What Retailers Need to Know About the Newest Alternative to Advertising- Commerce
BY Michael Jaconi | Co-founder & CEO | Button
When I was an executive officer at Japanese e-commerce giant Rakuten, I became a vocal champion of a two-year-old startup called Pinterest. Learning from my mentor Hiroshi “Mickey” Mikitani, I recognized the importance of businesses with transactional revenue models. What Pinterest inspired, more than any company I had studied, was an experience that drove consumers from “discovery” all the way to “purchase”. Compared to the variety of startups built for advertising only, a business model oriented towards commerce creates value for all parties and fosters alignment between “platform” and “advertiser or merchant”.
In May 2012, I was fortunate enough to play a role in Rakuten’s $100 million investment in Pinterest at a valuation of $1.5 billion. Six years later, that bet on a “better model”—one built on commerce—looks like it’s going to pay off: the company is now worth an estimated $13 to $15 billion and the press speculates they’ll IPO in 2019.
THE SHIFT IN INTENT
My belief in a commerce-first model has only grown in recent years. Increasingly, consumers are turning to mobile as the starting point in their search for products and services, and improvements in mobile payment technology have made it easier than ever to make purchases.
Last year, e-commerce sales grew by 16 percent in the U.S. and mobile shopping app sessions increased by 54 percent. Per user, mobile commerce is forecasted to increase more than 250 percent by 2021 as an increasing number of consumers take to mobile and basket sizes increase. Rather than running a Google search, users are more likely to hunt for, say, hotels or earrings, in customized apps with better recommendations and user experiences. This shift in intent is creating tremendous opportunities for companies that can capitalize on it and threatening those models that focus exclusively on advertising.
Companies that capture billions of impressions while offering commerce capabilities are already seeing the game-changing impact of shifting intent. In China, WeChat has grown from a messaging app to a platform and “mobile portal” capable of connecting 1 billion users with the things they want to buy. The app allows users to call a taxi, order food, get movie tickets, and check in for flights, to name a few. Thanks to its mobile-first, commerce-oriented strategy, WeChat has been cited to have an estimated average revenue per user of $4.60 as of 2017, compared to $0.10 for WhatsApp.
US-based companies are also taking advantage of the shift. Earlier this year, Google announced Shopping Actions, a program that allows users to buy products through Google Express or Google Assistant, to increase commerce capabilities. Amazon’s commerce-first model continues to increase its value.
HOW COMMERCE CAN HELP RETAILERS WIN
At a moment when the ad tech industry is seeing further consolidation, and Google and Facebook are capturing 90 percent of growth in online ad spending, this evolution is a good sign for savvy retailers. Leading with commerce—the ability to match people with what they want to buy when they want it—is becoming the leading form of monetization in mobile, challenging advertising-based models and creating opportunity for fresh leaders to emerge. Retailers who seek to be among these leaders should focus on profiting from new sites of intent through a strategy that puts mobile and commerce center stage. Here’s how retailers can take advantage of current opportunities and emerge at the forefront of the industry:
– FIGHT FOR A MOBILE-FIRST STRATEGY
Many retailers still build for desktop and adapt for mobile later, or are still in a decade long battle of adapting to mobile, period. Use the continued shift towards mobile to catalyze a “mobile first” plan. Building an app to check the box doesn’t work these days. Retailers need apps that are optimized for mobile in their design, functions and orientation. If you build an app with top-notch user experience, you’ll be in a position to not only attract new traffic but to make the most of the traffic you have—turning intent into revenue. Conversely, if consumers have a bad experience, they’ll punish you for it. For example, with McDonald’s rated as having one of the worst retail mobile apps, including user experience and reliability challenges, it’s no surprise that customer adoption has been low.
Given the primacy of mobile, you need to fight for the resources to make it a priority—your business depends on it.
– THINK IN TERMS OF YOUR USERS
The Japanese concept of omotenashi, which defines the rules of anticipatory hospitality, includes the idea that a host should anticipate a guest’s needs before the guest recognizes the need. With new pools of intent bubbling up, consider how you can satisfy them by providing a great consumer experience including the opportunity to purchase where intent originates. Predicting what users want and bringing value to them where they are will ensure they build a habit of using your app in all the areas where intent for your service or product originates. And empowering other businesses to realize how they can benefit by connecting their users to products or services through your app creates a win-win situation.
For example, Samsung Pay’s millions of users go to their digital wallets to make a purchase or to save more money. Working with Button, the company I co-founded, Samsung enabled users to generate savings into their Samsung Pay accounts when shopping at retailers they partner with via Button. That allowed Samsung Pay to offer more value to their users and offer its retailer partners a new way to reach consumers in a mobile-first way.
– HELP CREATE A THIRD CHANNEL FOR CUSTOMER ACQUISITION
There is a growing need for retailers to find an alternative to the Facebook-Google duopoly, which is causing acquisition costs to skyrocket. Retailers should be looking for a third channel that allows them to find intent and tap into it in a scalable way. I founded Button four years ago to become that third channel and help companies build mobile commerce partnerships simply and at scale. So far, we’ve partnered with companies like Hotels.com, Walmart, Boxed, and Uber, and there is a tremendous opportunity for retailers who consider these kind of partnerships an important part of their strategies. This year, we’ll drive over $1B in sales to apps on our platform.
In a mobile-dominated world intent is everywhere, and there’s no longer one clear path from intent to purchase. Retailers who take the shift in intent seriously and focus on offering users what they want, in the moment they want it, will increasingly be poised to emerge as tomorrow’s leaders.
Michael Jaconi is the Co-Founder and CEO of Button, the leading platform powering contextual commerce among today’s leading brands. Jaconi formerly served as the CEO of Rakuten Loyalty and Executive Officer of parent company Rakuten. Michael helped build Rakuten Loyalty from a fledgling state to a multi-million dollar business in less than two years and led Rakuten’s $100M investment in Pinterest, helping secure Rakuten’s place as one of the most innovative and aggressive global internet companies. Prior to his tenure at Rakuten Loyalty, Jaconi co-founded two public affairs companies in Washington, D.C. and served in a variety of capacities within various political campaigns.
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