standing by and ready to connect every device imaginable.  At CES last week, manufacturers demonstrated a proliferation of TVs, tablets, netbooks, radios, automotive dashboards, etc. with apps like Netflix, Pandora, Facebook, and Twitter.  This connectivity will be the catalyst for moving music from the PC and portable devices up to the cloud.  When gadget hungry users go to connect all of the new devices they’ve bought, they’ll get frustrated with challenges in accessing their iTunes music and look for new music services the fill the void.  The generation of Milleniums that never ripped CDs will find it ridiculous to manage music on their PC and obvious to centralize it in the cloud. 

The most innovative music players have already responded.  The recent generation of music start-ups; like MOG, Lala, and iLike; all center their music in the cloud.  Lala, for example, encourages you to upload all of your music and stream it.  They allow you to buy the right to stream a song, in addition to offering downloads.  Universal and Google have partnered to launch Vevo, a new music video service that streams its content.  Never before have so many music videos been at the fingertips of so many consumers.  Most significantly, Apple just acquired Lala, a move that paints a picture of where the digital music leader is going.   You can envision them moving all iTunes music to the cloud and distributing it to all of these new connected devices.

I just got a Logitech SqueezeBox Wi-Fi Radio for Christmas.  What a great product!  It took me no more than five minutes to connect it to my home network and set it up with Pandora music.  It’s only a matter of time before all the music I uploaded to Lala will play on this thing.  When that happens, the existing iTunes/iPod way of listening to music will be outdated.   And my guess is - we’ll be well on our way to the world of streaming music.