Web 2.0 Summit: Managing Hypergrowth

The session, moderated by Adam Lashinsky, is called “Managing Hypergrowth,” but it could just as well be “The Future of eCommerce. ” Susan Lyne, Chairman of Gilt Groupe, sits beside Tony Hsieh, CEO ofZappos.  In Internet time, Zappos is venerable, almost a cliche, for its relentless focus on customer experience, while Gilt Groupe is a bit of a dark horse.

In their own ways, both companies stretch the definition of commerce, never mind the “e.”  Zappos is probably most famous for its magical ability to delight its customers, seemingly shipping items before shoppers even know they want them.  Gilt Groupe has taken two ideas — flash sale and group buying — and quickly turned them into a business model. It’s hot now, but can it last?

Lashinsky, never one to pull a punch, asks Lyne directly. “That’s only an issue,” she responds without a beat, “if you think that’s all we’re ever going to do.” And there’s the point. Right now, we can only see the faintest implications of the changes at play in ecommerce.

Here are a few threads that bear a closer look:

  • The definition of a store. Group buying sites like Gilt take the idea of a store–whether a physical or online space–and blow it up entirely. Rather than a destination with a consistent look, aesthetic and inventory, Gilt changes out its merchandise every day. As a result, an essential element of its brand is about curation and discovery.  This theme is also evident in the offline world, with “pop-up” stores like ones that appeared in New York this summer for Belvedere Vodka and Toys R Us.  In online gaming, companies like Mertado provide the capability to add a working storefront to an online game, so that the player doesn’t even have to leave the game to make a purchase.
  • Experience grows in importance. Anyone who’s been to Loehmann’s (which, sadly, just filed for Chapter 11), Filene’s Basement or a similar discount store can attest: people love a good competition. With limited inventory, Gilt adds a gamelike aspect to the shopping experience; the early bird actually does get the discount cashmere sweater, while the retailer avoids costly investments in commercial leases.  SCVNGR, a game platform, works with companies like Tesla Motors, Sony Pictures and The Boston Celtics to make that gameplay explicit and part of the brand experience.
  • Customers at the center. Zappos revolutionized this idea with seemingly quaint notions — like a set of cultural values that actually drive its business. Says Hsieh about Zappos’ hiring practices, “We’ll pass on people who we know can make an immediate impact to our top and bottom line if they’re not a fit with our values and culture.”  What’s more, the company pays employees who do not live its values $2,000 (soon to be $3,000) to quit.

Where can all this go? If we spin these three themes out a bit (we’ll see if they grow up to be trends), a few intriguing implications emerge:

1. An infinite number of channels.
In hindsight, the idea of multichannel commerce as people envisioned it in the early days of the Internet is almost unbearably simple: store, website, catalog, phone. Today the possibilities for channel are infinite and unconstrained by space and time.  Stores can be virtual, but they can also be temporary, mobile, or, in the case of Mertado’s storefront capability, reduced to a simple transactional capability within another (gaming) experience.

2. The experience is the product.
If you strip away all the conventional markers of a store–permanence, location, inventory–and look at what’s left, the only truly consistent element is experience.  Zappos popularized this idea, to the point where it almost (actually?) doesn’t matter what is being sold. Tony Hsieh himself admits to owning only four pairs of shoes. But what people remember when they go to Zappos is the experience: smooth, fast, easy, friendly, efficient. That’s what they sell.  Gilt sells something different: curation, fun, serendipity, the thrill of the chase.  What do you sell?

3. The consumer defines all of the above. It also stands to reason that when you strip away all the conventional markers of a store and replace it with experience, that the consumer will be the one to determine whether that experience was good, bad or indifferent. Assuming there’s no massive shift in quality control, an Hermes scarf will always connote exclusivity, so the real differentiator is the experience of buying it. Moxsie, an online retailer of independent designer goods, giftwraps its deliveries; a seemingly minor but personal touch.

So here’s an experiment; what would happen if you redefined your business according to these three themes? What if:

  • you could erase all barriers and change the location, time, venue or overall layout of your store?  What could that look like? What would be the ideal format or venue?
  • you reduced your brand promise to its essence and added experiences that supported that essence (fun, mystery, competition, games)?
  • you redesigned even one aspect of your business purely around customer need?  (See more about this idea, which Lora Cecere calls “the store of the community,” in her recent Rise of Social Commerce report).

What would you keep? What would you change? What would you throw out entirely?

About susanetlinger

Industry Analyst at Altimeter Group
This entry was posted in social commerce and tagged , , , . Bookmark the permalink.

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